LOGO Kirkpatrick & Lockhart Preston Gates Ellis LLP
1601 K Street NW
Washington, DC 20006-1600
T 202.778.9000 www.klgates.com
Diane E. Ambler
202.778.9886
Fax: 202.778.9100
diane.ambler@klgates.com
February 15, 2013
VIA EDGAR AND E-MAIL
Mr. Sonny Oh
United States Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: MetLife Insurance Company of Connecticut
MetLife Flex Market Shield Annuity
Form S-3 Registration Statement
File No. 333-185333
Dear Mr. Oh:
Set forth below, on behalf of MetLife Insurance Company of Connecticut
("MetLife"), is the response to General Comment No. 1 to the above-referenced
Registration Statement from your letter to us dated February 11, 2013. Given
the significance of this Comment and its impact on the entire Registration
Statement and related time-sensitive matters, MetLife is responding to it at
this time and will address the remaining staff comments in due course under
separate cover.
SEC STAFF GENERAL COMMENT 1
---------------------------
"The staff is concerned with the use of the word 'shield' in both the name
of the contract and the investment options. The staff believes that the term
would mislead investors in an insurance product as to the risks that the
product entails. Please either revise the name used to describe the contract
and investment option or clarify supplementally why you believe the term
would not mislead investors."
METLIFE'S RESPONSE:
MetLife strongly believes that the word "shield" is accurate and not
misleading as used in both the name of the product and the "Shield Options"
available in the annuity. In fact, depending on the "Shield Rate" chosen,
the MetLife Flex Market Shield Annuity actually does shield all or a portion
of the investment from loss, in contrast to other products such
as mutual funds. The staff has not offered an explanation for its concern
with the use of the word "shield" and why that word "would mislead investors
. . . as to the risks that the product entails." Nevertheless, in an effort
to quickly resolve the matter, MetLife is willing to make modifications to
the name of the product to make clear that a number of different "Shield
Options" are available in the product (E.G., MetLife Shield Choice Annuity
or MetLife Flexible Shield Annuity); however, MetLife strongly believes that
the word "shield" is not only appropriate as used in the prospectus (E.G.,
Shield Option, Shield Rate, Shield 10, Shield 15, Shield 25 and Shield 100)
but also properly conveys what the product is designed to do - provide
downside protection at the end of the "Shield Option" term up to the amount
of downside protection chosen by the contract owner.
THE WORD SHIELD DOES NOT MISLEAD INVESTORS.
-------------------------------------------
MetLife believes that the customer will be well aware of the "Shield Rate"
that applies to the investment amounts in their contract. The single premium
deferred annuity contract described by the prospectus offers certain
guarantees against negative returns - guarantees MetLife calls "Shield
Rates." The "Shield Rate" is the amount of negative index performance that
is absorbed by MetLife at the end of the term (I.E., the downside protection
offered by the "Shield Rate").
Each "Shield Rate" is named "shield" with the related numeric value (E.G.,
Shield 10, Shield 15, Shield 25 and Shield 100) that shows what downside
protection the "Shield Rate" provides. For example, the Shield 25 absorbs
the first 25% of negative performance at the end of the term. If the
contract owner wants no downside exposure, the Shield 100 provides that
MetLife will absorb all of the negative return on investment amounts
allocated to that Shield Option. Thus, the product gives the contract owner
the ability to tailor downside exposure to fit his or her needs.
An investor buying the product must at the outset affirmatively select the
"Shield Options" he or she wants for the level of protection desired.
"Shield Options" permit contract owners to potentially receive interest
equal to the percentage returns of certain indices, up to a cap rate or step
rate. Each "Shield Option" has an associated (i) term, (ii) index,
(iii) "Shield Rate," and (iv) either a cap rate or step rate. This act of
choosing reinforces that different "Shield Options" have different levels of
downside protection. Thus, at the time of purchase, the purchaser fills out
an administrative form in which he or she specifies the percentage of
purchase payment to be allocated to each "Shield Option." The following is
an example of the allocation form:
PURCHASE PAYMENT ALLOCATION
FIXED ACCOUNT OPTION
1 Year Term Fixed Account ______%
SHIELD OPTIONS
SHIELD 100
1 Year Shield Term Index A ______%
Index A Step Rate ______%
-2-
SHIELD 25
6 Year Shield Term Index A ______%
SHIELD 15
3 Year Shield Term Index A ______%
6 Year Shield Term Index A ______%
SHIELD 10
1 Year Shield Term Index A ______%
Index A Step Rate ______%
Index B ______%
Index C ______%
3 Year Shield Term Index A ______%
Index A Step Rate ______%
Index B ______%
Index C ______%
6 Year Shield Term Index A ______%
TOTAL ______%
Each time the contract owner selects one or more of the "Shield Options" the
contract owner will receive a confirmation noting the "Shield Options"
selected. The confirmation will show the investment amount, the index, the
Shield Rate, the term and the applicable step rate or cap for each Shield
Option chosen. The overall contract owner experience reinforces the
differences in the level of downside protection provided by each of the
available "Shield Options."
The prospectus discloses prominently in a number of places the level of
downside protection offered as well as the risks involved in choosing a
particular level of downside protection. For example, there is clear
disclosure regarding the operation of the "Shield Options" and the impact of
withdrawals and other investor actions. Also, the "Risk Factors" section
clearly states:
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.
SATISFYING THE COMMISSION'S "PLAIN ENGLISH" REQUIREMENT.
--------------------------------------------------------
The word "shield" itself is defined by Merriam-Webster as "one that protects
or defends" and "a device or part that serves as protective cover or
barrier." That is precisely what the product does: it does not purport to
"guarantee" returns; it simply provides a "shield" against levels of market
risk. Other risks certainly remain, and they are fully disclosed.
The word "shield" does not connote complete or absolute protection against
an event. For example, a "heat shield" is designed to shield a substance
from absorbing excessive heat from an outside source by dissipating,
reflecting or simply absorbing the heat. If the heat exceeds the
thermodynamic properties of the heat shield, the heat shield will fail.
-3-
The word "shield" in the context of the product name and in the names of the
shield options available in the product is purely descriptive and far from
misleading.
Redefining a commonly understood word to mean something more than it
actually does goes against the "plain English" principles promoted in Rule
421 under the Securities Act of 1933 and the Plain English Handbook of the
Office of Investor Education and Assistance of the Commission. Rule
421(d)(2)(ii), for example, states a plain English principle for prospectus
drafting of using "[d]efinite, concrete, everyday words," particularly in
the front and back cover pages, the summary and the risk factors section of
the prospectus.
MetLife chose the word "shield" in the name of the product and for the
"Shield Options" and "Shield Rate" precisely because the word perfectly fits
the plain English concepts endorsed by the Commission. The word "shield" is
a definite, concrete and everyday word.
CONCLUSION. There is no suggestion in the staff comments that the product's
shield features are somehow illusory. The staff does not, and could not,
suggest that the insurance features of the contract do not effectively
shield investments - the MetLife Flex Market Shield Annuity actually does
shield investments, in contrast to other products such as mutual funds.
MetLife strongly believes that the word "shield" (i) does not mislead
investors, (ii) will not confuse investors regarding the level of downside
protection they will be getting, (iii) is the correct descriptive word for
the concept under the circumstances and (iv) adheres to the "plain English"
requirements expounded by the Commission.
*****
Please contact Andras P. Teleki at (202) 778-9477 or the undersigned at
(202) 778-9886 with any questions comments.
Sincerely,
/s/ Diane E. Ambler
Diane E. Ambler
cc William Kotapish
Joyce Pickholz
-4-