REGISTRATION STATEMENT NO. 333-[.]
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
METLIFE INSURANCE COMPANY OF CONNECTICUT
(Exact name of registrant as specified in its charter)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
06-0566090
(I.R.S. Employer Identification Number)
1300 HALL BOULEVARD, BLOOMFIELD, CONNECTICUT 06002-2910,
(860) 656-3000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
NICHOLAS D. LATRENTA, ESQ.
GENERAL COUNSEL
METLIFE INSURANCE COMPANY OF CONNECTICUT
1300 HALL BOULEVARD, BLOOMFIELD, CONNECTICUT 06002-2910,
(860) 656-3000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Diane E. Ambler, Esq.
K&L Gates LLP
1601 K Street, N.W.
Washington, D.C. 20006
AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVENESS OF THE REGISTRATION STATEMENT
(Approximate date of commencement of proposed sale to the public)
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a registration statement pursuant to General Instruction I.D. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
<Table>
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [X](Do not check if a smaller
reporting company) Smaller reporting company[ ]
</Table>
CALCULATION OF REGISTRATION FEE
<Table>
<Caption>
================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------------------
Modified Guaranteed Annuity
Contract $2,000,000,000 Not applicable $2,000,000,000 $272,800
================================================================================================================================
</Table>
1. Interests are sold on a dollar for dollar basis and not on the basis of a
price per share or unit.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES OFFERED HEREIN
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
JURISDICTION.
METLIFE FLEX MARKET SHIELD/SM/ ANNUITY
MetLife Flex Market Shield/SM/ Annuity is a single premium deferred annuity
contract (the "Contract") issued by MetLife Insurance Company of Connecticut
("MICC", "we" or "us").
MICC is located at 1300 Hall Boulevard, Bloomfield, Connecticut 06002-2910. The
telephone number is 1-800-343-8496. MetLife Investors Distribution Company, 5
Park Plaza, Suite 1900, Irvine, California 92614, is the principal underwriter
and distributor of the Contracts.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The Contracts may be distributed through broker-dealers that have relationships
with banks or other financial institutions or by employees of such banks.
However, the Contracts are not deposits or obligations of, or guaranteed by such
institutions or any Federal regulatory agency. Investment in the Contracts
involves investment risks, including possible loss of principal.
Mutual funds, annuities and insurance products are not deposits of any bank, and
are not insured or guaranteed by the Federal Deposit Insurance Corporation (the
"FDIC") or any other government agency. You may lose money invested in the
Contract.
The Risk Factors for this Contract appear on Page 14.
Prospectus dated [o], 2013
TABLE OF CONTENTS
SPECIAL TERMS........................................... 5
SUMMARY................................................. 9
Key Features of the Contract.......................... 10
RISK FACTORS............................................ 14
THE ANNUITY CONTRACT.................................... 15
Replacement of Contracts.............................. 16
Exchanges............................................ 16
Exchange Programs.................................... 17
PURCHASE................................................ 17
Purchase Payment...................................... 17
Allocation of the Purchase Payment.................... 17
SHIELD OPTIONS.......................................... 18
TERM.................................................. 19
Term Start Date...................................... 19
Term End Date........................................ 19
INDICES............................................... 19
Discontinuation or Substantial Change to an Index.... 20
Index Value.......................................... 20
Index Performance.................................... 20
SHIELD RATES.......................................... 20
RATE CREDITING TYPES.................................. 21
Cap Rate............................................. 21
Step Rate............................................ 21
ADDITION OR DISCONTINUANCE OF A SHIELD OPTION........... 21
INVESTMENT AMOUNT....................................... 22
CALCULATING YOUR INVESTMENT AMOUNT ON A TERM END DATE... 22
INTERIM VALUE CALCULATION............................... 27
Accrued Shield Rate for Interim Value Calculation..... 27
Accrued Cap Rate for Interim Value Calculation........ 27
Accrued Step Rate for Interim Value Calculation....... 27
YOUR ACCOUNT VALUE...................................... 30
WITHDRAWAL PROVISIONS................................... 30
Withdrawal Charge..................................... 31
When No Withdrawal Charge Applies..................... 31
Free Withdrawal Amount............................... 32
2
TRANSFERS................................................ 37
DEATH BENEFITS........................................... 38
Standard Death Benefit................................. 39
Optional Death Benefit - Return of Premium............. 39
General Death Benefit Provisions...................... 39
Controlled Payout..................................... 40
Total Control Account................................. 40
Death of Owner During the Accumulation Period......... 40
Death of Annuitant During the Accumulation Period..... 40
Death Benefit Options................................. 41
INCOME PAYMENTS (THE INCOME PERIOD)...................... 42
Annuity Date........................................... 42
Maturity Date.......................................... 42
Income Payments........................................ 42
Annuity Options........................................ 43
Death of Owner During the Income Period............... 44
PREMIUM AND OTHER TAXES.................................. 44
INCOME TAXES............................................. 44
FEDERAL TAX CONSIDERATIONS............................... 45
Taxation of Non-Qualified Contracts.................... 45
Taxation of Qualified Contracts........................ 46
Puerto Rico Tax Considerations......................... 48
Possible Tax Law Changes............................... 48
YOUR RIGHT TO CANCEL (FREE LOOK)......................... 48
OWNERSHIP PROVISIONS..................................... 49
Owner.................................................. 49
Joint Owner............................................ 49
Annuitant.............................................. 49
Beneficiary............................................ 49
Assignment............................................. 49
SUSPENSION OF PAYMENTS OR TRANSFERS...................... 50
WHEN WE CAN CANCEL YOUR CONTRACT......................... 50
THE INSURANCE COMPANY.................................... 50
MetLife Insurance Company of Connecticut ("MICC")...... 50
THE SEPARATE ACCOUNT..................................... 50
MICC Separate Account SA............................... 51
INVESTMENTS BY MICC...................................... 51
ANNUAL STATEMENT......................................... 51
DISTRIBUTION OF THE CONTRACTS............................ 51
3
THE FIXED ACCOUNT...................................... 54
RESTRICTIONS ON FINANCIAL TRANSACTIONS................. 55
REQUESTS AND ELECTIONS................................. 55
CONFIRMING TRANSACTIONS................................ 56
LEGAL PROCEEDINGS...................................... 56
EXPERTS................................................ 56
STATE VARIATIONS....................................... 56
ELECTRONIC DELIVERY.................................... 57
AMENDMENT OF THE CONTRACT.............................. 57
MISSTATEMENT........................................... 57
INFORMATION INCORPORATED BY REFERENCE.................. 57
Appendix A - Index Publishers.......................... A-1
Appendix B - Death Benefit Example..................... B-1
Appendix C - The Fixed Account......................... C-1
Appendix D - Premium Tax Table......................... D-1
4
SPECIAL TERMS
In this prospectus, the following terms have the indicated meanings:
ACCOUNT VALUE - The total of the Fixed Account Value and the value of the Shield
Option(s) under the Contract, adjusted for any amounts that may be included by
rider during the Accumulation Period.
ACCRUED CAP RATE - The portion of the Cap Rate that has accrued from the Term
Start Date to any day within the Term. This is the maximum Index Performance
that may be applied in calculating the Interim Value on any day prior to the
Term End Date if Index Performance is greater than zero. The Accrued Cap Rate
is equal to the Cap Rate multiplied by the number of days elapsed since the Term
Start Date, divided by the total number of days in the Term.
ACCRUED SHIELD RATE - The portion of the Shield Rate that has accrued from the
Term Start Date to any day within the Term. This is the amount that will be
applied in calculating the Interim Value on any day prior to the Term End Date
if Index Performance is less than zero. The Accrued Shield Rate is equal to the
Shield Rate multiplied by the number of days elapsed since the Term Start Date,
divided by the total number of days in the Term. Unlike the other Shield
Options, a Shield Option with the Shield 100 is not subject to accrual, and so
the Shield 100 is fully accrued on any Business Day during the Term.
ACCRUED STEP RATE - The portion of the Step Rate that has accrued from the Term
Start Date to any day within the Term. This is the rate that will be applied in
calculating the Interim Value on any day prior to the Term End Date if Index
Performance is equal to or greater than zero. The Accrued Step Rate is equal to
the Step Rate multiplied by the number of days elapsed since the Term Start
Date, divided by the total number of days in the Term.
ACCUMULATION PERIOD - The period prior to the Annuity Date.
ANNUITANT - The natural person(s) listed on the Contract Schedule on whose life
Income Payments are based. Any reference to Annuitant will also include any
Joint Annuitant under an Annuity Option.
ANNUITY DATE - A date on which you choose to begin receiving Income Payments.
If we agree, you may change the Annuity Date, subject to certain requirements.
If you do not choose an Annuity Date, the Annuity Date will be the Annuity Date
indicated on the Contract Schedule.
ANNUITY SERVICE OFFICE - The office indicated on the Contract Schedule to which
notices and requests must be sent, or as otherwise changed by Notice from us.
BENEFICIARY - The person(s) or entity(ies) you name to receive a death benefit
payable under the Contract upon the death of the Owner or a Joint Owner, or in
certain circumstances, an Annuitant.
BUSINESS DAY - Any day our Annuity Service Office is open for business. For
purposes of administrative requests and transactions, a Business Day ends at
4:00 PM Eastern Standard Time.
CAP RATE - The maximum rate that may be credited at the Term End Date based on
Index Performance. The Cap Rate may vary between Shield Options and it is not
an annual rate.
CODE - The Internal Revenue Code of 1986, as amended, and all related laws and
regulations, which are in effect during the term of the Contract.
CONTRACT - The legal agreement between you and MetLife. It contains relevant
provisions of your deferred annuity.
CONTRACT ANNIVERSARY - An anniversary of the Issue Date of the Contract.
CONTRACT SCHEDULE - The schedule attached to your Contract.
CONTRACT YEAR - A one-year period starting on the Issue Date and on each
Contract Anniversary thereafter.
DEATH BENEFIT AMOUNT - For the standard death benefit, the Account Value, and,
for the optional Return of Premium Death Benefit, the greater of the Account
Value or your Purchase Payment (reduced proportionately by the percentage
reduction in Account Value of
5
the Shield Option(s) and the Fixed Account for each partial withdrawal
(including any applicable Withdrawal Charge)) determined as of the end of the
Business Day on which we have received Notice of due proof of death and an
acceptable election for the payment method.
FIXED ACCOUNT - An account, if available, that consists of all of the assets
under the Contract other than those in the Separate Account. You may allocate
your Purchase Payment or transfer your Investment Amount to the Fixed Account.
The Fixed Account is part of the General Account assets of MICC.
FIXED ACCOUNT VALUE - The initial Fixed Account Value is the amount of your
Purchase Payment initially allocated to the Fixed Account. Thereafter, the
Fixed Account Value equals: (a) the initial Fixed Account Value or the Fixed
Account Value on the most recent Contract Anniversary, including any transfers,
whichever is applicable; plus (b) any interest credited by us; less (c) the
amount of any withdrawals including any Withdrawal Charges; less (d) any Premium
or Other Taxes, if applicable; and less (e) any other fees indicated on the
Contract Schedule or associated with riders and endorsements, if applicable.
FREE WITHDRAWAL AMOUNT - The Free Withdrawal Amount in the first Contract Year
is zero. Thereafter, the Free Withdrawal Amount each Contract Year is equal to
10% of your Account Value as of the prior Contract Anniversary, less the total
amount withdrawn from the Account Value in the current Contract Year. The Free
Withdrawal Amount is non-cumulative and is not carried over to other Contract
Years.
GENERAL ACCOUNT - The General Account of MICC.
GOOD ORDER - A request or transaction generally is considered in "Good Order" if
it complies with our administrative procedures and the required information is
complete and accurate. A request or transaction may be rejected or delayed if
not in Good Order. If you have any questions, you should contact us or your
sales representative before submitting the form or request.
INCOME PAYMENTS - A series of payments made by us during the Income Period,
which we guarantee as to dollar amount.
INCOME PERIOD - A period starting on the Annuity Date during which Income
Payments are payable.
INDEX - We currently offer Shield Options based on two types of indices:
Indices based on the performance of securities ("Securities Indices") and an
Index based on the performance of commodities (the "Commodity Index"). In the
future we may offer Shield Options based on other types of Indices. We may also
add other indices for new Contracts at our discretion.
INDEX PERFORMANCE - The percentage change in the Index Value measured from the
Term Start Date to any day, including the Term End Date, within the Term. Index
Performance can be positive, zero or negative.
INDEX VALUE - The Index Value of an Index, on a Business Day, is the published
closing value of the Index on that Business Day. The Index Value on any day
that is not a Business Day is the value as of the prior Business Day.
INTEREST RATE TERM - The length of time over which the current Fixed Account
interest rate is guaranteed. No Interest Rate Term will extend beyond the
Annuity Date. The minimum Interest Rate Term depends on the date your Contract
is issued but will not be less than one (1) year.
INTEREST RATE TERM END DATE - The Contract Anniversary on which an Interest Rate
Term ends.
INTEREST RATE TERM START DATE - The Contract Anniversary on which an Interest
Rate Term is established. If chosen at issue, the initial Interest Rate Term
Start Date begins on the Issue Date or otherwise it will begin on the first
Contract Anniversary in which you make the allocation to the Fixed Account.
INTERIM VALUE - For each Shield Option, the value we assign on any Business Day
prior to the Term End Date. During the Transfer Period, the Interim Value of
each Shield Option will equal the Investment Amount in that Shield Option.
After the Transfer Period, the Interim Value of that Shield Option is equal to
the Investment Amount in the Shield Option, adjusted for the Index Performance
of the associated Index and subject to the applicable Accrued Shield Rate,
Accrued Cap Rate or Accrued Step Rate. The Interim Value is the amount that is
available for annuitization, death benefits, withdrawals and Surrenders.
INVESTMENT AMOUNT - The Investment Amount, for each Shield Option, is the amount
that is initially allocated to the Shield Option and subsequently reflects all
withdrawals and adjustments at the Term End Date. The Investment Amount will be
reduced for any withdrawal by the same percentage that the withdrawal reduces
the Interim Value attributable to that Shield Option. The Investment Amount is
adjusted by the Performance Rate at the end of the Term.
6
ISSUE DATE - The date the Contract is issued.
JOINT ANNUITANT - If there is more than one Annuitant, each Annuitant will be a
Joint Annuitant of the Contract.
JOINT OWNER - If there is more than one Owner, each Owner will be a Joint Owner
of the Contract.
MATURITY DATE - The Maturity Date as specified in your Contract.
MICC ("WE". "US", "OUR") - MetLife Insurance Company of Connecticut.
MINIMUM ACCOUNT VALUE - $2000.
MINIMUM GUARANTEED INTEREST RATE - the amount as shown on your Contract Schedule
and applies only to amounts in the Fixed Account. This interest rate is
guaranteed to be a rate not less than the minimum interest rate allowed by state
law - see Appendix C.
MINIMUM PARTIAL WITHDRAWAL AMOUNT - $500.
NOTICE - Any form of communication providing information we need, either in a
signed writing or another manner that we approve in advance. All Notices to us
must be sent to our Annuity Service Office and received in Good Order. To be
effective for a Business Day, a Notice must be received in Good Order prior to
the end of that Business Day.
OWNER ("YOU", "YOURS") - The person(s) entitled to the ownership rights under
the Contract. If Joint Owners are named, all references to Owner shall mean
Joint Owners.
PERFORMANCE RATE - The rate credited at the Term End Date. The Performance
Rate is based on the Index Performance, adjusted for the applicable Shield Rate,
Cap Rate or Step Rate. The Performance Rate can be positive, zero or negative.
At the end of the Term, any increase or reduction in the Investment Amount in a
particular Shield Option is determined by multiplying the Performance Rate by
the Investment Amount of the Shield Option on the last day of the Term.
PERFORMANCE RATE ADJUSTMENT - The adjustment made to the Investment Amount for
each Shield Option on any day during the Term, up to, and including, the Term
End Date. Prior to the Term End Date, this adjustment is based on the Index
Performance of the associated Index for a particular Term, subject to any
applicable Accrued Shield Rate, Accrued Cap Rate or Accrued Step Rate. On the
Term End Date, this adjustment is based on the Performance Rate. This
adjustment can be positive, zero or negative. When the Performance Rate
Adjustment is positive we may also refer to this adjustment as "earnings." When
the Performance Rate Adjustment is negative we may also refer to this adjustment
as "losses."
PREMIUM TAX - The amount of tax, if any, charged by the state or municipality.
PURCHASE PAYMENT - The amount paid to us under the Contract as consideration for
the benefits it provides.
RATE CREDITING TYPE - Either the Cap Rate or the Step Rate.
RMD - Required Minimum Distribution.
SEPARATE ACCOUNT - The separate account is MICC Separate Account SA.
SHIELD RATE - The amount of any negative Index Performance that is absorbed by
us at the Term End Date. Any negative Index Performance beyond the Shield Rate
will reduce the Investment Amount associated with the Shield Option. The Shield
Rate may vary between Shield Options and it is not an annual rate. We currently
offer Shield Rates of 10% ("Shield 10"), 15% ("Shield 15"), 25% ("Shield 25")
and 100% ("Shield 100").
SHIELD OPTION - You may allocate your Purchase Payment or transfer your
Investment Amount to one or more of the available Shield Options. Each Shield
Option has an associated Term, Index, Shield Rate and either a Cap Rate or Step
Rate.
STEP RATE - The rate credited at the Term End Date if the Index Performance is
equal to or greater than zero. The Step Rate may vary between Shield Options
and it is not an annual rate.
7
SURRENDER - A full withdrawal of your Account Value.
TERM - The Term is the number of years that the Shield Option is in effect. We
currently offer Terms of 1 year, 3 years or 6 years. The Initial Term(s) begin
on the Issue Date.
TERM END DATE - The Contract Anniversary on which a Shield Option ends.
TERM START DATE - The Contract Anniversary on which a Shield Option is
established. The initial Term Start Date(s) begins on the Issue Date, and
thereafter, will be the Contract Anniversary coinciding with the term duration
of the current Term you have selected.
TRANSFER PERIOD - The five (5) calendar days following the Contract Anniversary
coinciding with the Term End Date for each applicable Shield Option and/or the
Interest Rate Term End Date for the Fixed Account, during the Accumulation
Period.
WITHDRAWAL CHARGE - A charge applied to the percentage of the amount withdrawn
from your Account Value in a Contract Year in excess of the Free Withdrawal
Amount.
8
SUMMARY
The MetLife Flex Market Shield/SM/ Annuity is a single premium deferred annuity
contract (the "Contract") issued by MICC, that provides for the accumulation of
retirement savings. The Contract is intended for retirement or other long term
investment purposes.
The Contract offers various Shield Options, which permit Owners to potentially
receive interest equal to the percentage returns of certain Securities Indices
and a Commodity Index, up to a Cap Rate or Step Rate, with certain guarantees
against negative returns - guarantees we call "Shield Rates." We currently
offer Shield Options with Terms of 1, 3, or 6 years in length.
The Cap Rate and Step Rate (each, a "Rate Crediting Type") are the two ways we
offer that you can potentially receive interest based on the upside performance
of an Index. The Cap Rate is the maximum rate that may be credited at the Term
End Date based on Index Performance and the Step Rate is the rate credited at
the Term End Date if the Index Performance is equal to or greater than zero.
(See "Key Features of the Contract - Rate Crediting Type" below.)
Unless you allocate your Purchase Payment to a Shield Option with the Shield
100, you may lose money by investing in the Contract. Unlike the other Shield
Options, a Shield Option with the Shield 100 provides a guarantee that we absorb
100% of any negative return on Investment Amounts in those Shield Options. A
Fixed Account that guarantees a fixed rate of interest may also be available.
You may withdraw a portion or all of your Account Value at any time until you
commence receiving Income Payments, subject to an adjustment to the Investment
Amounts. Depending on the performance of the Indices you choose, this
adjustment may be substantial. Withdrawal Charges may also apply.
The Contract is available only in those states where it has been approved for
sale.
When you purchase the Contract, you can choose between the standard death
benefit and an optional Return of Premium death benefit. The standard death
benefit is the Account Value, however, if you select the Return of Premium death
benefit, the death benefit will be the greater of your (i) Account Value or (ii)
Purchase Payment, reduced proportionately by the percentage reduction in Account
Value for each partial withdrawal (including any applicable Withdrawal Charge).
Like all annuity contracts the Contract offers a range of annuity options, which
provide Income Payments for your lifetime.
See "SPECIAL TERMS" in this prospectus for more detailed explanations of the
terms associated with the Shield Options.
9
The following chart describes the key features of the Contract. Please read
this prospectus for more detailed information about the Contract.
KEY FEATURES OF THE CONTRACT
Contract Single premium deferred annuity contract.
Purchase Payment The minimum Purchase Payment: $25,000.
Prior approval required for Purchase Payment of $1,000,000 or more.
Owner and Annuitant Issue Ages 85
Contract Periods The Contract has two periods:
o The Accumulation Period, the period prior to the Annuity Date; and
o The Income Period, which begins on the Annuity Date and during
which Income Payments are provided.
Account Value The total of the Fixed Account Value and the value of the Shield Option(s)
under the Contract, adjusted for any amounts that may be included by rider
during the Accumulation Period.
Shield Option You may allocate your Purchase Payment or transfer your Investment Amount
to one or more of the available Shield Options or into the Fixed Account. Each
Shield Option has an associated Term, Index, Shield Rate and Rate Crediting
Type.
Term The initial Term(s) begin on the Issue Date. The Term may be 1, 3, or 6 years in length.
Indices We currently offer two types of indices: Indices based on the performance of
securities ("Securities Indices") and an Index based on the performance of
commodities (the "Commodity Index"). In the future we may offer Shield
Options based on other types of Indices. We may also add other indices for new
Contracts at our discretion.
The Indices are as follows:
o [Index A];
o [Index B];
o [Index C];
o [Index D]; and
o [Index E].
Shield Rate The amount of any negative Index Performance that is absorbed by us at the
Term End Date. Any negative Index Performance beyond the Shield Rate will
reduce the Investment Amount. The Shield Rate may vary between Shield
Options and it is not an annual rate but is the rate for the duration of the Term.
We currently offer Shield Rates of 10% ("Shield 10"), 15% ("Shield 15"), 25%
("Shield 25") and 100% ("Shield 100").
In deciding whether to purchase a Shield Option with a higher Shield Rate, you
should consider that Shield Options with higher Shield Rates tend to have lower
Cap Rates and Step Rates compared to Shield Options that have the same index
and term but provide lower Shield Rates.
Rate Crediting Type Cap Rate: The maximum rate that may be credited at the Term End Date based
on Index Performance. The Cap Rate may vary between Shield Options and it is
not an annual rate but is the rate for the duration of the Term.; or
10
Step Rate: The rate credited at the Term End Date if the Index Performance is
equal to or greater than zero. The Step Rate may vary between Shield Options
and it is not an annual rate but is the rate for the duration of the Term.
In deciding whether to purchase a Shield Option with a Cap Rate or a Step Rate,
you should consider that Step Rates are generally lower than Cap Rates. If
Index Performance is equal to or greater than zero but less than the Step Rate,
and you chose a Cap Rate for your Shield Option, your Performance Rate
Adjustment will be lower than it would be had you chosen a Step Rate.
Alternatively, if the Index Performance is positive and exceeds the Step Rate,
and you chose a Step Rate for your Shield Option, your Performance Rate
Adjustment will be lower than it would be had you chosen a Cap Rate.
The following chart lists the Shield Options (each of which is issued with a Cap
Rate unless otherwise noted) currently available:
SHIELD OPTIONS
TERM INDEX
SHIELD 100
1 Year [Index A]
[Index A] / Step Rate
SHIELD 25
6 Year [Index A]
SHIELD 15
3Year [Index A]
6 Year [Index A]
SHIELD 10
1 Year [Index A]
[Index A] / Step Rate
[Index B]
[Index C]
[Index D]
[Index E]
3 Year [Index A]
[Index A] / Step Rate
[Index B]
[Index C]
[Index D]
[Index E]
6 Year [Index A]
Performance Rate Adjustment A Performance Rate Adjustment will be applied to the Investment Amount in
each Shield Option on any day during the Term, up to, and including, the Term
End Date, based on the Index Performance of the associated Index. The
Performance Rate Adjustment may be positive, zero or negative. When the
Performance Rate Adjustment is positive we may also refer to this adjustment as
"earnings." When the Performance Rate Adjustment is negative we may also
refer to this adjustment as "losses."
Interim Value For each Shield Option, the value we assign on any Business Day prior to the
Term End Date. During the Transfer Period, the Interim Value of each Shield
Option will equal the Investment Amount in that Shield Option. After the
Transfer Period, the Interim Value of that Shield Option is equal to the
Investment Amount in the Shield Option, adjusted for the Index Performance of
the associated Index and subject to the applicable Accrued Shield Rate, Accrued
Cap Rate or Accrued Step Rate. The Interim Value is the amount that is
available for annuitization, death benefits, withdrawals and Surrenders.
Transfers During the Accumulation Period you may make transfers to the Fixed Account
and/or to new Shield Option(s) during the Transfer Period. The effective date of
such transfer is the first day of the Interest Rate Term and/or a Term(s) in which
the transfer is made.
11
Fixed Account See Appendix C.
Access to Your Money You may withdraw some or all of your money at any time prior to the Annuity
Date. For any withdrawal, a Performance Rate Adjustment, as of the date of the
withdrawal, will apply. In addition, a withdrawal taken in excess of the Free
Withdrawal Amount may be subject to a Withdrawal Charge. The Free
Withdrawal Amount for each Contract Year, after the first, is equal to 10% of
your Account Value, as of the prior Contract Anniversary, less the total amount
withdrawn from the Account Value in the current Contract Year. The Free
Withdrawal Amount is non-cumulative and is not carried over to other Contract
Years.
Withdrawal Charge A percentage charge applied to withdrawals in excess of the Free Withdrawal Amount.
The Withdrawal Charge is calculated at the time of each withdrawal in accordance
with the following:
Number of Complete Contract Years
since Issue Date Withdrawal Charge percentage
--------------------------------- ----------------------------
0 9%
1 8%
2 8%
3 7%
4 6%
5 5%
6 or more 0%
Withdrawal Charge Waivers Withdrawal Charges will be waived for (if permitted in your state):
(i) Maturity of the Contract;
(ii) Payment of the death benefit;
(iii) Application of your Account Value to an Annuity Option;
(iv) If the withdrawal is to avoid required Federal income tax penalties or to
satisfy Federal income tax rules concerning minimum distribution requirements that
apply to your Contract, except for RMDs on a decedent Roth IRA. For purposes of
this exception, we assume that the Contract is the only contract or funding vehicle
from which distributions are required to be taken and we will ignore all other
Account Values;
(v) If you properly "recharacterize" as permitted under Federal tax law your
Traditional IRA Contract or Roth IRA Contract issued by us;
(vi) If we agree in writing that none will apply. For example, if you transfer
your Account Value to another approved annuity contract issued by us or one
of our affiliates;
(vii) Withdrawals pursuant to the Nursing Home Exception or the Terminal Illness Exception; or
(viii) Withdrawals up to the Free Withdrawal Amount.
Death Benefits If you die during the Accumulation Period, we will pay either the standard death benefit
or the optional Return of Premium death benefit (this optional benefit is irrevocable if
selected by you at the time the Contract is issued) to your Beneficiary (or Beneficiaries).
The standard death benefit is the Account Value.
The optional Return of Premium death benefit will be the greater of:
(i) your Account Value or;
(ii) your Purchase Payment, reduced proportionately by the percentage
reduction in Account Value for each partial withdrawal (including any
applicable Withdrawal Charge).
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Other than a Shield Option with the Shield 100, the cost for this optional death benefit
will be reflected in lower Cap Rates and Step Rates, which will not be less than the
minimum rates stated in the Contract, than if this optional benefit was not elected.
Annuity Options You can choose an Annuity Option. After Income Payments begin, you cannot change
the Annuity Option. You can choose one of the following Annuity Options on a fixed
payment basis or any other Annuity Option acceptable to us:
(i) Life Annuity;
(ii) Life Annuity with 10 Years of Income Payments Guaranteed;
(iii) Joint and Last Survivor Annuity; and
(iv) Joint and Last Survivor Annuity with 10 Years of Income Payments Guaranteed.
Charges and Expenses You will bear the following charges and expenses:
(i) Withdrawal Charges;
(ii) Premium and Other Taxes; and
(iii) Lower Cap Rates and Step Rates if the Return of Premium Death Benefit is selected.
Your Right to Cancel You may cancel the Contract within a certain time period after receiving it. This is
known as a "free look." Unless otherwise required by state law, we will return either
your Purchase Payment or Account Value, depending on your state, and we will not
deduct a Withdrawal Charge.
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RISK FACTORS
The purchase of the Contract involves certain risks. You should carefully
consider the following factors, in addition to the matters set forth elsewhere
in the prospectus, prior to purchasing the Contract.
o There is a risk of substantial loss of your principal (unless you
allocated your Purchase Payment to a Shield Option with the Shield 100 or
the Fixed Account) because you agree to absorb all losses that exceed the
Shield Rate for the Shield Options you select under the Contract. This
means that if a negative Index Performance for a Shield Option you select
exceeds the corresponding Shield Rate at the Term End Date, you will bear
the portion of the loss that exceeds the Shield Rate.
o When you purchase the Contract and allocate your Purchase Payment to a
Shield Option(s), you will not be investing in the Index for the Shield
Options you select or in a mutual fund or exchange traded fund that tracks
the Index for the Shield Options you select. Your Performance Rate
Adjustment for a Shield Option is limited by a Cap Rate or Step Rate, which
means your Investment Amount will be lower than if you had invested in a
mutual fund or exchange traded fund designed to track the performance of
the applicable Index and the performance is greater than your Cap Rate or
Step Rate.
o If you purchase a Contract with the optional Return of Premium Death
Benefit, the Cap Rates and Step Rates set for your Shield Options under the
Contract will be lower than the Cap Rates and Step Rates that you would
have received had you purchased the Contract without this optional death
benefit, except for a Shield Option with the Shield 100. In deciding
whether to purchase the optional death benefit, you should consider the
desirability of the benefit, relative to the generally lower Cap Rates and
Step Rates that will be set under your Contract for the life of the
Contract as compared to a Contract purchased without such benefit, and your
needs.
o The method we use in calculating your Interim Value may result in an
amount that is less than the amount you would receive had you held the
investment until the Term End Date.
o If you take a withdrawal, including RMDs, your Account Value will be
reduced by the amount withdrawn proportionately from your Shield Options
and Fixed Account unless you tell us from which options, in which you
currently have any Account Value, where the withdrawal should be taken.
o If you die (unless you selected the optional Return of Premium Death
Benefit), make a withdrawal or Surrender your Contract prior to the Term
End Date, we will pay the Interim Value, which may be less than if you held
the Contract until all of your Shield Options reached their Term End Dates.
o If your Contract is annuitized prior to a Term End Date, we will use the
Interim Value to calculate the Income Payments you will receive based on
the applicable Annuity Option. In deciding on an Annuity Date, you should
take into consideration the Term End Dates of your Shield Options relative
to the Annuity Date you have chosen.
o The calculation of the Interim Value will be based on Index Performance
and the applicable Accrued Shield Rate, Accrued Cap Rate or Accrued Step
Rate as of the date of the calculation. Shield Rates, with the exception of
a Shield 100, Cap Rates and Step Rates accrue during the Term and only
reach full accrual on the last day of a Term. If negative Index Performance
is constant during the Term, the Interim Value will be lower the earlier a
withdrawal is made during the Term because the Shield Rate is accruing
during this period. Also, withdrawals prior to the Term End Date, when
Index Performance is positive, are subject to an Accrued Cap Rate or
Accrued Step Rate based on the period those amounts were invested in the
Shield Option. This means the earlier you take a withdrawal the lesser
extent to which any positive Index Performance is reflected in your Account
Value due to the accruing of the Cap Rate or Step Rate.
o You may make transfers between the Fixed Account and the Shield Option(s)
only during the Transfer Period. You cannot make transfers outside the
Transfer Period and you cannot transfer out of a current Shield Option to
another Shield Option or the Fixed Account until the Term End Date of the
current Shield Option and you
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cannot transfer out of the Fixed Account to a Shield Option until the
Interest Rate Term End Date (which will not be less than one (1) year). In
both cases, the amount transferred, can only be transferred to new Shield
Options or the Fixed Account and not a Shield Option you may currently have
whose Term has not ended as of the date you would like to transfer such
amount. This may limit your ability to react to market conditions.
We may stop offering Shield Options, consequently, a Shield Option may not be
available for you to transfer your Investment Amount or Fixed Account Value into
after a Term End Date or the Interest Rate Term End Date. However, a Shield
Option with the Shield 100 will be available to you for at least your first six
(6) Contract Years, subject to the transfer requirements.
In addition, you should understand that for renewals into the same Shield
Option, a new Cap Rate or Step Rate, as applicable, will be declared and will go
into effect on the Contract Anniversary that coincides with the beginning of the
new Shield Option.
o We have the right to substitute a comparable index prior to the Term End
Date if any Index is discontinued or, at our sole discretion, we determine
that our use of such Index should be discontinued, or if the calculation of
an Index is substantially changed. We would attempt to choose a substitute
index that has a similar investment objective and risk profile to the
replaced index. Upon substitution of an Index, we will calculate your Index
Performance on the replaced Index up until the date of substitution and the
substitute Index from the date of substitution to the Term End Date. An
Index substitution will not change the Shield Rate, Cap Rate or Step Rate
for an existing Shield Option.
o You may withdraw some or all of your money at any time prior to the Annuity
Date, however, any applicable Withdrawal Charge is calculated as a
percentage of the amount withdrawn. After the first Contract Year, the
Contract provides for a limited free access to your money, called the Free
Withdrawal Amount. If you withdraw an amount that is greater than the Free
Withdrawal Amount for your Contract, you may be subject to a Withdrawal
Charge which will reduce the amount that is payable to you. For example,
assume you make a $1,000 Purchase Payment at Contract issue. If your
Account Value is $800 in the beginning of the fifth (5/TH/) Contract Year
and you take a full withdrawal from your Contract, the Free Withdrawal
Amount is $80 (10% of $800) and a Withdrawal Charge percentage of 5% is
applied to the remaining amount. This is a 5% reduction of your Account
Value, less the Free Withdrawal Amount ($720 = $800-$80). The Withdrawal
Charge would be $36 (5% of $720). This results in a cash value of $764 paid
to you ($764 = $800 - $36). If you make a withdrawal before a Term End
Date, a Performance Rate Adjustment, as of the date of the withdrawal, will
apply. A Performance Rate Adjustment may result in a loss that is greater
than the Accrued Shield Rate when Index Performance is negative on the date
of the withdrawal. Performance Rate Adjustments, at the time of the
withdrawal, may decrease the amount that is payable to you.
o If your Account Value falls below the Minimum Account Value as a result of
a withdrawal, we may terminate your Contract.
o No company other than MICC has any legal responsibility to pay amounts
that MICC owes under the Contract. An Owner should look to the financial
strength of MICC for its claims-paying ability.
THE ANNUITY CONTRACT
This prospectus describes the MetLife Flex Market Shield/SM/ Annuity issued by
us. The MetLife Flex Market Shield/SM/ Annuity is a contract between you as the
Owner, and us, the insurance company, where you agree to make a Purchase Payment
to us and we agree to make a series of Income Payments at a later date you
select (the "Annuity Date").
The Contract, like all deferred annuity contracts, has two periods: the
Accumulation Period and the Income Period. During the Accumulation Period,
Account Value accumulates on a tax-deferred basis and is taxed as income when
15
you make a withdrawal. If you make a withdrawal during the Accumulation Period,
we may assess a Withdrawal Charge of up to 9%. Withdrawals, depending on the
amount and timing, may negatively impact the benefits and guarantees provided by
your Contract. You should carefully consider whether a withdrawal under a
particular circumstance will have any negative impact to your benefits or
guarantees. The Income Period occurs when you or a designated payee begin
receiving regular Income Payments from your Contract.
The maximum issue age for this Contract is 85.
When you purchase the Contract, you can choose one or more of the available
Shield Options and the Fixed Account. A Purchase Payment applied to the Shield
Options is allocated to the Separate Account. You do not share in the
investment performance of assets allocated to the Separate Account. We are
obligated to pay all money we owe under the Contract, including death benefits
and income payments. Any such amount that exceeds the assets in the Separate
Account is paid from our General Account, subject to our financial strength and
claims-paying ability and our long-term ability to make such payments, and is
not guaranteed by any other party. (See "THE SEPARATE ACCOUNT.")
The Contract is intended for retirement savings or other long-term investment
purposes. The Contract benefits from tax deferral. Tax deferral means that you
are not taxed on Account Value or appreciation on the assets in your Contract
until you take money out of your Contract. For any tax qualified account (e.g.,
an IRA), 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 TAX
CONSIDERATIONS.")
In most states, the Contract also contains a Fixed Account (contact your
registered representative regarding the availability in your state). The Fixed
Account is not offered by this prospectus. The Fixed Account offers an interest
rate that is guaranteed by us. The minimum interest rate depends on the date
your Contract is issued and is indicated on your Contract Schedule. Your
registered representative can tell you the current and minimum interest rates
that apply. If you select the Fixed Account, your money will be placed with our
other General Account assets, and the amount of money you are able to accumulate
in your Contract during the Accumulation Period depends upon the total interest
credited to your Contract. The Fixed Account is part of our General Account.
Our General Account consists of all assets owned by us other than those in the
Separate Account and our other separate accounts. We have sole discretion over
the investment of assets in the General Account and the Separate Account. If
you select an Annuity Option during the Income Period, payments are made from
our General Account assets.
The amount of the Income Payments you receive during the Income Period from an
Income Payment option will remain level for the entire Income Period, subject to
the payout chosen. (See "Income Payments (The Income Period)" for more
information.)
As Owner, you exercise all interests and rights under the Contract. You can
change the Owner at any time, subject to our underwriting requirements. The
Contract may be owned generally by Joint Owners (limited to natural persons).
(See "OWNERSHIP PROVISIONS.")
Under the Code, spousal continuation and certain distribution options are
available only to a person who is defined as a "spouse" under the Federal
Defense of Marriage Act or other applicable Federal law. All Contract
provisions will be interpreted and administered in accordance with the
requirements of the Code. Therefore, under current Federal law, a purchaser who
has or is contemplating a civil union or same-sex marriage should note that the
favorable tax treatment afforded under Federal law would not be available to
such same-sex partner or same-sex spouse. Same-sex partners or spouses who own
or are considering the purchase of annuity products that provide benefits based
upon their status as a spouse should consult a tax advisor.
REPLACEMENT OF CONTRACTS
EXCHANGES. Generally you can exchange one annuity contract for another in a
tax-free exchange under Section 1035 of the Code. Before making an exchange,
you should compare both annuities carefully. If you exchange another annuity
for the one described in this prospectus, you might have to pay a withdrawal
charge on your old
16
annuity, and there will be a new Withdrawal Charge period for
the Contract. Other charges may be higher (or lower) and the benefits may be
different. Also, because we will not issue the Contract until we have received
the initial premium from your existing insurance company, the issuance of the
Contract may be delayed. Generally, it is not advisable to purchase a Contract
as a replacement for an existing annuity contract. Before you exchange another
annuity for our Contract, ask your registered representative whether the
exchange would be advantageous, given the Contract features, benefits and
charges.
EXCHANGE PROGRAMS. From time to time we may offer programs under which certain
annuity contracts previously issued by us or one of our affiliates may be
exchanged for the Contracts offered by this prospectus. Currently, with respect
to exchanges from certain of our annuity contracts to the Contract, an existing
Contract is eligible for exchange if a Surrender of the Contract would not
trigger a Withdrawal Charge. The Account Value of the Contract attributable to
the exchanged assets will not be subject to any Withdrawal Charge. You should
carefully consider whether an exchange is appropriate for you by comparing the
benefits and other guarantees provided by the Contract you currently own to the
benefits and guarantees that would be provided by the new Contract offered by
this prospectus. Then, you should compare the fees and charges of your current
contract to the fees and charges of the new Contract, which may be higher than
your current contract. The programs we offer will be made available on terms
and conditions determined by us, and any such programs will comply with
applicable law. We believe the exchanges will be tax free for Federal income
tax purposes; however, you should consult your tax advisor before making any
such exchange.
PURCHASE
The Contract may not be available for purchase through your broker dealer
("selling firm") during certain periods. There are a number of reasons why the
Contract periodically may not be available, including that the insurance company
wants to limit the volume of sales of the Contract. You may wish to speak to
your registered representative about how this may affect your purchase. For
example, you may be required to submit your purchase application in Good Order
prior to or on a stipulated date in order to purchase a Contract, and a delay in
such process could result in your not being able to purchase a Contract. Your
selling firm may offer the Contract with a lower maximum issue age for the
Contract and certain riders than other selling firms.
PURCHASE PAYMENT
A Purchase Payment is the total amount of money you give us to invest in the
Contract. The Purchase Payment is due on the date the Contract is issued.
o The minimum Purchase Payment we will accept is $25,000.
o If you want to make a Purchase Payment of $1,000,000 or more you will need
our prior approval.
o We reserve the right to refuse a Purchase Payment made via a personal
check in excess of $100,000. A Purchase Payment over $100,000 may be
accepted in other forms, including, but not limited to, EFT/wire transfers,
certified checks, corporate checks, and checks written on financial
institutions.
o We will not accept a Purchase Payment made with cash, money orders, or
travelers checks.
We reserve the right to reject any application.
ALLOCATION OF THE PURCHASE PAYMENT
You may allocate your Purchase Payment to one or more of the available Shield
Options or into the Fixed Account. On your Issue Date, your Purchase Payment is
allocated to the Shield Option(s) and/or the Fixed Account, as you specified on
the application, unless we receive Notice of any changes from you before we have
issued your Contract. All allocations must be in whole percentages that total
100% or in whole dollars. Once your Purchase Payment is allocated to the Shield
Options and/or the Fixed Account, they become part of your Account Value.
17
SHIELD OPTIONS
The MetLife Flex Market Shield/SM/ Annuity is not a variable annuity where your
account value varies based on the investment performance of the underlying
portfolios you choose, rather the Shield Options offer potential interest based
upon index performance. This potential interest - the Performance Rate
Adjustment - may be a positive or negative percentage or zero. You may allocate
your Purchase Payment to one or more of the Shield Options we currently offer
and the Fixed Account. Based upon the Index Performance of the Index associated
with the Shield Option, a Performance Rate Adjustment will be applied to the
Investment Amount in that Shield Option on any day during the Term that you make
a withdrawal from the Shield Option, Surrender your Contract, annuitize your
Contract, a Death Benefit is paid or the Term ends. Given that Index
Performance may be positive, zero or negative, your Performance Rate Adjustment
may be positive, zero or negative. It is possible for you to lose a portion of
the Purchase Payment and any earnings invested in the Contract. The Performance
Rate Adjustment is based on a certain amount of protection against decreases in
an Index Value and a limitation on potential interest based on an Index Value.
The extent of the downside protection varies by the Shield Rate you select. If
you access amounts in the Shield Options before the Term End Date, we will
instead calculate an Interim Value on each Business Day between the Term Start
Date and the Term End Date. (See "Interim Value Calculation.")
You have the opportunity to allocate your Investment Amount to any of the Shield
Options described below, subject to the requirements, limitations and procedures
disclosed in the prospectus. We are not obligated to offer any one particular
Shield Option. Also, we are not obligated to offer any Shield Options. Each
Shield Option has an associated (i) Term, (ii) Index, (iii) Shield Rate and (iv)
Rate Crediting Type.
The following chart lists the Shield Options (each of which is issued with a Cap
Rate unless otherwise noted) currently available:
SHIELD OPTIONS
TERM INDEX
SHIELD 100
[Index A]
1 Year [Index A] / Step Rate
SHIELD 25
6 Year [Index A]
SHIELD 15
3 Year [Index A]
6 Year [Index A]
SHIELD 10
1 Year [Index A]
[Index A] / Step Rate
[Index B]
[Index C]
[Index D]
[Index E]
3 Year [Index A]
[Index A] / Step Rate
[Index B]
[Index C]
[Index D]
[Index E]
6 Year [Index A]
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The Indices are described in more detail below, under the heading "Indices."
For each new Shield Option we declare a new Cap Rate or a new Step Rate, as
applicable, for each Term. The initial Cap Rate or Step Rate, as applicable,
for each Shield Option is declared on the Issue Date. Thereafter the Cap Rate
or Step Rate, as applicable, for each subsequent Shield Option is declared for
each subsequent Term. See "Cap Rate" and "Step Rate".
ALSO PLEASE NOTE, SHIELD OPTIONS WITH HIGHER SHIELD RATES TEND TO HAVE LOWER CAP
RATES AND STEP RATES, AS APPLICABLE, THAN OTHER SHIELD OPTIONS THAT USE THE SAME
INDEX AND TERM BUT PROVIDE LOWER SHIELD RATES. For example, a [Index A] with a
1 year Term and a Shield 100 will tend to have a Cap Rate that is lower than a
[Index A] with a 1 year Term and a Shield 10.
We reserve the right to change the duration of any new Shield Options, stop
offering any or all of the Shield Options or suspend offering any or all of the
Shield Options temporarily. We may also add Shield Options in the future. All
Shield Options may not be available in all states.
TERM
The Term is the number of years that a Shield Option is in effect. For specific
Shield Options we currently offer Terms of 1 year, 3 years or 6 years. An
Initial Term(s) begins on the Issue Date. A Term ends and a subsequent Term
begins, on the Contract Anniversary coinciding with the term duration of the
then current Term for the Shield Option you have selected.
TERM START DATE
Each Shield Option will have a Term Start Date, which is the Contract
Anniversary on which a Shield Option is established. The initial Term Start
Date(s) begins on the Issue Date, and thereafter, will be the Contract
Anniversary coinciding with the term duration of the Term for the Shield Option
completed.
TERM END DATE
The Contract Anniversary on which a Shield Option ends. We will send you
written Notice thirty (30) days in advance of the maturing Shield Options in
which you are currently invested. At the Term End Date, the Investment Amount
allocated to the Shield Option that has reached its Term End Date will
automatically be renewed into the same Shield Option unless you elect to
transfer such amount into a different Shield Option(s) or the Fixed Account. If
the same Shield Option is no longer available at the Term End Date, the
Investment Amount will automatically transfer into the Fixed Account at the Term
End Date, unless you instruct us otherwise. The amounts transferred to the
Fixed Account must remain in the Fixed Account until the Interest Rate Term End
Date (which, currently, will not be less than one (1) year). If the Fixed
Account is not available, the Investment Amount will automatically transfer into
the Shield Option with, in order of priority, the shortest Term, the highest
Shield Rate and the lowest Cap Rate, from the Shield Options available at the
Term End Date, unless you instruct us otherwise. You have the Transfer Period
to notify us that you want to transfer some or all of your Investment Amount to
a new Shield Option(s) or the Fixed Account. For renewals into the same Shield
Option, a new Cap Rate or Step Rate, as applicable, will be declared and will go
into effect on the Contract Anniversary that coincides with the beginning of the
new Term in the Shield Option that just ended. The amount transferred to the
new Shield Option is the Investment Amount as of the Contract Anniversary.
INDICES
The Performance Rate of a Shield Option is based on the performance of the
associated Index. We currently offer Shield Options based on two types of
Indices: Indices based on the performance of securities (the "Securities
Indices") and an Index based on the performance of commodities (the "Commodity
Index"). In the future we may offer Shield Options based on other types of
indices. We may also add or remove indices for new Contracts at our discretion.
Securities Indices.
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The following Securities Indices are currently available:
[Index A]. [TO COME]
[Index B]. [TO COME]
[Index C]. [TO COME]
[Index D]. [TO COME]
Commodities Index.
The following Commodity Index is currently available:
[Index E]. [TO COME]
See Appendix A for important information regarding the publishers of the
Indices.
DISCONTINUATION OR SUBSTANTIAL CHANGE TO AN INDEX. If any Index is discontinued
or, we determine that our use of such Index should be discontinued, or if the
calculation of an Index is substantially changed, we may substitute a comparable
index with a similar investment objective and risk profile. We will send you a
Notice in writing before any such substitution is made. Upon substitution of an
Index, we will calculate your Index Performance on the existing Index up until
the date of substitution and the substitute Index from the date of substitution
to the Term End Date. An Index substitution will not change the Term, Shield
Rate, Cap Rate or Step Rate for an existing Shield Option.
INDEX VALUE
The Index Value of an Index, on a Business Day, is the published closing value
of the Index on that Business Day. The Index Value on any day that is not a
Business Day is the value as of the prior Business Day. We will use consistent
sources to obtain Index Values. If these sources are no longer available for
specific indices, we will select an alternative published source(s) for these
Index Values.
INDEX PERFORMANCE
The Performance Rate of a Shield Option is based on the performance of an Index.
Index Performance is the percentage change in an Index Value measured from the
Term Start Date to any day, including the Term End Date, within the Term. The
Index Performance can be positive, zero or negative.
SHIELD RATES
The Shield Rate is accrued from the Term Start Date to the Term End Date, and
the full Shield Rate only applies if you hold the Shield Option until the Term
End Date, other than the Shield 100. The Shield Rate for each Shield Option is
the amount of any negative Index Performance that is absorbed by us at the Term
End Date. Any negative Index Performance beyond the Shield Rate will reduce the
Investment Amount. For example, a -15% Index Performance with a 10% Shield Rate
will result in a -5% Performance Rate; or, a -10% Index Performance with a 25%
Shield Rate will result in a 0% Performance Rate. The Shield Rate may vary
between Shield Options and it is not an annual rate. We currently offer the
following Shield Rates: Shield 10, Shield 15, Shield 25 and Shield 100.
Unlike the other Shield Rates, the Shield 100 is not subject to accrual, and so
the Shield 100 is fully accrued on any Business Day during the Term. This
means you get the full benefit of the Shield 100 regardless of where you are in
your Term. For Shield Options without the Shield 100, you get more of the
Shield Rate the closer you are to the Term End Date. A Shield Option with the
Shield 100 will be available for at least the first six (6) Contract Years,
subject to the transfer requirements. See "TRANSFERS."
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In deciding whether to choose a Shield Option with a higher Shield Rate, you
should consider that Shield Options with higher Shield Rates tend to have lower
Cap Rates and Step Rates, as applicable, than Shield Options with lower Shield
Rates that have the same index and term.
RATE CREDITING TYPES
CAP RATE
The Cap Rate is the maximum rate that may be credited at the Term End Date based
on Index Performance. The Cap Rate may vary between Shield Options and it is
not an annual rate. The Cap Rate is measured from the Term Start Date to the
Term End Date, and the full Cap Rate only applies if you hold the Shield Option
until the Term End Date. For renewals into the same Shield Option a new Cap
Rate is declared for each subsequent Term, and such rate will not be less than
the minimum guaranteed cap rate, as indicated in your Contract. A thirty (30)
day advance written Notice will be mailed to you indicating your maturing Shield
Options and how you can obtain the new Cap Rates and Step Rates for the
available Shield Options and the interest rate for the Fixed Account. At the
Term End Date, the Investment Amount will automatically be renewed into the same
Shield Option, with the new Cap Rate, unless you elect to transfer such amount
into a different Shield Option(s) or the Fixed Account. See "TRANSFERS."
STEP RATE
The Step Rate is the rate credited at the Term End Date if the Index Performance
is equal to or greater than zero. The Step Rate is measured from the Term Start
Date to the Term End Date, and the full Step Rate only applies if you hold the
Shield Option until the Term End Date. The Step Rate may vary between Shield
Options and it is not an annual rate. For renewals into the same Shield Option
a new Step Rate is declared for each subsequent Term, and such rate will not be
less than minimum guaranteed step rate, as indicated in your Contract. A thirty
(30) day advance written Notice will be mailed to you indicating your maturing
Shield Options and how you can obtain the new Step Rates and Cap Rates for the
available Shield Options and the interest rate for the Fixed Account. At the
Term End Date, the Investment Amount will automatically be renewed into the same
Shield Option, with the new Step Rate, unless you elect to transfer such amount
into a different Shield Option(s) or the Fixed Account. See "TRANSFERS."
In deciding whether to purchase a Shield Option with a Cap Rate or a Step Rate,
you should consider that Step Rates are generally lower than Cap Rates. If
Index Performance is equal to or greater than zero but less than the Step Rate,
and you chose a Cap Rate for your Shield Option, your Performance Rate
Adjustment will be lower than it otherwise would be had you chosen a Step Rate.
Alternatively, if the Index Performance is positive and exceeds the Step Rate,
and you chose a Step Rate for your Shield Option, your Performance Rate
Adjustment will be lower than it would otherwise be had you chosen a Cap Rate.
ADDITION OR DISCONTINUANCE OF A SHIELD OPTION
We can add or discontinue any Shield Option. When a change is made to a Shield
Option or an Index, or changed subsequent to the Issue Date, we will send a
notification describing any changes to the Shield Option, as required by law.
This change will take effect under your Contract as of the next Contract
Anniversary for any allowable transfers into the Shield Option(s). If you are
currently allocated in a Shield Option which is no longer available, you will
remain in that Shield Option until the Term End Date, but that Shield Option
will no longer be available following the Term End Date. However, a Shield
Option with the Shield 100 will be available to you for at least your first six
(6) Contract Years, subject to the transfer requirements. For more on transfers
and renewals, see "TRANSFERS."
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INVESTMENT AMOUNT
The Investment Amount, for each Shield Option, is the amount that is allocated
to the Shield Option. The Investment Amount will be reduced for any withdrawal
by the same percentage that the withdrawal reduces the Interim Value
attributable to that Shield Option. The Investment Amount is adjusted by the
Performance Rate at the end of the Term.
CALCULATING YOUR INVESTMENT AMOUNT ON A TERM END DATE
On the Term End Date, we apply the Performance Rate Adjustment to your
Investment Amount. The Performance Rate Adjustment is based on the Performance
Rate, which is the rate credited at the Term End Date. The Performance Rate is
determined by the Index Performance adjusted for the applicable Shield Rate, Cap
Rate or Step Rate. The Performance Rate can be positive, zero or negative and
is determined as follows:
IF INDEX PERFORMANCE
SHIELD OPTION TYPE: (CAN BE POSITIVE, ZERO OR NEGATIVE) IS: PERFORMANCE RATE WILL EQUAL:
-------------------- --------------------------------------------------- ------------------------------------------------------
Shield 100 with a less than or equal to zero zero
Cap Rate
greater than zero and less than the Cap Rate the Index Performance
greater than zero and equals or exceeds the Cap Rate the Cap Rate
Shield 100 with a less than zero zero
Step Rate
equal to or greater than zero the Step Rate
Other Shield less than or equal to zero the lesser of: zero or the Index Performance
Options with a Cap increased by the Shield Rate (For example: a -15%
Rate Index Performance with a Shield 10 will result in a
-5% Performance Rate. The Performance Rate can
never be greater than zero if the Index Performance
is negative.)
greater than zero and less than the Cap Rate the Index Performance
greater than zero and equals or exceeds the Cap Rate the Cap Rate
Other Shield the lesser of: zero or the Index Performance
Options with a Step less than zero increased by the Shield Rate (For example: a -15%
Rate Index Performance with a Shield 10 will result in a
-5% Performance Rate. The Performance Rate can
never be greater than zero if the Index Performance
is negative.)
equal to or greater than zero the Step Rate
22
EXAMPLES
--------
Example 1 set forth below, as well as Examples 2-4 found throughout this
prospectus, are intended to illustrate how your Contract works. They will use
hypothetical "Owner 1" and "Owner 2" to illustrate the following:
Example 1 - Calculating your Investment Amount on a Term End Date (See below.)
Example 2 - Calculating your Interim Value (See "INTERIM VALUE CALCULATION.")
Example 3 - Withdrawals (See "WITHDRAWAL PROVISIONS.")
Example 4 - Transfers (See "TRANSFERS.")
In order to illustrate the impact of Index Performance on the Investment Amount
of a Shield Option, Owner 1's allocations have positive Index Performance and
Owner 2's allocations have negative Index Performance in Examples 1-4.
These examples should not be considered a representation of past or future
performance for any Shield Option. Actual performance may be greater or less
than those shown. Similarly, the Index Values in the examples are not an
estimate or guarantee of future Index Performance.
The rates for the Rate Crediting Types shown in the following examples are for
illustrative purposes only and may not reflect actual declared rates.
In the example tables, "N/A" has been inserted where a value is not necessary
for the calculation being made.
Values are rounded for display purposes only.
23
EXAMPLE 1 - CALCULATING YOUR INVESTMENT AMOUNT ON A TERM END DATE
Owner 1 and Owner 2 each allocate their $150,000 Purchase Payment equally into
the same three Shield Options. They each have Shield Option 1 and Shield Option
2 that have 2/1/15 Term End Dates and want to know what their Investment Amount
is in each of those Shield Options as of that date.
For this example assume the following:
o Issue Date is 2/1/14.
o No withdrawals.
Owner 1 Owner 2
-------------------------------------------------------------------- ------------------------------------------------------------
Shield Shield Shield Shield Shield Shield
Option 1 Option 2 Option 3 Option 1 Option 2 Option 3
------------ ------------ ------------- ------------- ------------ ------------
Purchase Purchase
Payment $ 50,000 $ 50,000 $50,000 Payment $50,000 $50,000 $50,000
Term 1 year 1 year 3 year Term 1 year 1 year 3 year
Index Index A Index B Index C Index Index A Index B Index C
Index Value Index Value
on 2/1/14 1,000 1,000 500 on 2/1/14 1,000 1,000 500
Index Value Index Value
on 2/1/15 1,200 1,050 600 on 2/1/15 800 850 400
Shield Rate Shield 100 Shield 10 Shield 15 Shield Rate Shield 100 Shield 10 Shield 15
Rate Rate
Crediting 5% Cap 10% Step 30% Cap Crediting 5% Cap 10% Step 30% Cap
Type Rate Rate Rate Type Rate Rate Rate
Index Index
Performance 20% 5% N/A Performance -20% -15% N/A
Performance Performance
Rate 5% 10% N/A Rate 0% -5% N/A
Performance Performance
Rate $2,500 $5,000 N/A Rate $0 -$2,500 N/A
Adjustment Adjustment
INVESTMENT INVESTMENT
AMOUNT AS AMOUNT AS
OF 2/1/15 $52,500 $55,000 N/A OF 2/1/15 $50,000 $47,500 N/A
24
OWNER 1:
--------
SHIELD OPTION 1:
Index Performance = 20%
1,200-1000 = 200
200/1000 = 20%
Performance Rate = 5%
(since Index Performance is greater than zero and exceeds the Cap Rate, the
Performance Rate equals the Cap Rate. The Performance Rate is capped at 5%,
even though the Index Performance is greater than 15%.)
Performance Rate Adjustment (earnings) = $2,500
$50,000 x 5% = $2,500
INVESTMENT AMOUNT AS OF 2/1/15 = $52,500
$50,000 + $2,500 = $52,500
SHIELD OPTION 2:
Index Performance = 5%
1,050-1,000 = 50
50/1,000 = 5%
Performance Rate = 10%
(since Index Performance is equal to or greater than zero, the Performance Rate
equals the Step Rate. Because of the Step Rate, the Performance Rate is 10%,
even though the Index Performance is only 5%.)
Performance Rate Adjustment (earnings) = $5,000
$50,000 x 10% = $5,000
INVESTMENT AMOUNT AS OF 2/1/15 = $55,000
$50,000 + $5,000 = $55,000
25
OWNER 2:
--------
SHIELD OPTION 1:
Index Performance = -20%
800-1,000 = -200
-200/1,000 = -20%
Performance Rate = 0%
(since Index Performance is less than or equal to zero, the Performance Rate
equals zero (0). The Shield 100 absorbs 100% of any negative return so the
Performance Rate is 0%, even though the Index Performance is -20%.)
Performance Rate Adjustment = $0
$50,000 x 0% = $0
INVESTMENT AMOUNT AS OF 2/1/15 = $50,000
$50,000 + $0 = $50,000
SHIELD OPTION 2:
Index Performance = -15%
850-1,000 = -150
-150/1,000 = -15%
Performance Rate = -5%
(since Index Performance is less than zero, the Performance Rate is equal to the
lesser of zero (0) or the Index Performance increased by the Shield Rate (-15% +
10% = -5%). The Performance Rate equals -5% because this is less than 0.)
Performance Rate Adjustment (losses) = -$2,500
$50,000 x -5% = -$2,500
INVESTMENT AMOUNT AS OF 2/1/15 = $47,500
$50,000 + (-$2,500) = $47,500
26
INTERIM VALUE CALCULATION
Your Investment Amount in each Shield Option on the Term End Date is calculated
as described above "Calculating your Investment Amount on a Term End Date". In
setting the various rates we use in calculating the Investment Amount, we assume
that you are going to hold a Shield Option until the Term End Date.
Nevertheless, you have the right under the Contract to make withdrawals,
Surrender the Contract or annuitize before the Term End Date. Therefore, we
calculate an Interim Value on each Business Day between the Term Start Date and
prior to the Term End Date that you make a withdrawal, Surrender the Contract,
annuitize or we pay a death benefit. It is equal to the Investment Amount in
the Shield Option, adjusted for the Index Performance of the associated Index
and subject to the applicable Accrued Shield Rate, Accrued Cap Rate or Accrued
Step Rate. A withdrawal from a Shield Option will reduce your Interim Value by
the amount withdrawn on the date of withdrawal. The Interim Value calculation
is different than the calculation we use to calculate the Investment Amount for
a Shield Option on the Term End Date. Prior to the Term End Date, we use the
Interim Value to calculate the amount that is available for (1) annuitizations;
(2) death benefits; (3) withdrawals; or (4) Surrenders.
ACCRUED SHIELD RATE FOR INTERIM VALUE CALCULATION
The Accrued Shield Rate is the portion of the Shield Rate that has accrued from
the Term Start Date to any day within the Term. This is the amount that will be
applied in calculating the Interim Value on any day prior to the Term End Date
if Index Performance is less than zero. The Accrued Shield Rate is equal to the
Shield Rate multiplied by the number of days elapsed since the Term Start Date,
divided by the total number of days in the Term. Unlike the other Shield
Options, a Shield Option with the Shield 100 is not subject to accrual, and so
the Shield 100 is fully accrued on any Business Day during the Term. This means
you get the full benefit of the Shield 100 regardless of where you are in your
Term. For Shield Options without the Shield 100, you get more of the Shield
Rate the closer you are to the Term End Date.
ACCRUED CAP RATE FOR INTERIM VALUE CALCULATION
The Accrued Cap Rate is the portion of the Cap Rate that has accrued from the
Term Start Date to any day within the Term. This is the maximum Index
Performance that may be applied in calculating the Interim Value on any day
prior to the Term End Date if Index Performance is greater than zero. The
Accrued Cap Rate is equal to the Cap Rate multiplied by the number of days
elapsed since the Term Start Date, divided by the total number of days in the
Term.
ACCRUED STEP RATE FOR INTERIM VALUE CALCULATION
The Accrued Step Rate is the portion of the Step Rate that has accrued from the
Term Start Date to any day within the Term. This is the rate that will be
applied in calculating the Interim Value on any day prior to the Term End Date
if Index Performance is equal to or greater than zero. The Accrued Step Rate is
equal to the Step Rate multiplied by the number of days elapsed since the Term
Start Date, divided by the total number of days in the Term.
For purposes of determining the Accrued Shield Rate, Accrued Cap Rate and
Accrued Step Rate, the total number of days in each calendar year of a Term is
365.
PERFORMANCE RATE FOR DETERMINATION OF INTERIM VALUE. The Performance Rate
during a particular Term is the Index Performance, adjusted for the applicable
Accrued Shield Rate, Accrued Cap Rate or Accrued Step Rate.
As noted above, the Interim Value is calculated using accrued values for the
Shield Rate, Cap Rate and Step Rate. So if you annuitize, die, make a
withdrawal, Surrender or cancel your Contract before the Term End Date, you will
not receive the full benefit of the Shield Rate (other than the Shield 100), Cap
Rate or Step Rate but instead will receive the accrued percentage to the date of
the annuitization, date of the payment of the death benefit, withdrawal or
Surrender. In addition, a withdrawal from a Shield Option will reduce your
Interim Value by the amount
27
withdrawn on the date of the withdrawal. For example if you have a Shield Option
with a Term Start Date of February 15, 2013, a 6 year Term, a Shield 10 and a
20% Cap Rate and you make a withdrawal on February 15, 2016, halfway through
your Term, the Interim Value will be calculated using your Accrued Shield Rate
and Accrued Cap Rate. That means your Accrued Shield Rate will be 5% and your
Accrued Cap Rate will be 10%. The accrued rates are calculated as follows:
The Shield Rate (10%) is multiplied by the number of days elapsed since the Term
Start Date (1095) and divided by the total number of days in the Term (2190), so
the Accrued Shield Rate is 5%.
The Cap Rate (20%) is multiplied by the number of days elapsed since the Term
Start Date (1095) and divided by the total number of days in the Term (2190), so
the Accrued Cap Rate is 10%.
EXAMPLE 2 - CALCULATING YOUR INTERIM VALUE
Owner 1 and Owner 2 each have Shield Option 3 that has a 2/1/17 Term End Date
and want to know what their Interim Value is in that Shield Option as of 2/1/15.
For this example assume the following:
o Issue Date is 2/1/14.
o No withdrawals.
Owner 1 Owner 2
--------------------------------------------------------------- --------------------------------------------------------------
Shield Shield Shield Shield Shield Shield
Option 1 Option 2 Option 3 Option 1 Option 2 Option 3
-------------- ------------- ------------- ------------- ------------- -------------
Purchase Purchase
Payment $50,000 $50,000 $50,000 Payment $50,000 $50,000 $50,000
Term 1 year 1 year 3 year Term 1 year 1 year 3 year
Index Index A Index B Index C Index Index A Index B Index C
Index Value Index Value
on 2/1/14 1,000 1,000 500 on 2/1/14 1,000 1,000 500
Index Value Index Value
on 2/1/15 1,200 1,050 600 on 2/1/15 800 850 400
Shield Rate Shield 100 Shield 10 Shield 15 Shield Rate Shield 100 Shield 10 Shield 15
Rate Rate
Crediting 5% Cap 10% Step 30% Cap Crediting 5% Cap 10% Step 30% Cap
Type Rate Rate Rate Type Rate Rate Rate
Accrued Accrued
Cap Rate N/A N/A 10% Cap Rate N/A N/A 10%
Accrued Accrued
Shield Rate N/A N/A 5% Shield Rate N/A N/A 5%
Index Index
Performance N/A N/A 20% Performance N/A N/A -20%
Performance Performance
Rate N/A N/A 10%* Rate N/A N/A -15%*
Performance Performance
Rate Rate
Adjustment N/A N/A $5,000 Adjustment N/A N/A -$7,500
Investment Investment
Amount as Amount as
of 2/1/15 N/A N/A $50,000 of 2/1/15 N/A N/A $50,000
INTERIM INTERIM
VALUE AS OF VALUE AS OF
2/1/15 N/A N/A $55,000 2/1/15 N/A N/A $42,500
* Performance Rate using applicable Accrued Shield Rate, Accrued Step Rate
and Accrued Cap Rate.
28
OWNER 1:
--------
SHIELD OPTION 3:
Index Performance = 20%
600-500 = 100
100/500 = 20%
Performance Rate = 10%
(since Index Performance is greater than zero and exceeds the Accrued Cap Rate,
the Performance Rate equals the Accrued Cap Rate. The Performance Rate is
capped at 10%, even though the Index Performance is greater than 10%.)
Performance Rate Adjustment (earnings) = $5,000
$50,000 x 10% = $5,000
INTERIM VALUE AS OF 2/1/15 = $55,000
$50,000 + $5,000 = $55,000
OWNER 2:
--------
SHIELD OPTION 3:
Index Performance = -20%
400-500 = -100
-100/500 = -20%
Performance Rate = -15%
(since Index Performance is less than zero, the Performance Rate is equal to the
lesser of zero (0) or the Index Performance increased by the Accrued Shield Rate
(-20% + 5% = -15%). The Performance Rate equals -15% because this is less than
zero.)
Performance Rate Adjustment (losses) = -$7,500
$50,000 x -15% = -$7,500
INTERIM VALUE AS OF 2/1/15 = $41,667
$50,000 + (-$7,500) = $42,500
29
YOUR ACCOUNT VALUE
Your Account Value is the total of the Fixed Account Value and the value of the
Shield Option(s) under your Contract, adjusted for any amounts that may be
included by rider during the Accumulation Period.
WITHDRAWAL PROVISIONS
Prior to the Annuity Date, you may, upon Notice to us, request a full or a
partial withdrawal and we will withdraw that amount from your Account Value (the
"Withdrawal Amount"). A withdrawal will result in a reduction to the Investment
Amount in each Shield Option and the Fixed Account in the ratio that each Shield
Option and the Fixed Account bears to the total Account Value, unless you
instruct us otherwise. The amount payable to you will be a net amount equal to
the Withdrawal Amount adjusted for any applicable Withdrawal Charge and any
other fees, Premium and Other Taxes and any other rider and endorsement fees.
The total Withdrawal Amount from the Account Value must not be less than the
Minimum Partial Withdrawal Amount. If the withdrawal would result in the
Account Value being less than the Minimum Account Value, we will treat the
withdrawal request as a request for a full withdrawal.
If you request a full or partial withdrawal, the Withdrawal Amount after
adjustments for any Withdrawal Charge will result in our paying you a net
amount. The net amount payable to you is equal to (a)-(b)-(c)-(d), where:
(a) is the amount withdrawn from the Account Value, and
(b) is the Withdrawal Charge and other fees, if any, and
(c) is the Premium and Other Taxes, if any, and
(d) is the rider and endorsement fees, if any.
The Withdrawal Amount will reduce the Investment Amount for each Shield Option
by the percentage reduction in the Interim Value of such Shield Option. For
example, assume you make a $100,000 Purchase Payment at Contract issue and
allocate the Purchase Payment equally to two Shield Options so that each starts
with $50,000. This amount is the initial Investment Amount. Assume in 6 months
Shield Option A has an Interim Value of $65,000 and Shield Option B has an
Interim Value of $45,000. Assume at this time you decide to make a withdrawal
of $20,000. If the withdrawal is taken completely from Shield Option A, the
reduction in the Interim Value is 30.8% ($20,000 / $65,000). The Investment
Amount for Shield Option A would then be reduced to $34,615.38 ($50,000 x
(1-30.8%)). The total Investment Amount is then $84,615.38 ($34,615.38 +
$50,000). If the entire withdrawal is taken from Shield Option B, the reduction
in the Interim Value is 44.4% ($20,000 / $45,000). The Investment Amount for
Shield Option B would be reduced to $27,777.78 ( $50,000 x (1-44.4%)). The
total Investment Amount is then $77,777.78 ($50,000 + $27,777.78).
A partial withdrawal from a Shield Option does not affect the Cap Rate or Step
Rate, as applicable, and the Shield Rate that will apply to the remaining
Investment Amounts that are held in the Shield Option through the Term End Date.
After receipt of a Notice of withdrawal from you, we reserve the right to defer
payment for a withdrawal for the period permitted by applicable law but not more
than six (6) months.
A withdrawal made pursuant to a divorce or separation instrument is subject to
the same withdrawal provisions described above.
30
WITHDRAWAL CHARGE
We impose a Withdrawal Charge to reimburse us for contract sales expenses,
including commissions and other distribution, promotion, and acquisition
expenses. During the Accumulation Period, you can make a partial or complete
withdrawal from your Contract.
The Withdrawal Charge is the percentage of the amount withdrawn from the Account
Value in a Contract Year in excess of the Free Withdrawal Amount.
The Withdrawal Charge is calculated at the time of each withdrawal in accordance
with the following:
Number of Complete Contract
Years since Issue Date Withdrawal Charge percentage
----------------------------- ----------------------------
0 9%
1 8%
2 8%
3 7%
4 6%
5 5%
6 or more 0%
A Withdrawal Charge may be assessed if any amount is withdrawn pursuant to a
divorce or separation instrument, if permissible under tax law.
NOTE: For tax purposes, earnings from Non-Qualified Contracts are considered to
come out first.
WHEN NO WITHDRAWAL CHARGE APPLIES
In some cases we will not charge you the Withdrawal Charge when you make a
withdrawal. We may, however, ask you to prove that you meet any of the
following conditions:
(i) Maturity of the Contract;
(ii) Payment of the death benefit;
(iii) Application of your Account Value to an Annuity Option;
(iv) If the withdrawal is to avoid required Federal income tax penalties
or to satisfy Federal income tax rules concerning minimum
distribution requirements that apply to your Contract, except for
RMDs on a decedent Roth IRA. For purposes of this exception, we
assume that the Contract is the only contract or funding vehicle
from which distributions are required to be taken and we will ignore
all other Account Values;
(v) If you properly "recharacterize" as permitted under Federal tax law
your Traditional IRA Contract or Roth IRA Contract issued by us;
(vi) If we agree in writing that none will apply. For example, if you
transfer your Account Value to another approved annuity contract
issued by us or one of our affiliates;
(vii) Withdrawals pursuant to either the Nursing Home Exception or the
Terminal Illness Exception (see below); or
(viii) Withdrawals up to the Free Withdrawal Amount.
Nursing Home Exception/Terminal Illness Exception. After the first Contract
Year, if approved in your state, and your Contract provides for this, a
Withdrawal Charge which would otherwise apply to a withdrawal will be waived, if
you, or your Joint Owner:
31
o Nursing Home Exception) Has been a resident of certain nursing home
facilities or a hospital for a minimum of 90 consecutive days or for a
minimum total of 90 days where there is no more than a 6-month break in
that residency and the residencies are for related causes, where you have
exercised this right no later than 90 days after exiting the nursing home
facility or hospital. The confinement must be prescribed by a physician
and be medically necessary; or
o (Terminal Illness Exception) Is diagnosed with a terminal illness and not
expected to live more than 12 months (a physician certifies to your illness
and life expectancy) and you were not diagnosed with the terminal illness
as of the date we issued your Contract.
This Contract feature is only available if you are less than 80 years old on the
Contract Issue Date and terminates on the Annuity Date. This Contract feature
is free of charge and is not available in Massachusetts. Additional conditions
and requirements apply and are specified in the rider(s) that are part of your
Contract.
FREE WITHDRAWAL AMOUNT. After the first Contract Year, you may withdraw a
portion of your Account Value free from any Withdrawal Charge. The Free
Withdrawal Amount each Contract Year is equal to 10% of your Account Value as of
the prior Contract Anniversary, less the total amount withdrawn from the Account
Value in the current Contract Year. The Free Withdrawal Amount is
non-cumulative and is not carried over to other Contract Years.
32
EXAMPLE 3 - WITHDRAWALS
Owner 1 and Owner 2 would each like to withdraw $20,000 from Shield Option 3 on
2/1/15 and would like to know the remaining Investment Amount of Shield Option 3
after such withdrawal.
For this example assume the following:
o Issue Date is 2/1/14.
o Owner 1 has no Withdrawal Charge (due to a Withdrawal Charge waiver) and
Owner 2 has an 8% Withdrawal Charge.
Owner 1 Owner 2
---------------------------------------------------------- ----------------------------------------------------------
Shield Shield Shield Shield Shield Shield
Option 1 Option 2 Option 3 Option 1 Option 2 Option 3
------------- ------------- ------------- ------------- ------------- -------------
Purchase Purchase
Payment $50,000 $50,000 $50,000 Payment $50,000 $50,000 $50,000
Term 1 year 1 year 3 year Term 1 year 1 year 3 year
Index Index A Index B Index C Index Index A Index B Index C
Index Value Index Value
on 2/1/14 1,000 1,000 500 on 2/1/14 1,000 1,000 500
Index Value Index Value
on 2/1/15 1,200 1,050 600 on 2/1/15 800 850 400
Shield Rate Shield 100 Shield 10 Shield 15 Shield Rate Shield 100 Shield 10 Shield 15
Rate Rate
Crediting 5% Cap 10% Step 30% Cap Crediting 5% Cap 10% Step 30% Cap
Type Rate Rate Rate Type Rate Rate Rate
Accrued Cap Accrued Cap
Rate N/A N/A 10% Rate N/A N/A 10%
Accrued Accrued
Shield Rate N/A N/A 5% Shield Rate N/A N/A 5%
Index Index
Performance N/A N/A 20% Performance N/A N/A -20%
Performance Performance
Rate N/A N/A 10%* Rate N/A N/A -15%*
Performance Performance
Rate Rate
Adjustment N/A N/A $5,000 Adjustment N/A N/A -$7,500
Investment Investment
Amount as of Amount as of
2/1/15 $52,500 $55,000 $50,000 2/1/15 $50,000 $47,500 $50,000
Interim Value Interim Value
as of 2/1/15 N/A N/A $55,000 as of 2/1/15 N/A N/A $42,500
Account Account
Value as of Value as of
2/1/15 N/A N/A $162,500 2/1/15 N/A N/A $140,000
Gross Gross
Withdrawal N/A N/A $20,000 Withdrawal N/A N/A $20,000
Free Free
Withdrawal Withdrawal
Amount N/A N/A $16,250 Amount N/A N/A $14,000
Withdrawal Withdrawal
Subject to Subject to
Withdrawal Withdrawal
Charge N/A N/A $3,750 Charge N/A N/A $6,000
Withdrawal Withdrawal
Charge Charge
percentage N/A N/A 0% percentage N/A N/A 8%
33
Withdrawal Withdrawal
Charge N/A N/A $0 Charge N/A N/A $480
Net Net
Withdrawal Withdrawal
Amount N/A N/A $20,000 Amount N/A N/A $19,520
Shield Option Shield Option
3 Interim 3 Interim
Value after Value after
2/1/15 2/1/15
withdrawal N/A N/A $35,000 withdrawal N/A N/A $22,500
SHIELD SHIELD
OPTION 3 OPTION 3
INVESTMENT INVESTMENT
AMOUNT AMOUNT
AFTER 2/1/15 AFTER 2/1/15
WITHDRAWAL N/A N/A $31,818 WITHDRAWAL N/A N/A $26,471
* Performance Rate using applicable Accrued Shield Rate, Accrued Step Rate
and Accrued Cap Rate.
OWNER 1:
--------
SHIELD OPTION 3:
Index Performance = 20%
600-500 = 100
100/500 = 20%
Performance Rate = 10%
(since Index Performance is greater than zero and exceeds the Accrued Cap Rate,
the Performance Rate equals the Accrued Cap Rate. The Performance Rate is
capped at 10%, even though the Index Performance is greater than 10%.)
Performance Rate Adjustment (earnings) = $5,000
$50,000 x 10% = $5,000
Interim Value as of 2/1/15 = $55,000
$50,000 + $5,000 = $55,000
Account Value as of 2/1/15 = $162,500
Investment Amount of Shield Option 1 ($52,500) +
Investment Amount of Shield Option 2 ($55,000) + Interim Value of Shield Option
3 ($55,000) = $162,500
Free Withdrawal Amount = $16,250
$162,500 x 10% = $16,250
Withdrawal Subject to Withdrawal Charge= $3,750
$20,000 - $16,250= $3,750
Withdrawal Charge = $0
$3,750 x 0% = $0
34
Net Withdrawal Amount=$20,000
$20,000 - $0= $20,000
SHIELD OPTION 3 INTERIM VALUE AFTER 2/1/15 WITHDRAWAL = $35,000
$55,000-$20,000-$0 = $35,000
SHIELD OPTION 3 INVESTMENT AMOUNT AFTER 2/1/15 WITHDRAWAL= $31,818
$50,000 x ((1-$20,000) / $55,000) = $31,818
35
OWNER 2:
--------
SHIELD OPTION 3:
Index Performance = -20%
400-500 = -100
-100/500 = -20%
Performance Rate = -15%
(since Index Performance is less than zero, the Performance Rate is equal to the
lesser of zero (0) or the Index Performance increased by the Accrued Shield Rate
(-20% + 5% = -15%). The Performance Rate equals -16.67% because this is less
than zero.)
Performance Rate Adjustment (losses) = -$7,500
$50,000 x -15% = -$7,500
Interim Value as of 2/1/15 = $42,500
$50,000 + (-$7,500) = $42,500
Account Value as of 2/1/15 = $140,000
Investment Amount of Shield Option 1 ($50,000) +
Investment Amount of Shield Option 2 ($47,500) + Interim Value of Shield Option
3 ($42,500) = $140,000
Free Withdrawal Amount = $14,000
$140,000 x 10% = $14,000
Withdrawal Subject to Withdrawal Charge= $6,000
$20, 000 - $14,000 = $6,000
Withdrawal Charge = $480
$6,000 x 8% = $480
Net Withdrawal Amount = $19,520
$20,000 - $480 = $19,520
SHIELD OPTION 3 INTERIM VALUE AFTER 2/1/15 WITHDRAWAL = $22,500
$42,500-$20,000= $22,500
SHIELD OPTION 3 INVESTMENT AMOUNT AFTER 2/1/15 WITHDRAWAL = $26,471
$50,000 x ((1-$20,000)/$42,500) = $26,471
36
TRANSFERS
During the Transfer Period you may make transfers to or from the Fixed Account
and/or to or from the Shield Option(s). You cannot make transfers outside the
Transfer Period and transfers may not be made after the Annuity Date. To make a
transfer from a Shield Option in which you have an Investment Amount the Shield
Option must have reached its Term End Date. The Transfer Period is the five (5)
days following the Contract Anniversary coinciding with the Term End Date and
Interest Rate Term End Date, as applicable, for the Shield Option(s) and/or the
Fixed Account. The effective date of such transfer is the first day of the
Interest Rate Term and/or a Term(s) in which the transfer is made.
During the Transfer Period, the Interim Value of each Shield Option will equal
the Investment Amount in that Shield Option. After the Transfer Period, the
Interim Value of that Shield Option is equal to the Investment Amount in the
Shield Option, adjusted for the Index Performance of the associated Index and
subject to the applicable Accrued Shield Rate, Accrued Cap Rate or Accrued Step
Rate.
At the Term End Date, the Investment Amount allocated to the Shield Option that
has reached its Term End Date will automatically be renewed into the same Shield
Option unless you elect to transfer into a different Shield Option or the Fixed
Account. If the same Shield Option is no longer available at the end of the
existing Term, these amounts will automatically transfer into the Fixed Account
at the Term End Date, unless otherwise instructed by you. The amounts
transferred to the Fixed Account must remain in the Fixed Account until the
Interest Rate Term End Date (which, currently, will not be less than one (1)
year). If the Fixed Account is not available, these amounts will automatically
transfer into the Shield Option with, in order of priority, the shortest Term,
the highest Shield Rate and the lowest Cap Rate, from the Shield Options
available at the Term End Date, unless otherwise instructed by you. You have
the Transfer Period to notify us if you want to transfer some or all of your
Investment Amount to a new Shield Option(s) or the Fixed Account.
RENEWALS. For renewals into the same Shield Option, a new Cap Rate or Step Rate,
as applicable, will be declared and will go into effect on the Contract
Anniversary that coincides with the beginning of the new Shield Option.
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EXAMPLE 4 - TRANSFERS
As of the Shield Option 1 and 2 Term End Date, Owner 1 and Owner 2 would like to
transfer an equal amount of their Shield Option 1 Investment Amount to two new
Shield Options (respectively "Shield Option 1A" and "Shield Option 1B") and opt
to let the Investment Amount in Shield Option 2 automatically renew into a new
Shield Option ("Shield Option 2A"). Since Shield Option 3 is not at the Term
End Date, it is not available to make Transfers. For this example assume the
Issue Date is 2/1/14.
Shield Options prior to Transfer:
Owner 1 Owner 2
-------------------------------------------------- --------------------------------------------------
Shield Shield Shield Shield Shield Shield
Option 1 Option 2 Option 3 Option 1 Option 2 Option 3
----------- ----------- ----------- ----------- ----------- -----------
Initial Initial
Purchase Purchase
Payment $50,000 $50,000 $50,000 Payment $50,000 $50,000 $50,000
Term 1 year 1 year 3 year Term 1 year 1 year 3 year
Index Index A Index B Index C Index Index A Index B Index C
Shield Rate Shield 100 Shield 10 Shield 15 Shield Rate Shield 100 Shield 10 Shield 15
Rate Rate
Crediting 5% Cap 10% Step 30% Cap Crediting 5% Cap 10% Step 30% Cap
Type Rate Rate Rate Type Rate Rate Rate
Investment Investment
Amount as Amount as
of 2/1/15 $52,500 $55,000 N/A of 2/1/15 $50,000 $47,500 N/A
Shield Options after Transfer:
Owner 1 Owner 2
------------------------------------------------------------ ------------------------------------------------------------
Shield Shield Shield Shield Shield Shield Shield Shield
Option Option Option Option Option Option Option Option
1A 1B 2A 3 1A 1B 2A 3
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment Investment
Amount as of Amount as of
2/1/15 $26,250 $26,250 $55,000 N/A 2/1/15 $25,000 $25,000 $47,500 N/A
Term 1 year 6 year 1 year 3 year Term 1 year 3 year 1 year 3 year
Index Index A Index A Index B Index C Index Index A Index A Index B Index C
Shield Rate Shield 10 Shield 15 Shield 10 Shield 15 Shield Rate Shield 10 Shield 15 Shield 10 Shield 15
Rate Rate
Crediting 15% Cap 40% Cap 8% Step 30% Cap Crediting 15% Cap 25% Cap 8% Step 30% Cap
Type Rate Rate Rate Rate Type Rate Rate Rate Rate
DEATH BENEFITS
If you die during the Accumulation Period, we will pay a death benefit to your
Beneficiary (or Beneficiaries). The standard death benefit for your Contract is
described below. At the time you purchase the Contract, depending on
availability in your state, you can select the optional Return of Premium Death
Benefit. The decision to add the optional death benefit is made at application
and is irrevocable. If you purchase a Contract with the optional Return of
Premium Death Benefit, the Cap Rates and Step Rates set for your Shield Options
under the Contract will be lower than the Cap Rates and Step Rates that you
would have received had you purchased the Contract without this
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optional death benefit. If you choose the optional death benefit, you receive
the optional death benefit in place of the standard death benefit. In deciding
whether to purchase the optional death benefit, you should consider the
desirability of the benefit, relative to the lower Cap Rates and Step Rates that
may be set under your Contract as compared to a Contract purchased without such
benefit, and your needs. Unless you tell us otherwise, we will assume that you
are purchasing the Contract with the standard death benefit and not the optional
death benefit.
If you have already been issued a Contract, please check your Contract and
riders for the specific provisions applicable to you. We will require both due
proof of death and an acceptable election for the payment method before any
death benefit is paid. Our obligations are subject to all payments made and
actions taken by us before our receipt of Notice of due proof of death. Any
death benefit will be paid in accordance with applicable law or regulations
governing death benefit payments. (See "General Death Benefit Provisions"
below.)
STANDARD DEATH BENEFIT
The death benefit is the Account Value.
OPTIONAL DEATH BENEFIT - RETURN OF PREMIUM
Please check with your registered representative regarding the availability of
the following in your state.
If you are age 75 or younger at the Issue Date of your Contract, you may select
the Return of Premium Death Benefit.
The death benefit will be the greater of:
(1) your Account Value; or
(2) your Purchase Payment, reduced proportionately by the percentage
reduction in Account Value of the Shield Option(s)and the Fixed
Account for each partial withdrawal (including any applicable
Withdrawal Charge).
If a non-natural person owns the Contract, then the Annuitant will be deemed to
be the Owner for purposes of determining the Death Benefit Amount. If Joint
Owners are named, the age of the oldest Joint Owner will be used to determine
the Death Benefit Amount.
If the Owner is a natural person and the Owner is changed, subject to our
underwriting requirements, to someone other than a spouse, the Death Benefit
Amount will be determined as defined above; however, subsection (2) will be
changed to provide as follows: "the Account Value as of the effective date of
the change of Owner, reduced proportionately by the percentage reduction in
Account Value of the Shield Option(s) and the Fixed Account for each partial
withdrawal (including any applicable Withdrawal Charge) made after such date."
In the event that a Beneficiary who is the spouse of the Owner elects to
continue the Contract in his or her name after the Owner dies, the Death Benefit
Amount will be determined in accordance with (1) or (2) above.
Other than a Shield Option with the Shield 100, the cost for this optional death
benefit will be reflected in lower Cap Rates and Step Rates, which will not be
less than the minimum rates stated in the Contract, than if this optional
benefit was not elected.
See Appendix B for examples of the Return of Premium death benefit rider.
GENERAL DEATH BENEFIT PROVISIONS
If the Beneficiary under a Qualified Contract is the Annuitant's spouse, the tax
law generally allows distributions to begin by the year in which the Annuitant
would have reached 701/2 (which may be more or less than five years after the
Annuitant's death).
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The Death Benefit Amount is determined as of the end of the Business Day on
which we receive both due proof of death and an acceptable election for the
payment method. Where there are multiple Beneficiaries, the death benefit will
be determined as of the time the first Beneficiary submits the necessary
documentation in Good Order. Any excess of the Death Benefit Amount over the
Account Value will be allocated to the Fixed Account. If the Fixed Account is
not available, any excess amount of the Death Benefit Amount over the Account
Value will be allocated into the Shield Option with, in order of priority, the
shortest Term, the highest Shield Rate, and the lowest Cap Rate from the Shield
Options available at the end of the Term. The Death Benefit Amount remains in
the Contract until each of the other Beneficiaries submits the necessary
documentation in Good Order to claim his/her death benefit. Any Death Benefit
Amounts held in the Contract on behalf of the remaining Beneficiaries will
remain in the existing Shield Options and/or the Fixed Account and are subject
to fluctuation in value. This risk is borne by the Beneficiaries. There is no
additional death benefit guarantee.
Upon the death of either Owner, the surviving Joint Owner will be the primary
Beneficiary. Any other Beneficiary designation will be treated as a contingent
Beneficiary, unless instructed otherwise.
If we are presented with notification of your death before any requested
transaction is completed, we will cancel the request. As described above, the
death benefit will be determined when we receive both due proof of death and an
election for the payment method.
We will pay interest on any delayed death benefit payments in accordance with
the laws and regulations in effect under the applicable state law.
CONTROLLED PAYOUT
You may elect to have the death benefit proceeds paid to your Beneficiary in the
form of Income Payments for life or over a period of time that does not exceed
your Beneficiary's life expectancy. This election must be in writing in a form
acceptable to us. You may revoke the election only in writing and only in a
form acceptable to us. Upon your death, the Beneficiary cannot revoke or modify
your election. The Controlled Payout is only available to Non-Qualified
Contracts.
TOTAL CONTROL ACCOUNT
The Beneficiary may elect to have the Contract's death proceeds paid through a
settlement option called the Total Control Account. The Total Control Account
is an interest-bearing account through which the Beneficiary has immediate and
full access to the proceeds, with unlimited draft writing privileges. We credit
interest to the account at a rate that will not be less than a guaranteed
minimum annual effective rate.
Assets backing the Total Control Accounts are maintained in our General Account
and are subject to the claims of our creditors. We will bear the investment
experience of such assets; however, regardless of the investment experience of
such assets, the interest credited to the Total Control Account will never fall
below the applicable guaranteed minimum annual effective rate. Because we bear
the investment experience of the assets backing the Total Control Account, we
may receive a profit from these assets. The Total Control Account is not
insured by the FDIC or any other governmental agency. The Total Control Account
may not be available, please check with your registered representative regarding
availability.
DEATH OF OWNER DURING THE ACCUMULATION PERIOD
The death benefit will be paid to your Beneficiary(ies) upon your death, or the
first death of a Joint Owner. If the Contract is owned by a non-natural person,
the Annuitant will be deemed the Owner in determining the death benefit. If
there are Joint Owners, the age of the older Owner will be used to determine the
death benefit.
DEATH OF ANNUITANT DURING THE ACCUMULATION PERIOD
Upon the death of an Annuitant, who is not the Owner or Joint Owner, the Owner
(or Oldest Joint Owner) automatically becomes the Annuitant, unless the Owner,
subject to our underwriting requirements in effect at the time of the request,
chooses a new Annuitant. If the Owner is a non-natural person, the death of the
Annuitant will be treated as the death of an Owner, and a new Annuitant may not
be named. (See "Death of Owner During the Accumulation Period" above).
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DEATH BENEFIT OPTIONS
In the event an Owner (or the Annuitant, where the Owner is not an individual)
dies during the Accumulation Period, a Beneficiary must choose payment of the
death benefit under one of the options below (unless the Owner has previously
made the election). The death benefit options available under the Contract
include the following and any other options acceptable to you and us:
(a) Option 1 - lump sum payment of the death benefit; or
(b) Option 2 - payment of the entire death benefit within five (5) years of
the date of death of the Owner or the first Joint Owner to die; or
(c) Option 3 - payment of the death benefit under an Annuity Option or
other periodic payment option acceptable to us in substantially equal periodic
payments (made at least annually) over the lifetime of the Beneficiary or over a
period not extending beyond the life expectancy of the Beneficiary with
distribution beginning within one (1) year of the date of death of the Owner or
the first Joint Owner to die. Any portion of the death benefit not applied
within one (1) year of the date of the Owner's or Joint Owner's death must be
distributed within five (5) years of the date of death.
For Non-Qualified Contracts, payment must begin within one year of the date of
death. For Qualified Contracts, payment must begin no later than the end of the
calendar year immediately following the year of death.
We may also offer a payment option, for both Non-Qualified Contracts and certain
Qualified Contracts, under which your Beneficiary may receive payments, over a
period not extending beyond his or her life expectancy, under a method of
distribution similar to the distribution of RMDs from Individual Retirement
Accounts. If this option is elected, we will issue a new contract to your
Beneficiary in order to facilitate the distribution of payments. Upon the death
of your Beneficiary, the death benefit would be required to be distributed to
your Beneficiary's Beneficiary at least as rapidly as under the method of
distribution in effect at the time of your Beneficiary's death. (See "FEDERAL
TAX CONSIDERATIONS.")
If a lump sum payment is elected and all the necessary requirements are met, the
payment will be made within seven (7) days.
BENEFICIARY CONTINUATION OPTIONS. We offer two types of Beneficiary
Continuation Options during the Accumulation Period: the Spousal Continuation
and Non-Spousal Beneficiary Continuation Options described below. We must
receive Notice of the election of one of these Beneficiary Continuation Options
by the end of the 90th day after we receive Notice of due proof of death. If
the surviving spouse qualifies for Spousal Continuation and has not chosen one
of the death benefit options above by the end of the 90 day period, the Spousal
Continuation Option will be automatically applied on the 90th day. If a
Non-Spousal Beneficiary qualifies for Non-Spousal Beneficiary Continuation and
has not chosen one of the death benefit options above by the end of the 90 day
period, the Non-Spousal Beneficiary Continuation Option will be automatically
applied on the 90th day.
SPOUSAL CONTINUATION. If the Owner dies during the Accumulation Period, the
spouse may choose to continue the Contract in his or her own name and exercise
all of the Owner's rights under the Contract. Upon such election the Account
Value will be adjusted to an amount equal to the Death Benefit Amount determined
upon such election and receipt of due proof of death of the Owner. Any excess
of the Death Benefit Amount over the Account Value will be allocated to the
Fixed Account. If the Fixed Account is not available, any excess amount of the
Death Benefit Amount over the Account Value will be allocated into the Shield
Option with, in order of priority, the shortest Term, the highest Shield Rate,
and the lowest Cap Rate from the Shield Options available at the end of the
Term.
Spousal continuation will not satisfy minimum required distribution rules for
Qualified Contracts other than IRAs (see "FEDERAL TAX CONSIDERATIONS.")
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NON-SPOUSAL BENEFICIARY CONTINUATION. A Beneficiary who is not a spouse can
choose to continue the Contract until the fifth anniversary of the Owner's
death. The Contract can be continued by a Beneficiary only if his or her share
of the death benefit is at least equal to our published minimum for this right.
If the Beneficiary continues the Contract under this provision his or her share
will not be paid. It will instead be continued in the Contract on the date we
determine the Death Benefit Amount. Such Beneficiary will have the right to make
partial and full withdrawals of his/her share of the Contract, not subject to
Withdrawal Charges. Such Beneficiary will also have the right to make transfers
at the Term End Date or the Interest Rate Term End Date.
During the continuation period the Beneficiary can choose to receive his/her
share of the Contract in a single lump sum payment or apply it to an Annuity
Option or other option acceptable to us that must be payable for the life of the
Beneficiary or for a term no longer than the life expectancy of the Beneficiary
starting within one (1) year after the death of the Owner.
On the fifth anniversary of the Owner's death any Beneficiary will be paid
his/her share of the Account Value that has not been applied to an Annuity
Option or other settlement option permissible under the Code, in a single lump
sum payment and the Contract will terminate.
INCOME PAYMENTS (THE INCOME PERIOD)
ANNUITY DATE
Under the Contract you can receive regular income payments ("Income Payments").
You can choose the month and year in which those payments begin (the "Annuity
Date"). Your Annuity Date must be the first day of a calendar month. The
Annuity Date must not be less than thirteen (13) months from the Issue Date.
You can change the Annuity Date at any time before the Annuity Date, subject to
certain limitations and restrictions that may apply in your state. Income
Payments must begin on, or before, the Maturity Date. Please note that in the
Contract, the Annuity Date and Maturity Date are the same date.
MATURITY DATE
The Maturity Date is specified in your Contract at purchase and is the first day
of the calendar month following the Annuitant's 90th birthday or 10 years from
the date we issue your Contract, whichever is later. If Income Payments don't
begin on, or before, the Maturity Date, the Contract will be annuitized at the
Maturity Date under the Contract's default Annuity Option, or you can make a
complete withdrawal of your Account Value.
Currently we may allow you to extend your Maturity Date beyond the Maturity Date
specified in your Contract at purchase (subject to state restrictions or
restrictions imposed by your selling firm). The latest date we will allow you
to extend to must be based on the Owner's age and not the Annuitant's age. You
must contact us at our Annuity Service Office to make this election. This
requirement may be changed by us.
PLEASE BE AWARE THAT ONCE YOUR CONTRACT IS ANNUITIZED, YOU ARE INELIGIBLE TO
RECEIVE THE DEATH BENEFIT.
INCOME PAYMENTS
You (unless another payee is named) will receive Income Payments during the
Income Period. The Annuitant is the natural person(s) whose life we look to in
the determination of Income Payments. All Income Payments are fixed as to
amount.
The Account Value, less any applicable Premium Taxes on the day immediately
preceding the Annuity Date will be used to determine the Income Payment amount.
The amount of each Income Payment will be based upon the Annuity Option elected,
the Annuitant's age, the Annuitant's sex (where permitted by law), and the
appropriate Annuity Option table. Your annuity rates will not be less than
those guaranteed in your Contract at the time of purchase. If, as of the
annuity calculation date, the then current Annuity Option rates applicable to
this class of contracts provide an Income Payment greater than that which is
guaranteed under the same Annuity Option under the Contract, the greater payment
will be made.
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Income Payments will be paid as monthly installments or at any frequency
acceptable to you and us. If the amount of the Account Value to be applied
under an Annuity Option is less than $5,000, we reserve the right to make one
lump sum payment equal to the then current Account Value in lieu of Income
Payments. If the amount of the Income Payment would be less than $100, we may
reduce the frequency of payments to an interval which will result in the payment
being at least $100, but with a frequency of no less than annually.
ANNUITY OPTIONS
You can choose among income plans (the "Annuity Options"). You can change it at
any time before the death benefit becomes payable or the Annuity Date.
If you do not choose an Annuity Option at the time you purchase the Contract,
Option 2, which provides a life annuity with 10 years of guaranteed Income
Payments, will automatically be applied.
You can choose one of the following Annuity Options or any other Annuity Option
acceptable to us. After Income Payments begin, you cannot change the Annuity
Option.
If more than one frequency is permitted under your Contract, choosing less
frequent payments will result in each Income Payment being larger. Annuity
Options that guarantee that payments will be made for a certain number of years
regardless of whether the Annuitant or joint Annuitant are alive (such as
Options 2 and 4 below) result in Income Payments that are smaller than Annuity
Options without such a guarantee (such as Options 1 and 3 below). For Annuity
Options with a designated period, choosing a shorter designated period will
result in each Income Payment being larger.
OPTION 1. LIFE ANNUITY. Under this option, we will make Income Payments so
long as the Annuitant is alive. We stop making Income Payments after the
Annuitant's death. It is possible under this option to receive only one Income
Payment if the Annuitant dies before the due date of the second payment or to
receive only two Income Payments if the Annuitant dies before the due date of
the third payment, and so on.
OPTION 2. LIFE ANNUITY WITH 10 YEARS OF INCOME PAYMENTS GUARANTEED. Under this
option, we will make Income Payments so long as the Annuitant is alive. If,
when the Annuitant dies, we have made Income Payments for less than ten years,
we will then continue to make Income Payments to the Beneficiary for the rest of
the 10 year period.
OPTION 3. JOINT AND LAST SURVIVOR ANNUITY. Under this option, we will make
Income Payments so long as the Annuitant and a second person (joint Annuitant)
are both alive. When either Annuitant dies, we will continue to make Income
Payments, so long as the survivor continues to live. We will stop making Income
Payments after the last survivor's death.
OPTION 4. JOINT AND LAST SURVIVOR ANNUITY WITH 10 YEARS OF INCOME PAYMENTS
GUARANTEED. Under this option, we will make Income Payments so long as the
Annuitant and a second person (joint Annuitant) are both alive. When either
Annuitant dies, we will continue to make Income Payments, so long as the
survivor continues to live. If, at the last death of the Annuitant and the
joint Annuitant, we have made Income Payments for less than ten years, we will
then continue to make Income Payments to the Beneficiary for the rest of the 10
year period.
We may require proof of the age or sex of an Annuitant before making any Income
Payments under the Contract that are measured by the Annuitant's life. If the
age or sex of the Annuitant has been misstated, the amount payable will be the
amount that the Account Value would have provided at the correct age or sex.
Once Income Payments have begun, any underpayments will be made up in one sum
with the next Income Payment or in any other manner agreed to by us. Any
overpayments will be deducted first from future Income Payments. No interest
will be credited or charged in the event of an underpayment or overpayment.
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Upon the death of the last surviving Annuitant, the Beneficiary may choose to
continue receiving income payments or to receive the commuted value of the
remaining guaranteed payments. The calculation of the commuted value will be
done using the then current Annuity Option rates.
Due to underwriting, administrative or Code considerations, there may be
limitations on payments to the survivor under Options 3 and 4 and/or the
duration of the guarantee period under Options 2 and 4.
Tax rules with respect to decedent contracts may prohibit the election of Joint
and Last Survivor Annuity Options (or income types) and may also prohibit
payments for as long as the Owner's life in certain circumstances.
In addition to the Annuity Options described above, we may offer an additional
payment option that would allow your Beneficiary to take distribution of the
Account Value over a period not extending beyond his or her life expectancy.
Under this option, annual distributions would not be made in the form of an
annuity, but would be calculated in a manner similar to the calculation of RMDs
from IRAs. (See "FEDERAL TAX CONSIDERATIONS.") We intend to make this payment
option available to both Qualified Contracts and Non-Qualified Contracts. In
the event that you purchased the Contract as a Qualified Contract, you must take
distribution of the Account Value in accordance with the minimum required
distribution rules set forth in applicable tax law. (See "FEDERAL TAX
CONSIDERATIONS.") Under certain circumstances, you may satisfy those
requirements by electing an Annuity Option. You may choose any death benefit
available under the Contract. Upon your death, if Income Payments have already
begun, the death benefit would be required to be distributed to your Beneficiary
at least as rapidly as under the method of distribution in effect at the time of
your death.
DEATH OF OWNER DURING THE INCOME PERIOD
If the Owner (or a Joint Owner), is not the Annuitant, and dies during the
Income Period, any remaining guaranteed payments under the Annuity Option
elected will continue at least as rapidly as under the method of distribution in
effect at the time of the Owner's (or Joint Owner's) death. Upon the death of
the Owner (or a Joint Owner) during the Income Period, the Beneficiary becomes
entitled to exercise the rights of the Owner. If an Owner (or Joint Owner) is
the Annuitant and dies during the Income Period, the death benefit, if any, will
be as specified in the Annuity Option chosen and will continue at least as
rapidly as under the method of distribution in effect at the time of the Owner's
(or Joint Owner's) death.
PREMIUM AND OTHER TAXES
We reserve the right to deduct from the Purchase Payment or Account Value any
taxes relating to the Contract paid by us to any government entity (including,
but not limited to, Premium Taxes, Federal, state and local withholding of
income, estate, inheritance, other taxes required by law and any new or
increased state income taxes that may be enacted into law). Premium taxes
generally range from 0.5% to 3.5%, which are applicable only in certain
jurisdictions - see Appendix D. We will determine when taxes relate to the
Contract.
We may pay taxes when due and deduct that amount from the Account Value at a
later date. Payment at an earlier date does not waive any right we may have to
deduct amounts at a later date. Generally, it is our practice not to charge
Premium Taxes until Income Payments begin.
INCOME TAXES
We reserve the right to deduct from the Contract for any income taxes which we
incur because of the Contract. At the present time, however, we are not
incurring any such income tax or making any such deductions.
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FEDERAL TAX CONSIDERATIONS
The following discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax advisor. No attempt is
made to consider any applicable state tax or other tax laws, or to address any
state and local estate, inheritance and other tax consequences of ownership or
receipt of distributions under a contract.
When you invest in an annuity contract, you usually do not pay taxes on your
investment gains until you withdraw the money, generally for retirement
purposes. If you invest in an annuity contract as part of an individual
retirement plan your Contract is called a Qualified Contract. The tax rules
applicable to Qualified Contracts vary according to the type of individual
retirement plan and the terms and conditions of the plan. You should note that
for any Qualified Contract, the tax deferred accrual feature is provided by the
individual retirement plan, and as a result there should be reasons other than
tax deferral for acquiring the Contract within an individual retirement plan.
If your annuity is independent of any formal retirement or pension plan, it is
termed a Non-Qualified Contract.
Under current Federal income tax law, the taxable portion of distributions under
deferred annuity contracts and IRAs is not eligible for the reduced tax rate
applicable to long-term capital gains and qualifying dividends.
TAXATION OF NON-QUALIFIED CONTRACTS
NON-NATURAL PERSON. If a non-natural person (e.g., a trust) owns a
Non-Qualified Contract, the taxpayer generally must include in income any
increase in the excess of the Account Value over the investment in the Contract
(generally, the premium or other consideration paid for the Contract) during the
taxable year. There are some exceptions to this rule and a prospective Owner
that is not a natural person should discuss these with a tax advisor.
The following discussion generally applies to Non-Qualified Contracts owned by
natural persons.
WITHDRAWALS. When a withdrawal from a Non-Qualified Contract occurs, the amount
received will be treated as ordinary income subject to tax up to an amount equal
to the excess (if any) of the Account Value immediately before the distribution
over the Owner's investment in the Contract (generally, the premium or other
consideration paid for the Contract, reduced by any amount previously
distributed from the Contract that was not subject to tax) at that time. In the
case of a Surrender under a Non-Qualified Contract, the amount received
generally will be taxable only to the extent it exceeds the Owner's investment
in the Contract.
It is conceivable that certain benefits or the charges for certain benefits such
as any guaranteed death benefits could be considered to be taxable each year as
deemed distributions from the Contract to pay for non-annuity benefits. We
currently treat these charges and benefits as an intrinsic part of the annuity
contract and do not tax report these as taxable income until distributions are
actually made. However, it is possible that this may change in the future if we
determine that this is required by the IRS. If so, the charges or benefits
could also be subject to a 10% penalty tax if the taxpayer is under age 591/2.
We reserve the right to change our tax reporting practices if we determine that
they are not in accordance with IRS guidance (whether formal or informal).
ADDITIONAL PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution
(or a deemed distribution) from a Non-Qualified Contract, there may be imposed a
Federal income tax penalty equal to 10% of the amount treated as income. In
general, however, there is no penalty on distributions:
o made on or after the taxpayer reaches age 591/2;
o made on or after the death of an Owner;
o attributable to the taxpayer's becoming disabled;
o made as part of a series of substantially equal periodic payments (at
least annually) for the life (or life expectancy) of the taxpayer or the
joint lives (or joint life expectancies) of the taxpayer and his or her
designated Beneficiary; or
45
o under certain immediate income annuities providing for substantially equal
payments made at least annually (Non-Qualified Contracts only).
Other exceptions may be applicable under certain circumstances and special rules
may be applicable in connection with the exceptions enumerated above. Also,
additional exceptions apply to distributions from a Qualified Contract. You
should consult a tax advisor with regard to exceptions from the penalty tax.
INCOME PAYMENTS. Although tax consequences may vary depending on the Annuity
Option elected under an annuity contract, a portion of each Income Payment is
generally not taxed and the remainder is taxed as ordinary income. The
non-taxable portion of any Income Payment is generally determined in a manner
that is designed to allow you to recover your investment in the Contract ratably
on a tax-free basis over the expected stream of Income Payments, as determined
when Income Payments start. Once your investment in the Contract has been fully
recovered, however, the full amount of each Income Payment is subject to tax as
ordinary income.
If your Contract allows and you elect to apply less than the entire Account
Value of your Contract to an Annuity Option provided under the Contract
("partial annuitization"), an exclusion ratio will apply to the Income Payments
you receive, provided the Income Period is for 10 years or more, or for the life
of one or more individuals. Your after-tax Purchase Payment in the Contract
will be allocated pro rata between the annuitized portion of the Contract and
the portion that remains deferred. Consult your own independent tax advisor
before you partially annuitize your Contract.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Non-Qualified Contract because of your death or the death of the Annuitant.
Generally, such amounts are includible in the income of the recipient as
follows: (i) if distributed in a lump sum, they are taxed in the same manner as
a Surrender of the Contract, or (ii) if distributed under an Annuity Option,
they are taxed in the same way as Income Payments.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT. Where otherwise permitted
under the terms of the Contract, a transfer or assignment of ownership of a
Non-Qualified Contract, the designation or change of an Annuitant, the selection
of certain maturity dates, or the exchange of a contract may result in certain
adverse tax consequences to you that are not discussed herein. An Owner
contemplating any such transfer, assignment, exchange or event should consult a
tax advisor as to the tax consequences.
WITHHOLDING. Annuity distributions are generally subject to withholding for the
recipient's Federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions.
MULTIPLE CONTRACTS. The tax law provides that deferred annuities issued after
October 21, 1988 by the same insurance company or an affiliate in the same
calendar year to the same Owner are combined for tax purposes. As a result, a
greater portion of your withdrawals may be considered taxable income than you
would otherwise expect. Please consult your own tax advisor.
FURTHER INFORMATION. We believe that the Contracts will qualify as annuity
contracts for Federal income tax purposes and the above discussion is based on
that assumption.
TAXATION OF QUALIFIED CONTRACTS
The tax rules applicable to Qualified Contracts vary according to the type of
individual retirement plan and the terms and conditions of the plan. Your
rights under a Qualified Contract may be subject to the terms of the retirement
plan itself, regardless of the terms of the Qualified Contract. Adverse tax
consequences may result if you do not ensure that contributions, distributions
and other transactions with respect to the Contract comply with the law.
WITHDRAWALS. In the case of a withdrawal under a Qualified Contract, a ratable
portion of the amount received is taxable, generally based on the ratio of the
"investment in the contract" to the individual's total account balance or
accrued benefit under the retirement plan. The "investment in the contract"
generally equals the amount of any
46
non-deductible Purchase Payment paid by or on behalf of any individual. In many
cases, the "investment in the contract" under a Qualified Contract can be zero.
INDIVIDUAL RETIREMENT ARRANGEMENTS (IRAS). IRAs, as defined in Section 408 of
the Code, permit individuals to make annual contributions of up to the lesser of
the applicable dollar amount for the year (for 2012, $5,000 plus, for an Owner
age 50 or older, $1,000) or the amount of compensation includible in the
individual's gross income for the year. The contributions may be deductible in
whole or in part, depending on the individual's income. Distributions from
certain retirement plans may be "rolled over" into an IRA on a tax-deferred
basis without regard to these limits. Amounts in the IRA (other than
non-deductible contributions) are taxed when distributed from the IRA. A 10%
Federal income tax penalty generally applies to distributions made before age
591/2, unless an exception applies. Traditional and Roth IRAs may not invest in
life insurance. The Contract may provide death benefits that could exceed the
greater of the premium paid or the account balance. The final RMD income tax
regulations generally treat such benefits as part of the annuity contract and
not as life insurance and require the value of such benefits to be included in
the participant's interest that is subject to the RMD rules.
ROTH IRA. A Roth IRA, as described in Code section 408A, permits certain
eligible individuals to make non-deductible contributions to a Roth IRA in cash
or as a rollover or transfer from another Roth IRA or other eligible retirement
plan. A rollover from, or conversion, of a non-Roth eligible retirement plan to
a Roth IRA is generally subject to tax, and other special rules apply. The
Owner may wish to consult a tax advisor before combining any converted amounts
with any other Roth IRA contributions, including any other conversion amounts
from other tax years. Distributions from a Roth IRA generally are not taxed,
except that, once aggregate distributions exceed contributions to the Roth IRA,
income tax and a 10% Federal income tax penalty may apply to distributions made
(1) before age 591/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
any Roth IRA. A 10% Federal income tax penalty may apply to amounts
attributable to a conversion from an eligible retirement plan if they are
distributed during the five taxable years beginning with the year in which the
conversion was made.
OTHER TAX ISSUES. IRAs have RMD rules that govern the timing and amount of
distributions. You should refer to your retirement plan, adoption agreement, or
consult a tax advisor for more information about these distribution rules.
Failure to meet such rules generally results in the imposition of a 50% excise
tax on the amount that should have been, but was not, distributed.
Income tax regulations regarding minimum distribution requirements affect both
deferred and income annuities. Generally, the actuarial present value of all
benefits under a deferred annuity (including death benefits in excess of Account
Value, as well as all living benefits) must be added to the Account Value in
computing the amount required to be distributed over the applicable period.
The RMD regulations permit income payments to increase due to "actuarial gain"
which includes the investment performance of the underlying assets, as well as
changes in actuarial factors and assumptions under certain conditions.
Additionally, withdrawals may also be permitted under certain conditions. These
rules are not entirely clear, and you should consult with your own tax advisor
to determine whether your income annuity will satisfy these rules for your own
situation.
For RMDs following the death of the Annuitant of a Qualified Contract, the
five-year rule is applied without regard to calendar year 2009. For instance,
for an Owner who died in 2007, the five-year period would end in 2013 instead of
2012. The RMD rules are complex, so consult with your tax advisor because the
application of these rules to your particular circumstances may have been
impacted by the 2009 RMD waiver.
Distributions from Qualified Contracts generally are subject to withholding for
the Owner's Federal income tax liability. The withholding rate varies according
to the type of distribution and the Owner's tax status. The Owner will be
provided the opportunity to elect not to have tax withheld from distributions.
FEDERAL ESTATE TAXES. While no attempt is being made to discuss the Federal
estate tax implications of the Contract, you should keep in mind that the value
of an annuity contract owned by a decedent and payable to a Beneficiary by
47
virtue of surviving the decedent is included in the decedent's gross estate.
Depending on the terms of the annuity contract, the value of the annuity
included in the gross estate may be the value of the lump sum payment payable to
the designated Beneficiary or the actuarial value of the payments to be received
by the Beneficiary. Consult an estate planning advisor for more information.
GENERATION-SKIPPING TRANSFER TAX. Under certain circumstances, the Code may
impose a "generation-skipping transfer tax" when all or part of an annuity
contract is transferred to, or a death benefit is paid to, an individual two or
more generations younger than the Owner. Regulations issued under the Code may
require us to deduct the tax from your Contract, or from any applicable payment,
and pay it directly to the IRS.
ANNUITY PURCHASE PAYMENT BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS. The
discussion above provides general information regarding U.S. Federal income tax
consequences to annuity purchasers that are U.S. citizens or residents.
Purchasers that are not U.S. citizens or residents will generally be subject to
the U.S. Federal withholding tax on taxable distributions from annuity contracts
at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may
be subject to state and/or municipal taxes and taxes that may be imposed by the
purchaser's country of citizenship or residence. Prospective purchasers are
advised to consult with a qualified tax advisor regarding U.S., state, and
foreign taxation with respect to an annuity contract purchase.
PUERTO RICO TAX CONSIDERATIONS
The Puerto Rico Internal Revenue Code of 2011 (the "2011 PR Code") taxes
distributions from non-qualified annuity contracts differently than in the U.S.
Distributions that are not in the form of an annuity (including partial
withdrawals and period certain payments) are treated under the 2011 PR Code
first as a return of investment. Therefore, a substantial portion of the
amounts distributed generally will be excluded from gross income for Puerto Rico
tax purposes until the cumulative amount paid exceeds your tax basis. The
amount of income on annuity distributions (payable over your lifetime) is
calculated differently under the 2011 PR Code. Since the U.S. source income
generated by a Puerto Rico bona fide resident is subject to U.S. income tax and
the Internal Revenue Service issued guidance in 2004 which indicated that the
income from an annuity contract issued by a U.S. life insurer would be
considered U.S. source income, the timing of recognition of income from an
annuity contract could vary between the two jurisdictions. Although the 2011 PR
Code provides a credit against the Puerto Rico income tax for U.S. income taxes
paid, an individual may not get full credit because of the timing differences.
You should consult with a personal tax advisor regarding the tax consequences of
purchasing an annuity contract and/or any proposed distribution, particularly a
partial distribution or election to annuitize.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is always the
possibility that the tax treatment of the Contract could change by legislation
or otherwise. We will notify you of any changes to your Contract. Consult a
tax advisor with respect to legislative developments and their effect on the
Contract.
We have the right to modify the Contract in response to legislative changes that
could otherwise diminish the favorable tax treatment that annuity Owners
currently receive. We make no guarantee regarding the tax status of the
Contract and do not intend the above discussion as tax advice.
YOUR RIGHT TO CANCEL (FREE LOOK)
If you change your mind about owning the Contract, you can cancel it within a
certain time period after receiving it. This is known as a "free look." Not
all Contracts issued are subject to free look provisions under state law. We
ask that you submit your request to cancel in writing, signed by you, to us
(e.g., the Annuity Service Office) or to the agent who sold it. When you cancel
the Contract within this free look period, we will not assess a Withdrawal
Charge. Unless otherwise required by state law, you will receive whatever your
Contract is worth on the day that we receive your cancellation request. The
amount you receive may be more or less than your Purchase Payment
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depending upon the Shield Options you allocated your Purchase Payment to during
the free look period. This means that you bear the risk of any decline in the
Account Value of your Contract during the free look period. We do not refund any
charges or deductions assessed during the free look period. In certain states,
we are required to give back your Purchase Payment if you decide to cancel your
Contract during the free look period.
OWNERSHIP PROVISIONS
OWNER. You, as the Owner, have all the interest and rights under the Contract.
These rights include the right to:
(a) change the Beneficiary.
(b) change the Annuitant before the Annuity Date (subject to our underwriting
and administrative rules).
(c) assign the Contract (subject to limitation).
(d) change the Income Payment option before the Annuity Date.
(e) exercise all other rights, benefits, options and privileges permitted by
the Contract or us.
The Owner is as designated at the time the Contract is issued, unless changed.
You may change the Owner at any time. Any change of Owner is subject to our
underwriting requirements in effect at the time of the request. A change of
Owner will automatically revoke any prior designation of the Owner.
JOINT OWNER. The Contract can be owned by Joint Owners, limited to natural
persons. Either Joint Owner can exercise all rights under the Contract unless
you inform us otherwise as indicated on the Contract Schedule or in a Notice to
us. Upon the death of either Owner, the surviving Joint Owner will be the
primary Beneficiary, unless you inform us otherwise. Any other Beneficiary
designation will be treated as a contingent Beneficiary unless otherwise
indicated on the Contract Schedule or in a Notice to us.
ANNUITANT. The Annuitant is the natural person(s) on whose life we base Income
Payments. You can change the Annuitant at any time prior to the Annuity Date,
unless an Owner is not a natural person. Any reference to Annuitant includes
any joint Annuitant under an Annuity Option. The Owner and the Annuitant do not
have to be the same person except as required under certain sections of the
Code. Any change of the Annuitant is subject to our underwriting requirements
in effect at the time of the request.
BENEFICIARY. The person(s) or entity(ies) you name to receive a death benefit
payable under the Contract upon the death of the Owner or a Joint Owner, or in
certain circumstances, an Annuitant. The Beneficiary is named at the time the
Contract is issued unless changed at a later date. Unless an irrevocable
Beneficiary has been named, you can change the Beneficiary at any time before
you die by filing a Notice with us. If Joint Owners are named, and unless you
tell us otherwise, the surviving Joint Owner will be the primary Beneficiary.
Any other primary Beneficiary designation will be treated as the contingent
Beneficiary.
ASSIGNMENT. Our rights as evidenced by a Contract may not be assigned without
our written consent and is subject to our underwriting requirements. You may
not assign your rights under the Contract after the start of Income Payments.
In certain tax markets, assignment of the Contract is prohibited by the Code.
If the Contract is assigned absolutely, we will treat it as a change of
ownership and all rights will be transferred. We are not bound by any
assignment request unless it is in writing. We assume no responsibility for the
validity or effect of any assignment. We will not be liable for any payment or
other action we take in accordance with the Contract before we record the
assignment. Assignments, unless otherwise specified by the Owner, will take
effect on the date the notice of assignment is signed, subject to any payments
made or actions taken by us before a signed copy of the assignment form is
received by us at our Annuity Service Office. You should consult your tax
advisor regarding the tax consequences of an assignment. AN ASSIGNMENT MAY BE A
TAXABLE EVENT.
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SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or delay the payment of death benefits, the
calculation of income payments, withdrawals and transfers when we cannot obtain
an Index Value under the following circumstances:
(i) the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
(ii) trading on the New York Stock Exchange is restricted;
(iii) an emergency exists such that we cannot value Investment Amounts; or
(iv) during any other period when a regulator by order, so permits.
WHEN WE CAN CANCEL YOUR CONTRACT
We may terminate your Contract by paying you the Account Value in one sum if,
prior to the Annuity Date the Minimum Account Value after any partial withdrawal
is less than $2,000 or any lower amount required by Federal tax laws.
Accordingly, no Contract will be terminated due solely to negative Index
Performance. We will only do so to the extent allowed by law. If we do so, we
will return the full Account Value. Federal tax law may impose additional
restrictions on our right to cancel your Traditional IRA or Roth IRA Contract.
We will not terminate any Contract if at the time the termination would
otherwise occur the guaranteed amount under any death benefit, is greater than
the Account Value. For all other Contracts, we reserve the right to exercise
this termination provision, subject to obtaining any required regulatory
approvals. State variations may apply.
THE INSURANCE COMPANY
METLIFE INSURANCE COMPANY OF CONNECTICUT ("MICC")
MICC is a stock insurance company chartered in 1863 in the state of Connecticut
and has been continuously engaged in the insurance business since that time. It
is licensed to conduct life insurance business in all states of the United
States, the District of Columbia, Puerto Rico, Guam, the U.S. and British Virgin
Islands and the Bahamas. MICC is a wholly-owned subsidiary of MetLife, Inc., a
publicly traded company. MetLife, Inc., through its subsidiaries and
affiliates, is a leading provider of insurance and other financial services to
individual and institutional customers.
MICC's Home Office is located at 1300 Hall Boulevard, Bloomfield, Connecticut
06002-2910. The office that administers your Contract is located at 4700
Westown Parkway, Ste. 200, West Des Moines, Iowa 50266.
THE SEPARATE ACCOUNT
The assets of the Separate Account are held in our name on behalf of the
Separate Account and legally belong to us. We are obligated to pay all money we
owe under the Contracts - such as death benefits and Income Payments - even if
that amount exceeds the assets in the Separate Account. Any such amount that
exceeds the assets in the Separate Account is paid from our General Account.
Amounts paid from the General Account are subject to the financial strength and
claims paying ability of MICC and our long term ability to make such payments
and are not guaranteed by any other party. We issue other annuity contracts and
life insurance policies where we pay all money we owe under those contracts and
policies from our General Account. MICC is regulated as an insurance company
under state law, which includes, generally, limits on the amount and type of
investments in its General Account. However, there is no guarantee that we will
be able to meet our claims paying obligations; there are risks to purchasing any
insurance product.
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MICC SEPARATE ACCOUNT SA
A Purchase Payment made to the Contract is allocated to the MICC Separate
Account SA (the "Separate Account"). We have exclusive and absolute ownership
and control of the assets of the Separate Account. It is a non-unitized
separate account. You do not share in the investment performance of assets
allocated to the Separate Account. All investment income, gains and losses,
whether or not realized, from assets allocated to the Separate Account are borne
by MICC. The obligations under the Contract are independent of the investment
performance of the Separate Account and are our obligations.
We will maintain in the Separate Account assets with an aggregate value at least
equal to the Contract reserves.
If the aggregate value of such assets in the Separate Account should fall below
such amount, we will transfer assets into the Separate Account so that the value
of the Separate Account's assets is at least equal to such amount. Assets
supporting reserves for annuity benefits under such contracts, in the course of
payment, will not be maintained in the Separate Account.
INVESTMENTS BY MICC
We must invest our assets according to applicable state laws regarding the
nature, quality and diversification of investments that may be made by life
insurance companies. In general, these laws permit investments, within
specified limits and subject to certain qualifications, in Federal, state and
municipal obligations, corporate bonds, preferred and common stocks, real estate
mortgages, real estate and certain other investments. Purchase Payments made to
these Contracts issued by MICC are invested in the MICC Separate Account SA.
The MICC Separate Account SA is a non-unitized Separate Account and to the
extent such assets are attributable to your Purchase Payment amount invested in
MICC Separate Account SA. Owners do not share in the investment performance of
assets allocated to the Separate Account. The obligations under the Contract
are independent of the investment performance of the Separate Account and are
the obligations of MICC.
ANNUAL STATEMENT
At least once each calendar year, we will send you a statement that will show:
(i) your Account Value;
(ii) all transactions regarding your Contract during the year; and
(iii) the interest and the Investment Amount credited to your Contract.
Such statements will be sent to your last known address on our records. You
will have sixty (60) days from the date you receive such statement to inform us
of any errors, otherwise such statement will be deemed final and correct.
DISTRIBUTION OF THE CONTRACTS
MetLife Investors Distribution Company ("MLIDC") is the principal underwriter
and distributor of the securities offered through this prospectus. MLIDC, which
is our affiliate, also acts as the principal underwriter and distributor of some
of the variable annuity contracts and variable life insurance policies we and
our affiliated companies issue. We reimburse MLIDC for expenses MLIDC incurs in
distributing the Contracts (e.g., commissions payable to the retail broker-
dealers who sell the Contracts, including our affiliated broker-dealers). MLIDC
does not retain any fees under the Contracts. We also pay amounts to MLIDC that
may be used for its operating and other expenses, including the following sales
expenses: compensation and bonuses for MLIDC's management team, advertising
expenses, and other expenses of distributing the Contracts. MLIDC's management
team also may be eligible for non-cash compensation items that we may provide
jointly with MLIDC. Non-cash items include conferences, seminars and trips
(including travel, lodging and meals in connection therewith), entertainment,
merchandise and other similar items.
51
MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900,
Irvine, CA 92614. MLIDC is registered as a broker-dealer with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
well as the securities commissions in the states in which it operates, and is a
member of the Financial Industry Regulatory Authority ("FINRA"). FINRA provides
background information about broker-dealers and their registered representatives
through FINRA BrokerCheck. You may contact the FINRA BrokerCheck Hotline at 1
800-289-9999, or log on to www.finra.org. An investor brochure that includes
information describing FINRA BrokerCheck is available through the Hotline or
online.
Contracts are sold through Metropolitan Life Insurance Company ("MetLife")
licensed sales representatives who are associated with MetLife Securities, Inc.
("MSI"), our affiliate and a broker-dealer, and through New England Financial/R/
licensed sales representatives who are associated with New England Securities
Corporation ("NES"), also our affiliate and a broker-dealer. Both
broker-dealers are paid compensation for the promotion and sale of the
Contracts. New England Financial/R/ is the service mark for New England Life
Insurance Company, Boston, MA, and related companies. The Contracts are also
sold through the registered representatives of our other affiliated
broker-dealers. MSI, NES and our affiliated broker-dealers are registered with
the SEC as broker-dealers under the Securities Exchange Act of 1934 and are also
members of FINRA. The Contracts may also be sold through other registered
broker-dealers. We also may sell the Contracts directly, without compensation,
to sales representatives, to employees, officers, directors, and trustees of
MetLife and its affiliated companies, and certain family members of the
foregoing, and to employees, officers, directors, trustees and registered
representatives of any broker-dealer authorized to sell the Contracts or any
bank affiliated with such a broker-dealer, and certain family members of the
foregoing. If consistent with applicable state insurance law, we may sell the
Contracts, without compensation, to MetLife or its affiliated companies for use
with deferred compensation plans for agents, employees, officers, directors, and
trustees of MetLife and its affiliated companies, subject to any restrictions
imposed by the terms of such plans, or to persons who obtain their Contracts
through a bank, advisor or consultant to whom they pay a fee for investment or
planning advice. Contracts also may be sold through the mail or over the
Internet.
There is no front-end sales load deducted from purchase payments to pay sales
commissions. Distribution costs are recovered through the charges and
deductions under the Contract. New England Financial/R/ sales representatives
and
MetLife sales representatives who are not in our MetLife Resources division
("non-MetLife Resources MetLife sales representatives") must meet a minimum
level of sales of proprietary products in order to maintain employment with us.
Sales representatives in our MetLife Resources division must meet a minimum
level of sales production in order to maintain employment with us.
New England Financial/R/ sales representatives, non-MetLife Resources MetLife
sales representatives and MetLife Resources sales representatives receive cash
payments for the products they sell and service based upon a 'gross dealer
concession' model. With respect to the Contract, the gross dealer concession
ranges from [o]% to [o]% of the Purchase Payment. A Gross dealer concession may
also be paid when the Contract is annuitized. The amount of this gross dealer
concession, payable upon annuitization, depends on several factors, including
the number of years the Contract has been in force. Compensation to the sales
representative is all or part of the gross dealer concession. Compensation to
sales representatives in the MetLife Resources division is based upon premiums
and purchase payments applied to all products sold and serviced by the
representative. Compensation to New England Financial/R/ sales representatives
and non-MetLife Resources MetLife sales representatives is determined based upon
a formula that recognizes premiums and purchase payments applied to proprietary
products sold and serviced by the representative as well as certain premiums and
purchase payments applied to non-proprietary products sold by the
representative. Proprietary products are those issued by us or our affiliates.
Because one of the factors determining the percentage of a gross dealer
concession that applies to New England Financial/R/ sales representatives and
non-MetLife Resources MetLife sales representative's compensation is sales of
proprietary products, these sales representatives have an incentive to favor the
sale of proprietary products. Because New England Financial/R/ sales
representatives and non-MetLife Resources MetLife sales managers' compensation
is based on the sales made by the representatives they supervise, these sales
managers also have an incentive to favor the sales of proprietary products.
52
New England Financial/R/ sales representatives, non-MetLife Resources MetLife
sales representatives and MetLife Resources sales representatives and their
managers and the sales representatives and managers of our affiliates may be
eligible for additional cash compensation, such as bonuses, equity awards (such
as stock options), training allowances, supplemental salary, financial
arrangements, marketing support, medical and other insurance benefits, and
retirement benefits and other benefits based primarily on the amount of
proprietary products sold. Because additional cash compensation paid to New
England Financial/R/ sales representatives and non-MetLife Resources MetLife
sales representatives and MetLife Resources sales representatives and their
managers and the sales representatives and their managers of our affiliates is
based primarily on the sales of proprietary products, New England Financial/R/
sales representatives and non-MetLife Resources MetLife sales representatives
and MetLife Resources sales representatives and their managers and the sales
representatives and their managers of our affiliates have an incentive to favor
the sale of proprietary products.
Sales representatives who meet certain productivity, persistency, and length of
service standards and/or their managers may be eligible for additional cash
compensation. Moreover, managers may be eligible for additional cash
compensation based on the sales production of the sales representatives that the
manager supervises.
Our sales representatives and their managers may be eligible for non-cash
compensation incentives, such as conferences, trips, prizes and awards. Other
non-cash compensation payments may be made for other services that are not
directly related to the sale of products. These payments may include support
services in the form of recruitment and training of personnel, production of
promotional services and other support services.
Other incentives and additional cash compensation provide sales representatives
and their managers with an incentive to favor the sale of proprietary products.
The business unit responsible for the operation of our distribution system is
also paid.
MLIDC also pays compensation for the sale of the Contracts by other affiliated
broker-dealers. The compensation paid to other affiliated broker-dealers for
sales of the Contracts is generally not expected to exceed, on a present value
basis, the aggregate amount of total compensation that is paid with respect to
sales made through New England Financial/R/ and MetLife representatives. (The
total compensation includes payments that we make to our business unit that is
responsible for the operation of the distribution systems through which the
Contracts are sold.) These firms pay their sales representatives all or a
portion of the commissions received for their sales of Contracts; some firms may
retain a portion of commissions. The amount that selling firms pass on to their
sales representatives is determined in accordance with their internal
compensation programs. Those programs may also include other types of cash and
non-cash compensation and other benefits. Sales representatives of other
affiliated broker-dealers and their managers may be eligible for various cash
benefits and non-cash compensation (as described above) that we may provide
jointly with other affiliated broker-dealers. Because of the receipt of this
cash and non-cash compensation, sales representatives and their managers of our
other affiliated broker-dealers have an incentive to favor the sale of
proprietary products.
MLIDC may also enter into preferred distribution arrangements with certain other
affiliated selling firms such as Walnut Street Securities, Inc. and Tower Square
Securities, Inc. These arrangements are sometimes called "shelf space"
arrangements. Under these arrangements, MLIDC may pay separate, additional
compensation to the broker-dealer firm for services the selling firm provides in
connection with the distribution of the Contracts.
These services may include providing us with access to the distribution network
of the selling firm, the hiring and training of the selling firm's sales
personnel, the sponsoring of conferences and seminars by the selling firm, or
general marketing services performed by the selling firm. The selling firm may
also provide other services or incur other costs in connection with distributing
the Contracts.
MLIDC and, in certain cases, we have also entered into selling agreements with
unaffiliated selling firms for the sale of the Contracts. A portion of the
payments made to selling firms may be passed on to their sales representatives
in
53
accordance with the selling firms' internal compensation programs. Those
programs may also include other types of cash and non-cash compensation and
other benefits.
We and MLIDC pay compensation to unaffiliated selling firms in the form of
commissions and may also provide certain types of non-cash compensation. The
maximum commission payable for Contract sales by selling firms is [o]% of each
Purchase Payment. Some selling firms may elect to receive a lower commission
when a Purchase Payment is made, along with annual trail commissions up to [o]%
of Account Value for so long as the Contract remains in effect or as agreed in
the selling agreement. We may also pay commissions when an Owner elects to
begin receiving regular income payments. MLIDC may also provide non-cash
compensation items that we may provide jointly with MLIDC. Non-cash items
include expenses for conference or seminar trips and certain gifts. With
respect to the Contracts, the compensation paid to unaffiliated selling firms is
generally not expected to exceed, on a present value basis, the aggregate amount
of commission that is paid by MLIDC to affiliated firms.
ADDITIONAL COMPENSATION FOR SELECTED SELLING FIRMS. We and MLIDC have entered
into distribution arrangements with certain selected selling firms. Under these
arrangements we and MLIDC may pay additional compensation to selected selling
firms, including marketing allowances, introduction fees, persistency payments,
preferred status fees and industry conference fees. Marketing allowances are
periodic payments to certain selling firms, the amount of which depends on
cumulative periodic (usually quarterly) sales of our insurance contracts
(including the Contracts) and may also depend on meeting thresholds in the sale
of certain of our insurance contracts (other than the Contracts). They may also
include payments we make to cover the cost of marketing or other support
services provided for or by registered representatives who may sell our
products. Introduction fees are payments to selling firms in connection with
the addition of our products to the selling firm's line of investment products,
including expenses relating to establishing the data communications systems
necessary for the selling firm to offer, sell and administer our products.
Persistency payments are periodic payments based on account values of our
insurance contracts (including Account Values of the Contracts) or other
persistency standards. Preferred status fees are paid to obtain preferred
treatment of the Contracts in selling firms' marketing programs, which may
include marketing services, participation in marketing meetings, listings in
data resources and increased access to their sales representatives. Industry
conference fees are amounts paid to cover in part the costs associated with
sales conferences and educational seminars for selling firms' sales
representatives. We and MLIDC have entered into such distribution agreements
with our affiliates, Tower Square Securities, Inc. and Walnut Street Securities,
Inc., as well as unaffiliated selling firms identified [on our website]. We and
MLIDC may enter into similar arrangements with other affiliates, such as MSI and
New England Securities Corporation.
The additional types of compensation discussed above are not offered to all
selling firms. The terms of any particular agreement governing compensation may
vary among selling firms and the amounts may be significant. The prospect of
receiving, or the receipt of, additional compensation as described above may
provide selling firms and/or their sales representatives with an incentive to
favor sales of the Contracts over other annuity contracts (or other investments)
with respect to which selling firm does not receive additional compensation, or
lower levels of additional compensation. You may wish to take such payment
arrangements into account when considering and evaluating any recommendation
relating to the Contracts. For more information about any such additional
compensation arrangements, ask your registered representative. (See [our
website] for a list of selling firms that received compensation during the last
calendar year, as well as the range of additional compensation paid.)
THE FIXED ACCOUNT
We may offer our Fixed Account as a funding option. Please refer to your
Contract and Appendix C for more information.
54
RESTRICTIONS ON FINANCIAL TRANSACTIONS
Federal laws designed to counter terrorism and prevent money laundering might,
in certain circumstances, require us to block an Owner's ability to make certain
transactions and thereby refuse to accept any request for transfers,
withdrawals, Surrenders, or death benefits, until instructions are received from
the appropriate regulator. We may also be required to provide additional
information about you and your Contract to government regulators.
REQUESTS AND ELECTIONS
We will treat your request for a Contract transaction, or your submission of the
Purchase Payment, as received by us if we receive a request conforming to our
administrative procedures or the Purchase Payment at our Annuity Service Office
on any Business Day before 4:00 PM Eastern Standard Time. We will treat your
submission of the Purchase Payment as received by us if we receive it at our
Annuity Service Office (or a designee receives it in accordance with the
designee's administrative procedures) on any Business Day before 4:00PM Eastern
Standard Time. If we receive the request, or if we (or our designee) receive
the Purchase Payment, on any Business Day on or after 4:00 PM Eastern Standard
Time, then the request or payment will be treated as received on the next day.
Our Annuity Service Office is located at P.O. Box 10366, Des Moines, IA
50306-0366. If you send your Purchase Payment or transaction requests to an
address other than the one we have designated for receipt of such Purchase
Payment or requests, we may return the Purchase Payment to you, or there may be
a delay in applying the Purchase Payment or processing the transaction.
Requests for service may be made through your registered representative:
o By telephone at (800) 343-8496, between the hours of 7:30AM and
5:30PM Central Time Monday through Thursday and 7:30AM and 5:00PM
Central Time on Friday;
o In writing to our Annuity Service Office;
o By fax at (515) 457-4400; or
o By Internet at www.metlife.com.
Some of the requests for service that may be made by telephone or Internet
include transfers of your Account Value into Shield Option(s) or the Fixed
Account. We may from time to time permit requests for other types of
transactions to be made by telephone or Internet. All transaction requests must
be in a form satisfactory to us. Contact us for further information. Some
selling firms may restrict the ability of their registered representatives to
convey transaction requests by telephone or Internet on your behalf.
A request or transaction generally is considered in Good Order if it complies
with our administrative procedures and the required information is complete and
accurate. A request or transaction may be rejected or delayed if not in Good
Order. If you have any questions, you should contact us or your registered
representative before submitting the form or request.
We will use reasonable procedures such as requiring certain identifying
information, tape recording the telephone instructions, and providing written
confirmation of the transaction, in order to confirm that instructions
communicated by telephone, fax, Internet or other means are genuine. Any
telephone, fax or Internet instructions reasonably believed by us to be genuine
will be your responsibility, including losses arising from any errors in the
communication of instructions. As a result of this policy, you will bear the
risk of loss. If we do not employ reasonable procedures to confirm that
instructions communicated by telephone, fax or Internet are genuine, we may be
liable for any losses due to unauthorized or fraudulent transactions. All other
requests and elections under your Contract must be in writing signed by the
proper party, must include any necessary documentation and must be received at
our Annuity Service Office to be effective. If acceptable to us, requests or
elections relating to Beneficiaries and Ownership will take effect as of the
date signed unless we have already acted in reliance on the prior status. We
are not responsible for the validity of any written request or action.
55
Telephone and computer systems may not always be available. Any telephone or
computer system, whether it is yours, your service provider's, your agent's, or
ours, can experience outages or slowdowns for a variety of reasons. These
outages or slowdowns may delay or prevent our processing of your request.
Although we have taken precautions to help our systems handle heavy use, we
cannot promise complete reliability under all circumstances. If you experience
technical difficulties or problems, you should make your transaction request in
writing to our Annuity Service Office.
INQUIRIES. If you need more information, please contact our Annuity Service
Office at:
MetLife Investors Distribution Company
P.O. Box 10366
Des Moines, Iowa 50306-0366
(800) 343-8496
CONFIRMING TRANSACTIONS
We will send out written statements confirming that a transaction was recently
completed. Unless you inform us of any errors within 60 days of receipt, we
will consider these communications to be accurate and complete.
LEGAL PROCEEDINGS
In the ordinary course of business, MICC, similar to other life insurance
companies, is involved in lawsuits (including class action lawsuits),
arbitrations and other legal proceedings. Also, from time to time, state and
Federal regulators or other officials conduct formal and informal examinations
or undertake other actions dealing with various aspects of the financial
services and insurance industries. In some legal proceedings involving
insurers, substantial damages have been sought and/or material settlement
payments have been made.
It is not possible to predict with certainty the ultimate outcome of any pending
legal proceeding or regulatory action. However, MICC does not believe any such
action or proceeding will have a material adverse effect upon the Separate
Account or upon the ability of MetLife Investors Distribution Company to perform
its contract with the Separate Account or of MICC to meet its obligations under
the contracts.
EXPERTS
Legal matters in connection with Federal laws and regulations affecting the
issue and sale of the Contracts described in this prospectus and the
organization of MICC, its authority to issue such Contracts under Connecticut
law and the validity of the forms of the Contracts under Connecticut law have
been passed on by legal counsel for MICC.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
[TO COME]
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 a Purchase Payment, the requirements for unisex annuity rates and the
general availability of certain features. However, please note that the
56
maximum fee is set forth in this prospectus. This prospectus describes all the
material features of the Contract. If you would like to review a copy of the
Contract and any endorsements, contact our Annuity Service Office.
ELECTRONIC DELIVERY
As Owner you may elect to receive electronic delivery of current prospectuses
related to the Contract and other Contract related documents. Contact us at
[our website] for more information and to enroll.
AMENDMENT OF THE CONTRACT
We reserve the right to amend the Contracts to comply with applicable Federal or
state laws or regulations. We will notify you in writing of any such amendments.
MISSTATEMENT
We may require proof of the age or sex (where permitted) of the Annuitant, Owner
and/or the Beneficiary before making any payments under the Contract that are
measured by the Annuitant's, Owner's or Beneficiary's life. If the age or sex
of the measuring life has been misstated, the amount payable will be the amount
that would have been provided at the correct age and sex.
INFORMATION INCORPORATED BY REFERENCE
Under the Securities Act of 1933, MICC has filed with the Securities and
Exchange Commission ("SEC") a registration statement (the "Registration
Statement") relating to the Contracts offered by this prospectus. This
prospectus has been filed as a part of the Registration Statement and does not
contain all of the information set forth in the Registration Statement and the
exhibits and reference is hereby made to such Registration Statement and
exhibits for further information relating to MICC and the Contracts. MICC's
annual report on Form 10-K was filed with the SEC on March 22, 2012 via EDGAR
File No. 033-03094. The Form 10-K contains information for the period ended
December 31, 2011, about MICC, including consolidated audited financial
statements for MICC's latest fiscal year. The Form 10-K is incorporated by
reference into this prospectus. In addition, all documents subsequently filed
by MICC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended ("Exchange Act") prior to the termination of
the offering, are also incorporated by reference into this prospectus. We are
not incorporating by reference, in any case, any documents or information deemed
to have been furnished and not filed in accordance with SEC rules.
There have been no material changes in MICC's affairs which have occurred since
the end of the latest fiscal year for which audited consolidated financial
statements were included in the latest Form 10-K or which have not been
described in a Form 10-Q or Form 8-K filed by MICC under the Exchange Act.
If requested, MICC will furnish, without charge, a copy of any and all of the
reports or documents that have been incorporated by reference into this
prospectus. You may direct your requests to MICC at, 1300 Hall Boulevard,
Bloomfield, Connecticut, 06002-2910. The telephone number 1-800-343-8496. You
may also access the incorporated reports and other documents at www.metlife.com.
MICC files periodic reports as required under the Exchange Act (including Form
10-K, 10-Q and 8-K). You may also read and copy any materials that MICC files
with the SEC at the SEC's Public Reference Room at 100 F Street, N.E.,
Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
an Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC
at http://www.sec.gov.
57
APPENDIX A
INDEX PUBLISHERS
[TO COME]
A-1
APPENDIX B
DEATH BENEFIT EXAMPLE
The purpose of this example is to illustrate the operation of the Return of
Premium death benefit 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 the allocation made by an Owner and the Index Performance for the
Shield Options chosen. THE EXAMPLES DO NOT REFLECT THE DEDUCTION OF FEES AND
CHARGES, IF ANY, WITHDRAWAL CHARGES OR INCOME TAXES AND TAX PENALTIES.
RETURN OF PREMIUM DEATH BENEFIT
The purpose of this example is to show how partial withdrawals reduce the Return
of Premium death benefit proportionately by the percentage reduction in Account
Value of the Shield Option(s) and the Fixed Account for each partial withdrawal.
DATE AMOUNT
----------------------------- -----------------------
A Purchase Payment 10/1/2012 $100,000
B Account Value 10/1/2013
(First Contract Anniversary) $104,000
C Death Benefit As of 10/1/2013 $104,000
(= greater of A and B)
D Account Value 10/1/2014
(Second Contract Anniversary) $90,000
E Death Benefit 10/1/2014 $100,000
(= greater of A and D)
F Withdrawal 10/2/2014 $9,000
G Percentage Reduction in Account Value 10/2/2014 10%
(= F/D)
H Account Value after Withdrawal 10/2/2014 $81,000
(= D-F)
I Purchase Payment Reduced for Withdrawal As of 10/2/2014 $90,000
(= A-(A x G))
J Death Benefit 10/2/2014 $90,000
(= greater of H and I)
Notes to Example
----------------
Purchaser is age 60 at issue.
The Account Values on 10/1/2014 and 10/2/2014 are assumed to be equal prior to
the withdrawal.
B-1
APPENDIX C
THE FIXED ACCOUNT
The Fixed Account is part of MICC's General Account assets. These General
Account assets include all assets of MICC other than those held in the Separate
Accounts sponsored by MICC or its affiliates.
The staff of the SEC does not generally review the disclosure in the prospectus
relating to the Fixed Account. Disclosure regarding the Fixed Account and the
General Account may, however, be subject to certain provisions of the Federal
securities laws relating to the accuracy and completeness of statements made in
the prospectus.
Under the Fixed Account, MICC assumes the risk of investment gain or loss,
guarantees a specified interest rate, and guarantees a specified periodic Income
Payment. We guarantee that, at any time, the Fixed Account Value will not be
less than the amount of the Purchase Payments allocated to the Fixed Account,
plus interest credited as described below, less any applicable Premium Taxes or
prior withdrawals.
Account Value allocated to the Fixed Account and any transfers made to the Fixed
Account become part of MICC's General Account, which supports insurance and
annuity obligations. Where permitted by state law, we reserve the right to
restrict Investment Amounts into the Fixed Account whenever the credited
interest rate on the Fixed Account is equal to the Minimum Guaranteed Interest
Rate specified in your Contract. The General Account and any interest therein
is not registered under, or subject to the provisions of, the Securities Act of
1933 or Investment Company Act of 1940. We will invest the assets of the Fixed
Account at our discretion. Investment income from such Fixed Account assets
will be allocated to us and to the Contracts participating in the Fixed Account.
Investment income from the Fixed Account allocated to us includes compensation
for risks borne by us in connection with Fixed Account Contracts. The amount of
such investment income allocated to the Contracts will vary from year to year in
our sole discretion at such rate or rates as we prospectively declare from time
to time.
We guarantee that for the life of the Contract we will credit interest at a rate
not less than the minimum interest rate allowed by state law. We reserve the
right to change the rate subject to applicable state law. We will determine any
interest we credit to amounts allocated to the Fixed Account in excess of the
Minimum Guaranteed Interest Rate at our sole discretion. You assume the risk
that interest credited to the Fixed Account may not exceed the Minimum
Guaranteed Interest Rate for any given year. We have no specific formula for
determining the interest rate. Some factors we may consider are regulatory and
tax requirements, general economic trends and competitive factors.
For renewals into the Fixed Account, the new guaranteed interest rate will be
declared for each subsequent Interest Rate Term. We guarantee that the interest
credited to your initial Fixed Account Value during the Interest Rate Term
beginning on the Issue Date will not be less than the Minimum Guaranteed
Interest Rate. At the Interest Rate Term End Date, the Fixed Account Value will
automatically be renewed into the same Interest Rate Term, with the new interest
rate, unless otherwise instructed by you. If the Fixed Account is not available
at the end of the existing Interest Rate Term, these amounts will automatically
transfer into the Shield Option with, in order of priority, the shortest Term,
the highest Shield Rate, and the lowest Cap Rate from the Shield Options
available at the end of the Interest Rate Term unless otherwise instructed by
you. You have the Transfer Period to notify us that you want to transfer some
or all of your Fixed Account Value to a new Shield Option(s).
FIXED ACCOUNT VALUE. We credit interest to the portion of the Account Value
allocated to the Fixed Account. (See "Interest Crediting" below.) The Fixed
Account is part of our General Account. We guarantee that the interest credited
to your initial allocation to the Fixed Account during the Interest Rate Term
beginning on the Issue Date will not be less than the Minimum Guaranteed
Interest Rate. Thereafter, we will declare an interest rate as of each Contract
Anniversary for the duration of the Interest Rate Term and such rate will not be
less than the Minimum Guaranteed Interest Rate. If the declared interest rate
equals the Minimum Guaranteed Interest Rate, we reserve the right to restrict
transfers and allocations into the Fixed Account.
The initial Fixed Account Value is the amount initially allocated to the Fixed
Account. Thereafter, the Fixed Account Value equals: (a) the initial Fixed
Account Value or the Fixed Account Value on the most recent Contract
Anniversary, as applicable, including any transfers; plus (b) any interest
credited by us; less (c) the amount of any withdrawals including any Withdrawal
Charges; less (d) any Premium or Other Taxes, if applicable; and less (e) any
other fees indicated on the Contract Schedule or associated with riders and
endorsements, if applicable.
C-1
INTEREST CREDITING. Interest will be compounded and credited to the Fixed
Account at an annual effective interest rate declared by us. Interest will be
credited on amounts allocated to the Fixed Account through the effective date
such amounts are withdrawn or transferred from the Fixed Account.
Important terms that will help you understand this Appendix C:
INTEREST RATE TERM. The Interest Rate Term is the length of time over which the
current interest rate is guaranteed. The minimum Interest Rate Term depends on
the date your Contract is issued but will not be less than one (1) year. No
Interest Rate Term will extend beyond the Annuity Date.
FIXED ACCOUNT VALUE. The Fixed Account Value at the end of the Interest Rate
Term.
TRANSFERS. During the Accumulation Period you may only make a transfer to the
Fixed Account and to a new Shield Option(s) during the Transfer Period. The
effective date of such transfer is the first day of the Interest Rate Term
and/or a Term(s) in which the transfer is made.
C-2
APPENDIX D
PREMIUM TAX TABLE
If you are a resident of one of the following jurisdictions, the percentage
amount listed by that jurisdiction is the premium tax rate applicable to your
annuity.
Non-Qualified Annuities IRA Annuities(1)
------------------------ ----------------
California 2.35% 0.5%
Florida(2) 1.0% 1.0%
Maine 2.0% -
Nevada 3.5% -
Puerto Rico(3) 1.0% 1.0%
South Dakota(4) 1.25% -
West Virginia 1.0% 1.0%
Wyoming 1.0% -
________________________
1 Premium tax rates applicable to IRA annuities purchased for use in
connection with individual retirement trust or custodial accounts meeting
the requirements of Section 408(a) of the Code are included under the
column heading "IRA Annuities."
2 Annuity premiums are exempt from taxation provided the tax savings are
passed back to the Owners. Otherwise, they are taxable at 1%. (MetLife
passes the tax savings back to Owners and, therefore, annuity premiums are
exempt from taxation.)
3 We will not deduct premium taxes paid by us to Puerto Rico from Purchase
Payments, Account Values, withdrawals, death benefits or income payments.
4 A special rate applies for large case annuity policies. The rate is 8/100
of 1% for that portion of the annuity considerations received on a Contract
exceeding $500,000 annually. The special rate on large case policies is not
subject to retaliation.
D-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred in
connection with the securities being offered:
Accountant's Fees and Expenses: [TBD]
Legal Fees and Expenses: [TBD]
Printing Expenses: [TBD]
Registration Fee: $272,800
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's parent, MetLife, Inc. ("MetLife") has secured a Financial
Institutions Bond in the amount of $50,000,000, subject to a $5,000,000
deductible. MetLife also maintains Directors' and Officers' Liability insurance
coverage with limits of $400 million under which the Registrant and Registrant's
underwriter, as well as certain other subsidiaries of MetLife are covered. A
provision in MetLife, Inc.'s by-laws provides for the indemnification (under
certain circumstances) of individuals serving as directors or officers of
certain organizations, including the Depositor and the Underwriter.
Sections 33-770 et seq. inclusive of the Connecticut General Statutes ("C.G.S.")
regarding indemnification of directors and officers of Connecticut corporations
provides in general that Connecticut corporations shall indemnify their
officers, directors and certain other defined individuals against judgments,
fines, penalties, amounts paid in settlement and reasonable expenses actually
incurred in connection with proceedings against the corporation. The
corporation's obligation to provide such indemnification generally does not
apply unless (1) the individual is wholly successful on the merits in the
defense of any such proceeding; or (2) a determination is made (by persons
specified in the statute) that the individual acted in good faith and in the
best interests of the corporation and in all other cases, his conduct was at
least not opposed to the best interests of the corporation, and in a criminal
case he had no reasonable cause to believe his conduct was unlawful; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With respect
to proceedings brought by or in the right of the corporation, the statute
provides that the corporation shall indemnify its officers, directors and
certain other defined individuals, against reasonable expenses actually incurred
by them in connection with such proceedings, subject to certain limitations.
C.G.S. Section 33-778 provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or lesser
than that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed upon basis.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 16. EXHIBITS
(A) EXHIBITS
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1(a). MetLife Investors Distribution Company Sales Agreement (Enterprise
Selling Agreement 02-11). Filed herein.
1(b). Distribution and Principal Underwriting Agreement. (Incorporated
herein by reference to Exhibit 3(a) to Post-Effective Amendment No. 1
to MetLife of CT Separate Account Eleven for Variable Annuities
Registration Statement on form N-4, File Nos. 333-152199/811-21262,
filed April 8, 2009).
2. None.
4(a). Contract. Filed herein.
4(b). Individual Retirement Annuity Qualification Rider. (L-22499 (09/12)). Filed herein.
4(c). Individual Non-Qualified Annuity Endorsement. (L-22504 (09/12)). Filed herein.
4(d). Roth Individual Retirement Annuity ("Roth IRA") Endorsement. (L-22503 (09/12)). Filed herein.
5. Opinion re: Legality of Shares. To be filed by amendment.
8. None.
12. None.
15. None.
23. Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
To be filed by amendment.
24. Powers of Attorney authorizing Michele H. Abate, Paul G. Cellupica,
John E. Connolly, Jr., Myra L. Saul, and Marie C. Swift to act as signatory
for Eric Thomas Steigerwalt, Gene L. Lunman, Elizabeth M. Forget, Stanley J.
Talbi, and Peter M. Carlson. Filed herein.
25. None.
26. None.
</Table>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows, pursuant to Item 512 of
Regulation S-K:
1. To file, during any period in which offers or sales of the registered
securities are being made, a post-effective amendment to this registration
statement:
i. to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
ii. to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price set represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement, and
iii. to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
4. That, for the purpose of determining liability under the Securities Act of
1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as
part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part of and included
in the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made
in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to
such first use, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of
first use.
5. That, for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such purchaser:
i. Any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424;
ii. Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
iii. The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
iv. Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
6. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
7. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Bloomfield, State of Connecticut, on December 7,
2012.
MetLife Insurance Company of Connecticut
(Registrant)
By: /s/ Elizabeth M. Forget
------------------------------------
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on December 7, 2012.
<Table>
/s/ *ERIC T. STEIGERWALT Director, President and
----------------------------------------------- Chief Executive Officer
(Eric T. Steigerwalt)
/s/ *GENE L. LUNMAN Director
-----------------------------------------------
(Gene L. Lunman)
/s/ *ELIZABETH M. FORGET Director
-----------------------------------------------
(Elizabeth M. Forget)
/s/ *STANLEY J. TALBI Executive Vice President and
----------------------------------------------- Chief Financial Officer
(Stanley J. Talbi)
/s/ *PETER M. CARLSON Executive Vice President and
----------------------------------------------- Chief Accounting Officer
(Peter M. Carlson)
*By: /s/ MYRA L. SAUL
------------------------------------------
Myra L. Saul, Attorney-in-Fact
</Table>
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1(a). MetLife Investors Distribution Company Sales Agreement (Enterprise
Selling Agreement 02-11).
4(a). Contract
4(b). Individual Retirement Annuity Qualification Rider (L-22499 (09/12)).
4(c). Individual Non-Qualified Annuity Endorsement (L-22504 (09/12)).
4(d). Roth Individual Retirement Annuity ("Roth IRA") Endorsement (L-22503 (09/12)).
24. Powers of Attorney
</Table>