Filed with the Securities and Exchange Commission on October 6, 2006
Registration No. 333-136996
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
On Form S-3
Registration Statement Under The Securities Act of 1933*
Post-Effective Amendment No.1
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Exact name of registrant as specified in its charter)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
63
(Primary Standard Industrial Classification Code Number)
06-1241288
(I.R.S. Employer Identification No.)
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 926-1888
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
JOSEPH D. EMANUEL, CHIEF LEGAL OFFICER
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 944-7504
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy To:
LAURA KEALEY, ESQ.
VICE PRESIDENT AND CORPORATE COUNSEL
One Corporate Drive, Shelton, Connecticut 06484 (203) 944-5477
Approximate date of commencement of proposed sale to the public:
November 20, 2006 or as soon as practicable after the effective date of this
Registration Statement
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier registration
statement for the same offering: [X] (the Securities Act registration number of
the earlier filing is 333-117052)
If this Form is a post-effective amendment pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
number of the earlier registration statement for the same offering: [ ]
If this Form is a registration statement pursuant to General Instruction I.D. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box: [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities
or additional classes of securities pursuant to rule 413(b) under the Securities
Act, check the following box: [ ]
Calculation of Registration Fee
================================================================================
Title of each Proposed Proposed
class of maximum maximum
securities Amount offering aggregate Amount of
to be to be price offering registration
registered registered per unit price** fee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market Value
Adjusted
- --------------------------------------------------------------------------------
Annuity Contracts $2,000,000,000.00 $214,000
*This filing is being made pursuant to Rule 462(b) under the Securities Act of
1933 to register an additional $2 billion of interests in market value-adjusted
annuity contracts. As permitted by Rule 457(o) under the Securities Act of 1933,
the filing fee set forth above was calculated based on the maximum aggregate
offering price of $2 billion. The market value adjusted securities are sold
according to dollar value, and are not denominated in either shares or units.
Finally, because some of Registrant's securities from the July 1, 2004 filing
remain unsold, Registrant intends to add those unsold securities to the $2
billion of securities being registered herewith (thus, Registrant has not
reduced the filing fee paid herewith on account of the filing fee associated
with securities that remain unsold from the July 1, 2004 offering).
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APEX
Note:
Registrant is filing this Post-Effective Amendment No. 1 to the Registration
Statement for the purpose of including in the Registration Statement a
Prospectus supplement, which adds a new benefit entitled Highest Daily Lifetime
Five. The Prospectus and Part II that were filed as part of the initial filing
with the SEC on August 20, 2006 are hereby incorporated by reference. Other
than as set forth herein, this post-effective amendment to the registration
statement does not amend or delete any other part of the registration statement.
Supplement to Prospectuses Dated May 1, 2006
Supplement dated November 20, 2006
Supplement dated November 20, 2006 to the May 1, 2006 Prospectuses for the
following annuity products: American Skandia Advisor Plan(SM) III, American
Skandia APEX(R) II, and American Skandia LifeVest(R) II, as previously
supplemented (the "Prospectuses").
This Supplement should be read and retained with the current Prospectus for
your annuity contract issued by American Skandia Life Assurance Corporation
("American Skandia"). This Supplement is intended to update certain information
in the Prospectus for the variable annuity you own, and is not intended to be a
prospectus or offer for any other variable annuity listed here that you do not
own. If you would like another copy of the current Prospectus, please contact
American Skandia at 1-800-752-6342.
We are issuing this supplement to describe in the Prospectus for the
above-referenced annuity products a new living benefit program, certain changes
to the underlying mutual funds and the maximum charge with respect to certain
optional benefits. These changes will be effective on or about November 20,
2006, unless specifically stated otherwise.
1. MAXIMUM CHARGES FOR CERTAIN OPTIONAL BENEFITS
In the Summary of Contract Fees and Charges section of the prospectus, we
revise the line items pertaining to GRO Plus Guaranteed Minimum Income Benefit
Option, Guaranteed Minimum withdrawal Benefit Option, Highest Daily Value Death
Benefit Option, and combination 5% Roll-Up and HAV Death Benefit Option to read
as follows:
TOTAL ANNUAL TOTAL ANNUAL TOTAL ANNUAL
OPTIONAL CHARGE CHARGE CHARGE
BENEFIT FEE/ for for for
CHARGE ASAPIII* APEX II* ASL II*
----------------- ------------- ------------- -------------
GUARANTEED RETURN OPTION PLUS(SM) (GRO Plus(SM))/GUARANTEED RETURN OPTION
(0.75% maximum) 1.50% in 1.90% for 190%; 1.65%
0.25% Currently Annuity Years Qualified BCO for Qualified
of average daily 1-8; 0.90% in BCO
net assets of Annuity Years
the Sub-accounts 9 and later;
1.65% for
Qualified BCO
GUARANTEED MINIMUM INCOME BENEFIT OPTION
(1% maximum) 1.50% in 1.90% for 190%; 1.65%
0.50% Currently Annuity Years Qualified BCO for Qualified
per year of the 1-8; 0.90% in BCO
average Protected Annuity Years
Income Value 9 and later;
during each year; 1.65% for
deducted annually Qualified BCO
in arrears each
Annuity Year
GUARANTEED MINIMUM WITHDRAWAL BENEFIT OPTION (GMWB)**
(1.00% maximum) 1.60% in 2.00% for 2.00%; 1.75%
0.35% Currently Annuity Years Qualified BCO for Qualified
of average daily 1-8; 0.90% in BCO
net assets of the Annuity Years
Sub-accounts 9 and later;
1.75% for
Qualified BCO
HIGHEST DAILY VALUE DEATH BENEFIT (HDV)**
(1.00% maximum) 1.75% in 2.15% 2.15%
0.50% Currently Annuity Years
of average daily 1-8; 1.15% in
net assets of the Annuity Years
Sub-accounts 9 and later;
1.75% for
Qualified BCO
COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT**
0.50% of 1.75% in 2.15% 2.15%
average daily Annuity Years
net assets of 1-8; 1.15% in
the Annuity Years
Sub-accounts 9 and later;
(1.00% 1.75% for
maximum) Qualified BCO
* We reserve the right to increase the charge for this benefit up to a maximum
amount indicated upon a step-up or reset, or for the election of the benefit.
2. NEW INSURANCE FEATURE
We are adding the Highest Daily Lifetime Five(SM) Income Benefit ("Highest
Daily Lifetime Five"), that guarantees until the death of a single
designated life the ability to withdraw an annual amount equal to a
percentage of an initial principal value regardless of the impact of market
performance on the Account Value. As a result, the following revisions are
made to the Prospectus:
A. We revise the Glossary of Terms section as follows:
. We add a definition for "Benefit Fixed Rate Account", that reads as
follows: "An investment option offered as part of this Annuity that is
used only if you have elected the optional Highest Daily Lifetime Five
Benefit. Amounts allocated to the Benefit Fixed Rate Account earn a fixed
rate of interest, and are held within our general account. You may not
allocate purchase payments to the Benefit Fixed Rate Account. Rather,
Account Value is transferred to the Benefit Fixed Rate Account only under
the asset transfer feature of the Highest Daily Lifetime Five Benefit."
. We add a definition for "Highest Daily Lifetime Five Benefit" that reads
as follows: "An optional feature available for an additional charge that
guarantees your ability to withdraw amounts equal to a percentage of a
principal value called the Protected Withdrawal Value. Subject to our
rules regarding the timing and amount of withdrawals, we guarantee these
withdrawal amounts, regardless of the impact of market performance on
your Account Value."
B. The following information has been added to "YOUR OPTIONAL BENEFIT FEES
AND CHARGES" table in the "Summary of Contract Fees and Charges" section
of the Prospectus:
OPTIONAL TOTAL ANNUAL TOTAL ANNUAL TOTAL ANNUAL
BENEFIT CHARGE CHARGE CHARGE
FEE/ for for for
CHARGE ASAPIII* APEX II* ASL II*
---------- ------------- ------------ ------------
LIFETIME FIVE INCOME BENEFIT***
MAXIMUM CHARGE FOR 3.00% 0.60% 1.85% in 2.25% 2.25%
LIFETIME FIVE ** currently Annuity Years
of average 1-8; 1.25% in
daily net Annuity Years
assets of 9 and later
the Sub-
accounts
SPOUSAL LIFETIME FIVE INCOME BENEFIT***
MAXIMUM CHARGE FOR 3.00% 0.75% 2.00% in 2.40% 2.40%
SPOUSAL LIFETIME currently Annuity Years
FIVE ** of average 1-8; 1.25% in
daily net Annuity Years
assets of 9 and later
the Sub-
accounts
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT***
MAXIMUM CHARGE FOR 3.00% 0.60% 1.85% in 2.25% 2.25%
HIGHEST DAILY currently Annuity Years
LIFETIME FIVE* of average 1-8; 1.25% in
daily net Annuity Years
assets of 9 and later
the Sub-
accounts
2
- --------
* The Total Annual Charge includes the Insurance Charge and Distribution
Charge (if applicable) assessed against the average daily net assets
allocated to the Sub-accounts. If you elect more than one optional benefit,
the Total Annual Charge would be increased to include the charge for each
optional benefit.
** We reserve the right to increase the charge for Lifetime Five, and Highest
Daily Lifetime Five to a maximum of 3% (2% for Spousal Lifetime Five), upon
a step-up or for a new election of each such benefit. However, we have no
present intention of increasing the charges for those benefits to that
maximum level.
*** This optional benefit is not available under the Qualified BCO, and is
currently not available in New York.
C. The Highest Daily Lifetime Five program is not available if you elect any
other optional living benefit, therefore all references in the Prospectus that
reflect the availability of the optional living benefits are revised
accordingly.
D. The following description of the new optional living benefit is added as the
last section under "Living Benefit Programs" in the Prospectus:
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT
(HIGHEST DAILY LIFETIME FIVE)
The Highest Daily Lifetime Five program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory approval
in those jurisdictions. Certain terms and conditions may differ between
jurisdictions once approved. Highest Daily Lifetime Five is offered as an
alternative to Lifetime Five and Spousal Lifetime Five. Currently, if you elect
Highest Daily Lifetime Five and subsequently terminate the benefit, you will
not be able to re-elect Highest Daily Lifetime Five, and will have a waiting
period until you can elect Spousal Lifetime Five or Lifetime Five.
Specifically, you will be permitted to elect Lifetime Five or Spousal Lifetime
Five only on an anniversary of the Issue Date that is at least 90 calendar days
from the date that Highest Daily Lifetime Five was terminated. We reserve the
right to further limit the election frequency in the future. The income benefit
under Highest Daily Lifetime Five currently is based on a single "designated
life" who is at least 55 years old on the date that the benefit is acquired.
The Highest Daily Lifetime Five Benefit is not available if you elect any other
optional living benefit, although you may elect any optional death benefit
(other than the Highest Daily Value Death Benefit). As long as your Highest
Daily Lifetime Five Benefit is in effect, you must allocate your Account Value
in accordance with the then-permitted and available investment option(s) with
this program.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Highest Daily Life Income
Benefit") equal to a percentage of an initial principal value (the "Protected
Withdrawal Value") regardless of the impact of market performance on the
Account Value, subject to our program rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, and wish to ensure that market performance will
not affect your ability to receive annual payments. You are not required to
make withdrawals as part of the program -- the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. We discuss Highest Daily Lifetime Five in greater detail
immediately below. In addition, please see the Glossary section of this
prospectus for definitions of some of the key terms used with this benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Highest Daily Lifetime Five, and in the Appendices
to this prospectus, we set forth the formula under which we make those asset
transfers.
As discussed below, a key component of Highest Daily Lifetime Five is the
Protected Withdrawal Value, which is an amount that is distinct from Account
Value. Protected Withdrawal Value is used to determine the Highest Daily Annual
Income Amount -- which is an amount that you can take out annually as a
withdrawal for your entire life. Because each of the Protected Withdrawal Value
and Highest Daily Annual Income Amount is determined in a way that is not
solely related to Account Value, it is possible for the Account Value to fall
to zero, even though the Highest Daily Annual Income Amount remains. You are
guaranteed to be able to withdraw the Highest Daily Annual Income Amount for
the rest of your life, provided that you have not made "excess withdrawals."
Excess withdrawals, as discussed below, will reduce your Highest Daily Annual
Income Amount. Thus, you could experience a scenario in which your Account
Value was zero, and, due to your excess withdrawals, your Highest Daily Annual
Income Amount also was reduced to zero. In that scenario, no further amount
would be payable under Highest Daily Lifetime Five.
KEY FEATURE -- Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of the annual
payments under the Highest Daily Life Income Benefit. The Protected Withdrawal
Value initially is equal to the Account Value on the date that you elect
Highest Daily Lifetime Five. On each business day thereafter, until the earlier
of the first withdrawal or ten years after the date of your election of the
benefit, we recalculate the Protected Withdrawal Value. Specifically, on each
such business day (the "Current Valuation Day"), the Protected Withdrawal Value
is equal to the greater of:
3
. the Protected Withdrawal Value for the immediately preceding business day
(the "Prior Valuation Day"), appreciated at the daily equivalent of 5%
annually during the calendar day(s) between the Prior Valuation Day and
the Current Valuation Day (i.e., one day for successive business days,
but more than one calendar day for business days that are separated by
weekends and/or holidays), plus the amount of any Purchase Payment made
on the Current Valuation Day; and
. the Account Value.
We cease these daily calculations of the Protected Withdrawal Value when you
make your first withdrawal. However, as discussed below, subsequent Purchase
Payments will increase the amount we guarantee to pay annually under the
Highest Daily Life Income Benefit (the "Highest Daily Annual Income Amount"),
while "excess" withdrawals (as described below) may decrease the Highest Daily
Annual Income Amount.
KEY FEATURE -- Highest Daily Annual Income Amount under the Highest Daily
Lifetime Five Benefit
The initial Highest Daily Annual Income Amount is equal to 5% of the Protected
Withdrawal Value. Under the Highest Daily Lifetime Five benefit, if your
cumulative withdrawals in an Annuity Year are less than or equal to the Highest
Daily Annual Income Amount, they will not reduce your Highest Daily Annual
Income Amount in subsequent Annuity Years, but any such withdrawals will reduce
the Highest Daily Annual Income Amount on a dollar-for-dollar basis in that
Annuity Year. If your cumulative withdrawals are in excess of the Highest Daily
Annual Income Amount ("Excess Income"), your Highest Daily Annual Income Amount
in subsequent years will be reduced (except with regard to required minimum
distributions) by the result of the ratio of the Excess Income to the Account
Value immediately prior to such withdrawal (see examples of this calculation
below). Reductions include the actual amount of the withdrawal, including any
CDSC that may apply. A Purchase Payment that you make will increase the
then-existing Highest Daily Annual Income Amount by an amount equal to 5% of
the Purchase Payment.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly Auto
Step-Up feature can result in a larger Highest Daily Annual Income Amount if
your Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of this feature starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary after your first withdrawal, we identify the
Account Value on the business days corresponding to the end of each quarter
that (i) is based on your Annuity Year, rather than a calendar year; (ii) is
subsequent to the first withdrawal; and (iii) falls within the immediately
preceding Annuity Year. If the end of any such quarter falls on a holiday or a
weekend, we use the next business day. We multiply each of those quarterly
Account Values by 5%, adjust each such quarterly value for subsequent
withdrawals and purchase payments, and then select the highest of those values.
If the highest of those values exceeds the existing Highest Daily Annual Income
Amount, we replace the existing amount with the new, higher amount. Otherwise,
we leave the existing Highest Daily Annual Income Amount intact. In later
years, (i.e., after the first Annuity Anniversary after the first withdrawal)
we determine whether an automatic step-up should occur on each Annuity
Anniversary, by performing a similar examination of the Account Values on the
end of the four immediately preceding quarters. If, on the date that we
implement a Highest Quarterly Auto Step-Up to your Highest Daily Annual Income
Amount, the charge for Highest Daily Lifetime Five has changed, you may be
subject to the new charge at the time of such step-up. Prior to increasing your
charge for Highest Daily Lifetime Five upon a step-up, we would notify you, and
give you the opportunity to cancel the automatic step-up feature.
The Highest Daily Lifetime Five program does not affect your ability to make
withdrawals under your annuity, or limit your ability to request withdrawals
that exceed the Highest Daily Annual Income Amount. Under Highest Daily
Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than
or equal to the Highest Daily Annual Income Amount, they will not reduce your
Highest Daily Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Highest Daily Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Highest Daily Annual
Income Amount in any Annuity Year, you cannot carry-over the unused portion of
the Highest Daily Annual Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Step-Up are set forth below. The values depicted here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime
Five benefit or any other fees and charges. Assume the following for all three
examples:
. The Issue Date is December 1, 2006
. On May 2, 2007, the client elects Highest Daily Lifetime Five and takes
the first withdrawal under the benefit on the same day.
Dollar-for-dollar reductions
On May 2, 2007, the Protected Withdrawal Value is $120,000, resulting in a
Highest Daily Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500
is withdrawn from the Annuity on this date, the remaining Highest Daily Annual
Income Amount for that Annuity Year (up to and including December 1, 2007) is
$3,500. This is the result of a dollar-for-dollar reduction of the Highest
Daily Annual Income Amount -- $6,000 less $2,500 = $3,500.
4
Proportional reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Highest Daily
Annual Income Amount for that Annuity Year to $0. The remaining withdrawal
amount -- $1,500 - reduces the Highest Daily Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there were other withdrawals in that Annuity Year, each would
result in another proportional reduction to the Highest Daily Annual Income
Amount).
Here is the calculation:
Account Value before withdrawal............................... $110,000.00
Less amount of "non" excess withdrawal........................ -$ 3,500.00
Account Value immediately before excess withdrawal of $1,500.. $106,500.00
Excess withdrawal amount...................................... $ 1,500.00
Divided by Account Value immediately before excess withdrawal. $106,500.00
Ratio......................................................... 1.41%
Annual Income Amount.......................................... $ 6,000.00
Less ratio of 1.41%........................................... -$ 84.51
Annual Income Amount for future Annuity Years................. $ 5,915.49
Highest Quarterly Step-Up
On each Annuity Anniversary date, the Highest Daily Annual Income Amount is
stepped-up if 5% of the highest quarterly value since your first withdrawal (or
last Annuity Anniversary in subsequent years), adjusted for excess withdrawals
and additional Purchase Payments, is higher than the Highest Daily Annual
Income Amount, also adjusted for excess withdrawals and additional Purchase
Payments.
Continuing the same example as above, the Highest Daily Annual Income Amount
for this Annuity Year is $6,000. However, the excess withdrawal on August 6
reduces this amount to $5,915.49 for future years (see above). For the next
Annuity Year, the Highest Daily Annual Income Amount will be stepped-up if 5%
of the highest quarterly Account Value, adjusted for withdrawals, is higher
than $5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 Valuation Days occur after the excess withdrawal on
August 6.
Highest Quarterly Value Adjusted Highest Daily
(adjusted with Annual Income Amount
withdrawal and Purchase (5% of the Highest
Date* Account value Payments)** Quarterly Value)
- ----- ------------- ----------------------- ----------------------
June 1, 2007...... $118,000.00 $118,000.00 $5,900.00
August 6, 2007.... $120,000.00 $112,885.55 $5,644.28
September 1, 2007. $112,000.00 $112,885.55 $5,644.28
December 1, 2007.. $119,000.00 $119,000.00 $5,950.00
- --------
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not use
the March 1 date as the first withdrawal took place after March 1. The
Annuity Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Highest Daily Annual Income Amount
of $5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Highest Daily Annual
Income Amount for the Annuity Year), resulting in an adjusted Account
Value of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a Highest
Quarterly Value of $112,885.55.
The adjusted Highest Daily Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this amount
to 5% of the Account Value on September 1. Since the June 1 adjusted Highest
Daily Annual Income Amount of $5,644.28 is
5
higher than $5,600.00 (5% of $112,000), we continue to carry $5,644.28 forward
to the next and final quarterly anniversary date of December 1. The Account
Value on December 1 is $119,000 and 5% of this amount is $5,950. Since this is
higher than $5,644.28, the adjusted Highest Daily Annual Income Amount is reset
to $5,950.00
In this example, 5% of the December 1 value yields the highest amount of $
5,950.00. Since this amount is higher than the current year's Highest Daily
Annual Income Amount of $5,915.49 adjusted for excess withdrawals, the Highest
Daily Annual Income Amount for the next Annuity Year, starting on December 2,
2007 and continuing through December 1, 2008, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME FIVE PROGRAM
. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Highest Daily
Annual Income Amount and amounts are still payable under the Highest
Daily Life Income Benefit, we will make an additional payment, if any,
for that Annuity Year equal to the remaining Highest Daily Annual Income
Amount for the Annuity Year. Thus, in that scenario, the remaining
Highest Daily Annual Income Amount would be payable even though your
Account Value was reduced to zero. In subsequent Annuity Years we make
payments that equal the Highest Daily Annual Income Amount as described
in this section. We will make payments until the death of the single
designated life. To the extent that cumulative withdrawals in the current
Annuity Year that reduced your Account Value to zero are more than the
Highest Daily Annual Income Amount, the Highest Daily Lifetime Five
benefit terminates, and no additional payments will be made.
. If Annuity payments are to begin under the terms of your Annuity, or if
you decide to begin receiving Annuity payments and there is a Highest
Daily Annual Income Amount due in subsequent Annuity Years, you can elect
one of the following two options:
(1) apply your Account Value to any Annuity option available; or
(2) request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Highest Daily Annual Income
Amount. We will make payments until the death of the single designated
life.
We must receive your request in a form acceptable to us at our office.
In the absence of an election when mandatory annuity payments are to begin, we
will make annual annuity payments in the form of a single life fixed annuity
with ten payments certain, by applying the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Annuity. The amount
that will be applied to provide such Annuity payments will be the greater of:
(1) the present value of the future Highest Daily Annual Income Amount
payments. Such present value will be calculated using the greater of the single
life fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2) the Account Value.
. If no withdrawal was ever taken, we will determine the Protected
Withdrawal Value and calculate the Highest Daily Annual Income Amount as
if you made your first withdrawal on the date the annuity payments are to
begin.
Other Important Considerations
. Withdrawals under the Highest Daily Lifetime Five benefit are subject to
all of the terms and conditions of the Annuity, including any CDSC.
. Withdrawals made while the Highest Daily Lifetime Five program is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. The Highest Daily Lifetime Five program
does not directly affect the Account Value or surrender value, but any
withdrawal will decrease the Account Value by the amount of the
withdrawal (plus any applicable CDSC). If you surrender your Annuity you
will receive the current surrender value.
. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Five
benefit. The Highest Daily Lifetime Five benefit provides a guarantee
that if your Account Value declines due to market performance, you will
be able to receive your Highest Daily Annual Income Amount in the form of
periodic benefit payments. You must allocate your Account Value in
accordance with the then available investment option(s) that we may
permit in order to elect and maintain the Highest Daily Lifetime Five
benefit.
Election of and Designations under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is the
same as the Annuitant, or if the Annuity is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at least
55 years old.
6
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
Highest Daily Lifetime Five can be elected at the time that you purchase your
Annuity. We also offer existing owners (i.e., those who have already acquired
their Annuity) the option to elect Highest Daily Lifetime Five after the Issue
Date, subject to our eligibility rules and restrictions.
Currently, if you terminate the Highest Daily Lifetime Five benefit, you will
(a) not be permitted to re-elect the benefit and (b) will be allowed to elect
the Spousal Lifetime Five Benefit or the Lifetime Five Income Benefit on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the Highest Daily Lifetime Five Benefit was terminated. We reserve the right to
further limit the election frequency in the future. Before making any such
change to the election frequency, we will provide prior notice to Owners who
have an effective Highest Daily Lifetime Five benefit.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election will
apply as described above. We reserve the right to further limit the frequency
election in the future. The benefit terminates: (i) upon your termination of
the benefit (ii) upon your surrender of the Annuity (iii) upon your election to
begin receiving annuity payments (iv) upon the death of the designated life
(v) if both the Account Value and Highest Daily Annual Income Amount equal zero
or (vi) if you fail to meet our requirements for issuing the benefit.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate Account
Value if you elect Highest Daily Lifetime Five. For purposes of this benefit,
we refer to those permitted sub-accounts as the "Permitted Sub-accounts". A
list of the Permitted Sub-accounts appears in the application form that you
must submit to us in order to elect this benefit. As a requirement of
participating in Highest Daily Lifetime Five, we require that you participate
in our specialized asset transfer program, under which we may transfer Account
Value between the Permitted Sub-accounts and a fixed interest rate account that
is part of our general account (the "Benefit Fixed Rate Account"). We determine
whether to make a transfer, and the amount of any transfer, under a
non-discretionary formula, discussed below. The Benefit Fixed Rate Account is
available only with this benefit, and thus you may not allocate purchase
payments to that Account.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Account Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to this prospectus). Speaking generally, the formula,
which we apply each business day, operates as follows. The formula starts by
identifying your Protected Withdrawal Value for that day and then multiplies
that figure by 5%, to produce a projected (i.e., hypothetical) Highest Daily
Annual Income Amount. Then, using our actuarial tables, based on paying you the
projected Highest Daily Annual Income Amount each year for the rest of your
life, we produce an estimate of the total amount of our obligation. In the
formula, we refer to that value as the "Target Value" or "L". If you have
already made a withdrawal, your projected Highest Daily Annual Income Amount
(and thus your Target Value) would take into account any automatic step-up
implemented according to the step-up formula described above. Next, the formula
subtracts from the Target Value the amount held within the Benefit Fixed Rate
Account on that day, and divides that difference by the amount held within the
Permitted Sub-accounts. That ratio, which essentially isolates the amount of
your Target Value that is not offset by amounts held within the Benefit Fixed
Rate Account, is called the "Target Ratio" or "r". If the Target Ratio exceeds
a certain percentage (currently 83%), it means essentially that too much Target
Value is not offset by assets within the Benefit Fixed Rate Account, and
therefore we will transfer an amount from your Permitted Sub-accounts to the
Benefit Fixed Rate Account. Conversely, if the Target Ratio falls below a
certain percentage (currently 77%), then a transfer from the Benefit Fixed Rate
Account to the Permitted Sub-accounts would occur.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Liability Ratio.
Moreover, certain market return scenarios involving "flat" returns over a period
7
of time also could result in the transfer of money to the Benefit Fixed Rate
Account. In deciding how much to transfer, we use another formula, which
essentially seeks to re-balance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Liability Ratio meets a target,
which currently is equal to 80%. Once you elect Highest Daily Lifetime Five,
the ratios we use will be fixed. For newly issued contracts that elect Highest
Daily Lifetime Five and existing contracts that elect Highest Daily Lifetime
Five, however, we reserve the right to change the ratios.
While you are not notified when your Annuity reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Account Value either to or from the Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer; or
. If a portion of your Account Value was previously allocated to the
Benefit Fixed Rate Account, transfer all or a portion of those amounts to
the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the Benefit Fixed Rate Account
will be withdrawn for this purpose on a last-in, first-out basis (an
amount renewed into a new guarantee period under the Benefit Fixed Rate
Account will be deemed a new investment for purposes of this last-in,
first-out rule); or
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest
that you earn on such transferred amount will be equal to the annual rate
that we have set for that day, and we will credit the daily equivalent of
that annual interest until the earlier of one year from the date of the
transfer or the date that such amount in the Benefit Fixed Rate Account
is transferred back to the Permitted Sub-accounts.
If a significant amount of your Account Value is systematically transferred to
the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Account Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that a significant portion of your Account Value may be allocated
to the Benefit Fixed Rate Account.
Additional Tax Considerations for Qualified Contracts
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the minimum distribution rules under
the Code require that you begin receiving periodic amounts from your annuity
beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for
which the participant is not a greater than 5 percent owner of the employer,
this required beginning date can generally be deferred to retirement, if later.
Roth IRAs are not subject to these rules during the owner's lifetime. The
amount required under the Code may exceed the Highest Daily Annual Income
Amount, which will cause us to increase the Highest Daily Annual Income Amount
in any Annuity Year that required minimum distributions due from your Annuity
that are greater than such amounts. In addition, the amount and duration of
payments under the annuity payment and death benefit provisions may be adjusted
so that the payments do not trigger any penalty or excise taxes due to tax
considerations such as minimum distribution requirements.
3. CHANGE WITH RESPECT TO CERTAIN PORTFOLIOS OF AMERICAN SKANDIA TRUST
In the "Investment Options" section of the prospectus, we make the following
changes to the chart setting forth a brief description of each variable
investment option, to reflect the following subadviser name change with respect
to one of the variable investment options:
.. AST Small Cap Value Portfolio. Salomon Brothers Asset Management will
change its name to ClearBridge Advisers LLC, effective in December 2006.
In the "Investment Options" section of each prospectus, we revise the
investment objectives/policies section, and portfolio advisor/sub-advisor
section for two Portfolios to read as follows. These new descriptions reflect
the addition of sub-advisors as well as revisions to non-fundamental investment
policies:
AST LSV International Value Portfolio.
8
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
------ ------------------------------------------- --------------------
International AST International Value Portfolio (formerly LSV Asset
Equity AST LSV International Value Portfolio): Management,
seeks capital growth. The Portfolio Thornburg Investment
normally invests at least 80% of the Management, Inc.
Portfolio's investable assets (net assets
plus borrowings made for investment
purposes) in the equity securities of
companies in developed countries outside
the United States that are represented in
the MSCI EAFE Index.
AST William Blair International Growth Portfolio.
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
------ ------------------------------------------------ ---------------
International AST International Growth Portfolio (formerly,AST Marsico Capital
Equity William Blair International Growth Portfolio): Management LLC,
seeks long-term capital appreciation. The William Blair &
Portfolio invests primarily in equity-related Company, LLC
securities of foreign issuers. The Portfolio
invests primarily in the common stock of large
and medium-sized foreign companies, although it
may also invest in companies of all sizes. Under
normal circumstances, the Portfolio invests at
least 65% of its total assets in common stock of
foreign companies operating or based in at least
five different countries, which may include
countries with emerging markets. The Portfolio
looks primarily for stocks of companies whose
earnings are growing at a faster rate than other
companies or which offer attractive growth
potential.
4. WE ADD THE FOLLOWING AS APPENDIX G:
Appendix G
Asset Transfer Formula Under Highest Daily Lifetime Five Benefit
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your Annuity. However, as discussed in the
"Living Benefits" section, we reserve the right to modify this formula with
respect to those who elect Highest Daily Lifetime Five in the future.
Terms and Definitions referenced in the calculation formula:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Valuation Day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of the
guarantee. The factors that we use currently are derived from the a2000
Individual Annuity Mortality Table with an assumed interest rate of 3%.
Each number in the table "a" factors (which appears below) represents a
factor, which when multiplied by the Highest Daily Annual Income Amount,
projects our total liability for the purpose of asset transfers under the
guarantee.
. Q - age based factors used in calculating the target value. These factors
are established on the Effective Date and are not changed for the life of
the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the Annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Account Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - annual income amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, it is 5%
9
Target Value Calculation:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to Benefit Fixed Rate Account.
. If r (less than) C\\l\\, and there are currently assets in the Benefit
Fixed Rate Account (F (greater than) 0), assets in the Benefit Fixed Rate
Account are transferred to the Permitted Sub-accounts.
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T ={Min(V, [L - F - V * C\\t\\] / T(greater than)0, Money moving from
(1-C\\t\\))} the Permitted Sub-accounts to the
Benefit Fixed Rate Account
T ={Min(F, [L - F - V * C\\t\\] / T(less than)0, Money moving from the
(1-C\\t\\))} Benefit Fixed Rate Account to the
Permitted Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L = I * Q * a
= 5000.67 * 1 * 15.34
= 76,710.28
Target Ratio:
r = (L - F) / V
= (76,710.28 - 0) / 92,300.00
= 83.11%
Since r (greater than) Cu ( because 83.11% (greater than) 83%) a transfer into
the Benefit Fixed rate Account occurs.
T = { Min ( V, [ L - F - V * Ct] / ( 1 - Ct))}
= { Min ( 92,300.00, [ 76,710.28 - 0 - 92,300.00 * 0.80] / ( 1 - 0.80))}
= { Min ( 92,300.00, 14,351.40 )}
= 14,351.40
10
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
- --------
* The values set forth in this table are applied to all ages.
11
Supplement to Prospectuses Dated May 1, 2006
Supplement dated November 20, 2006
Supplement dated November 20, 2006 to the May 1, 2006 Prospectus for the
following annuity product: American Skandia XTra Credit/SM/ SIX, as previously
supplemented (the "Prospectus").
This Supplement should be read and retained with the current Prospectus for
your annuity contract issued by American Skandia Life Assurance Corporation
("American Skandia"). If you would like another copy of the current Prospectus,
please contact American Skandia at 1-800-752-6342.
We are issuing this supplement to describe in the Prospectus for the
above-referenced annuity product a new living benefit program, a change to the
CDSC schedule with respect to American Skandia XTra Credit SIX and certain
changes to the underlying mutual funds and the maximum charge with respect to
certain optional benefits. These changes will be effective on or about
November 20, 2006, unless specifically stated otherwise.
1. MAXIMUM CHARGES FOR CERTAIN OPTIONAL BENEFITS
In the Summary of Contract Fees and Charges section of the prospectus, we
revise the line items pertaining to GRO Plus Guaranteed Minimum Income Benefit
Option, Guaranteed Minimum Withdrawal Benefit Option, Highest Daily Value Death
Benefit Option, and combination 5% Roll-Up and HAV Death Benefit Option to read
as follows:
TOTAL
OPTIONAL ANNUAL
BENEFIT CHARGE
FEE/ for
CHARGE ASXT6*
----------------- ------------------
GUARANTEED RETURN OPTION PLUS/SM/ (GRO Plus/SM/)/GUARANTEED RETURN OPTION
(0.75% 1.90% in Annuity
maximum)* Years 1-10;
0.25% Currently 0.90% in Annuity
of average daily Years 11 and
net assets of the later; 1.65% for
Sub-accounts Qualified BCO
GUARANTEED MINIMUM INCOME BENEFIT OPTION (GMIB)**
(1% maximum)* 1.65% in Annuity
0.50% Currently Years 1-10;
per year of the 0.90% in Annuity
average Years 11 and
Protected later PLUS;
Income Value 0.50% per year
during each of average
year; deducted Protected Income
annually in Value
arrears each
Annuity Year
GUARANTEED MINIMUM WITHDRAWAL BENEFIT OPTION (GMWB)**
(1.00% 2.00% in Annuity
maximum)* Years 1-10;
0.35% Currently 1.00% in Annuity
of average daily Years 11 and
net assets of the later; 1.75% for
Sub-accounts Qualified BCO
HIGHEST DAILY VALUE DEATH BENEFIT (HDV)**
(1.00% 2.15% in Annuity
maximum)* Years 1-10;
0.50% Currently 1.15% in Annuity
of average daily Years 9 and later;
net assets of the 1.75% for
Sub-accounts Qualified BCO
COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT**
(1.00% 2.15% in Annuity
maximum)* Years 1-10;
0.50% Currently 1.15% in Annuity
of average daily Years 11 and
net assets of the later;
Sub-accounts
* We reserve the right to increase the charge for this benefit up to a maximum
amount indicated upon a step-up or reset, or for the election of the benefit.
2. NEW INSURANCE FEATURE
We are adding the Highest Daily Lifetime Five/SM/ Income Benefit ("Highest
Daily Lifetime Five"), that guarantees until the death of a single designated
life the ability to withdraw an annual amount equal to a percentage of an
initial principal value regardless of the impact of market performance on the
Account Value. As a result, the following revisions are made to the Prospectus:
A. We revise the Glossary of Terms section as follows:
.. We add a definition for "Benefit Fixed Rate Account", that reads as
follows: "An investment option offered as part of this Annuity that is used
only if you have elected the optional Highest Daily Lifetime Five Benefit.
Amounts allocated to the Benefit Fixed Rate Account earn a fixed rate of
interest, and are held within our general account. You may not allocate
purchase payments to the Benefit Fixed Rate Account. Rather, Account Value
is transferred to the Benefit Fixed Rate Account only under the asset
transfer feature of the Highest Daily Lifetime Five Benefit."
.. We add a definition for "Highest Daily Lifetime Five Benefit" that reads as
follows: "An optional feature available for an additional charge that
guarantees your ability to withdraw amounts equal to a percentage of a
principal value called the Protected Withdrawal Value. Subject to our rules
regarding the timing and amount of withdrawals, we guarantee these
withdrawal amounts, regardless of the impact of market performance on your
Account Value."
B. The following information has been added to "YOUR OPTIONAL BENEFIT FEES AND
CHARGES" table in the "Summary of Contract Fees and Charges" section of the
Prospectus:
TOTAL ANNUAL
CHARGE
OPTIONAL BENEFIT for
FEE/CHARGE XT6*
-------------------------- --------------------------
LIFETIME FIVE***
3.00% (3.00 maximum)** 0.60% 2.25% in Annuity Years 1-
currently of average daily 10; 1.25% in Annuity Years
net assets of the Sub- 11 and later
accounts
SPOUSAL LIFETIME FIVE***
3.00% (3.00 maximum)** 0.75% 2.40% in Annuity Years 1-
currently of average daily 10; 1.40% in Annuity Years
net assets of the Sub- 11 and later
accounts
HIGHEST DAILY LIFETIME FIVE***
3.00% (3.00 maximum)** 0.60% 2.25% in Annuity Years 1-
currently of average daily 10; 1.25% in Annuity Years
net assets of the Sub- 11 and later
accounts
* The Total Annual Charge includes the Insurance Charge and Distribution
Charge (if applicable) assessed against the average daily net assets
allocated to the Sub-accounts. If you elect more than one optional benefit,
the Total Annual Charge would be increased to include the charge for each
optional benefit.
** We reserve the right to increase the charge for Lifetime Five, Spousal
Lifetime Five, and Highest Daily Lifetime Five to a maximum of 3 percent
upon a step-up or for a new election of each such benefit. However, we have
no present intention of increasing the charges for those benefits to that
maximum level.
*** This optional benefit is not available under the Qualified BCO, and is
currently not available in New York.
C. The Highest Daily Lifetime Five program is not available if you elect any
other optional living benefit, therefore all references in the Prospectus
that reflect the availability of the optional living benefits are revised
accordingly.
D. The following description of the new optional living benefit is added as
the last section under "Living Benefit Programs" in the Prospectus:
2
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT
(HIGHEST DAILY LIFETIME FIVE)
The Highest Daily Lifetime Five program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory approval
in those jurisdictions. Certain terms and conditions may differ between
jurisdictions once approved. Highest Daily Lifetime Five is offered as an
alternative to Lifetime Five and Spousal Lifetime Five. Currently, if you elect
Highest Daily Lifetime Five and subsequently terminate the benefit, you will
not be able to re-elect Highest Daily Lifetime Five, and will have a waiting
period until you can elect Spousal Lifetime Five or Lifetime Five.
Specifically, you will be permitted to elect Lifetime Five or Spousal Lifetime
Five only on an anniversary of the Issue Date that is at least 90 calendar days
from the date that Highest Daily Lifetime Five was terminated. We reserve the
right to further limit the election frequency in the future. The income benefit
under Highest Daily Lifetime Five currently is based on a single "designated
life" who is at least 55 years old on the date that the benefit is acquired.
The Highest Daily Lifetime Five Benefit is not available if you elect any other
optional living benefit, although you may elect any optional death benefit
(other than the Highest Daily Value Death Benefit). As long as your Highest
Daily Lifetime Five Benefit is in effect, you must allocate your Account Value
in accordance with the then-permitted and available investment option(s) with
this program.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Highest Daily Life Income
Benefit") equal to a percentage of an initial principal value (the "Protected
Withdrawal Value") regardless of the impact of market performance on the
Account Value, subject to our program rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, and wish to ensure that market performance will
not affect your ability to receive annual payments. You are not required to
make withdrawals as part of the program -- the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. We discuss Highest Daily Lifetime Five in greater detail
immediately below. In addition, please see the Glossary section of this
prospectus for definitions of some of the key terms used with this benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Highest Daily Lifetime Five, and in the Appendices
to this prospectus, we set forth the formula under which we make those asset
transfers.
As discussed below, a key component of Highest Daily Lifetime Five is the
Protected Withdrawal Value, which is an amount that is distinct from Account
Value. Protected Withdrawal Value is used to determine the Highest Daily Annual
Income Amount -- which is an amount that you can take out annually as a
withdrawal for your entire life. Because each of the Protected Withdrawal Value
and Highest Daily Annual Income Amount is determined in a way that is not
solely related to Account Value, it is possible for the Account Value to fall
to zero, even though the Highest Daily Annual Income Amount remains. You are
guaranteed to be able to withdraw the Highest Daily Annual Income Amount for
the rest of your life, provided that you have not made "excess withdrawals."
Excess withdrawals, as discussed below, will reduce your Highest Daily Annual
Income Amount. Thus, you could experience a scenario in which your Account
Value was zero, and, due to your excess withdrawals, your Highest Daily Annual
Income Amount also was reduced to zero. In that scenario, no further amount
would be payable under Highest Daily Lifetime Five.
KEY FEATURE -- Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of the annual
payments under the Highest Daily Life Income Benefit. The Protected Withdrawal
Value initially is equal to the Account Value on the date that you elect
Highest Daily Lifetime Five. On each business day thereafter, until the earlier
of the first withdrawal or ten years after the date of your election of the
benefit, we recalculate the Protected Withdrawal Value. Specifically, on each
such business day (the "Current Valuation Day"), the Protected Withdrawal Value
is equal to the greater of:
. the Protected Withdrawal Value for the immediately preceding business
day (the "Prior Valuation Day"), appreciated at the daily equivalent
of 5% annually during the calendar day(s) between the Prior Valuation
Day and the Current Valuation Day (i.e., one day for successive
business days, but more than one calendar day for business days that
are separated by weekends and/or holidays), plus the amount of any
Purchase Payment (including any associated credit with respect to XT6)
made on the Current Valuation Day; and
. the Account Value.
We cease these daily calculations of the Protected Withdrawal Value when you
make your first withdrawal. However, as discussed below, subsequent Purchase
Payments (and any associated credits for XT6 only) will increase the amount we
guarantee to pay annually under the Highest Daily Life Income Benefit (the
"Highest Daily Annual Income Amount"), while "excess" withdrawals (as described
below) may decrease the Highest Daily Annual Income Amount.
KEY FEATURE -- Highest Daily Annual Income Amount under the Highest Daily
Lifetime Five Benefit
The initial Highest Daily Annual Income Amount is equal to 5% of the Protected
Withdrawal Value. Under the Highest Daily Lifetime Five benefit, if your
cumulative withdrawals in an Annuity Year are less than or equal to the Highest
Daily Annual Income Amount, they will not reduce your Highest Daily Annual
Income Amount in subsequent Annuity Years, but any such withdrawals will
3
reduce the Highest Daily Annual Income Amount on a dollar-for-dollar basis in
that Annuity Year. If your cumulative withdrawals are in excess of the Highest
Daily Annual Income Amount ("Excess Income"), your Highest Daily Annual Income
Amount in subsequent years will be reduced (except with regard to required
minimum distributions) by the result of the ratio of the Excess Income to the
Account Value immediately prior to such withdrawal (see examples of this
calculation below). Reductions include the actual amount of the withdrawal,
including any CDSC that may apply. A Purchase Payment that you make will
increase the then-existing Highest Daily Annual Income Amount by an amount
equal to 5% of the Purchase Payment (including, with respect to XT6, the amount
of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly Auto
Step-Up feature can result in a larger Highest Daily Annual Income Amount if
your Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of this feature starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary after your first withdrawal, we identify the
Account Value on the business days corresponding to the end of each quarter
that (i) is based on your Annuity Year, rather than a calendar year; (ii) is
subsequent to the first withdrawal; and (iii) falls within the immediately
preceding Annuity Year. If the end of any such quarter falls on a holiday or a
weekend, we use the next business day. We multiply each of those quarterly
Account Values by 5%, adjust each such quarterly value for subsequent
withdrawals and purchase payments, and then select the highest of those values.
If the highest of those values exceeds the existing Highest Daily Annual Income
Amount, we replace the existing amount with the new, higher amount. Otherwise,
we leave the existing Highest Daily Annual Income Amount intact. In later
years, (i.e., after the first Annuity Anniversary after the first withdrawal)
we determine whether an automatic step-up should occur on each Annuity
Anniversary, by performing a similar examination of the Account Values on the
end of the four immediately preceding quarters. If, on the date that we
implement a Highest Quarterly Auto Step-Up to your Highest Daily Annual Income
Amount, the charge for Highest Daily Lifetime Five has changed, you may be
subject to the new charge at the time of such step-up. Prior to increasing your
charge for Highest Daily Lifetime Five upon a step-up, we would notify you, and
give you the opportunity to cancel the automatic step-up feature.
The Highest Daily Lifetime Five program does not affect your ability to make
withdrawals under your annuity, or limit your ability to request withdrawals
that exceed the Highest Daily Annual Income Amount. Under Highest Daily
Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than
or equal to the Highest Daily Annual Income Amount, they will not reduce your
Highest Daily Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Highest Daily Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Highest Daily Annual
Income Amount in any Annuity Year, you cannot carry-over the unused portion of
the Highest Daily Annual Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Step-Up are set forth below. The values depicted here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime
Five benefit or any other fees and charges. Assume the following for all three
examples:
. The Issue Date is December 1, 2006
. On May 2, 2007, the client elects Highest Daily Lifetime Five and
takes the first withdrawal under the benefit on the same day.
Dollar-for-dollar reductions
On May 2, 2007, the Protected Withdrawal Value is $120,000, resulting in a
Highest Daily Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500
is withdrawn from the Annuity on this date, the remaining Highest Daily Annual
Income Amount for that Annuity Year (up to and including December 1, 2007) is
$3,500. This is the result of a dollar-for-dollar reduction of the Highest
Daily Annual Income Amount -- $6,000 less $2,500 = $3,500.
Proportional reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Highest Daily
Annual Income Amount for that Annuity Year to $0. The remaining withdrawal
amount -- $1,500 - reduces the Highest Daily Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there were other withdrawals in that Annuity Year, each would
result in another proportional reduction to the Highest Daily Annual Income
Amount).
Here is the calculation:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal -$3,500.00
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $6,000.00
Less ratio of 1.41% -$84.51
Annual Income Amount for future Annuity Years $5,915.49
4
Highest Quarterly Step-Up
On each Annuity Anniversary date, the Highest Daily Annual Income Amount is
stepped-up if 5% of the highest quarterly value since your first withdrawal (or
last Annuity Anniversary in subsequent years), adjusted for excess withdrawals
and additional Purchase Payments, is higher than the Highest Daily Annual
Income Amount, also adjusted for excess withdrawals and additional Purchase
Payments.
Continuing the same example as above, the Highest Daily Annual Income Amount
for this Annuity Year is $6,000. However, the excess withdrawal on August 6
reduces this amount to $5,915.49 for future years (see above). For the next
Annuity Year, the Highest Daily Annual Income Amount will be stepped-up if 5%
of the highest quarterly Account Value, adjusted for withdrawals, is higher
than $5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 Valuation Days occur after the excess withdrawal on
August 6.
Highest Quarterly Value Adjusted Highest Daily
(adjusted with Annual Income Amount (5%
withdrawal and Purchase of the Highest Quarterly
Date* Account value Payments)** Value)
- ----------------- ------------- ----------------------- ------------------------
June 1, 2007 $118,000.00 $118,000.00 $5,900.00
August 6, 2007 $120,000.00 $112,885.55 $5,644.28
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
December 1, 2007 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter - March 1, June 1,
September 1, and December 1. In this example, we do not use the March 1
date as the first withdrawal took place after March 1. The Annuity
Anniversary Date of December 1 is considered the fourth and final quarterly
valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Highest Daily Annual Income Amount
of $5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Highest Daily
Annual Income Amount for the Annuity Year), resulting in an adjusted
Account Value of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio
in the above example which is the excess withdrawal divided by the
Account Value immediately preceding the excess withdrawal) resulting
in a Highest Quarterly Value of $112,885.55.
The adjusted Highest Daily Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this amount
to 5% of the Account Value on September 1. Since the June 1 adjusted Highest
Daily Annual Income Amount of $5,644.28 is higher than $5,600.00 (5% of
$112,000), we continue to carry $5,644.28 forward to the next and final
quarterly anniversary date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than $5,644.28,
the adjusted Highest Daily Annual Income Amount is reset to $5,950.00
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Highest Daily
Annual Income Amount of $5,915.49 adjusted for excess withdrawals, the Highest
Daily Annual Income Amount for the next Annuity Year, starting on December 2,
2007 and continuing through December 1, 2008, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME FIVE PROGRAM
. To the extent that your Account Value was reduced to zero as a result
of cumulative withdrawals that are equal to or less than the Highest
Daily Annual Income Amount and amounts are still payable under the
Highest Daily Life Income Benefit, we will make an additional payment,
if any, for that Annuity Year equal to the remaining Highest Daily
Annual Income Amount for the Annuity Year. Thus, in that scenario, the
remaining Highest Daily Annual Income Amount would be payable even
though your Account Value was reduced to zero. In subsequent Annuity
Years we make payments that equal the Highest
5
Daily Annual Income Amount as described in this section. We will make
payments until the death of the single designated life. To the extent
that cumulative withdrawals in the current Annuity Year that reduced
your Account Value to zero are more than the Highest Daily Annual
Income Amount, the Highest Daily Lifetime Five benefit terminates, and
no additional payments will be made.
. If Annuity payments are to begin under the terms of your Annuity, or
if you decide to begin receiving Annuity payments and there is a
Highest Daily Annual Income Amount due in subsequent Annuity Years,
you can elect one of the following two options:
(1) apply your Account Value to any Annuity option available; or
(2) request that, as of the date Annuity payments are to begin, we
make Annuity payments each year equal to the Highest Daily Annual
Income Amount. We will make payments until the death of the single
designated life.
We must receive your request in a form acceptable to us at our office.
In the absence of an election when mandatory annuity payments are to begin, we
will make annual annuity payments in the form of a single life fixed annuity
with ten payments certain, by applying the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Annuity. The amount
that will be applied to provide such Annuity payments will be the greater of:
(1) the present value of the future Highest Daily Annual Income
Amount payments. Such present value will be calculated using the greater of the
single life fixed annuity rates then currently available or the single life
fixed annuity rates guaranteed in your Annuity; and
(2) the Account Value.
. If no withdrawal was ever taken, we will determine the Protected
Withdrawal Value and calculate the Highest Daily Annual Income Amount
as if you made your first withdrawal on the date the annuity payments
are to begin.
Other Important Considerations
. Withdrawals under the Highest Daily Lifetime Five benefit are subject
to all of the terms and conditions of the Annuity, including any CDSC.
. Withdrawals made while the Highest Daily Lifetime Five program is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. The Highest Daily Lifetime Five program
does not directly affect the Account Value or surrender value, but any
withdrawal will decrease the Account Value by the amount of the
withdrawal (plus any applicable CDSC). If you surrender your Annuity
you will receive the current surrender value.
. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Five
benefit. The Highest Daily Lifetime Five benefit provides a guarantee
that if your Account Value declines due to market performance, you
will be able to receive your Highest Daily Annual Income Amount in the
form of periodic benefit payments. You must allocate your Account
Value in accordance with the then available investment option(s) that
we may permit in order to elect and maintain the Highest Daily
Lifetime Five benefit.
Election of and Designations under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is the
same as the Annuitant, or if the Annuity is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at least
55 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
Highest Daily Lifetime Five can be elected at the time that you purchase your
Annuity. However, with respect to XT6, you may elect this benefit at the time
you purchase your Annuity only if the CDSC schedule for XT6 Annuities issued on
or after November 20, 2006 applies. (See "Summary of Contract Fees and Charges"
section of the Prospectus and section 2 of this Supplement). We also offer
existing owners (i.e., those who have already acquired their Annuity) the
option to elect Highest Daily Lifetime Five after the Issue Date, subject to
our eligibility rules and restrictions. However, for existing Owners of XT6
whose Annuities are subject to the CDSC schedule for Annuities issued prior to
November 20, 2006, this benefit may only be elected on or after the first
anniversary of the Issue Date.
Currently, if you terminate the Highest Daily Lifetime Five benefit, you will
(a) not be permitted to re-elect the benefit and (b) will be allowed to elect
the Spousal Lifetime Five Benefit or the Lifetime Five Income Benefit on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the Highest Daily Lifetime Five Benefit was terminated. We reserve the right to
further limit the
6
election frequency in the future. Before making any such change to the election
frequency, we will provide prior notice to Owners who have an effective Highest
Daily Lifetime Five benefit.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election will
apply as described above. We reserve the right to further limit the frequency
election in the future. The benefit terminates: (i) upon your termination of
the benefit (ii) upon your surrender of the Annuity (iii) upon your election to
begin receiving annuity payments (iv) upon the death of the designated life
(v) if both the Account Value and Highest Daily Annual Income Amount equal zero
or (vi) if you fail to meet our requirements for issuing the benefit.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate Account
Value if you elect Highest Daily Lifetime Five. For purposes of this benefit,
we refer to those permitted sub-accounts as the "Permitted Sub-accounts". A
list of the Permitted Sub-accounts appears in the application form that you
must submit to us in order to elect this benefit. As a requirement of
participating in Highest Daily Lifetime Five, we require that you participate
in our specialized asset transfer program, under which we may transfer Account
Value between the Permitted Sub-accounts and a fixed interest rate account that
is part of our general account (the "Benefit Fixed Rate Account"). We determine
whether to make a transfer, and the amount of any transfer, under a
non-discretionary formula, discussed below. The Benefit Fixed Rate Account is
available only with this benefit, and thus you may not allocate purchase
payments to that Account.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Account Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to this prospectus). Speaking generally, the formula,
which we apply each business day, operates as follows. The formula starts by
identifying your Protected Withdrawal Value for that day and then multiplies
that figure by 5%, to produce a projected (i.e., hypothetical) Highest Daily
Annual Income Amount. Then, using our actuarial tables, based on paying you the
projected Highest Daily Annual Income Amount each year for the rest of your
life, we produce an estimate of the total amount of our obligation. In the
formula, we refer to that value as the "Target Value" or "L". If you have
already made a withdrawal, your projected Highest Daily Annual Income Amount
(and thus your Target Value) would take into account any automatic step-up
implemented according to the step-up formula described above. Next, the formula
subtracts from the Target Value the amount held within the Benefit Fixed Rate
Account on that day, and divides that difference by the amount held within the
Permitted Sub-accounts. That ratio, which essentially isolates the amount of
your Target Value that is not offset by amounts held within the Benefit Fixed
Rate Account, is called the "Target Ratio" or "r". If the Target Ratio exceeds
a certain percentage (currently 83%), it means essentially that too much Target
Value is not offset by assets within the Benefit Fixed Rate Account, and
therefore we will transfer an amount from your Permitted Sub-accounts to the
Benefit Fixed Rate Account. Conversely, if the Target Ratio falls below a
certain percentage (currently 77%), then a transfer from the Benefit Fixed Rate
Account to the Permitted Sub-accounts would occur.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Liability Ratio.
Moreover, certain market return scenarios involving "flat" returns over a
period of time also could result in the transfer of money to the Benefit Fixed
Rate Account. In deciding how much to transfer, we use another formula, which
essentially seeks to re-balance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Liability Ratio meets a target,
which currently is equal to 80%. Once you elect Highest Daily Lifetime Five,
the ratios we use will be fixed. For newly issued contracts that elect Highest
Daily Lifetime Five and existing contracts that elect Highest Daily Lifetime
Five, we reserve the right to change the ratios.
While you are not notified when your Annuity reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Account Value either to or from the Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
7
. Not make any transfer; or
. If a portion of your Account Value was previously allocated to the
Benefit Fixed Rate Account, transfer all or a portion of those amounts
to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro
rata (i.e., in the same proportion as the current balances in your
variable investment options). Amounts taken out of the Benefit Fixed
Rate Account will be withdrawn for this purpose on a last-in,
first-out basis (an amount renewed into a new guarantee period under
the Benefit Fixed Rate Account will be deemed a new investment for
purposes of this last-in, first-out rule); or
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest
that you earn on such transferred amount will be equal to the annual
rate that we have set for that day, and we will credit the daily
equivalent of that annual interest until the earlier of one year from
the date of the transfer or the date that such amount in the Benefit
Fixed Rate Account is transferred back to the Permitted Sub-accounts.
If a significant amount of your Account Value is systematically transferred to
the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Account Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that a significant portion of your Account Value may be allocated
to the Benefit Fixed Rate Account.
Additional Tax Considerations for Qualified Contracts
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the minimum distribution rules under
the Code require that you begin receiving periodic amounts from your annuity
beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for
which the participant is not a greater than 5 percent owner of the employer,
this required beginning date can generally be deferred to retirement, if later.
Roth IRAs are not subject to these rules during the owner's lifetime. The
amount required under the Code may exceed the Highest Daily Annual Income
Amount, which will cause us to increase the Highest Daily Annual Income Amount
in any Annuity Year that required minimum distributions due from your Annuity
that are greater than such amounts. In addition, the amount and duration of
payments under the annuity payment and death benefit provisions may be adjusted
so that the payments do not trigger any penalty or excise taxes due to tax
considerations such as minimum distribution requirements.
2. CHANGE TO THE CDSC SCHEDULE WITH RESPECT TO XT6
A. The list of the "CONTINGENT DEFERRED SALES CHARGES FOR EACH ANNUITY" in the
"Summary of Contract Fees and Charges" section of the Prospectus is replaced
with the following with regard to XT6:
For Annuities issued prior to November 20, 2006, the following schedule applies:
XT6
-----------------------------------------------------------------
Yr.1 Yr.2 Yr.3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+
---- ---- ---- ----- ----- ----- ----- ----- ----- ------ -------
9.0% 9.0% 8.5% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
For Annuities issued on or after November 20, 2006, (subject to state
availability), the following schedule applies*:
XT6
-----------------------------------------------------------------
Yr.1 Yr.2 Yr.3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+
---- ---- ---- ----- ----- ----- ----- ----- ----- ------ -------
9.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
* In jurisdictions that have not yet approved this schedule, the
schedule for Annuities issued prior to November 20, 2006 will apply.
B. Under the "Expense Examples" section of the Prospectus, we add a
parenthetical after XT6 stating "(CDSC schedule for Annuities issued before
November 20, 2006)". In addition, we add a new line item as follows:
IF YOU SURRENDER YOUR ANNUITY IF YOU ANNUITIZE YOUR ANNUITY
AT THE END OF THE APPLICABLE AT THE END OF THE APPLICABLE IF YOU DO NOT SURRENDER
TIME PERIOD: TIME PERIOD: YOUR ANNUITY:
--------------------------- ----------------------------- -------------------------
XT6 (CDSC schedule for $1,479 $2,599 $3,602 $6,025 N/A N/A $3,026 $5,929 $615 $1,831 $3,026 $5,929
Annuities issued on or
after November 20, 2006)
8
C. We revise Appendix F of the Prospectus entitled "Selecting the Variable
Annuity That's Right for You" as follows:
We revise the entry entitled "Withdrawal Charge Schedule" as follows:
(9%,9%,8%,7%,6%,5%,4%,3%,2%,1% for Annuities issued on or after November 20,
2006), and (9%, 9%, 8.5%, 8%, 7%, 6%, 5%, 4%, 3% 2% for Annuities issued prior
to November 20, 2006).
The 0 percent and 6 percent Gross Rate of Return columns for Xtra Credit SIX
assume the CDSC applicable to such Annuities sold prior to November 20, 2006.
In addition to those hypothetical values, we add these values, for Xtra Credit
SIX Annuities sold on or after November 20, 2006, which are subject to a
different CDSC schedule:
0% Gross Rate of Return
APEX II ASAP III Xtra Credit SIX ASL II
------------------ ------------------ ------------------ ------------------
Contract Surrender Contract Surrender Contract Surrender Contract Surrender
Yr Value Value Value Value Value Value Value Value
- -- -------- --------- -------- --------- -------- --------- -------- ---------
1 96,942 88,442 97,335 88,835 103,243 94,243 96,942 96,942
2 93,936 85,936 94,700 87,700 100,044 91,044 93,936 93,936
3 91,021 84,021 92,136 85,636 96,942 88,942 91,021 91,021
4 88,197 82,197 89,640 83,640 93,936 86,936 88,197 88,197
5 85,458 85,458 87,211 82,211 91,022 85,022 85,458 85,458
6 85,470 85,470 85,333 81,333 88,197 83,197 82,804 82,804
7 82,815 82,815 83,019 80,019 85,458 81,458 80,231 80,231
8 80,242 80,242 80,767 78,767 82,804 79,804 77,737 77,737
9 77,748 77,748 79,051 79,051 80,231 78,231 75,320 75,320
10 75,330 75,330 77,371 77,371 77,737 76,737 72,976 72,976
11 72,986 72,986 75,727 75,727 76,083 76,083 70,705 70,705
12 70,714 70,714 74,117 74,117 74,466 74,466 68,503 68,503
13 68,512 68,512 72,541 72,541 72,882 72,882 66,368 66,368
14 66,377 66,377 70,998 70,998 71,332 71,332 64299 64,299
15 64,308 64,308 69,486 69,486 69,813 69,813 62,294 62,294
16 62,302 62,302 68,006 68,006 68,326 68,326 60,350 60,350
17 60,358 60,358 66,557 66,557 66,871 66,871 58,465 58,465
18 58,473 58,473 65,138 65,138 65,445 65,445 56,639 56,639
19 56,647 56,647 63,748 63,748 64,049 64,049 54,868 54,868
20 54,876 54,876 62,387 62,387 62,682 62,682 53,152 53,152
21 53,159 53,159 61,055 61,055 61,344 61,344 51,488 51,488
22 51,495 51,495 59,751 59,751 60,033 60,033 49,876 49,876
23 49,882 49,882 58,473 58,473 58,750 58,750 48,312 48,312
24 48,319 48,319 57,222 57,222 57,493 57,493 46,797 46,797
25 46,803 46,803 55,997 55,997 56,263 56,263 45,328 45,328
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 1.44%
c. No optional death benefits or living benefits elected
d. Annuity was issued on or after November 20, 2006
e. Surrender value assumes surrender 2 days before policy anniversary
6% Gross Rate of Return
APEX II ASAP III Xtra Credit SIX ASL II
------------------ ------------------ ------------------ ------------------
Contract Surrender Contract Surrender Contract Surrender Contract Surrender
Yr Value Value Value Value Value Value Value Value
- -- -------- --------- -------- --------- -------- --------- -------- ---------
1 102,742 94,242 103,159 94,659 109,420 100,420 102,742 102,742
2 105,567 97,567 106,427 99,427 112,393 103,393 105,567 105,567
3 108,470 101,470 109,798 103,298 115,448 107,448 108,470 108,470
4 111,453 105,453 113,276 107,276 118,586 111,586 111,453 111,453
5 114,518 114,518 116,864 111,864 121,811 115,811 114,518 114,518
6 120,492 120,492 121,082 117,082 125,125 120,125 117,667 117,667
7 123,805 123,805 124,917 121,917 128,530 124,530 120,902 120,902
8 127,210 127,210 128,874 126,874 132,028 129,028 124,227 124,227
9 130,708 130,708 133,762 133,762 135,623 133,623 127,643 127,643
10 134,302 134,302 138,838 138,838 139,316 138,316 131,153 131,153
11 137,995 137,995 144,106 144,106 144,562 144,562 134,759 134,759
12 141,789 141,789 149,574 149,574 150,011 150,011 138,465 138465
13 145,688 145,688 155,250 155,250 155,667 155,667 142,272 142,272
14 149,694 149,694 161,141 161,141 161,537 161,537 146,184 146,184
15 153,811 153,811 167,255 167,255 167,631 167,631 150,204 150,204
16 158,040 158,040 173,602 173,602 173,955 173,955 154,334 154,334
17 162,386 162,386 180,189 180,189 180,520 180,520 158,578 158,578
18 166,851 166,851 187,027 187,027 187,333 187,333 162,939 162,939
19 171,439 171,439 194,123 194,123 194,405 194,405 167,419 167,419
20 176,153 176,153 201,489 201,489 201,746 201,746 172,023 172,023
21 180,997 180,997 209,135 209,135 209,365 209,365 176,753 176,753
22 185,974 185,974 217,071 217,071 217,273 217,273 181,613 181,613
23 191,088 191,088 225,307 225,307 225,481 225,481 186,607 186,607
24 196,343 196,343 233,857 233,857 234,000 234,000 191,739 191,739
25 201,742 201,742 242,730 242,730 242,843 242,843 197,011 197,011
9
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 1.44%
c. No optional death benefits or living benefits elected
d. Annuity was issued on or after November 20, 2006
e. Surrender value assumes surrender 2 days before policy anniversary
Finally, we replace each table that depicts the days in which each annuity
product would have the highest surrender value with the following:
In addition, the following charts indicate the days (measured from the Issue
Date) in which each annuity product would have the highest Surrender Value
amongst the products listed given the above assumptions.
0% Gross Rate of Return (After November 20, 2006)
Over 30 Years, days won
Total Days Year Actual Days
----------------------- ----- -----------
APEX II 1459 4-5 1460-1824
6-8 1826-2919
ASAP III 635 9 2936-3284
10 3364-3649
Xtra Credit SIX 7397 5 1825
8-9 2920-2935
9-10 3285-3363
10-30 3650-10950
ASL II 1824 1-5 1-1824
6% Gross Rate of Return (After November 20, 2006)
Over 30 Years, days won
Total Days Year Actual Days
----------------------- ----- -----------
APEX II 364 6 1826-2189
ASAP III 910 9 3245-3284
10 3511-3649
28-30 10220-10950
Xtra Credit SIX 8472 4-5 1205-1825
6-9 2190-3244
9-10 3245-3510
10-28 3650-10219
ASL II 1204 1-4 1-1204
3. CHANGE WITH RESPECT TO CERTAIN PORTFOLIOS OF AMERICAN SKANDIA TRUST
In the "Investment Options" section of the prospectus, we make the following
changes to the chart setting forth a brief description of each variable
investment option, to reflect the following subadviser name change with respect
to one of the variable investment options:
.. AST Small Cap Value Portfolio. Salomon Brothers Asset Management will
change its name to ClearBridge Advisers LLC, effective in December 2006.
10
In the "Investment Options" section of the prospectus, we revise the investment
objectives/policies section, and portfolio advisor/sub-advisor section for two
Portfolios to read as follows. These new descriptions reflect the addition of
sub-advisors as well as revisions to non-fundamental investment policies:
AST LSV International Value Portfolio.
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
- ------------- --------------------------------------------------- ---------------------
International AST International Value Portfolio (formerly LSV Asset Management,
Equity AST LSV International Value Portfolio): seeks Thornburg Investment
capital growth. The Portfolio normally invests at Management, Inc.
least 80% of the Portfolio's investable assets (net
assets plus borrowings made for investment
purposes) in the equity securities of companies in
developed countries outside the United States that
are represented in the MSCI EAFE Index.
AST William Blair International Growth Portfolio.
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
- ------------- ------------------------------------------------------ ---------------
International AST International Growth Portfolio (formerly, AST Marsico Capital
Equity William Blair International Growth Portfolio): seeks Management LLC,
long-term capital appreciation. The Portfolio invests William Blair &
primarily in equity-related securities of foreign Company, LLC
issuers. The Portfolio invests primarily in the
common stock of large and medium-sized foreign
companies, although it may also invest in companies
of all sizes. Under normal circumstances, the
Portfolio invests at least 65% of its total assets in
common stock of foreign companies operating or
based in at least five different countries, which may
include countries with emerging markets. The
Portfolio looks primarily for stocks of companies
whose earnings are growing at a faster rate than other
companies or which offer attractive growth potential.
4. WE ADD THE FOLLOWING AS APPENDIX G:
Appendix G
Asset Transfer Formula Under Highest Daily Lifetime Five Benefit
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your contract. However, as discussed in the
"Living Benefits" section, we reserve the right to modify this formula with
respect to those who elect Highest Daily Lifetime Five in the future. However,
upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your Annuity.
Terms and Definitions referenced in the calculation formula:
.. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
.. C\\t\\ - the target is established on the Effective Date and is not changed
for the life of the guarantee. Currently, it is 80%.
.. C\\l\\ - the lower target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 77%.
.. L - the target value as of the current Valuation Day.
.. r - the target ratio.
.. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of the
guarantee. The factors that we use currently are derived from the a2000
Individual Annuity Mortality Table with an assumed interest rate of 3%.
Each number in the table "a" factors (which appears below) represents a
factor, which when multiplied by the Highest Daily Annual Income Amount,
projects our total liability for the purpose of asset transfers under the
guarantee.
.. Q - age based factors used in calculating the target value. These factors
are established on the Effective Date and are not changed for the life of
the guarantee. The factor is currently set equal to 1.
.. V - the total value of all Permitted Sub-accounts in the Annuity.
11
.. F - the total value of all Benefit Fixed Rate Account allocations.
.. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the first
withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily Annual
Income Amount, the quarterly step-up amount times the annual income
percentage, and the Account Value times the annual income percentage.
.. T - the amount of a transfer into or out of the Benefit Fixed Rate Account.
.. I% - Annual Income Amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee. Currently,
it is 5%
Target Value Calculation:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts
are transferred to Benefit Fixed Rate Account.
. If r (less than) C\\l\\, and there are currently assets in the Benefit
Fixed Rate Account (F (greater than) 0), assets in the Benefit Fixed
Rate Account are transferred to the Permitted Sub-accounts.
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T ={Min(V, [L - F - V * C\\t\\] / (1-C\\t\\))} T(greater than)0, Money moving from the Permitted Sub-accounts to
the Benefit Fixed Rate Account
T ={Min(F, [L - F - V * C\\t\\] / (1-C\\t\\))} T(less than)0, Money moving from the Benefit Fixed Rate Account
to the Permitted Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L = I * Q * a
= 5000.67 * 1 * 15.34
= 76,710.28
Target Ratio:
r = (L - F) / V
= (76,710.28 - 0) / 92,300.00
= 83.11%
Since r (greater than) Cu ( because 83.11% (greater than) 83%) a transfer into
the Benefit Fixed rate Account occurs.
T = { Min ( V, [ L - F - V * Ct] / ( 1 - Ct))}
= { Min ( 92,300.00, [ 76,710.28 - 0 - 92,300.00 * 0.80] / ( 1 - 0.80))}
= { Min ( 92,300.00, 14,351.40 )}
= 14,351.40
12
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
-----------------------------------------------------------------------
Years 1 2 3 4 5 6 7 8 9 10 11 12
- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
13
Supplement to Prospectuses Dated May 1, 2006
Supplement dated November 20, 2006
Supplement dated November 20, 2006 to the May 1, 2006 Prospectuses for the
following annuity products: Optimum and Optimum Four, as previously
supplemented (the "Prospectuses").
This Supplement should be read and retained with the current Prospectus for
your annuity contract issued by American Skandia Life Assurance Corporation
("American Skandia"). This Supplement is intended to update certain information
in the Prospectus for the variable annuity you own, and is not intended to be a
prospectus or offer for any other variable annuity listed here that you do not
own. If you would like another copy of the current Prospectus, please contact
American Skandia at 1-800-752-6342.
We are issuing this supplement to describe in the Prospectus for the
above-referenced annuity products a new living benefit program, certain changes
to the underlying mutual funds and the maximum charge with respect to certain
optional benefits. These changes will be effective on or about November 20,
2006, unless specifically stated otherwise.
1. MAXIMUM CHARGES FOR CERTAIN OPTIONAL BENEFITS
In the Summary of Contract Fees and Charges section of the prospectus, we
revise the line items pertaining to GRO Plus Guaranteed Minimum Income Benefit
Option, Guaranteed Minimum Withdrawal Benefit Option, Highest Daily Value Death
Benefit Option, and combination 5% Roll-Up and HAV Death Benefit Option to read
as follows:
OPTIONAL TOTAL ANNUAL TOTAL ANNUAL
BENEFIT CHARGE CHARGE
FEE/ for for
CHARGE Optimum* Optimum Four*
----------- ------------- -------------
GUARANTEED RETURN OPTION PLUS(SM) (GRO Plus(SM))/GUARANTEED RETURN OPTION
(0.75% 1.50% in 1.90% for
maximum) Annuity Years Qualified BCO
0.25% 1-8; 0.90% in
Currently Annuity Years
of average 9 and later;
daily net 1.65% for
assets of Qualified BCO
the Sub-
accounts
GUARANTEED MINIMUM INCOME BENEFIT OPTION
(1% 1.50% in 1.90% for
maximum) Annuity Years Qualified BCO
0.50% 1-8; 0.90% in
Currently Annuity Years
per year of 9 and later;
the 1.65% for
average Qualified BCO
Protected
Income
Value
during
each year;
deducted
annually
in arrears
each
Annuity
Year
GUARANTEED MINIMUM WITHDRAWAL BENEFIT OPTION (GMWB)**
(1.00% 1.60% in 2.00% for
maximum) Annuity Years Qualified BCO
0.35% 1-8; 0.90% in
Currently Annuity Years
of average 9 and later;
daily net 1.75% for
assets of Qualified BCO
the Sub-
accounts
HIGHEST DAILY VALUE DEATH BENEFIT (HDV)**
(1.00% 1.75% in 2.15%
maximum) Annuity Years
0.50% 1-8; 1.15% in
Currently Annuity Years
of average 9 and later;
daily net 1.75% for
assets of Qualified BCO
the Sub-
accounts
* We reserve the right to increase the charge for this benefit up to a maximum
amount indicated upon a step-up or reset, or for election of the benefit.
1
COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT**
0.50% of 1.75% in 2.15%
average Annuity Years
daily net 1-8; 1.15% in
assets of Annuity Years
the Sub- 9 and later;
accounts 1.75% for
(1.00% Qualified BCO
maximum)
2. NEW INSURANCE FEATURE
We are adding the Highest Daily Lifetime Five(SM) Income Benefit ("Highest
Daily Lifetime Five"), that guarantees until the death of a single
designated life the ability to withdraw an annual amount equal to a
percentage of an initial principal value regardless of the impact of market
performance on the Account Value. As a result, the following revisions are
made to the Prospectus:
A. We revise the Glossary of Terms section as follows:
. We add a definition for "Benefit Fixed Rate Account", that reads as
follows: "An investment option offered as part of this Annuity that is
used only if you have elected the optional Highest Daily Lifetime Five
Benefit. Amounts allocated to the Benefit Fixed Rate Account earn a fixed
rate of interest, and are held within our general account. You may not
allocate purchase payments to the Benefit Fixed Rate Account. Rather,
Account Value is transferred to the Benefit Fixed Rate Account only under
the asset transfer feature of the Highest Daily Lifetime Five Benefit."
. We add a definition for "Highest Daily Lifetime Five Benefit" that reads
as follows: "An optional feature available for an additional charge that
guarantees your ability to withdraw amounts equal to a percentage of a
principal value called the Protected Withdrawal Value. Subject to our
rules regarding the timing and amount of withdrawals, we guarantee these
withdrawal amounts, regardless of the impact of market performance on
your Account Value."
B. The following information has been added to "YOUR OPTIONAL BENEFIT FEES AND
CHARGES" table in the "Summary of Contract Fees and Charges" section of the
Prospectus:
TOTAL ANNUAL
TOTAL ANNUAL CHARGE
OPTIONAL BENEFIT CHARGE for
FEE/ for Optimum
CHARGE Optimum* Four*
----------------- ----------------- ------------
LIFETIME FIVE INCOME
BENEFIT***
MAXIMUM CHARGE FOR LIFETIME 0.60% currently 1.85% in Annuity 2.25%
FIVE ** 3.00% of average daily Years 1-8; 1.25%
net assets of the in Annuity Years
Sub-accounts 9 and later
SPOUSAL LIFETIME FIVE
INCOME BENEFIT***
MAXIMUM CHARGE FOR SPOUSAL 0.75% currently 2.00% in Annuity 2.40%
LIFETIME of average daily Years 1-8; 1.25%
FIVE ** 3.00% net assets of the in Annuity Years
Sub-accounts 9 and later
HIGHEST DAILY LIFETIME FIVE
INCOME BENEFIT***
MAXIMUM CHARGE FOR HIGHEST 0.60% currently 1.85% in Annuity 2.25%
DAILY LIFETIME FIVE* 3.00% of average daily Years 1-8; 1.25%
net assets of the in Annuity Years
Sub-accounts 9 and later
2
- --------
* The Total Annual Charge includes the Insurance Charge and Distribution
Charge (if applicable) assessed against the average daily net assets
allocated to the Sub-accounts. If you elect more than one optional benefit,
the Total Annual Charge would be increased to include the charge for each
optional benefit.
** We reserve the right to increase the charge for Lifetime Five, Spousal
Lifetime Five, and Highest Daily Lifetime Five to a maximum of 3 percent
upon a step-up or for a new election of each such benefit. However, we have
no present intention of increasing the charges for those benefits to that
maximum level.
*** This optional benefit is not available under the Qualified BCO.
C. The Highest Daily Lifetime Five program is not available if you elect
any other optional living benefit, therefore all references in the
Prospectus that reflect the availability of the optional living benefits
are revised accordingly.
D. The following description of the new optional living benefit is added as
the last section under "Living Benefit Programs" in the Prospectus:
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT
(HIGHEST DAILY LIFETIME FIVE)
The Highest Daily Lifetime Five program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory approval
in those jurisdictions. Certain terms and conditions may differ between
jurisdictions once approved. Highest Daily Lifetime Five is offered as an
alternative to Lifetime Five and Spousal Lifetime Five. Currently, if you elect
Highest Daily Lifetime Five and subsequently terminate the benefit, you will
not be able to re-elect Highest Daily Lifetime Five, and will have a waiting
period until you can elect Spousal Lifetime Five or Lifetime Five.
Specifically, you will be permitted to elect Lifetime Five or Spousal Lifetime
Five only on an anniversary of the Issue Date that is at least 90 calendar days
from the date that Highest Daily Lifetime Five was terminated. We reserve the
right to further limit the election frequency in the future. The income benefit
under Highest Daily Lifetime Five currently is based on a single "designated
life" who is at least 55 years old on the date that the benefit is acquired.
The Highest Daily Lifetime Five Benefit is not available if you elect any other
optional living benefit, although you may elect any optional death benefit
(other than the Highest Daily Value Death Benefit). As long as your Highest
Daily Lifetime Five Benefit is in effect, you must allocate your Account Value
in accordance with the then-permitted and available investment option(s) with
this program.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Highest Daily Life Income
Benefit") equal to a percentage of an initial principal value (the "Protected
Withdrawal Value") regardless of the impact of market performance on the
Account Value, subject to our program rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, and wish to ensure that market performance will
not affect your ability to receive annual payments. You are not required to
make withdrawals as part of the program -- the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. We discuss Highest Daily Lifetime Five in greater detail
immediately below. In addition, please see the Glossary section of this
prospectus for definitions of some of the key terms used with this benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Highest Daily Lifetime Five, and in the Appendices
to this prospectus, we set forth the formula under which we make those asset
transfers.
As discussed below, a key component of Highest Daily Lifetime Five is the
Protected Withdrawal Value, which is an amount that is distinct from Account
Value. Protected Withdrawal Value is used to determine the Highest Daily Annual
Income Amount--- which is an amount that you can take out annually as a
withdrawal for your entire life. Because each of the Protected Withdrawal Value
and Highest Daily Annual Income Amount is determined in a way that is not
solely related to Account Value, it is possible for the Account Value to fall
to zero, even though the Highest Daily Annual Income Amount remains. You are
guaranteed to be able to withdraw the Highest Daily Annual Income Amount for
the rest of your life, provided that you have not made "excess withdrawals."
Excess withdrawals, as discussed below, will reduce your Highest Daily Annual
Income Amount. Thus, you could experience a scenario in which your Account
Value was zero, and, due to your excess withdrawals, your Highest Daily Annual
Income Amount also was reduced to zero. In that scenario, no further amount
would be payable under Highest Daily Lifetime Five.
KEY FEATURE -- Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of the annual
payments under the Highest Daily Life Income Benefit. The Protected Withdrawal
Value initially is equal to the Account Value on the date that you elect
Highest Daily Lifetime Five. On each business day thereafter, until the earlier
of the first withdrawal or ten years after the date of your election of the
benefit, we recalculate the Protected Withdrawal Value. Specifically, on each
such business day (the "Current Valuation Day"), the Protected Withdrawal Value
is equal to the greater of:
3
. the Protected Withdrawal Value for the immediately preceding business day
(the "Prior Valuation Day"), appreciated at the daily equivalent of 5%
annually during the calendar day(s) between the Prior Valuation Day and
the Current Valuation Day (i.e., one day for successive business days,
but more than one calendar day for business days that are separated by
weekends and/or holidays), plus the amount of any Purchase Payment made
on the Current Valuation Day; and
. the Account Value.
We cease these daily calculations of the Protected Withdrawal Value when you
make your first withdrawal. However, as discussed below, subsequent Purchase
Payments will increase the amount we guarantee to pay annually under the
Highest Daily Life Income Benefit (the "Highest Daily Annual Income Amount"),
while "excess" withdrawals (as described below) may decrease the Highest Daily
Annual Income Amount.
KEY FEATURE -- Highest Daily Annual Income Amount under the Highest Daily
Lifetime Five Benefit
The initial Highest Daily Annual Income Amount is equal to 5% of the Protected
Withdrawal Value. Under the Highest Daily Lifetime Five benefit, if your
cumulative withdrawals in an Annuity Year are less than or equal to the Highest
Daily Annual Income Amount, they will not reduce your Highest Daily Annual
Income Amount in subsequent Annuity Years, but any such withdrawals will reduce
the Highest Daily Annual Income Amount on a dollar-for-dollar basis in that
Annuity Year. If your cumulative withdrawals are in excess of the Highest Daily
Annual Income Amount ("Excess Income"), your Highest Daily Annual Income Amount
in subsequent years will be reduced (except with regard to required minimum
distributions) by the result of the ratio of the Excess Income to the Account
Value immediately prior to such withdrawal (see examples of this calculation
below). Reductions include the actual amount of the withdrawal, including any
CDSC that may apply. A Purchase Payment that you make will increase the
then-existing Highest Daily Annual Income Amount by an amount equal to 5% of
the Purchase Payment.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly Auto
Step-Up feature can result in a larger Highest Daily Annual Income Amount if
your Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of this feature starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary after your first withdrawal, we identify the
Account Value on the business days corresponding to the end of each quarter
that (i) is based on your Annuity Year, rather than a calendar year; (ii) is
subsequent to the first withdrawal; and (iii) falls within the immediately
preceding Annuity Year. If the end of any such quarter falls on a holiday or a
weekend, we use the next business day. We multiply each of those quarterly
Account Values by 5%, adjust each such quarterly value for subsequent
withdrawals and purchase payments, and then select the highest of those values.
If the highest of those values exceeds the existing Highest Daily Annual Income
Amount, we replace the existing amount with the new, higher amount. Otherwise,
we leave the existing Highest Daily Annual Income Amount intact. In later
years, (i.e., after the first Annuity Anniversary after the first withdrawal)
we determine whether an automatic step-up should occur on each Annuity
Anniversary, by performing a similar examination of the Account Values on the
end of the four immediately preceding quarters. If, on the date that we
implement a Highest Quarterly Auto Step-Up to your Highest Daily Annual Income
Amount, the charge for Highest Daily Lifetime Five has changed, you may be
subject to the new charge at the time of such step-up. Prior to increasing your
charge for Highest Daily Lifetime Five upon a step-up, we would notify you, and
give you the opportunity to cancel the automatic step-up feature.
The Highest Daily Lifetime Five program does not affect your ability to make
withdrawals under your annuity, or limit your ability to request withdrawals
that exceed the Highest Daily Annual Income Amount. Under Highest Daily
Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than
or equal to the Highest Daily Annual Income Amount, they will not reduce your
Highest Daily Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Highest Daily Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Highest Daily Annual
Income Amount in any Annuity Year, you cannot carry-over the unused portion of
the Highest Daily Annual Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Step-Up are set forth below. The values depicted here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime
Five benefit or any other fees and charges. Assume the following for all three
examples:
. The Issue Date is December 1, 2006
. On May 2, 2007, the client elects Highest Daily Lifetime Five and takes
the first withdrawal under the benefit on the same day.
Dollar-for-dollar reductions
On May 2, 2007, the Protected Withdrawal Value is $120,000, resulting in a
Highest Daily Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500
is withdrawn from the Annuity on this date, the remaining Highest Daily Annual
Income Amount for that Annuity Year (up to and including December 1, 2007) is
$3,500. This is the result of a dollar-for-dollar reduction of the Highest
Daily Annual Income Amount -- $6,000 less $2,500 = $3,500.
4
Proportional reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Highest Daily
Annual Income Amount for that Annuity Year to $0. The remaining withdrawal
amount -- $1,500 - reduces the Highest Daily Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there were other withdrawals in that Annuity Year, each would
result in another proportional reduction to the Highest Daily Annual Income
Amount).
Here is the calculation:
Account Value before withdrawal.................................. $110,000.00
Less amount of "non" excess withdrawal........................... -$ 3,500.00
Account Value immediately before excess withdrawal of $1,500..... $106,500.00
Excess withdrawal amount......................................... $ 1,500.00
Divided by Account Value immediately before excess withdrawal.... $106,500.00
Ratio............................................................ 1.41%
Annual Income Amount............................................. $ 6,000.00
Less ratio of 1.41%.............................................. -$ 84.51
Annual Income Amount for future Annuity Years.................... $ 5,915.49
Highest Quarterly Step-Up
On each Annuity Anniversary date, the Highest Daily Annual Income Amount is
stepped-up if 5% of the highest quarterly value since your first withdrawal (or
last Annuity Anniversary in subsequent years), adjusted for excess withdrawals
and additional Purchase Payments, is higher than the Highest Daily Annual
Income Amount, also adjusted for excess withdrawals and additional Purchase
Payments.
Continuing the same example as above, the Highest Daily Annual Income Amount
for this Annuity Year is $6,000. However, the excess withdrawal on August 6
reduces this amount to $5,915.49 for future years (see above). For the next
Annuity Year, the Highest Daily Annual Income Amount will be stepped-up if 5%
of the highest quarterly Account Value, adjusted for withdrawals, is higher
than $5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 Valuation Days occur after the excess withdrawal on
August 6.
Highest Quarterly Value Adjusted Highest Daily
(adjusted with Annual Income Amount
withdrawal and Purchase (5% of the Highest
Date* Account value Payments)** Quarterly Value)
----- ------------- ----------------------- ----------------------
June 1, 2007..... $118,000.00 $118,000.00 $5,900.00
August 6, 2007... $120,000.00 $112,885.55 $5,644.28
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
December 1, 2007. $119,000.00 $119,000.00 $5,950.00
- --------
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not use
the March 1 date as the first withdrawal took place after March 1. The
Annuity Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Highest Daily Annual Income Amount
of $5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Highest Daily Annual
Income Amount for the Annuity Year), resulting in an adjusted Account
Value of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a Highest
Quarterly Value of $112,885.55.
The adjusted Highest Daily Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this amount
to 5% of the Account Value on September 1. Since the June 1 adjusted Highest
Daily Annual Income Amount of $5,644.28 is
5
higher than $5,600.00 (5% of $112,000), we continue to carry $5,644.28 forward
to the next and final quarterly anniversary date of December 1. The Account
Value on December 1 is $119,000 and 5% of this amount is $5,950. Since this is
higher than $5,644.28, the adjusted Highest Daily Annual Income Amount is reset
to $5,950.00
In this example, 5% of the December 1 value yields the highest amount of $
5,950.00. Since this amount is higher than the current year's Highest Daily
Annual Income Amount of $5,915.49 adjusted for excess withdrawals, the Highest
Daily Annual Income Amount for the next Annuity Year, starting on December 2,
2007 and continuing through December 1, 2008, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME FIVE PROGRAM
. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Highest Daily
Annual Income Amount and amounts are still payable under the Highest
Daily Life Income Benefit, we will make an additional payment, if any,
for that Annuity Year equal to the remaining Highest Daily Annual Income
Amount for the Annuity Year. Thus, in that scenario, the remaining
Highest Daily Annual Income Amount would be payable even though your
Account Value was reduced to zero. In subsequent Annuity Years we make
payments that equal the Highest Daily Annual Income Amount as described
in this section. We will make payments until the death of the single
designated life. To the extent that cumulative withdrawals in the
current Annuity Year that reduced your Account Value to zero are more
than the Highest Daily Annual Income Amount, the Highest Daily Lifetime
Five benefit terminates, and no additional payments will be made.
. If Annuity payments are to begin under the terms of your Annuity, or if
you decide to begin receiving Annuity payments and there is a Highest
Daily Annual Income Amount due in subsequent Annuity Years, you can
elect one of the following two options:
(1) apply your Account Value to any Annuity option available; or
(2) request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Highest Daily Annual Income
Amount. We will make payments until the death of the single designated
life.
We must receive your request in a form acceptable to us at our office.
In the absence of an election when mandatory annuity payments are to begin, we
will make annual annuity payments in the form of a single life fixed annuity
with ten payments certain, by applying the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Annuity. The amount
that will be applied to provide such Annuity payments will be the greater of:
(1) the present value of the future Highest Daily Annual Income Amount
payments. Such present value will be calculated using the greater of the single
life fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2) the Account Value.
. If no withdrawal was ever taken, we will determine the Protected
Withdrawal Value and calculate the Highest Daily Annual Income Amount as
if you made your first withdrawal on the date the annuity payments are
to begin.
Other Important Considerations
. Withdrawals under the Highest Daily Lifetime Five benefit are subject to
all of the terms and conditions of the Annuity, including any CDSC.
. Withdrawals made while the Highest Daily Lifetime Five program is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. The Highest Daily Lifetime Five program
does not directly affect the Account Value or surrender value, but any
withdrawal will decrease the Account Value by the amount of the
withdrawal (plus any applicable CDSC). If you surrender your Annuity you
will receive the current surrender value.
. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Five
benefit. The Highest Daily Lifetime Five benefit provides a guarantee
that if your Account Value declines due to market performance, you will
be able to receive your Highest Daily Annual Income Amount in the form
of periodic benefit payments. You must allocate your Account Value in
accordance with the then available investment option(s) that we may
permit in order to elect and maintain the Highest Daily Lifetime Five
benefit.
Election of and Designations under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is the
same as the Annuitant, or if the Annuity is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at least
55 years old.
6
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
Highest Daily Lifetime Five can be elected at the time that you purchase your
Annuity. However, with respect to Optimum Plus, you may elect this benefit at
the time you purchase your Annuity only if the CDSC schedule for Optimum Plus
Annuities issued on or after November 20, 2006 applies. (See "Summary of
Contract Fees and Charges" section of the Prospectus and section 2 of this
Supplement). We also offer existing owners (i.e., those who have already
acquired their Annuity) the option to elect Highest Daily Lifetime Five after
the Issue Date, subject to our eligibility rules and restrictions. However, for
existing Owners of Optimum Plus whose Annuities are subject to the CDSC
schedule for Annuities issued prior to November 20, 2006, this benefit may only
be elected on or after the first anniversary of the Issue Date.
Currently, if you terminate the Highest Daily Lifetime Five benefit, you will
(a) not be permitted to re-elect the benefit and (b) will be allowed to elect
the Spousal Lifetime Five Benefit or the Lifetime Five Income Benefit on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the Highest Daily Lifetime Five Benefit was terminated. We reserve the right to
further limit the election frequency in the future. Before making any such
change to the election frequency, we will provide prior notice to Owners who
have an effective Highest Daily Lifetime Five benefit.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election will
apply as described above. We reserve the right to further limit the frequency
election in the future. The benefit terminates: (i) upon your termination of
the benefit (ii) upon your surrender of the Annuity (iii) upon your election to
begin receiving annuity payments (iv) upon the death of the designated life
(v) if both the Account Value and Highest Daily Annual Income Amount equal zero
or (vi) if you fail to meet our requirements for issuing the benefit.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate Account
Value if you elect Highest Daily Value Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". A list of the Permitted Sub-accounts appears in the application
form that you must submit to us in order to elect this benefit. As a
requirement of participating in Highest Daily Lifetime Five, we require that
you participate in our specialized asset transfer program, under which we may
transfer Account Value between the Permitted Sub-accounts and a fixed interest
rate account that is part of our general account (the "Benefit Fixed Rate
Account"). We determine whether to make a transfer, and the amount of any
transfer, under a non-discretionary formula, discussed below. The Benefit Fixed
Rate Account is available only with this benefit, and thus you may not allocate
purchase payments to that Account.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Account Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to this prospectus). Speaking generally, the formula,
which we apply each business day, operates as follows. The formula starts by
identifying your Protected Withdrawal Value for that day and then multiplies
that figure by 5%, to produce a projected (i.e., hypothetical) Highest Daily
Annual Income Amount. Then, using our actuarial tables, based on paying you the
projected Highest Daily Annual Income Amount each year for the rest of your
life, we produce an estimate of the total amount of our obligation. In the
formula, we refer to that value as the "Target Value" or "L". If you have
already made a withdrawal, your projected Highest Daily Annual Income Amount
(and thus your Target Value) would take into account any automatic step-up
implemented according to the step-up formula described above. Next, the formula
subtracts from the Target Value the amount held within the Benefit Fixed Rate
Account on that day, and divides that difference by the amount held within the
Permitted Sub-accounts. That ratio, which essentially isolates the amount of
your Target Value that is not offset by amounts held within the Benefit Fixed
Rate Account, is called the "Target Ratio" or "r". If the Target Ratio exceeds
a certain percentage (currently 83%), it means essentially that too much Target
Value is not offset by assets within the Benefit Fixed Rate Account, and
therefore we will transfer an amount from your Permitted Sub-accounts to the
Benefit Fixed Rate Account. Conversely, if the Target Ratio falls below a
certain percentage (currently 77%), then a transfer from the Benefit Fixed Rate
Account to the Permitted Sub-accounts would occur.
7
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Liability Ratio.
Moreover, certain market return scenarios involving "flat" returns over a
period of time also could result in the transfer of money to the Benefit Fixed
Rate Account. In deciding how much to transfer, we use another formula, which
essentially seeks to re-balance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Target Ratio meets a target, which
currently is equal to 80%. Once you elect Highest Daily Lifetime Five, the
ratios we use will be fixed. For newly issued contracts that elect Highest
Daily Lifetime Five and existing contracts that elect Highest Daily Lifetime
Five, we reserve the right to change the ratios.
While you are not notified when your Annuity reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Account Value either to or from the Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer; or
. If a portion of your Account Value was previously allocated to the
Benefit Fixed Rate Account, transfer all or a portion of those amounts to
the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the Benefit Fixed Rate Account
will be withdrawn for this purpose on a last-in, first-out basis (an
amount renewed into a new guarantee period under the Benefit Fixed Rate
Account will be deemed a new investment for purposes of this last-in,
first-out rule); or
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest
that you earn on such transferred amount will be equal to the annual rate
that we have set for that day, and we will credit the daily equivalent of
that annual interest until the earlier of one year from the date of the
transfer or the date that such amount in the Benefit Fixed Rate Account
is transferred back to the Permitted Sub-accounts.
If a significant amount of your Account Value is systematically transferred to
the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Account Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that a significant portion of your Account Value may be allocated
to the Benefit Fixed Rate Account.
Additional Tax Considerations for Qualified Contracts
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the minimum distribution rules under
the Code require that you begin receiving periodic amounts from your annuity
beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for
which the participant is not a greater than 5 percent owner of the employer,
this required beginning date can generally be deferred to retirement, if later.
Roth IRAs are not subject to these rules during the owner's lifetime. The
amount required under the Code may exceed the Highest Daily Annual Income
Amount, which will cause us to increase the Highest Daily Annual Income Amount
in any Annuity Year that required minimum distributions due from your Annuity
that are greater than such amounts. In addition, the amount and duration of
payments under the annuity payment and death benefit provisions may be adjusted
so that the payments do not trigger any penalty or excise taxes due to tax
considerations such as minimum distribution requirements.
2. CHANGE WITH RESPECT TO CERTAIN PORTFOLIOS OF AMERICAN SKANDIA TRUST
In the "Investment Options" section of the prospectus, we make the following
changes to the chart setting forth a brief description of each variable
investment option, to reflect the following subadviser name change with respect
to one of the variable investment options:
. AST Small Cap Value Portfolio. Salomon Brothers Asset Management will
change its name to ClearBridge Advisers LLC, effective in December 2006.
In the "Investment Options" section of each prospectus, we revise the
investment objectives/policies section, and portfolio advisor/sub-advisor
section for two Portfolios to read as follows. These new descriptions reflect
the addition of sub-advisors as well as revisions to non-fundamental investment
policies:
8
AST LSV International Value Portfolio.
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
------ ---------------------------------------------------- -----------
International AST International Value Portfolio (formerly AST LSV LSV Asset
Equity International Value Portfolio): seeks capital Management,
growth. The Portfolio normally invests at least 80% Thornburg
of the Portfolio's investable assets (net assets Investment
plus borrowings made for investment purposes) in the Management,
equity securities of companies in developed Inc.
countries outside the United States that are
represented in the MSCI EAFE Index.
AST William Blair International Growth Portfolio.
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
------ ---------------------------------------------------- -----------
International AST International Growth Portfolio (formerly,AST Marsico
Equity William Blair International Growth Portfolio): seeks Capital
long-term capital appreciation. The Portfolio Management
invests primarily in equity-related securities of LLC,
foreign issuers. The Portfolio invests primarily in William
the common stock of large and medium-sized foreign Blair &
companies, although it may also invest in companies Company,
of all sizes. Under normal circumstances, the LLC
Portfolio invests at least 65% of its total assets
in common stock of foreign companies operating or
based in at least five different countries, which
may include countries with emerging markets. The
Portfolio looks primarily for stocks of companies
whose earnings are growing at a faster rate than
other companies or which offer attractive growth
potential.
4. WE ADD THE FOLLOWING AS APPENDIX G:
Appendix G
Asset Transfer Formula Under Highest Daily Lifetime Five Benefit
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your Annuity. However, as discussed in the
"Living Benefits" section, we reserve the right to modify this formula with
respect to those who elect Highest Daily Lifetime Five in the future.
Terms and Definitions referenced in the calculation formula:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Valuation Day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of the
guarantee. The factors that we use currently are derived from the a2000
Individual Annuity Mortality Table with an assumed interest rate of 3%.
Each number in the table "a" factors (which appears below) represents a
factor, which when multiplied by the Highest Daily Annual Income Amount,
projects our total liability for the purpose of asset transfers under the
guarantee.
. Q - age based factors used in calculating the target value. These factors
are established on the Effective Date and are not changed for the life of
the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the Annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Account Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - Annual Income Amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, it is 5%
9
Target Value Calculation:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to Benefit Fixed Rate Account.
. If r (less than) C\\l\\, and there are currently assets in the Benefit
Fixed Rate Account (F (greater than) 0), assets in the Benefit Fixed Rate
Account are transferred to the Permitted Sub-accounts.
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T ={Min(V, [L - F - V * Ct] / (1-Ct))} T(greater than)0, Money moving from
the Permitted Sub-accounts to the
Benefit Fixed Rate Account
T ={Min(F, [L - F - V * Ct] / (1-Ct))} T(less than)0, Money moving from the
Benefit Fixed Rate Account to the
Permitted Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L = I * Q * a
= 5000.67 * 1 * 15.34
= 76,710.28
Target Ratio:
r = (L - F) / V
= (76,710.28 - 0) / 92,300.00
= 83.11%
Since r (greater than) Cu ( because 83.11% (greater than) 83%) a transfer into
the Benefit Fixed rate Account occurs.
T = { Min ( V, [ L - F - V * Ct] / ( 1 - Ct))}
= { Min ( 92,300.00, [ 76,710.28 - 0 - 92,300.00 * 0.80] / ( 1 - 0.80))}
= { Min ( 92,300.00, 14,351.40 )}
= 14,351.40
10
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
- --------
* The values set forth in this table are applied to all ages.
11
Supplement to Prospectuses Dated May 1, 2006
Supplement dated November 20, 2006
Supplement dated November 20, 2006 to the May 1, 2006 Prospectuses for the
following annuity product: Optimum, Plus, as previously supplemented (the
"Prospectus").
This Supplement should be read and retained with the current Prospectus for
your annuity contract issued by American Skandia Life Assurance Corporation
("American Skandia"). If you would like another copy of the current Prospectus,
please contact American Skandia at 1-800-752-6342.
We are issuing this supplement to describe in the Prospectus a new living
benefit program, a change to the CDSC schedule with respect to Optimum Plus and
certain changes to the underlying mutual funds and the maximum charge with
respect to certain optional benefits. These changes will be effective on or
about November 20, 2006, unless specifically stated otherwise.
1. MAXIMUM CHARGES FOR CERTAIN OPTIONAL BENEFITS
In the Summary of Contract Fees and Charges section of the prospectus, we
revise the line item pertaining to GRO Plus to read as follows:
TOTAL
ANNUAL
OPTIONAL CHARGE
BENEFIT for
FEE/ Optimum
CHARGE Plus*
------------------- ----------------
GUARANTEED RETURN OPTION PLUS(SM) (GRO
Plus(SM))/GUARANTEED RETURN OPTION
0.25% of average 1.90% in Annuity
daily net Years
assets 1-10;
of the Sub-accounts 0.90% in
(0.75% Annuity
maximum) Years 11
and
later;
1.65% for
Qualified
BCO
GUARANTEED MINIMUM INCOME BENEFIT OPTION (GMIB)**
0.50% per 1.65% in
year of Annuity
the Years
average 1-10;
Protected 0.90% in
Income Annuity
Value Years 11
during and later
each PLUS;
year; 0.50% per
deducted year of
annually average
in Protected
arrears Income
each Value
Annuity
Year (1%
maximum)
GUARANTEED MINIMUM WITHDRAWAL BENEFIT OPTION
(GMWB)**
0.35% of 2.00% in
average Annuity
daily net Years
assets of 1-10;
the 1.00% in
Sub-accounts Annuity
(1.00% Years 11
maximum) and
later;
1.75% for
Qualified
BCO
HIGHEST DAILY VALUE DEATH BENEFIT (HDV)**
0.50% of 2.15% in
average Annuity
daily net Years
assets of 1-10;
the 1.15% in
Sub-accounts Annuity
(1.00% Years 9
maximum) and
later;
1.75% for
Qualified
BCO
COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT**
(1% 2.15% in
maximum)* Annuity
0.50% Years 1-10;
Currently 1.15% in
of Annuity
average Years 11
daily net and later;
assets of
the
Sub-accounts
* We reserve the right to increase the charge for this benefit up to a maximum
amount indicated upon a step-up or reset, or for the election of the benefit.
2. NEW INSURANCE FEATURE
We are adding the Highest Daily Lifetime Five(SM) Income Benefit ("Highest
Daily Lifetime Five"), that guarantees until the death of a single
designated life the ability to withdraw an annual amount equal to a
percentage of an initial principal value regardless of the impact of market
performance on the Account Value. As a result, the following revisions are
made to the Prospectus:
A. We revise the Glossary of Terms section as follows:
. We add a definition for "Benefit Fixed Rate Account", that reads as
follows: "An investment option offered as part of this Annuity that is
used only if you have elected the optional Highest Daily Lifetime Five
Benefit. Amounts allocated to the Benefit Fixed Rate Account earn a fixed
rate of interest, and are held within our general account. You may not
allocate purchase payments to the Benefit Fixed Rate Account. Rather,
Account Value is transferred to the Benefit Fixed Rate Account only under
the asset transfer feature of the Highest Daily Lifetime Five Benefit."
. We add a definition for "Highest Daily Lifetime Five Benefit" that reads
as follows: "An optional feature available for an additional charge that
guarantees your ability to withdraw amounts equal to a percentage of a
principal value called the Protected Withdrawal Value. Subject to our
rules regarding the timing and amount of withdrawals, we guarantee these
withdrawal amounts, regardless of the impact of market performance on
your Account Value."
B. The following information has been added to "YOUR OPTIONAL BENEFIT FEES
AND CHARGES" table in the "Summary of Contract Fees and Charges" section
of the Prospectus:
TOTAL ANNUAL
CHARGE
OPTIONAL BENEFIT for
FEE/CHARGE Optimum Plus*
------------------- -------------------
LIFETIME FIVE***
(3.00 maximum)** 2.25% in Annuity
0.60% currently of Years 1-10; 1.25%
average daily net in Annuity Years 11
assets of the and later
Sub-accounts
SPOUSAL LIFETIME FIVE***
(3.00 maximum)** 2.40% in Annuity
0.75% currently of Years 1-10; 1.40%
average daily net in Annuity Years 11
assets of the and later
Sub-accounts
HIGHEST DAILY LIFETIME FIVE***
(3.00 maximum)** 2.25% in Annuity
0.60% currently of Years 1-10; 1.25%
average daily net in Annuity Years 11
assets of the and later
Sub-accounts
- --------
* The Total Annual Charge includes the Insurance Charge and Distribution
Charge (if applicable) assessed against the average daily net assets
allocated to the Sub-accounts. If you elect more than one optional benefit,
the Total Annual Charge would be increased to include the charge for each
optional benefit.
** We reserve the right to increase the charge for Lifetime Five, Spousal
Lifetime Five, and Highest Daily Lifetime Five to a maximum of 3 percent
upon a step-up or for a new election of each such benefit. However, we have
no present intention of increasing the charges for those benefits to that
maximum level.
*** This optional benefit is not available under the Qualified BCO.
C. The Highest Daily Lifetime Five program is not available if you elect
any other optional living benefit, therefore all references in the
Prospectus that reflect the availability of the optional living benefits
are revised accordingly.
D. The following description of the new optional living benefit is added as
the last section under "Living Benefit Programs" in the Prospectus:
2
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT
(HIGHEST DAILY LIFETIME FIVE)
The Highest Daily Lifetime Five program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory approval
in those jurisdictions. Certain terms and conditions may differ between
jurisdictions once approved. Highest Daily Lifetime Five is offered as an
alternative to Lifetime Five and Spousal Lifetime Five. Currently, if you elect
Highest Daily Lifetime Five and subsequently terminate the benefit, you will
not be able to re-elect Highest Daily Lifetime Five, and will have a waiting
period until you can elect Spousal Lifetime Five or Lifetime Five.
Specifically, you will be permitted to elect Lifetime Five or Spousal Lifetime
Five only on an anniversary of the Issue Date that is at least 90 calendar days
from the date that Highest Daily Lifetime Five was terminated. We reserve the
right to further limit the election frequency in the future. The income benefit
under Highest Daily Lifetime Five currently is based on a single "designated
life" who is at least 55 years old on the date that the benefit is acquired.
The Highest Daily Lifetime Five Benefit is not available if you elect any other
optional living benefit, although you may elect any optional death benefit
(other than the Highest Daily Value Death Benefit). As long as your Highest
Daily Lifetime Five Benefit is in effect, you must allocate your Account Value
in accordance with the then-permitted and available investment option(s) with
this program.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Highest Daily Life Income
Benefit") equal to a percentage of an initial principal value (the "Protected
Withdrawal Value") regardless of the impact of market performance on the
Account Value, subject to our program rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, and wish to ensure that market performance will
not affect your ability to receive annual payments. You are not required to
make withdrawals as part of the program -- the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. We discuss Highest Daily Lifetime Five in greater detail
immediately below. In addition, please see the Glossary section of this
prospectus for definitions of some of the key terms used with this benefit. As
discussed below, we require that you participate in our asset transfer program
in order to participate in Highest Daily Lifetime Five, and in the Appendices
to this prospectus, we set forth the formula under which we make those asset
transfers.
As discussed below, a key component of Highest Daily Lifetime Five is the
Protected Withdrawal Value, which is an amount that is distinct from Account
Value. Protected Withdrawal Value is used to determine the Highest Daily Annual
Income Amount -- which is an amount that you can take out annually as a
withdrawal for your entire life. Because each of the Protected Withdrawal Value
and Highest Daily Annual Income Amount is determined in a way that is not
solely related to Account Value, it is possible for the Account Value to fall
to zero, even though the Highest Daily Annual Income Amount remains. You are
guaranteed to be able to withdraw the Highest Daily Annual Income Amount for
the rest of your life, provided that you have not made "excess withdrawals."
Excess withdrawals, as discussed below, will reduce your Highest Daily Annual
Income Amount. Thus, you could experience a scenario in which your Account
Value was zero, and, due to your excess withdrawals, your Highest Daily Annual
Income Amount also was reduced to zero. In that scenario, no further amount
would be payable under Highest Daily Lifetime Five.
KEY FEATURE -- Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of the annual
payments under the Highest Daily Life Income Benefit. The Protected Withdrawal
Value initially is equal to the Account Value on the date that you elect
Highest Daily Lifetime Five. On each business day thereafter, until the earlier
of the first withdrawal or ten years after the date of your election of the
benefit, we recalculate the Protected Withdrawal Value. Specifically, on each
such business day (the "Current Valuation Day"), the Protected Withdrawal Value
is equal to the greater of:
. the Protected Withdrawal Value for the immediately preceding business
day (the "Prior Valuation Day"), appreciated at the daily equivalent
of 5% annually during the calendar day(s) between the Prior Valuation
Day and the Current Valuation Day (i.e., one day for successive
business days, but more than one calendar day for business days that
are separated by weekends and/or holidays), plus the amount of any
Purchase Payment (including any associated credit with respect to
Optimum Plus) made on the Current Valuation Day; and
. the Account Value.
We cease these daily calculations of the Protected Withdrawal Value when you
make your first withdrawal. However, as discussed below, subsequent Purchase
Payments (and any associated credits for Optimum Plus only) will increase the
amount we guarantee to pay annually under the Highest Daily Life Income Benefit
(the "Highest Daily Annual Income Amount"), while "excess" withdrawals (as
described below) may decrease the Highest Daily Annual Income Amount.
KEY FEATURE -- Highest Daily Annual Income Amount under the Highest Daily
Lifetime Five Benefit
The initial Highest Daily Annual Income Amount is equal to 5% of the Protected
Withdrawal Value. Under the Highest Daily Lifetime Five benefit, if your
cumulative withdrawals in an Annuity Year are less than or equal to the Highest
Daily Annual Income Amount, they will not reduce your Highest Daily Annual
Income Amount in subsequent Annuity Years, but any such withdrawals will
3
reduce the Highest Daily Annual Income Amount on a dollar-for-dollar basis in
that Annuity Year. If your cumulative withdrawals are in excess of the Highest
Daily Annual Income Amount ("Excess Income"), your Highest Daily Annual Income
Amount in subsequent years will be reduced (except with regard to required
minimum distributions) by the result of the ratio of the Excess Income to the
Account Value immediately prior to such withdrawal (see examples of this
calculation below). Reductions include the actual amount of the withdrawal,
including any CDSC that may apply. A Purchase Payment that you make will
increase the then-existing Highest Daily Annual Income Amount by an amount
equal to 5% of the Purchase Payment (including, with respect to Optimum Plus,
the amount of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly Auto
Step-Up feature can result in a larger Highest Daily Annual Income Amount if
your Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of this feature starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary after your first withdrawal, we identify the
Account Value on the business days corresponding to the end of each quarter
that (i) is based on your Annuity Year, rather than a calendar year; (ii) is
subsequent to the first withdrawal; and (iii) falls within the immediately
preceding Annuity Year. If the end of any such quarter falls on a holiday or a
weekend, we use the next business day. We multiply each of those quarterly
Account Values by 5%, adjust each such quarterly value for subsequent
withdrawals and purchase payments, and then select the highest of those values.
If the highest of those values exceeds the existing Highest Daily Annual Income
Amount, we replace the existing amount with the new, higher amount. Otherwise,
we leave the existing Highest Daily Annual Income Amount intact. In later
years, (i.e., after the first Annuity Anniversary after the first withdrawal)
we determine whether an automatic step-up should occur on each Annuity
Anniversary, by performing a similar examination of the Account Values on the
end of the four immediately preceding quarters. If, on the date that we
implement a Highest Quarterly Auto Step-Up to your Highest Daily Annual Income
Amount, the charge for Highest Daily Lifetime Five has changed, you may be
subject to the new charge at the time of such step-up. Prior to increasing your
charge for Highest Daily Lifetime Five upon a step-up, we would notify you, and
give you the opportunity to cancel the automatic step-up feature.
The Highest Daily Lifetime Five program does not affect your ability to make
withdrawals under your annuity, or limit your ability to request withdrawals
that exceed the Highest Daily Annual Income Amount. Under Highest Daily
Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than
or equal to the Highest Daily Annual Income Amount, they will not reduce your
Highest Daily Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Highest Daily Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Highest Daily Annual
Income Amount in any Annuity Year, you cannot carry-over the unused portion of
the Highest Daily Annual Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Step-Up are set forth below. The values depicted here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime
Five benefit or any other fees and charges. Assume the following for all three
examples:
. The Issue Date is December 1, 2006
. On May 2, 2007, the client elects Highest Daily Lifetime Five and takes
the first withdrawal under the benefit on the same day.
Dollar-for-dollar reductions
On May 2, 2007, the Protected Withdrawal Value is $120,000, resulting in a
Highest Daily Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500
is withdrawn from the Annuity on this date, the remaining Highest Daily Annual
Income Amount for that Annuity Year (up to and including December 1, 2007) is
$3,500. This is the result of a dollar-for-dollar reduction of the Highest
Daily Annual Income Amount -- $6,000 less $2,500 = $3,500.
Proportional reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Highest Daily
Annual Income Amount for that Annuity Year to $0. The remaining withdrawal
amount -- $1,500 - reduces the Highest Daily Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there were other withdrawals in that Annuity Year, each would
result in another proportional reduction to the Highest Daily Annual Income
Amount).
4
Here is the calculation:
Account Value before withdrawal.................................. $110,000.00
Less amount of "non" excess withdrawal........................... -$ 3,500.00
Account Value immediately before excess withdrawal of $1,500..... $106,500.00
Excess withdrawal amount......................................... $ 1,500.00
Divided by Account Value immediately before excess withdrawal.... $106,500.00
Ratio............................................................ 1.41%
Annual Income Amount............................................. $ 6,000.00
Less ratio of 1.41%.............................................. -$ 84.51
Annual Income Amount for future Annuity Years.................... $ 5,915.49
Highest Quarterly Step-Up
On each Annuity Anniversary date, the Highest Daily Annual Income Amount is
stepped-up if 5% of the highest quarterly value since your first withdrawal (or
last Annuity Anniversary in subsequent years), adjusted for excess withdrawals
and additional Purchase Payments, is higher than the Highest Daily Annual
Income Amount, also adjusted for excess withdrawals and additional Purchase
Payments.
Continuing the same example as above, the Highest Daily Annual Income Amount
for this Annuity Year is $6,000. However, the excess withdrawal on August 6
reduces this amount to $5,915.49 for future years (see above). For the next
Annuity Year, the Highest Daily Annual Income Amount will be stepped-up if 5%
of the highest quarterly Account Value, adjusted for withdrawals, is higher
than $5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 Valuation Days occur after the excess withdrawal on
August 6.
Adjusted
Highest
Daily
Highest Annual
Quarterly Income
Value Amount
(adjusted with (5% of the
withdrawal Highest
and Purchase Quarterly
Date* Account value Payments)** Value)
- ----- ------------- -------------- ----------
June 1, 2007.......................... $118,000.00 $118,000.00 $5,900.00
August 6, 2007........................ $120,000.00 $112,885.55 $5,644.28
September 1, 2007..................... $112,000.00 $112,885.55 $5,644.28
December 1, 2007...................... $119,000.00 $119,000.00 $5,950.00
- --------
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Annuity Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Highest Daily Annual Income Amount
of $5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Highest Daily Annual
Income Amount for the Annuity Year), resulting in an adjusted Account
Value of $114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a Highest
Quarterly Value of $112,885.55.
The adjusted Highest Daily Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this amount
to 5% of the Account Value on September 1. Since the June 1 adjusted Highest
Daily Annual Income Amount of $5,644.28 is higher than $5,600.00 (5% of
$112,000), we continue to carry $5,644.28 forward to the next and final
quarterly anniversary date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than $5,644.28,
the adjusted Highest Daily Annual Income Amount is reset to $5,950.00
In this example, 5% of the December 1 value yields the highest amount of $
5,950.00. Since this amount is higher than the current year's Highest Daily
Annual Income Amount of $5,915.49 adjusted for excess withdrawals, the Highest
Daily Annual Income Amount for the next Annuity Year, starting on December 2,
2007 and continuing through December 1, 2008, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME FIVE PROGRAM
. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Highest Daily
Annual Income Amount and amounts are still payable under the Highest
Daily Life Income Benefit, we will make an additional payment, if any,
for that Annuity Year equal to the remaining Highest Daily Annual Income
Amount for the Annuity Year. Thus, in that scenario, the remaining
Highest Daily Annual Income Amount would be payable even though your
Account Value was reduced to zero. In subsequent Annuity Years we make
payments that equal the Highest
5
Daily Annual Income Amount as described in this section. We will make
payments until the death of the single designated life. To the extent
that cumulative withdrawals in the current Annuity Year that reduced your
Account Value to zero are more than the Highest Daily Annual Income
Amount, the Highest Daily Lifetime Five benefit terminates, and no
additional payments will be made.
. If Annuity payments are to begin under the terms of your Annuity, or if
you decide to begin receiving Annuity payments and there is a Highest
Daily Annual Income Amount due in subsequent Annuity Years, you can elect
one of the following two options:
(1) apply your Account Value to any Annuity option available; or
(2) request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Highest Daily Annual Income
Amount. We will make payments until the death of the single designated
life.
We must receive your request in a form acceptable to us at our office.
In the absence of an election when mandatory annuity payments are to begin, we
will make annual annuity payments in the form of a single life fixed annuity
with ten payments certain, by applying the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Annuity. The amount
that will be applied to provide such Annuity payments will be the greater of:
(1) the present value of the future Highest Daily Annual Income Amount
payments. Such present value will be calculated using the greater of the single
life fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2) the Account Value.
. If no withdrawal was ever taken, we will determine the Protected
Withdrawal Value and calculate the Highest Daily Annual Income Amount as
if you made your first withdrawal on the date the annuity payments are to
begin.
Other Important Considerations
. Withdrawals under the Highest Daily Lifetime Five benefit are subject to
all of the terms and conditions of the Annuity, including any CDSC.
. Withdrawals made while the Highest Daily Lifetime Five program is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. The Highest Daily Lifetime Five program
does not directly affect the Account Value or surrender value, but any
withdrawal will decrease the Account Value by the amount of the
withdrawal (plus any applicable CDSC). If you surrender your Annuity you
will receive the current surrender value.
. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Five
benefit. The Highest Daily Lifetime Five benefit provides a guarantee
that if your Account Value declines due to market performance, you will
be able to receive your Highest Daily Annual Income Amount in the form of
periodic benefit payments. You must allocate your Account Value in
accordance with the then available investment option(s) that we may
permit in order to elect and maintain the Highest Daily Lifetime Five
benefit.
Election of and Designations under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is the
same as the Annuitant, or if the Annuity is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at least
55 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
Highest Daily Lifetime Five can be elected at the time that you purchase your
Annuity. However, with respect to Optimum Plus, you may elect this benefit at
the time you purchase your Annuity only if the CDSC schedule for Optimum Plus
Annuities issued on or after November 20, 2006 applies. (See "Summary of
Contract Fees and Charges" section of the Prospectus and section 2 of this
Supplement). We also offer existing owners (i.e., those who have already
acquired their Annuity) the option to elect Highest Daily Lifetime Five after
the Issue Date, subject to our eligibility rules and restrictions. However, for
existing Owners of Optimum Plus whose Annuities are subject to the CDSC
schedule for Annuities issued prior to November 20, 2006, this benefit may only
be elected on or after the first anniversary of the Issue Date.
Currently, if you terminate the Highest Daily Lifetime Five benefit, you will
(a) not be permitted to re-elect the benefit and (b) will be allowed to elect
the Spousal Lifetime Five Benefit or the Lifetime Five Income Benefit on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the Highest Daily Lifetime Five Benefit was terminated. We reserve the right to
further limit the election frequency in the future. Before making any such
change to the election frequency, we will provide prior notice to Owners who
have an effective Highest Daily Lifetime Five benefit.
6
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate the
benefit, any guarantee provided by the benefit will terminate as of the date
the termination is effective, and certain restrictions on re-election will
apply as described above. We reserve the right to further limit the frequency
election in the future. The benefit terminates: (i) upon your termination of
the benefit (ii) upon your surrender of the Annuity (iii) upon your election to
begin receiving annuity payments (iv) upon the death of the designated life
(v) if both the Account Value and Highest Daily Annual Income Amount equal zero
or (vi) if you fail to meet our requirements for issuing the benefit.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate Account
Value if you elect Highest Daily Value Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". A list of the Permitted Sub-accounts appears in the application
form that you must submit to us in order to elect this benefit. As a
requirement of participating in Highest Daily Lifetime Five, we require that
you participate in our specialized asset transfer program, under which we may
transfer Account Value between the Permitted Sub-accounts and a fixed interest
rate account that is part of our general account (the "Benefit Fixed Rate
Account"). We determine whether to make a transfer, and the amount of any
transfer, under a non-discretionary formula, discussed below. The Benefit Fixed
Rate Account is available only with this benefit, and thus you may not allocate
purchase payments to that Account.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Account Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to this prospectus). Speaking generally, the formula,
which we apply each business day, operates as follows. The formula starts by
identifying your Protected Withdrawal Value for that day and then multiplies
that figure by 5%, to produce a projected (i.e., hypothetical) Highest Daily
Annual Income Amount. Then, using our actuarial tables, based on paying you the
projected Highest Daily Annual Income Amount each year for the rest of your
life, we produce an estimate of the total amount of our obligation. In the
formula, we refer to that value as the "Target Value" or "L". If you have
already made a withdrawal, your projected Highest Daily Annual Income Amount
(and thus your Target Value) would take into account any automatic step-up
implemented according to the step-up formula described above. Next, the formula
subtracts from the Target Value the amount held within the Benefit Fixed Rate
Account on that day, and divides that difference by the amount held within the
Permitted Sub-accounts. That ratio, which essentially isolates the amount of
your Target Value that is not offset by amounts held within the Benefit Fixed
Rate Account, is called the "Target Ratio" or "r". If the Target Ratio exceeds
a certain percentage (currently 83%), it means essentially that too much Target
Value is not offset by assets within the Benefit Fixed Rate Account, and
therefore we will transfer an amount from your Permitted Sub-accounts to the
Benefit Fixed Rate Account. Conversely, if the Target Ratio falls below a
certain percentage (currently 77%), then a transfer from the Benefit Fixed Rate
Account to the Permitted Sub-accounts would occur.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Liability Ratio.
Moreover, certain market return scenarios involving "flat" returns over a
period of time also could result in the transfer of money to the Benefit Fixed
Rate Account. In deciding how much to transfer, we use another formula, which
essentially seeks to re-balance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Target Ratio meets a target, which
currently is equal to 80%. Once you elect Highest Daily Lifetime Five, the
ratios we use will be fixed. For contracts issued in the future that elect
Highest Daily Lifetime Five, however, we reserve the right to change the ratios.
While you are not notified when your Annuity reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Account Value either to or from the Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
7
. Not make any transfer; or
. If a portion of your Account Value was previously allocated to the
Benefit Fixed Rate Account, transfer all or a portion of those amounts to
the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the Benefit Fixed Rate Account
will be withdrawn for this purpose on a last-in, first-out basis (an
amount renewed into a new guarantee period under the Benefit Fixed Rate
Account will be deemed a new investment for purposes of this last-in,
first-out rule); or
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest
that you earn on such transferred amount will be equal to the annual rate
that we have set for that day, and we will credit the daily equivalent of
that annual interest until the earlier of one year from the date of the
transfer or the date that such amount in the Benefit Fixed Rate Account
is transferred back to the Permitted Sub-accounts.
If a significant amount of your Account Value is systematically transferred to
the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Account Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that a significant portion of your Account Value may be allocated
to the Benefit Fixed Rate Account.
Additional Tax Considerations for Qualified Contracts
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the minimum distribution rules under
the Code require that you begin receiving periodic amounts from your annuity
beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for
which the participant is not a greater than 5 percent owner of the employer,
this required beginning date can generally be deferred to retirement, if later.
Roth IRAs are not subject to these rules during the owner's lifetime. The
amount required under the Code may exceed the Highest Daily Annual Income
Amount, which will cause us to increase the Highest Daily Annual Income Amount
in any Annuity Year that required minimum distributions due from your Annuity
that are greater than such amounts. In addition, the amount and duration of
payments under the annuity payment and death benefit provisions may be adjusted
so that the payments do not trigger any penalty or excise taxes due to tax
considerations such as minimum distribution requirements.
2. CHANGE TO THE CDSC SCHEDULE WITH RESPECT TO OPTIMUM PLUS
A. The list of the "CONTINGENT DEFERRED SALES CHARGES FOR EACH ANNUITY" in the
"Summary of Contract Fees and Charges" section of the Prospectus is replaced
with the following with regard to Optimum Plus:
For Annuities issued prior to November 20, 2006, the following schedule applies:
Optimum Plus
------------
Yr.1 Yr.2 Yr.3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+
- ---- ---- ---- ----- ----- ----- ----- ----- ----- ------ -------
9.0% 9.0% 8.5% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
For Annuities issued on or after November 20, 2006, (subject to state
availability), the following schedule applies*:
Optimum Plus
------------
Yr.1 Yr.2 Yr.3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+
- ---- ---- ---- ----- ----- ----- ----- ----- ----- ------ -------
9.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
- --------
* In jurisdictions that have not yet approved this schedule, the schedule for
Annuities issued prior to November 20, 2006 will apply.
B. Under the "Expense Examples" section of the Prospectus, we add a
parenthetical after Optimum Plus stating "(CDSC schedule for Annuities issued
before November 20, 2006)". In addition, we add a new line item as follows:
IF YOU SURRENDER YOUR ANNUITY IF YOU ANNUITIZE YOUR ANNUITY
AT THE END OF THE APPLICABLE AT THE END OF THE APPLICABLE IF YOU DO NOT SURRENDER YOUR
TIME PERIOD: TIME PERIOD: ANNUITY:
--------------------------- ----------------------------- -------------------------
Optimum Plus.............. $1,354 $2,243 $3,043 $5,079 N/A N/A $2,467 $4,983 $490 $1,475 $2,467 $4,983
(CDSC schedule for
Annuities issued on or
after November 20, 2006)
8
C. We revise Appendix F of the Prospectus entitled "Selecting the Variable
Annuity That's Right for You" as follows:
For Optimum Plus, we revise the entry entitled "Withdrawal Charge Schedule" as
follows: (9%,9%,8%,7%,6%,5%,4%,3%,2%,1% for Annuities issued on or after
November 20, 2006), and (9%, 9%, 8.5%, 8%, 7%, 6%, 5%, 4%, 3% 2% for Annuities
issued prior to November 20, 2006).
The 0 percent and 6 percent Gross Rate of Return columns for Optimum Plus
assume the CDSC applicable to such Annuities sold prior to November 20, 2006.
In addition to those hypothetical values, we add these values, for Optimum Plus
Annuities sold on or after November 20, 2006, which are subject to a different
CDSC schedule:
0% Gross Rate of Return
Optimum 4 Optimum Optimum Plus
------------------ ------------------ ------------------
Contract Surrender Contract Surrender Contract Surrender
Value Value Value Value Value Value
-------- --------- -------- --------- -------- ---------
1 97,383 88,883 97,778 90,278 103,713 94,713
2 94,794 86,794 95,566 88,566 100,958 91,958
3 92,273 85,273 93,403 86,903 98,275 90,275
4 89,818 83,818 91,288 85,288 95,663 88,663
5 87,428 87,428 89,220 84,220 93,119 87,119
6 87,778 87,778 87,687 83,687 90,642 85,642
7 85,441 85,441 85,700 82,700 88,229 84,229
8 83,165 83,165 83,757 81,757 85,880 82,880
9 80,949 80,949 82,353 82,353 83,593 81,593
10 78,791 78,791 80,973 80,973 81,366 80,366
11 76,690 76,690 79,616 79,616 80,000 80,000
12 74,643 74,643 78,281 78,281 78,659 78,659
13 72,651 72,651 76,968 76,968 77,339 77,339
14 70,711 70,711 75,676 75,676 76,042 76,042
15 68,821 68,821 74,405 74,405 74,765 74,765
16 66,982 66,982 73,155 73,155 73,509 73,509
17 65,190 65,190 71,926 71,926 72,274 72,274
18 63,446 63,446 70,716 70,716 71,059 71,059
19 61,747 61,747 69,527 69,527 69,864 69,864
20 60,093 60,093 68,357 68,357 68,688 68,688
21 58,482 58,482 67,205 67,205 67,531 67,531
22 56,914 56,914 66,073 66,073 66,394 66,394
23 55,386 55,386 64,959 64,959 65,275 65,275
24 53,899 53,899 63,864 63,864 64,174 64,174
25 52,451 52,451 62,786 62,786 63,091 63,091
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.99%
c. No optional death benefits or living benefits elected
d. Annuity was issued on or after November 20, 2006
e. Surrender value assumes surrender 2 days before policy anniversary
9
6% Gross Rate of Return
Optimum 4 Optimum Optimum Plus
------------------ ---------------- ------------------
Contract Surrender Contract Surr Contract Surrender
Value Value Value Value Value Value
-------- --------- -------- ------- -------- ---------
1 103,210 94,710 103,629 96,129 109,919 100,919
2 106,532 98,532 107,399 100,399 113,421 104,421
3 109,961 102,961 111,307 104,807 117,035 109,035
4 113,501 107,501 115,357 109,357 120,767 113,767
5 117,154 117,154 119,555 114,555 124,618 118,618
6 123,764 123,764 124,423 120,423 128,593 123,593
7 127,748 127,748 128,951 125,951 132,696 128,696
8 131,860 131,860 133,643 131,643 136,932 133,932
9 136,104 136,104 139,345 139,345 141,303 139,303
10 140,485 140,485 145,293 145,293 145,815 144,815
11 145,007 145,007 151,495 151,495 151,999 151,999
12 149,675 149,675 157,961 157,961 158,450 158,450
13 154,493 154,493 164,703 164,703 165,177 165,177
14 159,466 159,466 171,734 171,734 172,191 172,191
15 164,599 164,599 179,064 179,064 179,504 179,504
16 169,897 169,897 186,707 186,707 187,130 187,130
17 175,366 175,366 194,677 194,677 195,081 195,081
18 181,011 181,011 202,986 202,986 203,371 203,371
19 186,838 186,838 211,651 211,651 212,015 212,015
20 192,852 192,852 220,685 220,685 221,029 221,029
21 199,060 199,060 230,105 230,105 230,427 230,427
22 205,467 205,467 239,926 239,926 240,226 240,226
23 212,081 212,081 250,167 250,167 250,443 250,443
24 218,908 218,908 260,846 260,846 261,097 261,097
25 225,954 225,954 271,980 271,980 272,205 272,205
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.99%
c. No optional death benefits or living benefits elected
d. Annuity was issued on or after November 20, 2006
e. Surrender value assumes surrender 2 days before policy anniversary
Finally, we replace each table that depicts the days in which each annuity
product would have the highest surrender value with the following:
In addition, the following charts indicate the days (measured from the Issue
Date) in which each annuity product would have the highest Surrender Value
amongst the products listed given the above assumptions.
0% Gross Rate of Return (After November 20, 2006)
Over 30 Years, days won
Total Days Year Actual Days
----------------------- ----- -----------
Optimum Four 1459 4-5 1460-1824
6-8 1826-2919
Optimum 578 9 2970-3284
10 3387-3649
Optimum Plus 8913 1-4 1-1459
5 1825
8-9 2920-2969
9-10 3285-3386
10-30 3650-10950
6% Gross Rate of Return (After November 20, 2006)
Over 30 Years, days won
Total Days Year Actual Days
----------------------- ----- -----------
Optimum Four 364 6 1826-2189
Optimum 134 9 3273-3284
10 3528-3649
Optimum Plus 8472 1-5 1-1825
6-9 2190-3272
9-10 3285-3527
10-28 3650-10950
10
3. CHANGE WITH RESPECT TO CERTAIN PORTFOLIOS OF AMERICAN SKANDIA TRUST
In the "Investment Options" section of the prospectus, we make the following
changes to the chart setting forth a brief description of each variable
investment option, to reflect the following subadviser name change with respect
to one of the variable investment options:
.. AST Small Cap Value Portfolio. Salomon Brothers Asset Management will
change its name to ClearBridge Advisers LLC, effective in December 2006.
In the "Investment Options" section of each prospectus, we revise the
investment objectives/policies section, and portfolio advisor/sub-advisor
section for two Portfolios to read as follows. These new descriptions reflect
the addition of sub-advisors as well as revisions to non-fundamental investment
policies:
AST LSV International Value Portfolio.
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
------ ---------------------------------------------------- -----------
International AST International Value Portfolio (formerly AST LSV LSV Asset
Equity International Value Portfolio): seeks capital Management,
growth. The Portfolio normally invests at least 80% Thornburg
of the Portfolio's investable assets (net assets Investment
plus borrowings made for investment purposes) in the Management,
equity securities of companies in developed Inc.
countries outside the United States that are
represented in the MSCI EAFE Index.
AST William Blair International Growth Portfolio.
PORTFOLIO
STYLE/ ADVISOR/
TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR
------ ---------------------------------------------------- -----------
International AST International Growth Portfolio (formerly,AST Marsico
Equity William Blair International Growth Portfolio): seeks Capital
long-term capital appreciation. The Portfolio Management
invests primarily in equity-related securities of LLC,
foreign issuers. The Portfolio invests primarily in William
the common stock of large and medium-sized foreign Blair &
companies, although it may also invest in companies Company,
of all sizes. Under normal circumstances, the LLC
Portfolio invests at least 65% of its total assets
in common stock of foreign companies operating or
based in at least five different countries, which
may include countries with emerging markets. The
Portfolio looks primarily for stocks of companies
whose earnings are growing at a faster rate than
other companies or which offer attractive growth
potential.
4. WE ADD THE FOLLOWING AS APPENDIX G:
Appendix G
Asset Transfer Formula Under Highest Daily Lifetime Five Benefit
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your Annuity. However, as discussed in the
"Living Benefits" section, we reserve the right to modify this formula with
respect to those who elect Highest Daily Lifetime Five in the future.
Terms and Definitions referenced in the calculation formula:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Valuation Day.
11
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of the
guarantee. The factors that we use currently are derived from the a2000
Individual Annuity Mortality Table with an assumed interest rate of 3%.
Each number in the table "a" factors (which appears below) represents a
factor, which when multiplied by the Highest Daily Annual Income Amount,
projects our total liability for the purpose of asset transfers under the
guarantee.
. Q - age based factors used in calculating the target value. These factors
are established on the Effective Date and are not changed for the life of
the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the Annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Account Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - Annual Income Amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, it is 5%
Target Value Calculation:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to Benefit Fixed Rate Account.
. If r (less than) C\\l\\, and there are currently assets in the Benefit
Fixed Rate Account (F (greater than) 0), assets in the Benefit Fixed Rate
Account are transferred to the Permitted Sub-accounts.
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T ={Min(V, [L - F - V * C\\t\\] / T(greater than)0, Money moving from
(1-C\\t\\))} the Permitted Sub-accounts to the
Benefit Fixed Rate Account
T ={Min(F, [L - F - V * C\\t\\] / T(less than)0, Money moving from the
(1-C\\t\\))} Benefit Fixed Rate Account to the
Permitted Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L = I * Q * a
= 5000.67 * 1 * 15.34
= 76,710.28
Target Ratio:
r = (L - F) / V
= (76,710.28 - 0) / 92,300.00
= 83.11%
12
Since r (greater than) Cu ( because 83.11% (greater than) 83%) a transfer into
the Benefit Fixed rate Account occurs.
T = { Min ( V, [ L - F - V * Ct] / ( 1 - Ct))}
= { Min ( 92,300.00, [ 76,710.28 - 0 - 92,300.00 * 0.80] / ( 1 - 0.80))}
= { Min ( 92,300.00, 14,351.40 )}
= 14,351.40
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
1 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
- --------
* The values set forth in this table are applied to all ages.
13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf on the 6th day of October, 2006.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Depositor
By: /s/ LAURA KEALEY
-----------------------------------
Laura Kealey, Vice President,
Corporate Counsel
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
Signature Title Date
- --------- ----------------------- -----------------------
(Principal Executive Officer)
David R. Odenath* Chief Executive Officer October 6, 2006
- ----------------------- and President
David R. Odenath
(Principal Financial Officer and Principal Accounting Officer)
Michael Bohm* Executive Vice October 6, 2006
- ----------------------- President and
Michael Bohm Chief Financial Officer
(Board of Directors)
James Avery* Bernard J. Jacob* Helen Galt*
- ----------------------- ----------------------- -----------------------
James Avery Bernard J. Jacob Helen Galt
Ronald Joelson* David R. Odenath* Kenneth Y. Tanji*
- ----------------------- ----------------------- -----------------------
Ronald Joelson David R. Odenath Kenneth Y. Tanji
*By /s/ LAURA KEALEY
-----------------------
Laura Kealey
*Executed by Laura Kealey on behalf of those indicated pursuant to Power of
Attorney