May 19, 2009
Mark Cowan
Senior Counsel
Office of Insurance Products
Division of Investment Management
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Subject: Genworth Life & Annuity VA Separate Account 2
Genworth Life and Annuity Insurance Company
Post-Effective Amendment No. 2
SEC File Nos. 333-143407 and 811-21892
Dear Mr. Cowan:
On behalf of Genworth Life and Annuity Insurance Company (the "Company") and
its Genworth Life & Annuity VA Separate Account 2 (the "Separate Account"), we
hereby submit our response to comments received by the staff of the Securities
and Exchange Commission by e-mail dated April 21, 2009, for the
above-referenced Post-Effective Amendment. We have made revisions to the
Registration Statement in response to your comments as appropriate, and have
attached revised pages to this correspondence for your review. We intend to
make these and other non-material revisions to the Registration Statement and
file a subsequent Post-Effective Amendment reflecting these revisions as soon
as practicable.
We provide the following responses to your comments, with citations to the
revised pages from the Post-Effective Amendment for your reference.
Comment 1. General Please clarify supplementally whether there are any types of
guarantees or support agreements with third parties to support any of the
company's guarantees under the policy (other than reinsurance agreements) or
whether the company will be primarily responsible for paying out on any
guarantees associated with the policy.
Response 1. There are no such agreements (other than reinsurance agreements).
The Company currently is responsible for paying the guarantees associated with
the policy.
Comment 2. Glossary Consider defining "good order" in the Glossary.
Response 2. We did not make this revision. We believe that the term "good
order" is best explained in context because what constitutes "good order" for
one situation might differ from another (for example, what constitutes "good
order" for a transfer request is different than what constitutes "good order"
for making a death benefit claim).
Mark Cowan
Office of Insurance Products
United States Securities and Exchange Commission
Page 2
Comment 3.a. Asset Allocation Program (p. 25) Please explain what will happen
if a request is determined to be not in good order. Will the underlying assets
be transferred in accordance with the new (updated) model?
Response 3.a. We have added the following sentence to the cited disclosure,
which now appears on page 26 of the prospectus:
If your request is rejected, your Contract Value (and subsequent purchase
payments, if applicable) will be reallocated in accordance with the updated
Model.
Please see page 26 of the prospectus, which is attached to this correspondence.
Comment 3.b. Asset Allocation Program (p. 25) Also, please clarify whether
optimization of the level of risk tolerance refers to the contract owner or to
Genworth's potential obligation to pay under the riders.
Response 3.b. We have added the word "investor" to the cited language, which is
on page 25 of the prospectus and is attached to this correspondence.
Comment 4. How to Claim Proceeds and/or Death Benefit Payments (pages 63-65) In
the discussion of Stretch Payment Choices, consider using italics or other
similar formatting to highlight the different discussions concerning
beneficiaries of Non-Qualified and Qualified Contracts.
Response 4. We have italicized the headers for those provisions. Please see
page 64 of the prospectus, which is attached to this correspondence.
Comment 5. Experts (SAI, page B-8) Please include the business address of the
Company's independent public accountant, KPMG LLP.
Response 5. We have added the address as requested. Please see page B-8 of the
Statement of Additional Information, which is attached to this correspondence.
Mark Cowan
Office of Insurance Products
United States Securities and Exchange Commission
Page 3
We hope that this adequately responds to the comments provided in your letter.
As mentioned above, we intend to file a subsequent Post-Effective Amendment
reflecting these revisions as soon as practicable.
Thank you for your assistance in this matter. Should you have any questions,
please do not hesitate to contact me at 804.289.3545 or via e-mail at
michael.pappas@genworth.com.
Sincerely,
/s/ Michael D. Pappas
--------------------------
Michael D. Pappas
Associate General Counsel
Mark Cowan
Office of Insurance Products
United States Securities and Exchange Commission
Page 4
Genworth Life and Annuity Insurance Company, on behalf of its Genworth Life &
Annuity VA Separate Account 2, acknowledges that:
Genworth Life and Annuity Insurance Company, on behalf of its Genworth Life &
Annuity VA Separate Account 2, is responsible for the adequacy and accuracy of
the disclosure in the filings. Staff comments or changes to disclosure in
response to Staff comments in the filings reviewed by the Staff do not
foreclose the Commission from taking any action with respect to the filing and
Genworth Life & Annuity VA Separate Account 2 may not assert this action as
defense in any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
/s/ Michael P. Cogswell
--------------------------
Michael P. Cogswell
Vice President
To provide further diversification benefits beyond the broad asset class
allocations, GFWM conducts an optimization analysis to determine the
appropriate allocations to sub-asset classes for each Asset Allocation Model.
While, generally, GFWM exercises its own broad discretion in allocating to
sub-asset classes, we may require GFWM to target certain levels of sub-asset
class allocations in order to achieve a level of risk consistent with certain
of our optional riders that require assets to be invested in an Investment
Strategy, which may include one or more of the Asset Allocation Models.
After the asset class and sub-asset class exposures have been identified for
each Asset Allocation Model, a determination is made as to how available
Portfolios can be used to implement the asset class allocations. Part of the
allocation process used by GFWM in determining the allocation to Portfolios in
the Asset Allocation Models is an evaluation of the asset and/or sub-asset
class(es) exposures given by each Portfolio in order to combine Portfolios to
arrive at the desired asset and sub-asset class allocation levels. The
Portfolios considered by GFWM are all those currently available for
contributions of new purchase payments under your contract and include the
Portfolios of the Genworth Variable Insurance Trust (or "GVIT"), which are
advised by GFWM.
GFWM considers various factors in determining allocations to each Portfolio for
each Asset Allocation Model, which may include historical style analysis and
asset performance and multiple regression analyses, as well as qualitative
assessments of a Portfolio's portfolio manager and expected future market and
economic conditions. While Portfolios are not required to report their current
securities holdings directly to GFWM, this analysis is generally made based on
the historic security holdings of the Portfolios as described in public
documents, including those of the GVIT Portfolios.
In addition, GFWM may consider (but is not obligated to follow) recommendations
we may make regarding what Portfolios to use. These recommendations may be
based on various factors, including whether the investment adviser or
distributor of a Portfolio pays us a fee in connection with certain
administrative and other services we provide relating to the Portfolio, and
whether our affiliate Capital Brokerage Corporation receives Rule 12b-1 fees
from the Portfolio. Based on this analysis, Portfolios are selected in a manner
that is intended to optimize potential returns of each Model, given a
particular level of risk tolerance. This process could, in some cases, result
in the inclusion of a Portfolio in a Model based on its specific asset class
exposure or other specific optimization factors, even when another Portfolio
may have better investment performance. In addition, this may also result in
the inclusion of Portfolios with higher fees that may adversely affect
performance.
The Asset Allocation Models will include allocations to certain GVIT
Portfolios, and GFWM has an incentive to include GVIT Portfolios in the Asset
Allocation Models, and/or to specify greater allocations to such GVIT
Portfolios, that results from the compensation received by it and its
affiliates relating to the GVIT Portfolios. You should consider this when
deciding to invest in accordance with an Asset Allocation Model.
Notwithstanding this incentive, GFWM does not intend to give any preference to
the GVIT Portfolios when constructing the Asset Allocation Models.
As investment adviser to the GVIT Portfolios, GFWM will not make decisions
regarding the purchase and sale of specific securities for the GVIT Portfolios
-- those decisions are made by the sub-advisers to the GVIT Portfolios -- but
GFWM's duties as investment adviser will likely give it access to non-public
information about the holdings of the GVIT Portfolios. However, in order to
establish a "level playing field" among all the available Portfolios for
purposes of developing the Asset Allocation Models, GFWM has established an
information barrier between its investment management staff responsible for
supervision of the GVIT Portfolio sub-advisers and the investment management
staff responsible for developing the Asset Allocation Models. Therefore,
contract owners should not assume that the relevant GFWM personnel would be
more knowledgeable about the holdings and investment styles of the GVIT
Portfolios than those of Portfolios advised by third parties. This information
barrier does not, however, eliminate the incentive for GFWM personnel to
include GVIT Portfolios in the Asset Allocation Models, and/or to recommend
greater allocations to GVIT Portfolios, that results from the compensation
received by GFWM and its affiliates relating to the GVIT Portfolios.
In addition, certain of the optional riders available for purchase under the
contract require assets to be invested in an Investment Strategy, which may
include one or more of the Asset Allocation Models or certain Designated
Subaccounts. Therefore, investment in an Asset Allocation Model as the
Investment Strategy under a rider may result in an additional economic benefit
to GFWM and to GFWM's affiliates, including the Company, by virtue of the fees
received from the GVIT Portfolios. You should consider this when deciding to
invest in an Asset Allocation Model as the Investment Strategy. Currently, none
of the GVIT Portfolios are Designated Subaccounts.
Periodic Updates of Asset Allocation Models and Notices of Updates
Each of the Asset Allocation Models is evaluated periodically (generally
annually) to assess whether the combination of Portfolios within each Model
should be changed to better seek to optimize the potential return for the level
of investor risk tolerance intended for the Model. As a result of such periodic
analysis, each
25
Model may change, such as by revising the percentages allocated to such
Portfolio. In addition, Portfolios may be added to a Model (including
Portfolios not currently available in the contract), or Portfolios may be
deleted from a Model.
When your Asset Allocation Model is updated (as described below), we will
reallocate your Contract Value (and subsequent purchase payments, if
applicable) in accordance with any changes to the Model you have selected. This
means the allocation of your Contract Value, and potentially the Portfolios in
which you are invested, will change and your Contract Value (and subsequent
purchase payments, if applicable) will be reallocated among the Portfolios in
your updated Model (independently of monthly rebalancing, as discussed below).
When Asset Allocation Models are to be updated, we will send you written notice
of the updates to the Models at least 30 days in advance of the date the
updated version of the Model is intended to be effective. Contract owners
purchasing contracts who elect to participate in the Asset Allocation Program
within the two week period prior to a date that Asset Allocation Models are to
be updated, will be provided with information regarding the composition of both
the current Asset Allocation Model as well as the proposed changes to the
Model. You should carefully review these notices. If you wish to accept the
changes to your selected Model, you will not need to take any action, as your
Contract Value (and subsequent purchase payments, if applicable) will be
reallocated in accordance with the updated Model. If you do not wish to accept
the changes to your selected Model, you have the following alternatives:
. If you elected Income Protector, you must transfer your Contract Value to
one or more of the Designated Subaccounts (as described in the sections of
this prospectus discussing the rider), or one of the other available Asset
Allocation Models. Contract owners that own Income Protector must always
allocate purchase payments and Contract Value in accordance with the
Investment Strategy, and any attempt to allocate purchase payments and
Contract Value otherwise will be considered not in good order and
rejected. If your request is rejected, your Contract Value (and subsequent
purchase payments, if applicable) will be reallocated in accordance with
the updated Model.
. If you did not elect Income Protector, you may change to a different Asset
Allocation Model or reject the change.
If you choose to reject a change in an Asset Allocation Model in accordance
with the procedures described above, you create your own portfolio (a
"self-directed portfolio"), you have terminated your advisory relationship with
GFWM and GFWM provides no investment advice related to the creation of a
self-directed portfolio. Further, once you have rejected a change in a Model,
you are considered to have elected to reject all future changes in the Model.
Therefore, if you reject a Model change and thereby create a self-directed
portfolio, you will not receive a periodic review of or changes to your
portfolio, as would be provided by GFWM with respect to the Asset Allocation
Models. You will, however, continue to receive a quarterly statement with
information about your Contract Value, as well as written materials from GFWM
about any changes proposed to be made to the Models, and you can notify us in
writing to allocate your Contract Value in accordance with such changes.
Selecting An Asset Allocation Model
If you elect to participate in the Asset Allocation Program, you must allocate
your Contract Value (and subsequent purchase payments, if applicable) to the
40/60 Model, the 60/40 Model or the 70/30 Model. We will not make this
decision, nor will GFWM. The following paragraph provides some information you
may want to consider in making this decision.
You should consult with your registered representative and/or your financial
adviser on your decision regarding which Asset Allocation Model to select. Your
registered representative can assist you in determining which Model may be best
suited to your financial needs, investment time horizon, and willingness to
accept investment risk, and can help you complete the proper forms to
participate in the Asset Allocation Program. You should also periodically
review these factors with your registered representative to consider whether
you should change Models (or, if you have purchased Income Protector, whether
you should transfer your Contract Value to one or more of the Designated
Subaccounts) to reflect any changes in your personal circumstances. Your
registered representative can help you complete the proper forms to change to a
different Model or transfer to Designated Subaccounts.
In light of our potential payment obligations under the riders, we will not
permit contract owners who have selected a rider to allocate their assets in
either a highly aggressive or highly conservative manner. In deciding whether
to purchase a rider, you and your registered representative should consider
whether an asset allocation not permitted under the rider would best meet your
investment objectives. Currently, all three Asset Allocation Models available
under the contract are also available in the Investment Strategy for Income
Protector.
You may, in consultation with your registered representative, utilize an
investor profile questionnaire we make available, which asks questions intended
to help you or your registered representative assess your financial needs,
investment time horizon, and willingness to accept investment risk. However,
26
becomes the Owner and Annuitant under the "Optional Payment Plans"
provision of this prospectus;
(2) receive the proceeds in one lump sum payment;
(3) receive the proceeds over a period of five years following the date of
death. We will set the Contract Value to be equal to the death proceeds
as of the first Valuation Day that we have received due proof of death.
At any time during the five-year period following the date of death, a
partial or full distribution may be taken from the contract. The
Contract Value as of the date of the distribution request will be the
amount payable. We will pay, in one payment, any Contract Value
remaining at the earlier of the end of the five-year period or at the
death of the designated beneficiary;
(4) elect a "stretch" payment choice, as described in the "Stretch Payment
Choices" provision below;
(5) if the designated beneficiary is the spouse of a deceased owner, he or
she may continue the contract as stated in the "Distribution Rules"
provision; or
(6) if the designated beneficiary is an owner or joint owner who is a
natural person, he or she may continue the contract as stated in the
"Distribution Rules" provision.
If a designated beneficiary makes no election within 60 days following receipt
of due proof of death and all required forms at our Home Office, payments will
default to payment choice 3.
Stretch Payment Choices
The following payment choice is available to designated beneficiaries of
Non-Qualified Contracts:
A designated beneficiary of a Non-Qualified Contract may apply the death
proceeds of the contract to provide for an annual payment equal to the Minimum
Annual Income, described below, for the life expectancy of the designated
beneficiary. The first income payment must be made no later than 350 days after
the original owner's date of death. The income payment period must be a period
not exceeding the designated beneficiary's life expectancy. Payments will
continue annually on the distribution date until the death of the designated
beneficiary or the Contract Value is reduced to $0. Upon death of the
designated beneficiary, the person or entity named by the designated
beneficiary or, if no one is named, the designated beneficiary's estate may
receive the remaining Contract Value. The recipient may take the Contract Value
as a lump sum or continue to receive the annual payment on the distribution
date equal to the Minimum Annual Income, or until the Contract Value is reduced
to $0.
The Minimum Annual Income is the amount withdrawn each year to satisfy Section
72(s)(2)(B) of the Code. The Minimum Annual Income will be re-determined each
year for the designated beneficiary's life expectancy using the Single Life
Table in Section 1.401(a)(9)-9 A-1 of the Income Tax Regulations, as amended.
After death, the Minimum Annual Income is calculated using the designated
beneficiary's remaining life expectancy. We may offer alternative calculations
of Minimum Annual Income based on amortization or annuitization calculations
methods described in guidance published by the Internal Revenue Service.
Special rules for this payment choice only:
. This payment choice cannot be selected if the Minimum Annual Income would
be less than $100.
. The designated beneficiary must elect a distribution date on which
payments will be made. The first distribution date must be no later than
350 days after the owner's date of death.
. Amounts paid to satisfy the Minimum Annual Income will not be subject to
surrender charges. Surrender charges will apply to amounts withdrawn above
the Minimum Annual Income.
. Optional living benefit and death benefit riders are not available with
this payment choice.
. Additional purchase payments may not be added with this payment choice.
Under this payment choice, the contract will terminate upon payment of the
entire Contract Value.
The following payment choice is available to designated beneficiaries of
Qualified Contracts or any beneficiary receiving death proceeds from any other
individual retirement plan:
An inherited owner may apply death proceeds to provide for an annual payment
equal to the Minimum Annual Income, described below. For purposes of this
provision, an inherited owner is any designated beneficiary receiving death
proceeds from a Qualified Contract or any beneficiary receiving death proceeds
from any other individual retirement plan. A surviving spouse may elect to be
treated as an inherited owner in lieu of exercising spousal continuation. The
inherited owner will be named the Annuitant at election of the payment choice.
Payments under this payment choice will continue annually on the distribution
date selected by the inherited owner, subject to the special rules stated
below, until the death of the inherited owner or the Contract Value is reduced
to $0. Upon death of the inherited owner, the person or entity named by the
inherited owner or, if no one is named, the inherited owner's estate may
64
at our Home Office will not be affected. We are not responsible for the
validity or tax consequences of an assignment. Your rights and the rights of a
beneficiary may be affected by an assignment. The basic benefits of a
Non-Qualified Contract are assignable. Additional benefits added by rider may
or may not be available/eligible for assignment. Assigning a contract as
collateral may have adverse tax consequences. See the "Tax Matters" provision
of the prospectus.
A Qualified Contract may not be sold, assigned, transferred, discounted,
pledged or otherwise transferred except under such conditions as may be allowed
under applicable law.
The Beneficiary
You may select one or more primary and contingent beneficiaries during your
lifetime upon application and by filing a written request with our Home Office.
Each change of beneficiary revokes any previous designation.
Non-Participating
The contract is non-participating. It does not share in our profits or surplus.
No dividends are payable.
Misstatement of Age or Gender
If any person's age or gender is misstated, any contract benefits or proceeds,
or availability thereof, will be determined using the correct age and gender.
If any overpayments have been made, future payments will be adjusted. Any
underpayments will be paid in full.
Incontestability
We will not contest the contract.
Statement of Values
At least once each year, we will send you a statement of values within 30 days
after each report date. The statement will show Contract Value, purchase
payments and other financial transactions made by you during the report period.
Trust as Owner or Beneficiary
If a trust is named as the owner or beneficiary of this contract and
subsequently exercises ownership rights or claims benefits hereunder, we will
have no obligation to verify that a trust is in effect or that the trustee is
acting within the scope of his/her authority. Payment of contract benefits to
the trustee shall release us from all obligations under the contract to the
extent of the payment. When we make a payment to the trustee, we will have no
obligation to ensure that such payment is applied according to the terms of the
trust agreement.
Written Notice
Any written notice should be sent to us at our Home Office at 6610 West Broad
Street, Richmond, Virginia 23230. The contract number and the Annuitant's full
name must be included.
We will send all notices to the owner at the last known address on file with us.
Legal Developments Regarding Employment-Related Benefit Plans
On July 6, 1983, the Supreme Court held in Arizona Governing Committee for Tax
Deferred Annuity v. Norris, 463 U.S. 1073 (1983), that optional annuity
benefits provided under an employee's deferred compensation plan could not,
under Title VII of the Civil Rights Act of 1964, vary between men and women on
the basis of gender. The contract contains guaranteed annuity purchase rates
for certain Optional Payment Plans that distinguish between men and women.
Accordingly, employers and employee organizations should consider, in
consultation with legal counsel, the impact of Norris, and Title VII generally,
on any employment-related insurance or benefit program for which a contract may
be purchased.
Regulation of Genworth Life and Annuity Insurance Company
Besides federal securities laws and Virginia insurance law, we are subject to
the insurance laws and regulations of other states within which we are licensed
to operate. Generally, the Insurance Department of any other state applies the
laws of the state of domicile in determining permissible investments.
Presently, we are licensed to do business in the District of Columbia and all
states, except New York.
Experts
The consolidated financial statements and financial statement schedules of
Genworth Life and Annuity Insurance Company and subsidiaries as of December 31,
2008 and 2007, and for each of the years in the three-year period ended
December 31, 2008, and the financial statements of the Separate Account as of
December 31, 2008 and for the periods indicated, have been included herein and
in the registration statement in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
The business address for KPMG LLP is 1021 East Cary Street, Suite 2000,
Richmond, Virginia 23219.
B-8