November 15, 2012
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549-4644
Re: Minnesota Life Insurance Company
Minnesota Life Individual Variable Universal Life Account
File: 333-183590; 811-22093
Dear Commissioners:
On behalf of Minnesota Life Insurance Company (the "Company") and Minnesota Life
Individual Variable Universal Life Account, we are filing this letter as
correspondence to the Form N-6 registration statement referenced above (the
"Registration Statement"). The letter responds to comments received by the
Company from the staff of the Securities and Exchange Commission ("SEC") in a
letter dated November 5, 2012.
Below are responses to the SEC staff's comments. For the SEC staff's
convenience, each of the SEC staff's comments is set forth below, and then the
response follows.
* * * * * * * * *
1. GENERAL COMMENTS
----------------
A. 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 CONTRACTS OR WHETHER THE COMPANY
WILL BE SOLELY RESPONSIBLE FOR PAYING OUT ON ANY GUARANTEES ASSOCIATED
WITH THE CONTRACTS.
RESPONSE:
The Company does not currently have any guarantee or support agreements
with third parties to support the Company's guarantees under the variable
universal life hybrid policies (the "Policies"). Accordingly, the Company
is primarily responsible for paying out on any guarantees associated with
the Policies.
B. Fixed Index Accounts. THE DISCLOSURE ON PAGE 16 OF THE PROSPECTUS
STATES THAT THE FIXED INDEXED ACCOUNTS HAVE NOT BEEN REGISTERED WITH
THE COMMISSION AND THAT THE REGISTRANT IS OF THE OPINION THAT THE
FIXED INDEX ACCOUNTS QUALIFY FOR AN EXEMPTION FROM REGISTRATION UNDER
THE FEDERAL SECURITIES LAWS. PLEASE NOTE THAT THE CONCLUSIONS
CONTAINED IN THIS DISCLOSURE ARE CURRENTLY THE TOPIC OF DISCUSSIONS
WITH COUNSEL TO MINNESOTA LIFE INSURANCE COMPANY AND THE STAFF MAY
HAVE FURTHER COMMENTS REGARDING THE LEGAL STATUS OF THE FIXED INDEX
ACCOUNTS.
Securities and Exchange Commission
November 15, 2012
Page 2 of 10
RESPONSE:
The Company acknowledges the SEC staff comment.
2. COVER PAGE
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THE EDGAR CLASS IDENTIFIER DIFFERS FROM THE CONTRACT NAME ON THE FRONT
COVER OF THE PROSPECTUS. PLEASE MAKE CHANGES TO THE EDGAR CLASS IDENTIFIERS
SO THAT THE CONTRACT NAME ON THE FRONT COVER PAGE OF THE PROSPECTUS IS THE
SAME AS THE EDGAR CLASS IDENTIFIERS.
RESPONSE:
The Company added the policy name "ML Premier Variable Universal Life" to
the cover page and confirms that the policy name on the front cover page
of the prospectus is and will continue to be the same as the EDGAR class
identifiers.
3. SPECIAL TERMS
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A. PLEASE CONFIRM THAT ALL SPECIAL TERMS HAVE BEEN DEFINED IN THE TEXT
PRIOR TO FIRST USE OR IN THE GLOSSARY OF SPECIAL TERMS. CONFIRM THAT
ALL SPECIAL TERMS APPEAR CONSISTENTLY IN UPPER CASE THROUGHOUT THE
PROSPECTUS.
RESPONSE:
The Company confirms that all special terms have been defined in the text
prior to first use or appear in the Glossary. The Company also confirms
that it will review and modify the prospectus so that all special terms
appear consistently in upper case throughout the prospectus.
B. PLEASE DEFINE IN THE GLOSSARY THE TERM "FACE AMOUNT."
RESPONSE:
The Company notes that the term "Face Amount" is defined in the Glossary on
page A-1.
C. PLEASE EXPAND ON THE DEFINITION OF "INTERIM ACCOUNT TRANSFER DATE" IN
ORDER TO DISCLOSE THE MAXIMUM TIME THAT MONEY WILL BE KEPT IN THE
ACCOUNT, THE FREQUENCY OF TRANSFER DATES, AND WHETHER INTEREST WILL BE
CREDITED.
RESPONSE:
In response to the SEC Staff comment, the definition of Interim Account
Transfer Date has been changed to read as follows:
Securities and Exchange Commission
November 15, 2012
Page 3 of 10
INTERIM ACCOUNT TRANSFER DATE: The third Friday of each month, which
is the date we transfer your Interim Account accumulation value,
including interest credited on amounts in the Interim Account, to a
Fixed Indexed Account according to your allocation instructions.
4. POLICY RISKS (PP. 3-5)
----------------------
ON PAGE 16, THE REGISTRANT DISCLOSES THAT ALLOCATIONS TO THE GUARANTEED
INTEREST ACCOUNT, THE FIXED INDEXED ACCOUNTS AND THE FIXED LOAN ACCOUNT ARE
PART OF THE COMPANY'S GENERAL ASSETS, WHICH ARE USED TO SUPPORT INSURANCE
AND ANNUITY OBLIGATIONS AND SUBJECT TO THE CLAIMS OF THE COMPANY'S
CREDITORS. ALSO, ON THIS PAGE THE REGISTRANT DISCLOSES THAT INVESTORS LOOK
TO THE FINANCIAL STRENGTH OF THE INSURANCE COMPANY FOR ITS INSURANCE
GUARANTEES. PLEASE ADD SUCH DISCLOSURE TO THE DISCUSSION OF POLICY RISKS ON
PAGES 3-5.
RESPONSE:
In response to the SEC staff comment, the following disclosure has been
added to the "What are some of the risks of the Policy" section on page 4
of the prospectus:
RISKS ASSOCIATED WITH THE GENERAL ACCOUNT. The Guaranteed Interest
Account, the Fixed Indexed Accounts and the Fixed Loan Account are
part of our general account. Our general account consists of all
assets owned by us other than those in the Variable Account and any
other separate accounts which we may establish. Investors look to the
financial strength of the insurance company for its insurance
guarantees. Guarantees provided by the insurance company as to the
benefits promised in the contract are subject to the claims paying
ability of the insurance company and are subject to the risk that the
insurance company may default on its obligations under those
guarantees.
5. QUALIFICATION AS LIFE INSURANCE (P. 4)
--------------------------------------
IF A POLICY COULD FAIL TO QUALIFY AS LIFE INSURANCE FOR REASONS OTHER THAN
"UNDERWRITING CLASS" PLEASE DISCLOSE THOSE REASONS. ALSO, PLEASE CLARIFY
WHETHER DEATH BENEFITS COULD BE SUBJECT TO ESTATE TAX FOR REASONS OTHER
THAN UNDERWRITING CLASSIFICATION.
RESPONSE:
In response to the SEC staff comment, the paragraph entitled "Qualification
as Life Insurance" in the "What are some of the risks of the Policy?"
section on page 4 of the prospectus is modified to read as follows:
Securities and Exchange Commission
November 15, 2012
Page 4 of 10
QUALIFICATION AS LIFE INSURANCE. We believe that a Policy issued on
the basis of a standard underwriting class should qualify as life
insurance under the Code. However, due to lack of guidance in this
area, it is not clear whether a Policy issued on a sub-standard basis
would qualify. A Policy may also fail to qualify as life insurance
under the Code if too much premium is paid into the Policy or the
diversification and investor control requirements are not met for
investments in the Variable Account. Failure to qualify would mean
that the death proceeds would be included in the beneficiary's gross
income for federal income tax purposes, and that the accumulation
value is constructively received before it is actually received.
Depending upon the amount of assets in and the level of estate
planning undertaken with regard to the Policy owner's estate, there is
also a risk that the death benefit payable under this Policy may be
subject to estate taxation. See the "Policy Premiums" and "Federal Tax
Status".
6. PERIODIC CHARGES OTHER THAN INVESTMENT OPTION OPERATING EXPENSES (P. 6)
-----------------------------------------------------------------------
PLEASE CONFIRM THAT THE CURRENT MONTHLY POLICY CHARGE OF $8 IS A FLAT
CHARGE AND NOT DEPENDENT ON THE FACE AMOUNT OF THE POLICY.
RESPONSE:
The current monthly policy charge shown in the "Table of Periodic Charges
other Than Investment Option Operating Expenses" is a flat charge of $8 per
Policy and is not dependent on the face amount of the Policy.
7. THE GUARANTEED INTEREST ACCOUNT, THE FIXED INDEXED ACCOUNTS AND THE FIXED
-------------------------------------------------------------------------
LOAN ACCOUNT (P. 16)
-----------------------
PLEASE PLACE THE FIRST SENTENCE OF THE FIFTH PARAGRAPH OF THIS SUB-SECTION
CONCERNING THE FINANCIAL STRENGTH OF THE INSURANCE COMPANY IN BOLD
TYPEFACE.
RESPONSE:
In response to the SEC staff's comment, the Company placed the sentence
referenced in the staff's comment in bold typeface.
8. FIXED INDEXED ACCOUNTS - EXAMPLES (PP. 18-19)
---------------------------------------------
PLEASE CONSIDER PROVIDING AN EXAMPLE SHOWING HOW INDEX CREDITS FOR A
SEGMENT ARE CALCULATED USING THE 140% PARTICIPATION RATE AND 8% GROWTH CAP
FOR FIXED INDEXED ACCOUNT B.
Securities and Exchange Commission
November 15, 2012
Page 5 of 10
RESPONSE:
The following examples showing the impact of interest crediting for Fixed
Account B have been added to the "Examples" section on page 19 of the
prospectus.
Example 1: Growth Cap Rate Exceeds Percentage Increase for Index
Assumptions:
. The value of the S&P 500/R/ on the Segment Date is 1,000;
. The value of the S&P 500/R/ at the end of the Index Credit Term
is 1,050;
. The Growth Cap for the Segment is 8%, or 0.08;
. The Participation Rate for the Segment is 140%; and
. The accumulation value under the Segment at the end of the Index
Credit Term is $10,000.
First, we determine the rate at which the Index Credit will be
applied. We subtract the value of the S&P 500/R/ on the Segment Date
(1,000) from the value of the S&P 500/R/ at the end of the Index
Credit Term (1,050). We divide the result (50) by the value of the S&P
500/R/ on the Segment Date (1,000).
(1,050 - 1,000) / 1,000 = 5.00%
Second, we multiply the lesser of the result (5.00%) and the Growth
Cap (8.00%) by the Participation Rate (140%). In this case, the result
is lower than the Growth Cap, so we multiple the result (5.00%) by the
Participation Rate (140%) to determine the Index Credit rate (7.00%).
Third, we determine the amount of the Index Credit. We multiply the
Index Credit rate (7.00%) by the accumulation value under the Segment
at the end of the Index Credit Term ($10,000).
7.00% x $10,000 = $700
The Segment earned a $700.00 Index Credit. Thus, the accumulation
value after we credit the Index Credit equals $10,700
($10,000 + $700).
Example 2: Percentage Increase of Index Exceeds Growth Cap
Assumptions are the same as Example 1, except:
. The value of the S&P 500/R/ at the end of the Index Credit Term
is 1,200.
First, we determine the rate at which the Index Credit will be
applied. We subtract the value of the S&P 500/R/ on the Segment Date
(1,000) from the value of the S&P 500/R/ at the end of the Index
Credit Term (1,200). We divide the result (200) by the value of the
S&P 500/R/ on the Segment Date (1,000).
Securities and Exchange Commission
November 15, 2012
Page 6 of 10
(1,200 - 1,000) / 1,000 = 20.00%
Second, we multiply the lesser of the result (20.00%) and the Growth
Cap (8.00%) by the Participation Rate (140%). In this case, the result
is higher than the Growth Cap, so we multiple the Growth Cap (8.00%)
by the Participation Rate (140%) to determine the Index Credit rate
(11.20%).
Third, we determine the amount of the Index Credit. We multiply the
Index Credit rate (11.20%) by the accumulation value under the Segment
at the end of the Index Credit Term ($10,000).
11.20% x $10,000 = $1,120
The Segment earned a $1,120 Index Credit. Thus, the accumulation value
after we credit the Index Credit equals $11,120 ($10,000 + $1,120).
Example 3: Index Declines
Assumptions are the same as Example 1, except:
. The value of the S&P 500/R/ at the end of the Index Credit Term
is 700.
First, we determine the rate at which the Index Credit will be
applied. We subtract the value of the S&P 500/R/ on the Segment Date
(1,000) from the value of the S&P 500/R/ at the end of the Index
Credit Term (700). We divide the result (-300) by the value of the S&P
500/R/ on the Segment Date (1,000).
(700 - 1,000) / 1,000= -30.00%
Since the Index Credit cannot be less than zero, a 0% Index Credit
rate is used.
The Segment earned a $0 Index Credit. Thus, the accumulation value
after we calculate the amount of the Index Credit equals $10,000
($10,000 + $0).
9. FLEXIBLITY AT ISSUE (P. 22)
---------------------------
THE LAST SENTENCE OF THIS SUB-SECTION REFERS READERS TO POLICY DATA PAGES
TO DISCOVER THE INITIAL MINIMUM PREMIUM. PLEASE DISCLOSE THE FACTORS THAT
DETERMINE THE INITIAL FACE PREMIUM OR REFERENCE THE DISCLOSURES ON PAGE 24
AND THE GLOSSARY, IF APPROPRIATE.
Securities and Exchange Commission
November 15, 2012
Page 7 of 10
RESPONSE:
In response to the SEC staff comment, the following sentence is added as
the second to last sentence in the section entitled "Flexibility at Issue"
on page 22 of the prospectus:
The amount of the initial minimum premium will depend on the Policy's
initial face amount, the death benefit option; the insured's age at
issue, gender, risk classification and any additional benefit
agreements chosen.
10. POLICY PREMIUMS (P. 26)
-----------------------
FURTHER, ON PAGE 26 THE REGISTRANT STATES THAT IF MANDATED UNDER APPLICABLE
LAW IT MAY REJECT A PREMIUM. PLEASE PROVIDE DISCLOSURE DETAILING THE
SPECIFIC CIRCUMSTANCES UNDER WHICH A PREMIUM MAY BE REJECTED.
RESPONSE:
The Company notes that a substantially identical comment was received in
other registration statement filings and in response to the SEC staff's
comments, a disclosure similar to that found in the Company's other
registration statements is added as the last two paragraphs under the
"Policy Premiums" section on page 26 of the prospectus:
We reserve the right to refuse a premium payment if appropriate under
our policies related to anti-money laundering or stranger owned life
insurance policies. This means that if we exercise these rights, you
will be required to comply with our anti-money laundering or stranger
owned life insurance policies before we will accept additional premium
payments from you. We will continue to take all Policy charges
applicable to the Policy and optional agreements from the Policy
accumulation value, which may result in your Policy terminating. You
should consider these premium payment limitations, and all other
limitations in this Policy, and how they may impact your long-term
financial plans, especially since this Policy provides a death benefit
that will only be payable if the Policy is still in force at the
insured's death.
If we exercise these rights, there will be no impact to premium
payments received prior to the effective date of the limitation. In
addition, Policy accumulation value and optional agreements will not
be affected by the restriction, but Policy charges will continue to
apply. We will apply these limitations in a non-discriminatory manner.
See "Policy Loans-Termination" and "Policy Charges."
Securities and Exchange Commission
November 15, 2012
Page 8 of 10
11. VARIABLE ACCOUNT ACCUMULATION VALUE AND TRANSFERS (PP. 27-30)
-------------------------------------------------------------
A. FOR CLARITY AND CONSISTENCY, PLEASE REVISE THE LAST FULL PARAGRAPH OF
PAGE 28 TO STATE THAT THE VALUE OF SUB-ACCOUNT UNITS WILL BE
DETERMINED AS OF THE CLOSE OF TRADING ON THE NEW YORK STOCK EXCHANGE
(TYPICALLY 3:00 P.M. CENTRAL TIME) AS OPPOSED TO "AS OF THE PRIMARY
CLOSING TIME FOR BUSINESS ON THE NEW YORK STOCK EXCHANGE (TYPICALLY,
3:00 P.M. CENTRAL TIME), ..."
RESPONSE:
In response to the SEC staff comment, we have incorporated the proposed
revision on page 28 of the prospectus.
B. WITH RESPECT TO THE RECEIPT OF TRANSFER REQUESTS DISCUSSED ON PAGE
30, PLEASE STATE THAT REQUESTS MUST BE RECEIVED BEFORE THE CLOSE OF
TRADING ON THE NYSE, TYPICALLY 3 P.M., AS OPPOSED TO SOLELY STATING A
3 P.M. DEADLINE.
RESPONSE:
In response to the SEC Staff comment, the second full sentence on page 30
of the prospectus is revised to read as follows:
This means that we must receive your request for transfer prior to 3:00
p.m. Central time on a Valuation Date in order to process the request at
the unit values determined as of that Valuation Date.
12. FIXED INDEX ACCOUNT TRANSFERS (P. 30)
-------------------------------------
ON PAGE 30, THE REGISTRANT STATES THAT: "[W]E RESERVE THE RIGHT TO CHANGE
THE INTERIM ACCOUNT TRANSFER DATE AND TO LIMIT TRANSFERS INTO THE FIXED
INDEX ACCOUNT." PLEASE EXPLAIN THE CIRCUMSTANCES UNDER WHICH THE REGISTRANT
WILL CHANGE THE INTERIM ACCOUNT TRANSFER DATES AND LIMIT TRANSFERS INTO THE
FIXED INDEX ACCOUNT.
RESPONSE:
In response to the SEC staff comment, the following sentences have been
added after the second sentence to the third paragraph under the "Fixed
Indexed Account Transfers" section of the prospectus beginning on page 30:
Since the Fixed Interim Transfer Date coincides with the day of the
month that S&P 500/R/ Index options close, changes in the Interim
Account Transfer Date will coincide with any change in the day of the
month for closing S&P 500/R/ Index options. Transfers to either of the
Fixed Indexed Accounts will be limited in those circumstances where we
determine that a Policy owner is engaging in market timing or
disruptive trading activities. See "Market Timing and Disruptive
Trading."
Securities and Exchange Commission
November 15, 2012
Page 9 of 10
13. TERMINATION (P. 42)
-------------------
PLEASE DISCLOSE THE POTENTIAL NEGATIVE TAX CONSEQUENCES OF TERMINATION WITH
AN OUTSTANDING LOAN BALANCE.
RESPONSE:
In response to the SEC Staff comment, the following paragraph is added as
the last paragraph in the section entitled "Termination" beginning on page
42 of the prospectus:
If the Policy terminates with an outstanding loan balance, the amount
of that outstanding loan will be treated as a distribution, which
could be taxable depending upon your investment in the Policy. This
means that as a result of a Policy termination, you could recognize
taxable income without any distribution of Policy accumulation value
in the form of cash that could be used to pay any income tax due. You
should consult your tax advisor regarding the tax treatment of a
Policy termination with an outstanding loan balance. See "Federal Tax
Status."
14. FINANCIAL STATEMENTS, EXHIBITS, AND OTHER INFORMATION
-----------------------------------------------------
PLEASE PROVIDE ANY FINANCIAL STATEMENTS, EXHIBITS, CONSENTS, AND OTHER
REQUIRED DISCLOSURE NOT INCLUDED IN THIS PRE-EFFECTIVE AMENDMENT.
RESPONSE:
The Company confirms that any financial statements, exhibits, consents, and
other required disclosures not included in this initial filing will be
included in the pre-effective amendment to the Registration Statement.
15. POWERS OF ATTORNEY
------------------
PLEASE PROVIDE POWERS OF ATTORNEY THAT RELATE SPECIFICALLY TO THIS
REGISTRATION STATEMENT AS REQUIRED BY RULE 483(B) OF THE SECURITIES ACT.
EACH POWER OF ATTORNEY MUST EITHER A) SPECIFICALLY LIST THE SECURITIES ACT
REGISTRATION NUMBER OF THE INITIAL FILING, OR B) SPECIFICALLY NAME THE
CONTRACT WHOSE PROSPECTUS AND/OR SAI IS BEING REGISTERED.
RESPONSE:
The Company confirms powers of attorney that relate specifically to the
Registration Statement will be included in the pre-effective amendment
filing.
Securities and Exchange Commission
November 15, 2012
Page 10 of 10
* * * * * * * * *
The Company believes that the changes noted above satisfy all of the SEC staff's
comments. When the Company received notice from the SEC staff that it should
proceed with the filing of its pre-effective amendment, all of the above
proposed changes will be incorporated into the pre-effective amendment to the
Registration Statement. If there are additional questions or comments, please
contact the undersigned at (651) 665-4593.
Very truly yours,
/s/ Timothy E. Wuestenhagen
Timothy E. Wuestenhagen
Senior Counsel
cc: Thomas E. Bisset, Esq.