W. THOMAS CONNER
DIRECT LINE: 202.383.0590
Internet: Thomas.conner@sablaw.com
March 5, 2007
VIA MESSENGER
_____________
Robert S. Lamont
Division of Investment Management
Office of Insurance Products
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
RE: POST-EFFECTIVE AMENDMENT NO. 20
METLIFE INVESTORS USA INSURANCE COMPANY AND METLIFE INVESTORS USA
SEPARATE ACCOUNT A (FILE NO. 333-54464) (SERIES VA)
POST-EFFECTIVE AMENDMENT NO. 3
METLIFE INVESTORS USA INSURANCE COMPANY AND METLIFE INVESTORS USA
SEPARATE ACCOUNT A (FILE NO. 333-125757) (MARQUIS)
POST-EFFECTIVE AMENDMENT NO. 19
METLIFE INVESTORS INSURANCE COMPANY AND METLIFE INVESTORS VARIABLE
ANNUITY ACCOUNT ONE (FILE NO. 333-50540) (CLASS AA)
Dear Mr. Lamont:
On January 11, 12 and 16, 2007, MetLife Investors USA Insurance Company and
MetLife Investors Insurance Company (the "Companies") and their respective
separate accounts, MetLife Investors USA Separate Account A and MetLife
Investors Variable Annuity Account One (the "Separate Accounts") filed the
above-referenced post-effective amendments (the "Amendments") to registration
statements on Form N-4 for certain variable annuity contracts pursuant to Rule
485(a) under the Securities Act of 1933. As you know, we provided the staff
("Staff") of the Securities and Exchange Commission with courtesy copies of the
Post-Effective Amendments on January 25 and February 6, 2007.
Robert S. Lamont
March 5, 2007
Page 2
We received oral comments from the Staff on the Amendments on February 22,
2007. The Staff requested that responses to the comments be made in writing.
The Companies' responses are set forth below. For convenience, each response is
preceded by the applicable Staff comment./1/ Page number references in the
responses are to the enclosed marked pages of the Series VA prospectus.
COMMENT ONE: FEE TABLE
___________
PLEASE ADD A LINE ITEM OR FOOTNOTE TO THE FEE TABLE STATING THAT THE COMPANY
MAY DEDUCT PREMIUM TAXES.
RESPONSE:
________
The Companies note that, pursuant to Item 3(a) of Form N-4, the required
introductory text to the Fee Table currently states that "state premium
taxes may also be deducted." In light of this, it would not appear that any
further disclosure in this regard is necessary.
COMMENT TWO: INVESTMENT PORTFOLIO EXPENSES
___________
FOOTNOTE 3 TO THE INVESTMENT PORTFOLIO EXPENSES TABLE STATES THAT "BECAUSE
THE PORTFOLIOS INVEST IN OTHER UNDERLYING PORTFOLIOS, EACH PORTFOLIO ALSO WILL
BEAR ITS PRO RATA PORTION OF THE OPERATING EXPENSES OF THE UNDERLYING
INVESTMENT PORTFOLIOS IN WHICH THE PORTFOLIO INVESTS, INCLUDING THE MANAGEMENT
FEE, WHICH IS NOT REFLECTED IN THE ABOVE TABLE" (EMPHASIS ADDED). PLEASE
CONFIRM THAT THE "NOT" EMPHASIZED IN THE PRIOR SENTENCE IS AN ERROR.
RESPONSE:
________
The Companies confirm the error and have revised the sentence to delete the
word "not." Please see page 9.
COMMENT THREE: GUARANTEED MINIMUM INCOME BENEFIT
_____________
UNDER "GUARANTEED MINIMUM INCOME BENEFIT" ON PAGE 27, THE THIRD PARAGRAPH
REFERENCES THE "GMIB ANNUITY TABLE." IS THERE DISCLOSURE ABOUT THIS TABLE
ELSEWHERE IN THE PROSPECTUS? IF NOT, PLEASE ADD SOME ADDITIONAL DISCLOSURE
EITHER ABOUT THE TABLE OR FOR HOW A CONTRACT OWNER COULD CALCULATE THE AMOUNT
OF THE BENEFIT.
- --------
1 As you know, the prospectus for Series VA was revised to describe the
"enhancement" to the existing Guaranteed Minimum Income Benefit Plus ("GMIB
Plus"). The prospectuses for Class AA and Marquis were revised to add this
enhanced version of GMIB Plus for the first time. Therefore, comments 5 and
6 are not applicable to the prospectuses for Class AA and Marquis.
Robert S. Lamont
March 5, 2007
Page 3
RESPONSE:
________
The Companies have added additional disclosure in response to this comment
on pages 27 and 28.
COMMENT FOUR: DESCRIPTION OF GMIB II
____________
UNDER "DESCRIPTION OF GMIB II" ON PAGE 28, PARAGRAPH (B)(II) DESCRIBES THE
ANNUAL INCREASE AMOUNT. ARE THERE ANY EXAMPLES IN APPENDIX D OF HOW (1) AND
(2) OPERATE? IF NOT, PLEASE ADD EXAMPLES.
RESPONSE:
________
The Companies have added examples as requested. Please see section (1) of
Appendix D on page D-1.
COMMENT FIVE: DESCRIPTION OF GMIB PLUS
____________
WITH REGARD TO THE FIRST PARAGRAPH UNDER "DESCRIPTION OF GMIB PLUS" ON PAGE
29, THE STAFF RECOMMENDS THAT THE INFORMATION BE SEPARATED INTO TWO
PARAGRAPHS-ONE FOR CONTRACTS ISSUED ON OR AFTER FEBRUARY 26, 2007 AND ONE FOR
CONTRACTS ISSUED PRIOR TO FEBRUARY 26, 2007.
RESPONSE:
________
The information has been separated into different paragraphs. Please see
pages 29 and 30.
COMMENT SIX: OPTIONAL RESET (FOR CONTRACTS ISSUED ON OR AFTER FEBRUARY 27, 2006)
___________
WITH REGARD TO "OPTIONAL RESET (FOR CONTRACTS ISSUED ON OR AFTER
FEBRUARY 27, 2006)" ON PAGE 30, THE STAFF RECOMMENDS THAT THE INFORMATION ABOUT
CONTRACTS ISSUED PRIOR TO FEBRUARY 26, 2007 BE MOVED TO A SEPARATE PARAGRAPH.
RESPONSE:
________
The information has been moved to a separate paragraph. Please see page 31.
COMMENT SEVEN: APPENDIX D (GUARANTEED MINIMUM INCOME BENEFIT EXAMPLES)
_____________
(a) With regard to Appendix D (Guaranteed Minimum Income Benefit Examples),
the Staff recommends that numerical illustrations be added to examples
1, 2 and 3.
(b) Please reverse the order of Examples 5 and 6.
Robert S. Lamont
March 5, 2007
Page 4
RESPONSE:
________
(a) The examples have been revised to provide numerical illustrations.
Please see pages D-1 to D-3.
(b) The order of the examples has been reversed. Please see pages D-4 to D-6.
* * *
If you have any questions or comments, please contact me at (202) 383-0590
or Aneal Krishnamurthy at (202) 383-0538.
Sincerely,
/s/ W. Thomas Conner
-----------------------------
W. Thomas Conner
cc: Michele H. Abate
John M. Richards
The Net Total Annual Portfolio Expenses have been restated to reflect
contractual arrangements in effect as of ____________ 2007, under which
investment advisers or managers of investment portfolios have agreed to waive
and/or pay expenses of the portfolios. Each of these arrangements is in effect
until at least April 30, 2008 (excluding optional extensions). Net Total Annual
Portfolio Expenses have not been restated to reflect expense reductions that
certain investment portfolios achieved as a result of directed brokerage
arrangements. The investment portfolios provided the information on their
expenses, and we have not independently verified the information. Unless
otherwise indicated the information provided is for the year ended December 31,
2006.
(1) Other Expenses may include amounts repaid to investment advisers or
managers pursuant to contractual arrangements for prior waivers or payments
of portfolio expenses. The amounts repaid per portfolio are: % for the
Met/AIM Mid Cap Core Equity Portfolio; % for the Met/AIM Small Cap Growth
Portfolio; % for the Harris Oakmark International Portfolio; % for the
Janus Aggressive Growth Portfolio; % for the Lord Abbett Growth and Income
Portfolio; % for the MFS(R) Research International Portfolio; % for the
Oppenheimer Capital Appreciation Portfolio; and % for the T. Rowe Price
Mid-Cap Growth Portfolio.
(2) Portfolio expenses for this investment portfolio are estimated for the year
ended December 31, 2007.
(3) Because the portfolios invest in other underlying portfolios, each
portfolio also will bear its pro rata portion of the operating expenses of
the underlying investment portfolios in which the portfolio invests,
including the management fee, which is reflected in the above table. The
estimated expenses of the underlying portfolios (after applicable expense
limitations) according to the allocation targets in place as of the date of
this prospectus are: % for the MetLife Defensive Strategy Portfolio; % for
the MetLife Moderate Strategy Portfolio; % for the MetLife Balanced
Strategy Portfolio; % for the MetLife Growth Strategy Portfolio; and % for
the MetLife Aggressive Strategy Portfolio. The total annual operating
expenses of the portfolios, including the weighted average of the total
operating expenses of the underlying investment portfolios (before
applicable expense limitations) according to the allocation targets in
place as of the date of this prospectus are: % for the MetLife Defensive
Strategy Portfolio; % for the MetLife Moderate Strategy Portfolio; % for
the MetLife Balanced Strategy Portfolio; % for the MetLife Growth Strategy
Portfolio; and % for the MetLife Aggressive Strategy Portfolio. Therefore,
contract owners may be able to realize lower aggregate expenses by
investing directly in the underlying investment portfolios instead of the
portfolios. A contract owner who chooses to invest directly in the
underlying investment portfolios would not, however, receive the asset
allocation services provided by Met Investors Advisory, LLC (See the fund
prospectus for a description of the target allocations.)
9
We will stop making annuity payments after the last survivor's death.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 10 YEARS OF ANNUITY PAYMENTS
GUARANTEED. Under this option, we will make annuity payments so long as the
annuitant and a second person (joint annuitant) are both alive. When either
annuitant dies, we will continue to make annuity payments, so long as the
survivor continues to live. If, at the last death of the annuitant and the
joint annuitant, we have made annuity payments for less than ten years, we will
then continue to make annuity payments for the rest of the 10 year period.
However, if you do not want to continue receiving annuity payments at the last
death of the annuitant and the joint annuitant, you may elect to have the
present value of the guaranteed variable annuity payments remaining (as of the
date due proof of the annuitant's death is received at our Annuity Service
Center) commuted at the AIR selected. We will require return of your contract
and proof of death before we pay the commuted values.
OPTION 5. PAYMENTS FOR A DESIGNATED PERIOD. We currently offer an annuity
option under which fixed or variable monthly annuity payments are made for a
selected number of years as approved by us, currently not less than 10 years.
This annuity option may be limited or withdrawn by us in our discretion. After
commencement of this annuity payout, you may elect to receive the partial or
full commuted value of the remaining guaranteed variable annuity payments, and
the payments will be commuted at the AIR selected.
There may be tax consequences resulting from the election of an annuity payment
option containing a commutation feature (I.E., an annuity payment option that
permits the withdrawal of a commuted value). (See "Federal Income Tax Status.")
In addition to the annuity options described above, we may offer an additional
payment option that would allow your beneficiary to take distribution of the
account value over a period not extending beyond his or her life expectancy.
Under this option, annual distributions would not be made in the form of an
annuity, but would be calculated in a manner similar to the calculation of
required minimum distributions from IRAs. (See "Federal Income Tax Status.") We
intend to make this payment option available to both tax qualified and non-tax
qualified contracts.
In the event that you purchased the contract as a tax qualified contract, you
must take distribution of the account value in accordance with the minimum
required distribution rules set forth in applicable tax law. (See "Federal
Income Tax Status.") Under certain circumstances, you may satisfy those
requirements by electing an annuity option. You may choose any death benefit
available under the contract, but certain other contract provisions and
programs will not be available. Upon your death, if annuity payments have
already begun, the death benefit would be required to be distributed to your
beneficiary at least as rapidly as under the method of distribution in effect
at the time of your death.
GUARANTEED MINIMUM INCOME BENEFIT
At the time you buy the contract, you may elect a Guaranteed Minimum Income
Benefit ("GMIB"). We offer three different versions of the Guaranteed Minimum
Income Benefit (GMIB I,-GMIB II and GMIB Plus), A MAXIMUM OF TWO OF WHICH ARE
OFFERED IN ANY PARTICULAR STATE. Version I is known as GMIB I, version II is
known as GMIB II and version III is known as GMIB Plus. All three versions of
the GMIB are described below; however, GMIB I is only offered in states where
GMIB II has not yet been approved. For contracts issued prior to February 26,
2007, we offered a version of GMIB Plus that is no longer available, as
described below. Please check with your registered representative regarding
which versions are available in your state. You may not have this benefit and a
GWB or GMAB rider in effect at the same time.
It is important to recognize that the "income base" (as described below) that
is guaranteed by the GMIB is not available for cash withdrawals and does not
establish or guarantee your account value or a minimum return for any
investment portfolio. Rather, the GMIB is designed to provide you with a
predictable minimum level of income for life after a minimum 10-year waiting
period regardless of investment performance or actual account value, by
providing a minimum guaranteed lifetime fixed income benefit in the form of
fixed monthly annuity payments.
The amount of the benefit is determined by applying the income base (described
below) at the time of exercise of the rider to the GMIB Annuity Table specified
in the rider. This table is calculated based on the Annuity 2000 Mortality
Table with a 7-year age set back with interest of 2.5% per annum. As with other
pay-out types, the amount you receive as an income payment also depends on your
age your sex, and the annuity option you select. The annuity rates in the GMIB
Annuity Table are conservative and a
27
withdrawal charge may be applicable, so the amount of guaranteed minimum
lifetime income that the GMIB II, GMIB Plus or GMIB I produces may be less than
the amount of annuity income that would be provided by applying your account
value on your annuity date to then-current annuity purchase rates. In this
case, your annuity payments will be higher if you do not exercise the rider.
Your registered representative can provide you an illustration of the amounts
you would receive if you exercised the rider.
The Guaranteed Principal Option of GMIB Plus does guarantee a minimum account
value after a 10-year waiting period that is available for cash withdrawals. If
you elect the Guaranteed Principal Option after the waiting period, this
guarantee applies in lieu of receiving GMIB payments.
(See Appendix D for examples of the GMIB.)
DESCRIPTION OF GMIB II
The GMIB II may be exercised after a 10 year waiting period and then only
within 30 days following a contract anniversary, provided that the exercise
must occur no later than the 30 day period following the contract anniversary
on or following the owner's 85th birthday. The GMIB II is only available for
owners up through age 75, and you can only elect the GMIB II at the time you
purchase the contract. Once elected, the rider cannot be terminated except as
discussed below.
INCOME BASE. The INCOME BASE is the greater of (a) or (b) below.
(a) Highest Anniversary Value: On the issue date, the "Highest Anniversary
Value" is equal to your initial purchase payment. Thereafter, the Highest
Anniversary Value will be increased by subsequent purchase payments and
reduced proportionately by the percentage reduction in account value
attributable to each subsequent withdrawal (including any applicable
withdrawal charge). On each contract anniversary prior to the owner's 81st
birthday, the Highest Anniversary Value will be recalculated and set equal
to the greater of the Highest Anniversary Value before the recalculation
or the account value on the date of the recalculation.
(b) Annual Increase Amount: On the issue date, the "Annual Increase Amount" is
equal to your initial purchase payment. (For these purposes, all purchase
payments credited within 120 days of the date we issued the contract will
be treated as if they were received on the date we issue the contract.)
Thereafter, the Annual Increase Amount is equal to (i) less (ii), where:
(i) is purchase payments accumulated at the annual increase rate. The
annual increase rate is 5% per year through the contract anniversary
on or following the owner's 85th birthday and 0% thereafter; and
(ii) is withdrawal adjustments accumulated at the annual increase rate.
Withdrawal adjustments in a contract year are determined according to
(1) or (2) as defined below;
(1) The withdrawal adjustment for each withdrawal in a contract year
is the value of the Annual Increase Amount immediately prior to
the withdrawal multiplied by the percentage reduction in account
value attributed to that withdrawal (including any applicable
withdrawal charge); or
(2) If total withdrawals in a contract year are 5% or less of the
Annual Increase Amount on the issue date or on the prior contract
anniversary after the first contract year, and if these
withdrawals are paid to you (or the annuitant if the contract is
owned by a non-natural person) or other payee we agree to, the
total withdrawal adjustments for that contract year will be set
equal to the dollar amount of total withdrawals (including any
applicable withdrawal charge) in that contract year. These
withdrawal adjustments will replace the withdrawal adjustments
defined in (1) above and be treated as though the corresponding
withdrawals occurred at the end of that contract year.
(See section (1) of Appendix D for examples of the calculation of the
withdrawal adjustment.)
In determining the GMIB II annuity income, an amount equal to the withdrawal
charge that would be assessed upon a complete withdrawal and the amount of any
premium and other taxes that may apply will be deducted from the income base.
The Highest Anniversary Value does not change after the contract anniversary
immediately preceding the owner's 81st birthday, except that it is increased
for each subsequent purchase payment and reduced proportionally
28
by the percentage reduction in account value attributable to each subsequent
withdrawal (including any applicable withdrawal charge). The Annual Increase
Amount does not change after the contract anniversary on or following the
owner's 85th birthday, except that it is increased for each subsequent purchase
payment and reduced by the withdrawal adjustments described in (b)(ii) above.
OWNERSHIP. If the owner is a natural person, the owner must be the annuitant.
If a non-natural person owns the contract, then annuitant will be considered
the owner in determining the income base and GMIB II annuity payments. If joint
owners are named, the age of the older will be used to determine the income
base and GMIB II annuity payments.
EXERCISING THE GMIB II RIDER. If you exercise the GMIB II, you must elect to
receive annuity payments under one of the following fixed annuity options:
(1) Life annuity with 10 years of annuity payments guaranteed. For
annuitization ages over 79, the guaranteed component of the life annuity is
reduced as follows:
Age at Annuitization Guarantee Period
-------------------- -------------------
80 9
81 8
82 7
83 6
84 and 85 5
(2) Joint and last survivor annuity with 10 years of annuity payments
guaranteed.
These options are described in the contract and the GMIB II rider.
If you exercise the GMIB II, your annuity payments will be the greater of:
.. the annuity payment determined by applying the amount of the income base to
the GMIB Annuity Table, or
.. the annuity payment determined for the same annuity option in accordance
with the base contract. (See "Annuity Payments (The Income Phase).")
If you take a full withdrawal of your account value, your contract is
terminated by us due to its small account value and inactivity (see "Purchase
- -- Purchase Payments"), or your contract lapses and there remains any income
base, we will commence making income payments within 30 days of the date of the
full withdrawal, termination or lapse. In such cases, your income payments
under this benefit, if any, will be determined using the income base and any
applicable withdrawal adjustment that was taken on account of the withdrawal,
termination or lapse.
If you choose not to receive annuity payments as guaranteed under the GMIB II,
you may elect any of the annuity options available under the contract.
TERMINATING THE GMIB II RIDER. Except as otherwise provided in the GMIB II
rider, the GMIB II will terminate upon the earliest of:
a) The 30th day following the contract anniversary on or following your
85th birthday;
b) The date you make a complete withdrawal of your account value;
c) The date you elect to receive annuity payments under the contract and
you do not elect to receive payments under the GMIB II;
d) Death of the owner or joint owner (unless the spouse (aged 84 or
younger) is the beneficiary and elects to continue the contract), or
death of the annuitant if a non-natural person owns the contract; or
e) A change for any reason of the owner or joint owner or the annuitant if
a non-natural person owns the contract.
When the GMIB II rider terminates, the corresponding GMIB II rider charge
terminates.
DESCRIPTION OF GMIB PLUS
GMIB Plus is identical to the GMIB II, described above, with the following
differences; (1) for purposes of calculating the Annual Increase Amount,
(a) the annual increase rate is 6% per year through the contract anniversary on
or following the owner's 85th birthday and (b) the amount of total withdrawal
adjustments for a contract year as calculated in paragraph (b)(ii)(2) of the
"Income Base" section of "Description of GMIB II" above
29
will be set equal to the dollar amount of total withdrawals in such contract
year provided that such total withdrawals do not exceed 6% of the Annual
Increase Amount on the issue date or on the prior contract anniversary after
the first contract year; (2) you may exercise a "GUARANTEED PRINCIPAL OPTION,"
in which case you will receive an additional amount to be added to the account
value in lieu of taking GMIB payments; (3) you may be permitted to periodically
reset the Annual Increase Amount; (4) you are limited to allocating your
account value to certain investment choices and you may not participate in the
Standard Dollar Cost Averaging (DCA) program; (5) the termination provisions
are expanded; and (6) the additional charge for the GMIB Plus is 0.80% of the
income base (with a maximum charge of 1.50% of the income base applicable upon
the exercise of the Optional Reset feature). A description of some of these
features follows.
NOTE: For contracts issued prior to February 26, 2007 we offered a version of
the GMIB Plus that is no longer available. The prior version of the GMIB Plus
differs with respect to the calculation of the Annual Increase Amount and the
applicable rider charge. Specifically; (1) for purposes of calculating the
Annual Increase Amount, (a) the annual increase rate is 5% per year through the
contract anniversary on or following the owner's 85th birthday and (b) the
amount of total withdrawal adjustments for a contract year as calculated in
paragraph (b)(ii)(2) of the "Income Base" section of "Description of GMIB II"
above will be set equal to the dollar amount of total withdrawals in such
contract year provided that such total withdrawals do not exceed 5% of the
Annual Increase Amount on the issue date or on the prior contract anniversary
after the first contract year; and (2) the additional charge for the GMIB Plus
is 0.75% of the income base (with a maximum charge of 1.50% of the income base
applicable upon the exercise of the Optional Reset feature).
GUARANTEED PRINCIPAL OPTION. Starting with the tenth contract anniversary prior
to the owner's 86th birthday, you may exercise the Guaranteed Principal Option.
If the owner is a non-natural person, the annuitant's age is the basis for
determining the birthday. If there are joint owners, the age of the oldest
owner is used for determining the birthday. We must receive your request to
exercise the Guaranteed Principal Option in writing, or any other method that
we agree to, within 30 days following the eligible contract anniversary. The
Guaranteed Principal Option will take effect at the end of this 30-day period
following the eligible contract anniversary.
By exercising the Guaranteed Principal Option, you elect to receive an
additional amount to be added to your account value intended to restore your
initial investment in the contract, in lieu of receiving GMIB payments. The
additional amount is called the Guaranteed Principal Adjustment and is equal to
(a) minus (b) where:
(a) is purchase payments credited within 120 days of the date we issued the
contract (reduced proportionately by the percentage reduction in account
value attributable to each partial withdrawal (including applicable
withdrawal charges) prior to the exercise of the Guaranteed Principal
Option) and
(b) the account value on the contract anniversary immediately preceding
exercise of the Guaranteed Principal Option.
The Guaranteed Principal Option can only be exercised if (a) exceeds (b), as
defined above. The Guaranteed Principal Adjustment will be added to each
applicable investment portfolio and EDCA account in the ratio the portion of
the account value in such investment portfolio bears to the total account value
in all investment portfolios. It is important to note that only purchase
payments made during the first 120 days that you hold the contract are taken
into consideration in determining the Guaranteed Principal Adjustment. If you
anticipate making purchase payments after 120 days, you should understand that
such payments will not increase the Guaranteed Principal Adjustment. However,
because purchase payments made after 120 days will increase your account value,
such payments may have a significant impact on whether or not a Guaranteed
Principal Adjustment is due. Therefore, GMIB Plus may not be appropriate for
you if you intend to make additional purchase payments after the 120-day period
and are purchasing the GMIB Plus for this feature.
The Guaranteed Principal Adjustment will never be less than zero. If the
Guaranteed Principal Option is exercised, the GMIB Plus rider will terminate as
of the date the option takes effect and no additional GMIB charges will apply
thereafter. The variable annuity contract, however, will continue.
30
OPTIONAL RESET. On each contract anniversary as permitted, you may elect to
reset the Annual Increase Amount to the account value. Such a reset may be
beneficial if your account value has grown at a rate above the 6% accumulation
rate on the Annual Increase Amount. However, resetting the Annual Increase
Amount will increase your waiting period for exercising the GMIB Plus by
restarting the waiting period, and the GMIB Plus rider charge will be reset to
the fee we charge new contract purchasers for the same GMIB Plus rider at that
time. An Optional Reset is permitted only if: (1) the account value exceeds the
Annual Increase Amount immediately before the reset; and (2) the owner (or
oldest joint owner or annuitant if the contract is owned by a non-natural
person) is not older than age 75 on the date of the Optional Reset.
NOTE: For contracts issued prior to February 26, 2007 an Optional Reset may be
beneficial if your account value has grown at a rate above the 5% accumulation
rate on the Annual Increase Amount.
You may elect either, 1) a one-time Optional Reset at any contract anniversary
provided the above requirements are met, or 2) Optional Resets to occur under
the Automatic Annual Step-Up. If you elect Automatic Annual Step-Ups on any
contract anniversary while this election is in effect the Annual Increase
Amount will reset to the account value automatically provided the above
requirements are met. The same conditions described above will apply to each
automatic step-up. You may discontinue this election at any time by notifying
us in writing at our Annuity Service Center (or by any other method acceptable
to us), at least 30 days prior to the contract anniversary on which a reset may
otherwise occur. Otherwise it will remain in effect through the seventh
contract anniversary following the date you make this election, at which point
you must make a new election if you want Automatic Annual Step-Ups to continue.
If you discontinue or do not re-elect the Automatic Annual Step-Ups, no
Optional Reset will occur automatically on any subsequent contract anniversary
unless you make a new election under the terms described above.
We must receive your request to exercise the Optional Reset in writing, at our
Annuity Service Center, or any other method acceptable to us. We must receive
your request prior to the contract anniversary for an Optional Reset to occur
on that contract anniversary. We reserve the right to prohibit an Optional
Reset if we no longer offer this benefit for this class of contract. We are
waiving this right with respect to purchasers of the contract offered by this
prospectus who elect or have elected the GMIB Plus rider and will allow
Optional Resets to those purchasers even if this benefit is no longer offered
for this class of contract.
The Optional Reset will:
(1) reset the Annual Increase Amount to the Account Value on the contract
anniversary following the receipt of an Optional Reset election;
(2) reset the GMIB Plus waiting period to the tenth contract anniversary
following the date the Optional Reset took effect; and
(3) reset the GMIB Plus rider charge to the then current level we charge for
the same GMIB Plus rider at the time of the reset, up to the Maximum
Optional Reset Fee Rate (not to exceed 1.50%).
On the date of the reset, the account value on that day will be treated as a
single purchase payment received on the date of the reset for purposes of
determining the Annual Increase Amount after the reset. All purchase payments
and
31
APPENDIX D
GUARANTEED MINIMUM INCOME
BENEFIT EXAMPLES
The purpose of these examples is to illustrate the operation of the Guaranteed
Minimum Income Benefit. The investment results shown are hypothetical and are
not representative of past or future performance. Actual investment results may
be more or less than those shown and will depend upon a number of factors,
including investment allocations and the investment experience of the
investment portfolios chosen. The examples do not reflect the deduction of fees
and charges.
(1) WITHDRAWAL ADJUSTMENTS TO ANNUAL INCREASE AMOUNT
Dollar-for-dollar adjustment when withdrawal is less than or equal to 5% of the
Annual Increase Amount from the prior contract anniversary.
Assume the initial purchase payment is $100,000 and the GMIB II is selected.
Assume the account value at the first contract anniversary is $100,000. The
Annual Increase Amount at the first contract anniversary will be $105,000
($100,000 increased by 5% per year, compounded annually). Assume that on the
first contract anniversary, $5,000 is withdrawn (leaving an account balance of
$95,000). Because the withdrawal is less than or equal to 5% of the Annual
Increase Amount from the prior contract anniversary, the Annual Increase Amount
is reduced by the withdrawal on a dollar-for-dollar basis to $100,000 ($105,000
- - $5,000 = $100,000). Assuming no other purchase payments or withdrawals are
made before the second contract anniversary the Annual Increase Amount at the
second contract anniversary will be $105,000 ($100,000 increased by 5% per year
compounded annually).
Proportionate adjustment when withdrawal is greater than 5% of the Annual
Increase Amount from the prior contract anniversary.
Assume the initial purchase payment is $100,000 and the GMIB II is selected.
Assume the account value at the first contract anniversary, is $100,000. The
Annual Increase Amount at the first contract anniversary will be $105,000
($100,000 increased by 5% per year, compounded annually). Assume that on the
first contract anniversary, $10,000 is withdrawn (leaving an account balance of
$90,000). Because the withdrawal is greater than 5% of the Annual Increase
Amount from the prior contract anniversary, the Annual Increase Amount is
reduced by the value of the Annual Increase Amount immediately prior to the
withdrawal ($105,000) multiplied by the percentage reduction in the account
value attributed to that withdrawal (10%). Therefore the new Annual Increase
Amount is $94,500 ($105,000 x 10% = $10,500-$105,000-$10,500 = $94,500).
Assuming no other purchase payments or withdrawals are made before the second
contract anniversary, the Annual Increase Amount at the second contract
anniversary will be $99,225 ($94,500 increased by 5% per year, compounded
annually).
(2) THE 5% ANNUAL INCREASE AMOUNT
Example
Assume the owner of the contract is a male, age 55 at issue, and he elects the
GMIB II rider. He makes an initial purchase payment of $100,000, and makes no
additional purchase payments or partial withdrawals. On the contract issue date
the 5% Annual Increase Amount is equal to $100,000 (the initial purchase
payment). The 5% Annual Increase Amount is calculated at each contract
anniversary (through the contract anniversary on or following the owner's 85th
birthday). At the tenth contract anniversary, when the owner is age 65 the 5%
Annual Increase Amount is $162,889 ($100,000 increased by 5% per year,
compounded annually). See section (3) below for an example of the calculation
of the Highest Anniversary Value.
Graphic Example: Determining a value upon which future income payments can be
based.
Assume that you make an initial purchase payment of $100,000. Prior to
annuitization, your account value fluctuates above and below your initial
purchase payment depending on the investment performance of the investment
options you selected. Your purchase payments accumulate at the annual increase
rate of 5%, until the contract anniversary on or immediately after the contract
owner's 85th birthday. Your purchase payments are also adjusted for any
withdrawals (including any applicable withdrawal charge) made during this
period. The line (your purchase payments accumulated at 5% a year adjusted
D-1
for withdrawals and charges "the 5% Annual Increase Amount") is the value upon
which future income payments can be based.
[GRAPHIC APPEARS HERE]
Graphic Example: Determining your guaranteed lifetime income stream
Assume that you decide to annuitize your contract and begin taking annuity
payments after 20 years. In this example, your 5% Annual Increase Amount is
higher than the Highest Anniversary Value and will produce a higher income
benefit. Accordingly, the 5% Annual Increase Amount will be applied to the
annuity pay-out rates in the Guaranteed Minimum Income Benefit Annuity Table to
determine your lifetime annuity payments. THE INCOME BASE IS NOT AVAILABLE FOR
CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING THE GUARANTEED
MINIMUM INCOME BENEFIT PAYMENT AND THE CHARGE FOR THE BENEFIT.
[GRAPHIC APPEARS HERE]
THE "HIGHEST ANNIVERSARY VALUE" ("HAV")
Example
Assume, as in the example in section (2) above, the owner of the contract is a
male, age 55 at issue, and he elects the GMIB II rider. He makes an initial
purchase payment of $100,000 and makes no additional purchase payments or
partial withdrawals. On the contract issue date, the Highest Anniversary Value
is equal to $100,000 (the initial purchase payment). Assume the account value
on the first contract anniversary is $108,000 due to good market performance.
Because the account value is greater than the Highest Anniversary Value
($100,000) the Highest Anniversary Value is set equal to the account value
($108,000). Assume the account value on the second contract anniversary is
$102,000 due to poor market performance. Because the account value is less than
the Highest Anniversary Value ($108,000), the Highest Anniversary Value remains
$108,000.
Assume this process is repeated on each contract anniversary until the tenth
contract anniversary when the account value is $155,000 and the Highest
Anniversary Value is $150,000. The Highest Anniversary Value is set equal to
the account value ($155,000). See section (4) below for an example of the
exercise of the GMIB II rider.
Graphic Example: Determining a value upon which future income payments can be
based.
Prior to annuitization, the Highest Anniversary Value begins to lock in growth.
The Highest Anniversary Value is adjusted upward each contract anniversary if
the account value at that time is greater than the amount of the current
Highest Anniversary Value. Upward adjustments will continue until the contract
anniversary immediately prior to the contract owner's 81st birthday. The
Highest Anniversary Value also is adjusted for any withdrawals taken (including
any applicable withdrawal charge) or any additional payments made. The Highest
Anniversary Value line is the value upon which future income payments can be
based.
[GRAPHIC APPEARS HERE]
D-2
Graphic Example: Determining your guaranteed lifetime income stream
Assume that you decide to annuitize your contract and begin taking annuity
payments after 20 years. In this example, the Highest Anniversary Value is
higher than the account value. Accordingly, the Highest Anniversary Value will
be applied to the annuity payout rates in the Guaranteed Minimum Income Benefit
Annuity Table to determine your lifetime annuity payments. THE INCOME BASE IS
NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING
THE GUARANTEED MINIMUM INCOME BENEFIT PAYMENT AND THE CHARGE FOR THE BENEFIT.
[GRAPHIC APPEARS HERE]
PUTTING IT ALL TOGETHER
Example
Continuing the examples in sections (2) and (3) above assume the owner chooses
to exercise the GMIB II rider at the tenth contract anniversary and elects a
life annuity with 10 years of annuity payments guaranteed. Because the 5%
Annual Increase Amount ($162,889) is greater than the Highest Anniversary Value
($155,000), the 5% Annual Increase Amount ($162,889) is used as the income
base. The income base of $162,889 is applied to the GMIB Annuity Table. This
yields annuity payments of $717 per month for life, with a minimum of 10 years
guaranteed. (If the same owner were instead age 70, the income base of $162,889
would yield monthly payments of $1,029; if the owner were age 75, the income
base of $162,889 would yield monthly payments of $1,499.)
The above example does not take into account the impact of premium and other
taxes. As with other payout types, the amount you receive as an income payment
depends on your age, sex, and the income type you select. THE INCOME BASE IS
NOT AVAILABLE FOR CASH WITHDRAWALS AND IS ONLY USED FOR PURPOSES OF CALCULATING
THE GUARANTEED MINIMUM INCOME BENEFIT PAYMENT AND THE CHARGE FOR THE BENEFIT.
Graphic Example
Prior to annuitization, the two calculations (the 5% Annual Increase Amount and
the Highest Anniversary Value) work together to protect your future income.
Upon annuitization of the contract, you will receive income payments for life
and the income bases and the account value will cease to exist. Also, the
Guaranteed Minimum Income Benefit may only be exercised no later than the
contract anniversary on or following the contract owner's 85th birthday, after
a 10 year waiting period, and then only within a 30 day period following the
contract anniversary.
[GRAPHIC APPEARS HERE]
[GRAPHIC APPEARS HERE]
With the Guaranteed Minimum Income Benefit, the Income Base is applied to
special, conservative
D-3
Guaranteed Minimum Income Benefit annuity purchase factors, which are
guaranteed at the time the contract is issued. However, if then-current annuity
purchase factors applied to the account value would produce a greater amount of
income, then you will receive the greater amount. In other words, when you
annuitize your contract you will receive whatever amount produces the greatest
income payment. Therefore, if your account value would provide greater income
than would the amount provided under the Guaranteed Minimum Income Benefit, you
will have paid for the Guaranteed Minimum Income Benefit although it was never
used.
[GRAPHIC APPEARS HERE]
(5) THE GUARANTEED PRINCIPAL OPTION -- GMIB PLUS
Initial purchase payment is $100,000. Assume that no withdrawals are taken.
Assume that account value at the 10th contract anniversary is $50,000 due to
poor market performance, and you exercise the Guaranteed Principal Option at
this time.
The effect of exercising the Guaranteed Principal Option:
1) A Guaranteed Principal Adjustment of $100,000 - $50,000 = $50,000 is added
to the account value 30 days after the 10th contract anniversary bringing
the account value back up to $100,000.
2) The GMIB Plus rider and rider fee terminates as of the date that the
adjustment is made to the account value; the variable annuity contract
continues.
3) GMIB Plus allocation and transfer restrictions terminate as of the date
that the adjustment is made to the account value.
[GRAPHIC APPEARS HERE]
. Withdrawals reduce the original purchase payment (I.E. those payments
credited within 120 days of contract issue date) proportionately and
therefore, may have a significant impact on the amount of the Guaranteed
Principal Adjustment.
D-4
(6) THE OPTIONAL RESET: AUTOMATIC ANNUAL STEP-UP (FOR CONTRACTS ISSUED ON OR
AFTER FEBRUARY 26, 2007) -- GMIB PLUS.
Assume your initial investment is $100,000 and no withdrawals are taken. The 6%
Annual Increase Amount increases to $106,000 on the first anniversary ($100,000
increased by 6% per year, compounded annually). Assume your account value at
the first contract anniversary is $110,000 due to good market performance, and
you elected Optional Resets to occur under the Automatic Annual Step-Up feature
prior to the first contract anniversary. Because your account value is higher
than your 6% Annual Increase Amount, an Optional Reset will automatically occur.
The effect of the Optional Reset is:
(1) The 6% Annual Increase Amount automatically resets from $106,000 to
$110,000;
(2) The 10-year waiting period to annuitize the contract under the
Guaranteed Minimum Income Benefit is reset to 10 years from the first
contract anniversary;
(3) The GMIB Plus rider charge is reset to the fee we charge new contract
owners for GMIB Plus at that time; and
(4) The Guaranteed Principal Option can still be elected on the l0th
contract anniversary.
The 6% Annual Increase Amount increases to $116,600 on the second anniversary
($110,000 increased by 6% per year, compounded annually). Assume your account
value at the second contract anniversary is $120,000 due to good market
performance, and you have not discontinued the Automatic Annual Step-Up
feature. Because your account value is higher than your 6% Annual Increase
Amount, an Optional Reset will automatically occur.
The effect of the Optional Reset is:
(1) The 6% Annual Increase Amount automatically resets from $116,600 to
$120,000;
(2) The 10-year waiting period to annuitize the contract under the
Guaranteed Minimum Income Benefit is reset to 10 years from the second
contract anniversary;
(3) The GMIB Plus rider charge is reset to the fee we charge new contract
owners for GMIB Plus at that time; and
(4) The Guaranteed Principal Option can still be elected on the 10th
contract anniversary.
Assume your account value increases by $10,000 at each contract anniversary in
years three through seven. At each contract anniversary, your account value
would exceed the 6% Annual Increase Amount and an Optional Reset would
automatically occur (provided you had not discontinued the Automatic Annual
Step-Up feature, and other requirements were met).
The effect of each Optional Reset is:
(1) The 6% Annual Increase Amount automatically resets to the higher account
value;
(2) The 10-year waiting period to annuitize the contract under the
Guaranteed Minimum Income Benefit is reset to 10 years from the date of
the Optional Reset;
(3) The GMIB Plus rider charge is reset to the fee we charge new contract
owners for GMIB Plus at that time; and
(4) The Guaranteed Principal Option can still be elected on the 10th
contract anniversary.
After the seventh contract anniversary, the initial Automatic Annual Step-Up
election expires. Assume you do not make a new election of the Automatic Annual
Step-Up.
The 6% Annual Increase Amount increases to $180,200 on the eighth anniversary
($170,000 increased by 6% per year, compounded annually). Assume your account
value at the eighth contract anniversary is $160,000 due to poor market
performance. An Optional Reset is NOT permitted because your account value is
lower than your 6% Annual Increase Amount. However, because the Optional Reset
has locked-in previous gains, the 6% Annual Increase Amount remains at $180,200
despite poor market performance, and, provided the rider continues in effect,
will continue to grow at 6% annually (subject to adjustments for additional
purchase payments and/or withdrawals) through the contract anniversary on or
after your 85th birthday. Also, please note:
(1) THE 10-YEAR WAITING PERIOD TO ANNUITIZE THE CONTRACT UNDER THE
GUARANTEED MINIMUM INCOME BENEFIT REMAINS AT THE 17TH CONTRACT
ANNIVERSARY (10 YEARS FROM THE DATE OF THE LAST OPTIONAL RESET);
D-5
(2) THE GMIB PLUS RIDER CHARGE REMAINS AT ITS CURRENT LEVEL; AND
(3) THE GUARANTEED PRINCIPAL OPTION CAN STILL BE ELECTED ON THE 10TH
CONTRACT ANNIVERSARY.
[GRAPHIC APPEARS HERE]
(7) THE OPTIONAL RESET -- GMIB PLUS (FOR CONTRACTS ISSUED PRIOR TO FEBRUARY 26,
2007)
Assume your initial purchase payment is $100,000 and no withdrawals are taken.
The 5% Annual Increase Amount increases to $105,000 on the first anniversary
($100,000 increased by 5% per, year compounded annually). Assume your account
value at the first contract anniversary is $110,000 due to good market
performance, and you elect an Optional reset.
The effect of the Optional Reset election is:
(1) The 5% Annual Increase Amount resets from $105,000 to $110,000;
(2) The 10-year waiting period to annuitize the contract under the
Guaranteed Minimum Income Benefit is reset to 10 years from the first
contract anniversary;
(3) The GMIB Plus rider charge is reset to the fee we charge new contract
owners for GMIB Plus at that time; and
(4) The Guaranteed Principal Option can still be elected on the 10th
contract anniversary
The 5% Annual Increase Amount increases to $115,500 on the fourth anniversary
($130,000 increased by 5% per year, compounded annually). Assume your account
value at the second contract anniversary is $112,000 due to poor market
performance. You may NOT elect an Optional Reset at this time, because the
account value is less than the 5% Annual Increase Amount.
D-6