[SUTHERLAND ASBILL & BRENNAN LLP LETTERHEAD] 1275 Pennsylvania Avenue NW
Washington, D.C. 20004-2415
202.383.0100
fax 202.637.3593
www.sablaw.com
MARY E. THORNTON
DIRECT LINE: 202.383.0698
Internet: mary.thornton@sablaw.com
March 21, 2008
VIA MESSENGER AND EDGAR CORRESPONDENCE SUBMISSION
Ms. Alison White
Division of Investment Management
Office of Insurance Products
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
RE: METLIFE INVESTORS USA INSURANCE COMPANY, METLIFE INVESTORS INSURANCE
COMPANY, METLIFE INVESTORS USA SEPARATE ACCOUNT A, AND METLIFE INVESTORS
VARIABLE ANNUITY ACCOUNT ONE (FILE NOS. 333-54464 AND 333-51950)
Dear Ms. White:
On behalf of MetLife Investors USA Insurance Company ("MLI USA"), MetLife
Investors Insurance Company ("MLI," and together with MLI USA, the "Companies")
and their respective separate accounts, MetLife Investors USA Separate Account A
and MetLife Investors Variable Annuity Account One, we are responding to the
comments that you orally provided to us on March 14, 2008 in connection with the
"Series VA" and the "Class XC" post-effective amendments filed on December 21,
2007 pursuant to paragraph (a)(1) of Rule 485 under the Securities Act of 1933
(the "1933 Act"). Each of the Staff's comments is set forth below, followed by
the Companies' response. The revised pages of the Series VA prospectus
reflecting the responses are attached hereto.
(1) HIGHLIGHTS--STATE VARIATIONS
COMMENT: (a) On page 6 under "State Variations," please revise the
prospectus to disclose the types of state variations.
RESPONSE: (a) On page 6, the Companies have revised the prospectuses to add
the following sentence: "These differences include, among other things,
free look rights, age issuance limitations, transfer rights and
limitations, the right to reject purchase payments, the right to assess
transfer fees, and general availability of certain riders."
Alison White, Esq.
March 21, 2008
Page 2
COMMENT: (b) On page 6 in the second sentence under "State Variations,"
please replace "important" with "material."
RESPONSE: (b) The Companies have revised the prospectuses to replace
"important" with "material."
COMMENT: (c) On page 6 under "State Variations," please add the phrase
"because of state law variations" to the end of the first sentence.
RESPONSE: (c) The Companies have revised the prospectuses to add the phrase
"because of state law variations" to the end of the first sentence.
(2) LIVING BENEFITS--GUARANTEED INCOME BENEFITS
COMMENT: (a) On page 39 under "Guaranteed Income Benefits," please bold the
third sentence of the first paragraph.
RESPONSE: (a) The Companies have revised the prospectuses to bold the third
sentence of the first paragraph under "Guaranteed Income Benefits."
COMMENT: (b) On page 39 under "Guaranteed Income Benefits," please add the
phrase "and thus you will have paid for the rider even though it was not
used" to the end of the third sentence.
RESPONSE: (b) The Companies have revised the prospectuses to add the phrase
"and thus you will have paid for the rider even though it was not used" to
the end of the third sentence under "Guaranteed Income Benefits."
(3) LIVING BENEFITS--FACTS ABOUT GUARANTEED INCOME BENEFIT RIDERS
COMMENT: (a) On page 39, please bold the second sentence under the "Income
Base and GMIB Annuity Payments" subheading.
RESPONSE: (a) The Companies have revised the prospectuses to bold the
second sentence under the "Income Base and GMIB Annuity Payments"
subheading.
COMMENT: (b) On page 39, under the "Income Base and GMIB Annuity Payments"
subheading, please delete or explain why the word "minimum" is placed
before the phrase "10-year waiting period."
RESPONSE: (b) The word "minimum" is placed before the phrase "10-year
waiting period" to emphasize that the rider can be exercised any time after
the 10-year waiting period. In addition, the word "minimum" is important
because a contract owner might have to wait longer than ten years to
exercise the rider if the contract owner chooses the optional step-up,
which restarts the waiting period.
Alison White, Esq.
March 21, 2008
Page 3
COMMENT: (c) Please consider whether there should be a reference to a
thirty-day window in this section.
RESPONSE: (c) The Companies have revised the third sentence under the
"Income Base and GMIB Annuity Payments" subheading as follows: "After a
minimum 10-year waiting period and then only within 30 days following a
contract anniversary, you may exercise the rider."
COMMENT: (d) Please consistently spell the word "ten" or use the numerical
figure throughout the prospectus.
RESPONSE: (d) Given the Companies' rigorous print schedule, the Companies
do not have the administrative resources available to make these revisions
at this time. The Companies will consider making these revisions at a later
date.
(4) LIVING BENEFITS--DESCRIPTION OF GMIB PLUS II
COMMENT: (a) On page 41, please bold the third sentence under the "Optional
Step-Up" subheading.
RESPONSE: (a) The Companies have revised the prospectuses to bold the third
sentence under the "Optional Step-Up" subheading.
COMMENT: (b) On page 41, the third sentence under the "Optional Step-Up"
subheading currently states that resetting the Annual Increase Amount will
restart the waiting period. Please clarify that the waiting period is ten
years.
RESPONSE: (b) The Companies have revised the prospectuses to clarify that
the waiting period is ten years.
COMMENT: (c) On page 42, in the third paragraph under the "Guaranteed
Principal Option" subheading, please bold the third and fourth sentences.
RESPONSE: (c) The Companies have revised the prospectuses to bold the third
and fourth sentences in the third paragraph under the "Guaranteed Principal
Option" subheading.
COMMENT: (d) On page 43, in the second paragraph under the "Exercising the
GMIB Plus II Rider" subheading, please bold the fourth sentence.
RESPONSE: (d) The Companies have revised the prospectuses to bold the
fourth sentence in the second paragraph under the "Exercising the GMIB Plus
II Rider" subheading.
COMMENT: (e) On page 43, under the "Exercising the GMIB Plus II Rider"
subheading, please clarify that if the amount of the guaranteed minimum
lifetime income that the GMIB produces is less than the amount of annuity
income that would be provided by
Alison White, Esq.
March 21, 2008
Page 4
applying contract value on the annuity date to the then-current annuity
purchase rates, then the contract owner would have paid for a benefit that
he did not use.
RESPONSE: (e) The Companies have revised the prospectuses to add the
following sentence: "If the amount of the guaranteed minimum lifetime
income that the GMIB Plus II produces is less than the amount of annuity
income that would be provided by applying contract value on the annuity
date to the then-current annuity purchase rates, then you would have paid
for a benefit that you did not use."
(5) LIVING BENEFITS--DESCRIPTION OF LIFETIME WITHDRAWAL GUARANTEE II
COMMENT: (a) On page 48, under the "Managing Your Withdrawals" subheading,
please explain how the withdrawal charges impact the withdrawal benefit
calculations.
RESPONSE: (a) The withdrawal charges do not have any impact on the Lifetime
Withdrawal Guarantee I or the Lifetime Withdrawal Guarantee II
calculations. As such, on page 48, the prospectuses state: "We do not
include withdrawal charges for the purpose of calculating whether you have
made an Excess Withdrawal."
COMMENT: (b) On page 48, under the "Automatic Annual Step-Up" subheading,
please clarify, if true, that the comparison of account value to the Total
Guaranteed Withdrawal Amount takes place after compounding.
RESPONSE: (b) The Companies previously disclosed that the comparison of
account value to the Total Guaranteed Withdrawal Amount takes place after
compounding under the "Lifetime Withdrawal Guarantee and Guaranteed
Withdrawal Benefit--Rider Charge" subheading under "Expenses." However, to
further clarify, the Companies also revised the prospectuses to add the
parenthetical "(after compounding)" immediately following the term "Total
Guaranteed Withdrawal Amount" in the first sentence under the "Automatic
Annual Step-Up" subheading.
COMMENT: (c) On page 50, under the "Additional Information" subheading,
please clarify the partial withdrawals from the LWG II death benefit amount
are deducted on a dollar for dollar basis.
RESPONSE: (c) The Companies have revised the third sentence under the under
the "Additional Information" subheading as follows: "The LWG II death
benefit amount that may be taken as a lump sum will be equal to total
purchase payments less any partial withdrawals (deducted on a dollar for
dollar basis)."
(6) LIVING BENEFITS--SUMMARY OF LIVING BENEFITS RIDERS
COMMENT: Please move the summary of living benefit riders chart from the
end of the "Living Benefits" section to the beginning of the "Living
Benefits" section.
Alison White, Esq.
March 21, 2008
Page 5
RESPONSE: The Companies have set forth disclosure on the living benefit
riders by first, providing an overview of each rider; second, providing a
detailed description of each rider; and third, providing a summary chart
that highlights the differences among the riders. The Companies believe
that this is the most logical and straightforward way to present the
disclosure on the living benefit riders. To that end, the Companies believe
that the summary chart is appropriately placed at the end of the "Living
Benefits" section because the chart is intended to serve as a tool to
compare each rider and it is only useful after a contract owner has read
the overview and detailed description of each rider. If the chart were to
be placed in the beginning of the section, it might be confusing for a
contract owner to compare the riders because he or she would not have had
the benefit of the overview and detailed disclosure relating to features,
costs, and restrictions associated with each rider. Thus, the Companies
respectfully decline to move the chart to the beginning of the "Living
Benefits" section.
(7) DEATH BENEFIT--OPTIONAL DEATH BENEFIT--ENHANCED DEATH BENEFIT
COMMENT: On page 62, in the "Optional Death Benefit-Enhanced Death Benefit"
subsection, please include an example of the Enhanced Death Benefit rider.
RESPONSE: The Companies will revise the prospectuses to include an example
of the Enhanced Death Benefit rider in an appendix. The Companies will
provide the Staff with this example under separate cover as soon as it is
final.
(8) SUPPLEMENTAL COMMENT
COMMENT: Please disclose to the staff whether there are any types of
guarantees or support agreements with third parties to support the
Companies' guarantees under the contracts.
RESPONSE: MLI does not have any guarantees or support agreements with third
parties to support its guarantees under the contracts, other than the net
worth maintenance agreement and contingent reinsurance agreement discussed
in the Statement of Additional Information. MLI USA does not have any
guarantees or support agreements with third parties.
(9) APPENDIX D-GUARANTEED MINIMUM INCOME BENEFIT EXAMPLES
COMMENT: (a) Please bold the last sentence of the first paragraph in
Appendix D.
RESPONSE: (a) The Companies have revised the prospectuses to bold the last
sentence of the first paragraph in Appendix D.
COMMENT: (b) If applicable, please add the phrase "or income taxes and tax
penalties" to the end of the last sentence of the first paragraph in
Appendix D.
Alison White, Esq.
March 21, 2008
Page 6
RESPONSE: (b) The Companies revised the prospectuses to add the phrase "or
income taxes and tax penalties" to the end of the last sentence of the
first paragraph in Appendix D.
COMMENT: (c) In Appendix D, please include a numerical example showing how
withdrawal charges apply with respect to the GMIB calculations.
RESPONSE: (c) The Companies have made a good faith effort to revise the
living benefits disclosure to make it straightforward and understandable.
In making these revisions, the Companies tried to anticipate all of the
areas that needed to be clarified or supplemented with additional examples.
The Companies gave a considerable amount of thought to which aspects of the
riders warranted further illustration and that is how the Companies decided
which examples to provide. Preparing rider examples involves a very lengthy
process and given the Companies' rigorous print schedule, they are not able
to add additional examples at this time. The Companies appreciate the
Staff's suggestions for additional examples and will consider adding these
examples in the future.
COMMENT: (d) In Appendix D, please include a numerical example of the
situation where a contract owner would pay for the GMIB without using it.
RESPONSE: (d) Please see response (9)(c).
(10) APPENDIX E-GUARANTEED WITHDRAWAL BENEFIT EXAMPLES
COMMENT: (a) In Appendix E, please include a numerical example showing how
withdrawal charges apply with respect to the Guaranteed Withdrawal Benefit
calculations.
RESPONSE: (a) Please see response (9)(c).
COMMENT: (b) In Appendix E, please revise the first sentence in the
parenthetical to read: "Examples A, B, and C are for the Lifetime
Withdrawal Guarantee I and Lifetime Withdrawal Guarantee II riders."
RESPONSE: (b) The Companies have revised the first sentence in the
parenthetical to read: "Examples A, B, and C are for the Lifetime
Withdrawal Guarantee I and Lifetime Withdrawal Guarantee II riders."
COMMENT: (c) Please bold the fourth sentence in the first paragraph in
Appendix E and please delete "withdrawal charges" from this sentence if the
Companies add an example illustrating the impact of withdrawal charges.
RESPONSE: (c) The Companies have revised the prospectuses to bold the
fourth sentence in the first paragraph in Appendix E. However, the
Companies respectfully decline to delete "withdrawal charges" from this
sentence because for the reasons discussed in response (9)(c) the Companies
respectfully declined to add an example illustrating the impact of
withdrawal charges.
Alison White, Esq.
March 21, 2008
Page 7
* * *
We hope that you will find these responses satisfactory. We appreciate the
Staff's assistance in reviewing these filings. As you are aware, because of the
number of prospectuses, the Companies need to begin printing on April 1, 2008.
If you have any questions or comments, please contact the undersigned at (202)
383-0698 or Lisa Flanagan at (202) 383-0873.
Sincerely,
/s/ Mary E. Thornton
----------------------------------------
Mary E. Thornton
Enclosures
cc: Michele Abate, Esq.
W. Thomas Conner, Esq.
Lisa Flanagan, Esq.
HIGHLIGHTS
The variable annuity contract that we are offering is a contract between you,
the owner, and us, the insurance company, where you agree to make at least one
purchase payment to us and we agree to make a series of annuity payments at a
later date. The contract has a maximum issue age and you should consult with
your registered representative. The contract provides a means for investing on
a tax-deferred basis in our fixed account and the investment portfolios. The
contract is intended for retirement savings or other long-term investment
purposes. When you purchase the contract, you can choose an optional death
benefit and fixed and variable income options. You can also select a guaranteed
minimum income benefit ("GMIB"), a guaranteed withdrawal benefit ("GWB"), or
the guaranteed minimum accumulation benefit ("GMAB").
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase,
earnings accumulate on a tax-deferred basis and are taxed as income when you
make a withdrawal. If you make a withdrawal during the accumulation phase, we
may assess a withdrawal charge of up to 7%. The income phase occurs when you or
a designated payee begin receiving regular annuity payments from your contract.
You and the annuitant (the person on whose life we base annuity payments) do
not have to be the same, unless you purchase a tax qualified contract or elect
a GMIB (see "Living Benefits - Guaranteed Income Benefit").
You can have annuity payments made on a variable basis, a fixed basis, or a
combination of both. If you choose variable annuity payments, the amount of the
variable annuity payments will depend upon the investment performance of the
investment portfolio(s) you select for the income phase. If you choose fixed
annuity payments, the amount of each payment will not change during the income
phase.
TAX DEFERRAL AND QUALIFIED PLANS. The contracts are offered for individuals and
some tax qualified and non-tax qualified retirement plans. For any tax
qualified account (e.g., an IRA or 403(b) plan), the tax deferred accrual
feature is provided by the tax qualified retirement plan. Therefore, there
should be reasons other than tax deferral for acquiring the contract within a
qualified plan. (See "Federal Income Tax Status.")
STATE VARIATIONS. Contracts issued in your state may provide different features
and benefits from, and impose different costs than, those described in this
prospectus because of state law variations.These differences include, among
other things, free look rights, age issuance limitations, transfer rights and
limitations, the right to reject purchase payments, the right to assess
transfer fees, and general availability of certain riders. This prospectus
provides material information about the contracts that we are offering.
However, there are also a contract and endorsements, which are separate
documents from this prospectus. If you would like to review a copy of the
contract and endorsements, contact our Annuity Service Center.
FREE LOOK. You may cancel the contract within 10 days after receiving it (or
whatever period is required in your state). If you mail your cancellation
request, the request must be postmarked by the appropriate day; if you deliver
your cancellation request by hand, it must be received by us by the appropriate
day. Unless otherwise required by state law, you will receive whatever your
contract is worth on the day that we receive your cancellation request and we
will not deduct a withdrawal charge. The amount you receive may be more or less
than your payment depending upon the performance of the investment portfolios.
You bear the risk of any decline in account value. We do not refund any charges
or deductions assessed during the free look period. We will return your payment
if required by law.
TAX PENALTY. The earnings in your contract are not taxed until you take money
out of your contract. If you take money out of a non-qualified contract during
the accumulation phase, for tax purposes any earnings are deemed to come out
first. If you are younger than 59 1/2 when you take money out, you may be
charged a 10% federal tax penalty on those earnings. Payments during the income
phase are considered partly a return of your original investment until your
investment is returned.
NON-NATURAL PERSONS AS OWNERS. If the owner of a non-qualified annuity contract
is not a natural person (e.g., a corporation, partnership or certain trusts),
gains under the contract are generally not eligible for tax deferral. The owner
of this contract can be a natural person, a trust established for the exclusive
benefit of a natural person, a charitable remainder trust or other trust
arrangement (if approved by us). The owner of this contract can also be a
6
10-year waiting period. The amount of the guarantee depends on which of three
permitted investment portfolios you select.
GUARANTEED INCOME BENEFITS
At the time you buy the contract, you may elect a guaranteed income benefit
rider, called a Guaranteed Minimum Income Benefit (GMIB), for an additional
charge. Each version of these riders is designed to guarantee a predictable,
minimum level of fixed annuity payments, regardless of investment performance
during the accumulation phase. HOWEVER, IF APPLYING YOUR ACTUAL ACCOUNT VALUE
AT THE TIME YOU ANNUITIZE THE CONTRACT TO THEN CURRENT ANNUITY PURCHASE RATES
(OUTSIDE OF THE RIDER) PRODUCES HIGHER INCOME PAYMENTS, YOU WILL RECEIVE THE
HIGHER PAYMENTS, AND THUS YOU WILL HAVE PAID FOR THE RIDER EVEN THOUGH IT WAS
NOT USED. Also, prior to exercising the rider, you may make specified
withdrawals that reduce your income base (as explained below) during the
accumulation phase and still leave the rider guarantees intact, provided the
conditions of the rider are met. Your registered representative can provide you
an illustration of the amounts you would receive, with or without withdrawals,
if you exercised the rider.
There are four versions of the GMIB available with this contract, A MAXIMUM OF
TWO OF WHICH ARE OFFERED IN ANY PARTICULAR STATE:
o GMIB Plus II
o GMIB Plus I
o GMIB II
o GMIB I
Additionally, there may be versions of each rider that vary by issue date and
state availability. 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. Once elected, the rider cannot be
terminated except as discussed below.
FACTS ABOUT GUARANTEED INCOME BENEFIT RIDERS
INCOME BASE AND GMIB ANNUITY PAYMENTS. Under all versions of the GMIB, we
calculate an "income base" (as described below) that determines, in part, the
minimum amount you receive as an income payment upon exercising the GMIB rider
and annuitizing the contract. IT IS IMPORTANT TO RECOGNIZE THAT THIS INCOME
BASE IS NOT AVAILABLE FOR CASH WITHDRAWALS AND DOES NOT ESTABLISH OR GUARANTEE
YOUR ACCOUNT VALUE OR A MINIMUM RETURN FOR ANY INVESTMENT PORTFOLIO. After a
minimum 10-year waiting period, and then only within 30 days following a
contract anniversary, you may exercise the rider. We then will apply the income
base calculated at the time of exercise to the conservative GMIB Annuity Table
(as described below) specified in the rider in order to determine your minimum
guaranteed lifetime fixed monthly annuity payments (your actual payment may be
higher than this minimum if, as discussed above, the base contract under its
terms would provide a higher payment).
THE GMIB ANNUITY TABLE. The GMIB Annuity Table is 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 withdrawal charge may be applicable, so the amount of
guaranteed minimum lifetime income that the GMIB 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.
If you exercise a GMIB rider, your annuity payments will be the greater of:
o the annuity payment determined by applying the amount of the income base to
the GMIB Annuity Table, or
o the annuity payment determined for the same annuity option in accordance
with the base contract. (See "Annuity Payments (The Income Phase).")
If you choose not to receive annuity payments as guaranteed under the GMIB
Plus, you may elect any of the annuity options available under the contract.
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 Plus annuity payments. If
joint owners are named, the age of the older will be used to determine the
income base and GMIB Plus annuity payments.
GMIB, QUALIFIED CONTRACTS AND DECEDENT CONTRACTS. The GMIB may have limited
usefulness in connection with a Qualified Contract, such as an IRA (see
39
or to another 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 Plus 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.
OPTIONAL STEP-UP. On each contract anniversary as permitted, you may elect to
reset the Annual Increase Amount to the account value. An Optional Step-Up 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
II BY RESTARTING THE 10-YEAR WAITING PERIOD, AND WE MAY RESET THE GMIB PLUS II
RIDER CHARGE TO A RATE WE SHALL DETERMINE THAT DOES NOT EXCEED THE MAXIMUM
OPTIONAL STEP-UP CHARGE (1.50%), PROVIDED THAT THIS RATE WILL NOT EXCEED THE
RATE CURRENTLY APPLICABLE TO THE SAME RIDER AVAILABLE FOR NEW CONTRACT
PURCHASES AT THE TIME OF THE OPTIONAL STEP-UP. An Optional Step-Up 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 80 on the date
of the Optional Step-Up.
You may elect either: 1) a one-time Optional Step-Up at any contract
anniversary provided the above requirements are met, or 2) Optional Step-Ups 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 Step-Up 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 Step-Up 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 Step-Up
to occur on that contract anniversary. We reserve the right to prohibit an
Optional Step-Up if we no longer offer this benefit for this class of contract.
The Optional Step-Up will:
(1) reset the Annual Increase Amount to the account value on the contract
anniversary following the receipt of an Optional Step-Up election;
(2) reset the GMIB Plus II waiting period to the tenth contract anniversary
following the date the Optional Step-Up took effect; and
(3) we may reset the GMIB Plus II rider charge to a rate we shall determine
that does not exceed the Maximum Optional Step-Up Charge (1.50%), provided
that this rate will not exceed the rate currently applicable to the same
rider available for new contract purchases at the time of the Optional
Step-Up.
On the date of the Optional Step-Up, the account value on that day will be
treated as a single purchase payment received on the date of the Step-Up for
purposes of determining the Annual Increase Amount after the reset. All
purchase payments and withdrawal adjustments previously used to calculate the
Annual Increase Amount will be set equal to zero on the date of the Step-Up.
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 Plus II annuity payments. If
joint owners are named, the age of the older
41
will be used to determine the income base and GMIB Plus II annuity payments.
INVESTMENT ALLOCATION RESTRICTIONS. If you elect the GMIB Plus II, there are
certain investment allocation restrictions. (See "Purchase - Investment
Allocation Restrictions for Certain Riders.") If you elect the GMIB Plus II,
you may not particpate in the Dollar Cost Averaging (DCA) program. However, you
may elect to participate in the Enhanced Dollar Cost Averaging (EDCA) program,
provided that your destination investment portfolios are selected in accordance
with the investment allocation restrictions.
GUARANTEED PRINCIPAL OPTION. Starting with the tenth contract anniversary prior
to the owner's 91st 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 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 II 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 II for this feature.
The Guaranteed Principal Adjustment will never be less than zero. If the
Guaranteed Principal Option is exercised, the GMIB Plus II 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, and
the GMIB Plus II investment allocation restrictions, described above, will no
longer apply.
EXERCISING THE GMIB PLUS II RIDER. If you exercise the GMIB Plus 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 - 90 5
(2) Joint and last survivor annuity with 10 years of annuity payments
guaranteed. Based on federal tax rules, this option is not available for
Qualified Contracts where the difference in ages of the joint annuitants
is greater than 10 years. (See "Annuity Payments (The Income Phase).")
These options are described in the contract and the GMIB Plus II rider.
The GMIB Annuity Table is 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 payout types, the amount you receive
as an income payment also depends on your age,
42
your sex, and the annuity option you select. THE ANNUITY RATES IN THE GMIB
ANNUITY TABLE ARE CONSERVATIVE AND A WITHDRAWAL CHARGE MAY BE APPLICABLE, SO
THE AMOUNT OF GUARANTEED MINIMUM LIFETIME INCOME THAT THE GMIB 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.
If you exercise the GMIB Plus II, your annuity payments will be the greater of:
o the annuity payment determined by applying the amount of the income base to
the GMIB Annuity Table, or
o the annuity payment determined for the same annuity option in accordance
with the base contract. (See "Annuity Payments (The Income Phase).")
If the amount of the guaranteed minimum lifetime income that the GMIB Plus II
produces is less than the amount of annuity income that would be provided by
applying contract value on the annuity date to the then-current annuity
purchase rates, then you would have paid for a benefit that you did not use.
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.
The GMIB purchase payout rates are enhanced under the following circumstances.
If:
o you take no withdrawals before your 60th birthday;
o your account value is fully withdrawn at or after your 60th birthday and
there is an income base remaining; and
o the annuity option you select is the single life annuity with 10 years of
annuity payments guaranteed;
then the annual annuity payments under the GMIB Plus II rider will equal or
exceed 6% of the Annual Increase Amount (calculated on the date the payments
are determined).
If you choose not to receive annuity payments as guaranteed under the GMIB Plus
II, you may elect any of the annuity options available under the contract.
TERMINATING THE GMIB PLUS II RIDER. Except as otherwise provided in the GMIB
Plus II rider, the GMIB Plus II will terminate upon the earliest of:
a) The 30th day following the contract anniversary on or following your
90th 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;
d) Death of the owner or joint owner (unless the spouse (age 89 or
younger) is the beneficiary and elects to continue the contract), or
death of the annuitant if a non-natural person owns the contract;
e) A change for any reason of the owner or joint owner or the
annuitant, if a non-natural person owns the contract, unless we agree
otherwise;
f) The effective date of the Guaranteed Principal Option; or
g) The date you assign your contract, subject to our administrative
procedures.
When the GMIB Plus II rider terminates, the corresponding GMIB Plus II rider
charge terminatesand the GMIB Plus II investment allocation restrictions no
longer apply.
(See Appendix D for examples illustrating the operation of the GMIB Plus II.)
DESCRIPTION OF GMIB PLUS I
In states where the GMIB Plus I has been approved and the GMIB Plus II has not
been approved, the GMIB Plus I is available only for owners up through age 75,
and you can only elect GMIB Plus I at the time you purchase the contract. GMIB
Plus I 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.
GMIB Plus I is otherwise identical to GMIB Plus II, with the following
exceptions:
(1) The GMIB Plus I Income Base is calculated as
43
Rate (6% Withdrawal Rate if you make your first withdrawal on or after the date
you reach age 76).
IT IS IMPORTANT TO NOTE:
o If you take your first withdrawal before the date you reach age 59 1/2, we
will continue to pay the Annual Benefit Payment each year until the
Remaining Guaranteed Withdrawal Amount is depleted, even if your account
value declines to zero. This guarantees that you will receive your
purchase payments regardless of market performance so long as you do not
take Excess Withdrawals; however, you will not be guaranteed income for
the rest of your life.
o If you take your first withdrawal on or after the date you reach age 59 1/2,
we will continue to pay the Annual Benefit Payment each year for the rest
of your life (and the life of your spouse, if the Joint Life version of
the rider was elected, and your spouse elects to continue the contract and
is at least age 59 1/2 at continuation), even if your Remaining Guaranteed
Withdrawal Amount and/or account value declines to zero. Therefore, you
will be guaranteed income for life.
o If you take your first withdrawal on or after the date you reach age 76,
your Annual Benefit payment will be set equal to a 6% Withdrawal Rate
multiplied by the Total Guaranteed Withdrawal Amount.
o If you have elected the LWG II, you should carefully consider when to begin
taking withdrawals. If you begin taking withdrawals too soon, you may
limit the value of the LWG II. For example, we no longer increase your
Total Guaranteed Withdrawal Amount by the 7.25% Compounding Income Amount
once you make your second withdrawal. However, if you delay taking
withdrawals for too long, you may limit the number of years available for
you to take withdrawals in the future (due to life expectancy) and you may
be paying for a benefit you are not using.
o At any time during the accumulation phase, you can elect to annuitize under
current annuity rates in lieu of continuing the LWG II rider. This may
provide higher income amounts and/or different tax treatment than the
payments received under the LWG II rider.
MANAGING YOUR WITHDRAWALS. It is important that you carefully manage your
annual withdrawals. To retain the full guarantees of this rider, your annual
withdrawals cannot exceed the Annual Benefit Payment each contract year. In
other words, you should not take Excess Withdrawals. We do not include
withdrawal charges for the purpose of calculating whether you have made an
Excess Withdrawal. If you do take an Excess Withdrawal, we will recalculate the
Total Guaranteed Withdrawal Amount and reduce the Annual Benefit Payment to the
new Total Guaranteed Withdrawal Amount multiplied by the 5% Withdrawal Rate (6%
Withdrawal Rate if you make your first withdrawal on or after the date you
reach age 76).
In addition, as noted above, if you take an Excess Withdrawal, we will reduce
the Remaining Total Guaranteed Withdrawal Amount in the same proportion that
the withdrawal reduces the account value. These reductions in the Total
Guaranteed Withdrawal Amount, Annual Benefit Payment, and Remaining Guaranteed
Withdrawal Amount may be significant. You are still eligible to receive either
lifetime payments or the remainder of the Remaining Guaranteed Withdrawal
Amount so long as the withdrawal that exceeded the Annual Benefit Payment did
not cause your account value to decline to zero.
You can always take Non-Excess Withdrawals. However, if you choose to receive
only a part of your Annual Benefit Payment in any given contract year, your
Annual Benefit Payment is not cumulative and your Remaining Guaranteed
Withdrawal Amount and Annual Benefit Payment will not increase. For example,
since your Annual Benefit Payment is 5% of your Total Guaranteed Withdrawal
Amount (or 6% if you make your first withdrawal on or after the date you reach
age 76), you cannot withdraw 3% of the Total Guaranteed Withdrawal Amount in
one year and then withdraw 7% of the Total Guaranteed Withdrawal Amount the
next year without making an Excess Withdrawal in the second year.
AUTOMATIC ANNUAL STEP-UP. On each contract anniversary prior to the owner's
91st birthday, an Automatic Annual Step-Up will occur, provided that the
account value exceeds the Total Guaranteed Withdrawal Amount (after
compounding) immediately before the Step-Up (and provided that you have not
chosen to decline the Step-Up as described below).
The Automatic Annual Step-Up will:
o reset the Total Guaranteed Withdrawal Amount and the Remaining Guaranteed
Withdrawal Amount to the
48
of your request. If cancelled, the LWG II rider will terminate, we will no
longer deduct the LWG II rider charge, and the investment allocation
restrictions described in "Purchase - Investment Allocation Restrictions for
Certain Riders" will no longer apply. The variable annuity contract, however,
will continue.
If you cancel the LWG II rider on the fifteenth contract anniversary or any
eligible contract anniversary thereafter, we will add a Guaranteed Principal
Adjustment to your account value. The Guaranteed Principal Adjustment is
intended to restore your initial investment in the contract in the case of poor
investment performance. The Guaranteed Principal Adjustment is equal to (a) -
(b) where:
(a) is purchase payments credited within 120 days of the date that we issued
the contract, reduced proportionately by the percentage reduction in
account value attributable to any partial withdrawals taken (including any
applicable withdrawal charges) and
(b) is the account value on the date of cancellation.
The Guaranteed Principal Adjustment will be added to each applicable investment
portfolio in the ratio the portion of the account value in such investment
portfolio bears to the total account value in all investment portfolios. The
Guaranteed Principal Adjustment will never be less than zero.
Only purchase payments made during the first 120 days that you hold the
contract are taken into consideration in determining the Guaranteed Principal
Adjustment. Contract owners who anticipate making purchase payments after 120
days should understand that such payments will not increase the Guaranteed
Principal Adjustment. Purchase payments made after 120 days are added to your
account value and impact whether or not a benefit is due. Therefore, the LWG II
may not be appropriate for you if you intend to make additional purchase
payments after the 120-day period and are purchasing the LWG II for its
Guaranteed Principal Adjustment feature.
TERMINATION OF THE LIFETIME WITHDRAWAL GUARANTEE II RIDER. The Lifetime
Withdrawal Guarantee II rider will terminate upon the earliest of:
(1) the date of a full withdrawal of the account value (a pro rata portion
of the rider charge will be assessed; you are still eligible to receive
either the Remaining Guaranteed Withdrawal Amount or lifetime payments,
provided the withdrawal did not exceed the Annual Benefit Payment and the
provisions and conditions of the rider have been met);
(2) the date all of the account value is applied to an annuity option (a pro
rata portion of the rider charge will be assessed);
(3) the date there are insufficient funds to deduct the Lifetime Withdrawal
Guarantee rider charge from the account value (you are still eligible to
receive either the Remaining Guaranteed Withdrawal Amount or lifetime
payments, provided the provisions and conditions of the rider have been
met);
(4) death of the owner or joint owner (or the annuitant if the owner is a
non-natural person), except where the contract is issued under the Joint
Life version of the Lifetime Withdrawal Guarantee, the primary beneficiary
is the spouse, and the spouse elects to continue the contract under the
spousal continuation provisions of the contract;
(5) change of the owner or joint owner for any reason (a pro rata portion of
the rider charge will be assessed), subject to our administrative
procedures;
(6) the effective date of the cancellation of the rider;
(7) termination of the contract to which the rider is attached (a pro rata
portion of the rider charge will be assessed, except for a termination due
to death); or
(8) the date you assign your contract, subject to our administrative
procedures.
Once the rider is terminated, the LWG II rider charge will no longer be
deducted and the LWG II investment allocation restrictions will no longer
apply.
ADDITIONAL INFORMATION. The LWG II rider may affect the death benefit available
under your contract. If the owner or joint owner should die while the LWG II
rider is in effect, an alternate death benefit amount will be calculated under
the LWG II rider that can be taken in a lump sum. The LWG II death benefit
amount that may be taken as a lump sum will be equal to total purchase payments
less any partial withdrawals (deducted on a dollar-for-dollar basis). If this
death benefit amount is greater than the death benefit provided by your
contract, and if you made no Excess Withdrawals, then this death
50
APPENDIX D
GUARANTEED MINIMUM INCOME BENEFIT EXAMPLES
The purpose of these examples is to illustrate the operation of the Guaranteed
Minimum Income Benefit. (Unless otherwise noted, these examples are for the
GMIB Plus II rider.) 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, WITHDRAWAL CHARGES OR INCOME TAXES OR TAX PENALITIES.
(1) WITHDRAWAL ADJUSTMENTS TO ANNUAL INCREASE AMOUNT
Dollar-for-dollar adjustment when withdrawal is less than or equal to 6% of
---------------------------------------------------------------------------
the Annual Increase Amount from the prior contract anniversary
--------------------------------------------------------------
Assume the initial purchase payment is $100,000 and the GMIB Plus 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 $106,000 ($100,000 increased by 6% per year, compounded
annually). Assume that on the first contract anniversary, $6,000 is
withdrawn (leaving an account balance of $94,000). Because the withdrawal
is less than or equal to 6% 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 ($106,000 - $6,000 =
$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 $106,000 ($100,000 increased by 6%
per year, compounded annually).
Proportionate adjustment when withdrawal is greater than 6% of the Annual
-------------------------------------------------------------------------
Increase Amount from the prior contract anniversary
---------------------------------------------------
Assume the initial purchase payment is $100,000 and the GMIB Plus 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 $106,000 ($100,000 increased by 6% 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 6% 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 ($106,000)
multiplied by the percentage reduction in the account value attributed to
that withdrawal (10%). Therefore, the new Annual Increase Amount is
$95,400 ($106,000 x 10% = $10,600; $106,000 - $10,600 = $95,400).
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 $101,124 ($95,400 increased by 6% per year,
compounded annually).
(In contrast to the GMIB Plus II rider, for the GMIB II rider, the annual
increase rate for purposes of calculating the Annual Increase Amount is
5% per year.)
(2) THE 6% ANNUAL INCREASE AMOUNT
Example
-------
Assume the owner of the contract is a male, age 55 at issue, and he elects
the GMIB Plus 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 6% Annual Increase Amount is equal to $100,000
(the initial purchase payment). The 6% Annual Increase Amount is
calculated at each contract anniversary (through the contract anniversary
on or following the owner's 90th birthday). At the tenth contract
anniversary, when the owner is age 65, the 6% Annual Increase Amount is
$179,085 ($100,000 increased by 6% 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 6%, until the contract anniversary on or
immediately
D-1
APPENDIX E
GUARANTEED WITHDRAWAL BENEFIT EXAMPLES
The purpose of these examples is to illustrate the operation of the Guaranteed
Withdrawal Benefit. (Examples A, B and C are for the Lifetime Withdrawal
Guarantee I and Lifetime Withdrawal Guarantee II riders. Examples D through K
are for Enhanced GWB and GWB I.) 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, WITHDRAWAL CHARGES OR INCOME TAXES AND TAX PENALTIES. The
Guaranteed Withdrawal Benefit does not establish or guarantee an account value
or minimum return for any investment portfolio. The Total Guaranteed Withdrawal
Amount and the Remaining Guaranteed Withdrawal Amount (under the Lifetime
Withdrawal Guarantee) and the Guaranteed Withdrawal Amount and the Benefit Base
(under the Enhanced GWB and GWB I) cannot be taken as a lump sum.
A. Lifetime Withdrawal Guarantee
1. When Withdrawals Do Not Exceed the Annual Benefit Payment
Assume that a contract had an initial purchase payment of $100,000. The initial
account value would be $100,000, the Total Guaranteed Withdrawal Amount would
be $100,000, the initial Remaining Guaranteed Withdrawal Amount would be
$100,000 and the initial Annual Benefit Payment would be $5,000 ($100,000 x
5%).
Assume that $5,000 is withdrawn each year, beginning before the contract owner
attains age 59 1/2. The Remaining Guaranteed Withdrawal Amount is reduced by
$5,000 each year as withdrawals are taken (the Total Guaranteed Withdrawal
Amount is not reduced by these withdrawals). The Annual Benefit Payment of
$5,000 is guaranteed to be received until the Remaining Guaranteed Withdrawal
Amount is depleted, even if the account value is reduced to zero.
If the first withdrawal is taken after age 59 1/2, then the Annual Benefit
Payment of $5,000 is guaranteed to be received for the owner's lifetime, even
if the Remaining Guaranteed Withdrawal Amount and the account value are reduced
to zero. (Under the Lifetime Withdrawal Guarantee II rider, if the contract
owner makes the first withdrawal at or after age 76, the Withdrawal Rate is 6%
instead of 5% and the Annual Benefit Payment is $6,000.)
[GRAPHIC APPEARS HERE]
Remaining
Annual Guaranteed Guaranteed
Benefit Cumulative Account Withdrawal Withdrawal
Payment Withdrawals Value Amount Amount
$5,000 $ 5,000 $ 100,000 $100,000 $100,000
5,000 10,000 90,250 95,000 100,000
5,000 15,000 80,987.5 90,000 100,000
5,000 20,000 72,188.13 85,000 100,000
5,000 25,000 63,828.72 80,000 100,000
5,000 30,000 55,887.28 75,000 100,000
5,000 35,000 48,342.92 70,000 100,000
5,000 40,000 41,175.77 65,000 100,000
5,000 45,000 34,366.98 60,000 100,000
5,000 50,000 27,898.63 55,000 100,000
5,000 55,000 21,753.7 50,000 100,000
5,000 60,000 15,916.02 45,000 100,000
5,000 65,000 10,370.22 40,000 100,000
5,000 70,000 5,101.706 35,000 100,000
5,000 75,000 96.62093 30,000 100,000
5,000 80,000 0 0 100,000
5,000 85,000 0 0 100,000
5,000 90,000 0 0 100,000
5,000 95,000 0 0 100,000
5,000 100,000 0 0 100,000
2. When Withdrawals Do Exceed the Annual Benefit Payment
a. Lifetime Withdrawal Guarantee II - Proportionate Reduction
Assume that a contract with the Lifetime Withdrawal Guarantee II rider had an
initial purchase payment of $100,000. The initial account value would be
$100,000, the Total Guaranteed Withdrawal Amount would be $100,000, the initial
Remaining Guaranteed Withdrawal Amount would be $100,000 and the initial Annual
Benefit Payment would be $5,000 ($100,000 x 5%). (If the contract owner makes
the first withdrawal on or after the date he or she reaches age 76, the
E-1