THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
METLIFE SHIELD LEVEL SELECTOR/SM/ ANNUITY
MetLife Shield Level Selector/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.
THE RISK FACTORS FOR THIS CONTRACT APPEAR ON PAGE 12.
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. 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 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.
THE PRINCIPAL UNDERWRITER OF THE CONTRACT IS METLIFE INVESTORS DISTRIBUTION
COMPANY. THE OFFERING OF THE CONTRACT IS INTENDED TO BE CONTINUOUS.
Prospectus dated April 12, 2013
EXAMPLES
--------
Example 1 set forth below, as well as Examples 2-4 found throughout this
prospectus, are intended to illustrate how various features of your Contract
work. The examples will use hypothetical "Owner 1" to illustrate the following
concepts:
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.")
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 in the examples. 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.
Values are rounded for display purposes only.
EXAMPLE 1 - CALCULATING YOUR INVESTMENT AMOUNT ON A TERM END DATE
Examples 1A and 1B are intended to show how the Investment Amount on a Term End
Date is calculated. In both examples assume Owner 1 allocates her $50,000
Purchase Payment into a one Year Term / Shield 10 / S&P 500(R) Index and she
allows her allocation to roll over from year to year for five years. In Example
1A she has selected the Shield 10 S&P 500(R) Index with a Cap Rate of 10%. In
Example 1B she has selected the Shield 10 S&P 500(R) Index with a Step Rate of
8%. For purposes of both examples, assume no withdrawals are made during the
five year example period, the Example 1A Cap Rate stays at 10% for all five
years and the Example 1B Step Rate stays at 8% for all five years. If a
withdrawal were made, a Withdrawal Charge and an Interim Value calculation may
apply; and consequently the Investment Amount for the Term would be adjusted
accordingly.
Example 1A - Shield Option with Cap Rate:
-----------------------------------------
Owner 1 allocates her $50,000 Purchase Payment into a one Year Term / Shield 10
/ S&P 500(R) Index with a Cap Rate of 10% and lets it roll over year after year
for five years. The following example illustrates how her initial $50,000
Purchase Payment could perform over a five-year period given fluctuating Index
Values. For renewals into the same Shield Option a new Cap Rate would be
declared and go into effect on the Contract Anniversary that coincides with the
beginning of the new Shield Option.
[GRAPHICS APPEARS HERE]
23
Contract Year 1 2 3 4 5
------------- ------- ------- ------- ------- -------
Investment Amount at Term Start
Date adjusted for any
withdrawals(l) $50,000 $55,000 $57,750 $57,750 $57,750
Index Value at Term Start Date 1,000 1,200 1,260 1,260 1,197
Index Value at Term End Date 1,200 1,260 1,260 1,197 1,017
Index Performance(2) 20% 5% 0% -5% -15%
Cap Rate 10% 10% 10% 10% 10%
Shield Rate 10% 10% 10% 10% 10%
Performance Rate (one year)(3) 10% 5% 0% 0% -5%
Performance Rate Adjustment(4) $5,000 $2,750 $0 $0 -$2,888
INVESTMENT AMOUNT AT TERM END
DATE(5) $55,000 $57,750 $57,750 $57,750 $54,862
--------
Notes to the table above:
(1)Investment Amount at Term Start Date in year one is the $50,000 Purchase
Payment. In years two through five, the Investment Amount at Term Start Date
would be $55,000, $57,750, $57,750 and $57,750, respectively, which was the
Investment Amount at Term End Date for the prior year.
(2)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the Term End Date. For example, in year
one, Index Performance is calculated as follows:
(1,200 [Index Value at Term End Date] - 1,000 [Index Value at Term Start Date])
/ 1,000 [Index Value at Term Start Date] = 20%
(3)In year one, Index Performance exceeds the Cap Rate and therefore the
Performance Rate is equal to the Cap Rate. In years two and three the
Performance Rate is equal to the Index Performance because the Index
Performance is not negative and does not exceed the Cap Rate. In year four
the Performance Rate is 0% because the Index Performance is -5% and the
Shield 10 absorbs up to 10% of the negative Index Performance. In year five,
the Performance Rate is -5% because the Index Performance is -15% and the
Shield 10 absorbs up to 10% of negative Index Performance.
(4)The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) plus the Performance Rate adjustment. For
example, in year one the Investment Amount at the Term End Date is
calculated as follows:
$50,000 [Investment Amount at Term Start Date] x 10% [Performance Rate] = $5,000
(5)The Investment Amount at the Term End Date is equal to the Investment Amount
at Term Start Date adjusted for any withdrawals (there are no withdrawals in
the example) plus the Performance Rate Adjustment. For example, in year one
the Investment Amount at the Term End Date is calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $5,000 [Performance Rate
Adjustment] = $55,000
Example IB - Shield Option with Step Rate:
------------------------------------------
Owner 1 allocates her $50,000 Purchase Payment into a one Year Term / Shield 10
/ S&P 500(R) Index with a Step Rate of 8% and lets it roll over year after year
for five years. The following example illustrates how her initial $50,000
Purchase Payment could perform over a five-year period given fluctuating Index
Values. For renewals into
24
the same Shield Option a new Step Rate would be declared and go into effect on
the Contract Anniversary that coincides with the beginning of the new Shield
Option.
[GRAPHIC APPEARS HERE]
Contract Year 1 2 3 4 5
------------- ------- ------- ------- ------- -------
Investment Amount at Term Start
Date adjusted for any
withdrawals(l) $50,000 $54,000 $58,320 $62,986 $62,986
Index Value at Term Start Date 1,000 1,050 1,260 1,260 1,134
Index Value at Term End Date 1,050 1,260 1,260 1,134 964
Index Performance(2) 5% 20% 0% -10% -15%
Step Rate 8% 8% 8% 8% 8%
Shield Rate 10% 10% 10% 10% 10%
Performance Rate (one year)(3) 8% 8% 8% 0% -5%
Performance Rate Adjustment(4) $4,000 $4,320 $4,666 $0 -$3,149
INVESTMENT AMOUNT AT TERM END
DATE(5) $54,000 $58,320 $62,986 $62,986 $59,837
--------
Notes to the table above:
(1)Investment Amount at Term Start Date in year one is the $50,000 Purchase
Payment. In years two through five, the Investment Amount at the Term Start
Date would be $54,000, $58,320, $62,986 and $62,986, respectively, which was
the Investment Amount at the Term End Date for the prior year.
(2)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the Term End Date. For example, in year
one, Index Performance is calculated as follows:
(1,050 [Index Value at Term End Date] - 1,000 [Index Value at Term Start Date])
/ 1,000 [Index Value at Term Start Date]) = 5%
(3)In years one, two and three the Performance Rate is equal to the Step Rate
because the Index Performance is positive or zero. It should be noted that
although Index Performance was 20% in year two, the Performance Rate is
capped at 8% by the Step Rate. In year four the Performance Rate is 0%
because the Index Performance is -10% and the Shield 10 absorbs up to 10% of
the negative Index Performance. In year five, the Performance Rate is -5%
because the Index Performance is -15% and the Shield 10 absorbs up to 10% of
the negative Index Performance.
(4)The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. For example,
in year one the Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x 8% [Performance Rate] = $4,000
(5)The Investment Amount at the Term End Date is equal to the Investment Amount
at Term Start Date adjusted for any withdrawals (there are no withdrawals in
the example) plus the Performance Rate Adjustment. For example, in year one
the Investment Amount at the Term End Date is calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $4,000 [Performance Rate
Adjustment] = $54,000
25
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 at
the Term Start Date, adjusted for any withdrawals, 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
26
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 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%.
An Accrued Step Rate is calculated in the same manner - the Step Rate is
multiplied by the number of days elapsed since the Term Start Date and divided
by the total number of days in the Term. For example, if the Step Rate is 8%
and the total number of days in the Term is 2190 and 1095 days have elapsed,
then the Step Rate (8%) is multiplied by 1095 and divided by 2190 to arrive at
an Accrued Step Rate of 4%.
EXAMPLE 2 - CALCULATING YOUR INTERIM VALUE
Examples 2A and 2B are intended to show how an Interim Value is calculated. An
Interim Value Calculation will be made if you annuitize, die, make a
withdrawal, Surrender or cancel your Contract before the Term End Date. In both
examples assume Owner 1 allocates her $50,000 Purchase Payment on February 1,
2014 to a three Year Term / Shield 15 / S&P 500(R) Index with a Cap Rate of
30%. Example 2A will illustrate an Interim Value calculation with positive
Index Performance and Example 2B will illustrate an Interim Value calculation
with negative Index Performance. For purposes of these examples, assume the
activity that triggers the Interim Value calculation occurs on February 1, 2015
and that there are no withdrawals made as of the date the Interim Value is
calculated.
Example 2A - Positive Index Performance:
----------------------------------------
Term Start Date February 1, 2014
Investment Amount at Term Start Date $50,000
Shield Rate Shield 15
Cap Rate 30%
Index Value on February 1, 2014 500
Date of Interim Value Calculation February 1, 2015
Index Value on February 1, 2015 600
Index Performance(l) 20%
Accrued Cap Rate(2) 10%
Performance Rate(3) 10%
Performance Rate Adjustment(4) $5,000
Interim Value as of February 1, 2015(5) $55,000
--------
Notes to the table above:
(1)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Interim Value
calculation. Index Performance is calculated as follows:
(600 [Index Value on date of Interim Value calculation] - 500 [Index Value at
Term Start Date]) / 500 [Index Value at Term Start Date] = 20%
(2)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. The Accrued Cap Rate is calculated as follows:
30% [Cap Rate] x 365 [number of days elapsed since the Term Start Date] / 1095
[total number of days in the Term] = 10%
27
(3)The Performance Rate is equal to the Accrued Cap Rate because it cannot
exceed the Accrued Cap Rate even though the Index Performance was at 20%.
(4)The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x 10% [Performance Rate] = $5,000
(5)The Interim Value on February 1, 2015 is equal to the Investment Amount at
the Term Start Date adjusted for any withdrawals (there are no withdrawals
in the example) plus the Performance Rate Adjustment. The Interim Value is
calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $5,000 [Performance Rate
Adjustment] = $55,000
Example 2B - Negative Index Performance:
----------------------------------------
Term Start Date February 1, 2014
Investment Amount at Term Start Date $50,000
Shield Rate Shield 15
Cap Rate 30%
Index Value on February 1, 2014 500
Date of Interim Value Calculation February 1, 2015
Index Value on February 1, 2015 400
Index Performance(1) -20%
Accrued Shield Rate(2) 5%
Performance Rate(3) -15%
Performance Rate Adjustment(4) -$7,500
Interim Value as of February 1, 2015(5) $42,500
--------
Notes to the table above:
(1)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Interim Value
calculation. Therefore the Index Performance is calculated as follows:
(400 [Index Value on date of Interim Value calculation] - 500 [Index Value at
Term Start Date]) / 500 [Index Value at Term Start Date]) = -20%
(2)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. The Accrued Shield Rate is calculated as follows:
15% [Shield Rate] x 365 [number of days elapsed since the Term Start Date] /
1095 [total number of days in the Term] = 5%
(3)The Performance Rate is -15% because the Index Performance is -20% and the
Accrued Shield Rate of 5% absorbs up to 5% of the negative Index Performance.
(4)The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x -15% [Performance Rate] =
-$7,500
(5)The Interim Value on February 1, 2015 is equal to the Investment Amount at
the Term Start Date adjusted for any withdrawals (there are no withdrawals
in the example) plus the Performance Rate Adjustment. The Interim Value is
calculated as follows:
$50,000 [Investment Amount at Term Start Date] + -$7,500 [Performance Rate
Adjustment] = $42,500
28
after exiting the nursing home facility or hospital. The confinement must be
prescribed by a physician and be medically necessary. Not available in
Massachusetts and South Dakota; or
. (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. Not available
in Massachusetts and Washington.
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. 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.
EXAMPLE 3 - WITHDRAWALS
Examples 3A and 3B are intended to show how withdrawals work. In both examples
assume that Owner 1 allocates her $50,000 Purchase Payment on February 1, 2014
to the three Year Term / Shield 15 / S&P 500(R) Index with a Cap Rate of 30%.
Example 3A will illustrate a withdrawal when Index Performance is positive and
assumes no Withdrawal Charge applies due to a Withdrawal Charge waiver. Example
3B will illustrate a withdrawal when Index Performance is negative and an 8%
Withdrawal Charge is applied. In both examples, Owner 1 takes only one $20,000
withdrawal on February 1, 2015. The remaining Investment Amount after a
withdrawal will be used as the Investment Amount for the Term going forward
until the Term End Date for that Shield Option (assuming no additional
withdrawals).
Example 3A - Positive Index Performance and no Withdrawal Charge:
-----------------------------------------------------------------
Term Start Date February 1, 2014
Investment Amount at Term Start Date $50,000
Shield Rate Shield 15
Cap Rate 30%
Index Value at Term Start Date 500
Date of Interim Value Calculation February 1, 2015
Index Value on February 1, 2015 600
Index Performance(l) 20%
Accrued Cap Rate(2) 10%
Performance Rate(3) 10%
Performance Rate Adjustment(4) $5,000
Interim Value as of February 1, 2015(5) $55,000
Withdrawal Amount taken on February 1, 2015 $20,000
Investment Amount adjusted for any withdrawals(6) $31,818
Net Proceeds from withdrawal paid to Contract Owner(7) $20,000
Index Value at Term End Date 700
Index Performance at Term End Date(8) 40%
Performance Rate at Term End Date(9) 30%
Performance Rate Adjustment at Term End Date(10) $9,545
Investment Amount at Term End Date(l1) $41,363
--------
Notes to the table above:
(1)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Interim Value
calculation. Index Performance is calculated as follows:
(600 [Index Value on date of Interim Value calculation] - 500 [Index Value at
Term Start Date]) / 500
[Index Value at Term Start Date]) = 20%
31
(2)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. The Accrued Cap Rate is calculated as follows:
30% [Cap rate] x 365 [number of days elapsed since Term Start Date] / 1095
[total number of days in the Term] = 10%
(3)The Performance Rate is equal to the Accrued Cap Rate because it cannot
exceed the Accrued Cap Rate even though Index Performance was at 20%.
(4)The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (no withdrawals
have been taken so far) multiplied by the Performance Rate. The Performance
Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x 10% [Performance Rate] = $5,000
(5)The Interim Value on February 1, 2015 is equal to the Investment Amount at
the Term Start Date adjusted for any withdrawals plus the Performance Rate
Adjustment. This is the amount in the Shield Option selected that would be
available if you annuitize, die, make a withdrawal, Surrender or cancel your
Contract on that date. The Interim Value is calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $5,000 [Performance Rate
Adjustment] = $55,000
(6)The Investment Amount is reduced proportionally by the withdrawal taken
based on the reduction in Interim Value. Therefore, the Investment Amount
adjusted for any withdrawals is calculated as follows:
$50,000 [Investment Amount on February 1, 2014] x (1 - $20,000 [gross
withdrawal amount on February 1, 2015] / $55,000 [Interim Value as of
February 1, 2015]) = $31,818
The proportionally reduced Investment Amount is used as the Investment
Amount for the Term going forward until the Term End Date for this Shield
Option (assuming no additional withdrawals.)
(7)The net amount payable to the Contact Owner is equal to the amount withdrawn
minus the Withdrawal Charge. The net amount payable is calculated as follows:
$20,000 [amount withdrawn] - $0 [Withdrawal Charge] = $20,000.
(8)Index Performance at the Term End Date is equal to the percentage change in
the Index Value measured from the Term Start Date to the Term End Date.
Index Performance at the Term End Date is calculated as follows:
(700 [Index Value at Term End Date] - 500 [Index Value at Term Start Date]) /
500 [Index Value at Term Start Date] = 40%
(9)Index Performance at the Term End Date exceeds the Cap Rate and therefore
the Performance Rate the Term End Date is equal to the Cap Rate.
(10)The Performance Rate Adjustment at the Term End Date is equal to the
product of the Investment Amount at the Term Start Date adjusted for any
withdrawals multiplied by the Performance Rate at the Term End Date. The
Performance Rate Adjustment at the Term End Date is calculated as follows:
$31,818 [Investment Amount on February 1, 2015] x 30% [Performance Rate at Term
End Date] = $9,545
(11)The Investment Amount at the Term End Date is equal to the Investment
Amount on February 1, 2015 adjusted for any withdrawals plus the
Performance Rate Adjustment at Term End Date. The Investment Amount at the
Term End Date is calculated as follows:
$31,818 [Investment Amount on February 1, 2015] + $9,545 [Performance Rate
Adjustment at Term End Date] = $41,363
32
Example 3B - Negative Index Performance and Withdrawal Charge:
--------------------------------------------------------------
Term Start Date February 1, 2014
Investment Amount at Term Start Date $50,000
Shield Rate Shield 15
Cap Rate 30%
Index Value at Term Start Date 500
Date of Interim Value Calculation February 1, 2015
Index Value on February 1, 2015 400
Index Performance(l) -20%
Accrued Shield Rate(2) 5%
Performance Rate(3) -15%
Performance Rate Adjustment(4) -$7,500
Interim Value as of February 1, 2015(5) $42,500
Withdrawal Amount taken on February 1, 2015 $20,000
Investment Amount adjusted for any withdrawals(6) $26,471
Free Withdrawal Amount(7) $4,250
Withdrawal Charge Amount(8) $1,260
Net Proceeds from Withdrawal paid to Contract Owner(9) $18,740
Index Value at Term End Date 450
Index Performance at Term End Date(10) -10%
Performance Rate at Term End Date(l1) 0%
Performance Rate Adjustment at Term End Date(12) $0
Investment Amount at Term End Date(13) $26,471
--------
Notes to the table above:
(1)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Interim Value
calculation. Index Performance is calculated as follows:
(400 [Index Value on date of Interim Value calculation] - 500 [Index Value at
Term Start Date]) / 500 [Index Value at Term Start Date]) = -20%
(2)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. The Accrued Shield Rate is calculated as follows:
15% [Shield Rate] x 365 [number of days elapsed since Term Start Date] / 1095
[total number of days in the Term] = 5%
(3)The Performance Rate is -15% because the Index Performance is -20% and the
Accrued Shield Rate of 5% absorbs up to 5% of the negative Index Performance.
(4)The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (no withdrawals
have been taken so far) multiplied by the Performance Rate. The Performance
Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x -15% [Performance Rate] =
-$7,500
(5)The Interim Value on February 1, 2015 is equal to the Investment Amount at
the Term Start Date adjusted for any withdrawals plus the Performance Rate
Adjustment. This is the amount in the Shield Option selected that would be
available if you annuitize, die, make a withdrawal, Surrender or cancel your
Contract on that date. The Interim Value is calculated as follows:
$50,000 [Investment Amount at Term Start Date] + -$7,500 [Performance Rate
Adjustment] = $42,500
(6)The Investment Amount is reduced proportionally by the withdrawal taken
based on the reduction in Interim Value. Therefore, the Investment Amount
adjusted for any withdrawals is calculated as follows:
$50,000 [Investment Amount as of February 1, 2014] x (1 - $20,000 [gross
withdrawal amount on February 1, 2015]) / $42,500 [Interim Value as of
February 1, 2015] = $26,471
33
The proportionally reduced Investment Amount will be used as the Investment
Amount for the Term going forward until the Term End Date for this Shield
Option (assuming no additional withdrawals.)
(7)The Free Withdrawal Amount is the value as of the most recent Contract
Anniversary multiplied by the Free Withdrawal Amount Percentage. The Free
Withdrawal Amount is calculated as follows:
$42,500 [Interim Value as of February 1, 2015] x 10% [Free Withdrawal Amount
percentage] = $4,250
(8)The Withdrawal Charge Amount is the gross withdrawal amount minus the Free
Withdrawal Amount multiplied by the Withdrawal Charge.
($20,000 [gross withdrawal amount] - $4,250 [Free Withdrawal Amount*]) x 8%
[Withdrawal Charge] = $1,260
(9)The net amount payable to the Contact Owner is equal to the amount withdrawn
minus the Withdrawal Charge. The net amount payable is calculated as follows:
$20,000 [amount withdrawn] - $1,260 [Withdrawal Charge] = $18,740
(10)Index Performance at the Term End Date is equal to the percentage change in
the Index Value measured from the Term Start Date to the Term End Date.
Index Performance at the Term End Date is calculated as follows:
(450 [Index Value at Term End Date] - 500 [Index Value at Term Start Date]) /
500 [Index Value at Term Start Date] = -10%
(11)The Performance Rate at the Term End Date is 0% because the Index
Performance at the Term End Date is -10% and the Shield 15 absorbs up to
15% of the negative Index Performance.
(12)The Performance Rate Adjustment at the Term End Date is equal to the
product of the Investment Amount at the Term Start Date adjusted for any
withdrawals multiplied by the Performance Rate at the Term End Date. The
Performance Rate Adjustment at the Term End Date is calculated as follows:
$26,471 [Investment Amount on February 1, 2015] x 0% [Performance Rate at Term
End Date] = $0
(13)The Investment Amount at the Term End Date is equal to the Investment
Amount on February 1, 2015 adjusted for any withdrawals plus the
Performance Rate Adjustment at Term End Date. The Investment Amount at the
Term End Date is calculated as follows:
$26,471 [Investment Amount on February 1, 2015] + $0 [Performance Rate
Adjustment at Term End Date] = $26,471
TRANSFERS
During the Transfer Period you may make transfers to or from the Fixed Account
and/or to or from the Shield Option(s). We must receive notification of your
election to transfer, in a form satisfactory to us or by calling us at
1-800-343-8496, no later than five (5) calendar days after the Contract
Anniversary on which the transfer will take place. Your financial
representative can provide more information or you may contact our Annuity
Service Office. 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.
34
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.
EXAMPLE 4 - TRANSFERS
Example 4 is intended to show how transfers work. Owner 1 allocates her $50,000
Purchase Payment on February 1, 2014 to the one Year Term / Shield 15 / S&P
500(R) Index with a Cap Rate of 10%. At the end of the one year Term, she
transfers 50% of her one Year Term / Shield 15 / S&P 500(R) Index with a Cap
Rate of 10% into a one Year Term / Shield 10 / S&P 500(R) Index with a Cap Rate
of 15% and opts to let the remaining 50% of her Investment Amount automatically
roll over.
Shield Options prior to Transfer:
CONTRACT YEAR 1
------------- --------
Investment Amount at Term Start Date (February I, 2014) $50,000
Index Value at Term Start Date 1,000
Index Value at Term End Date 1,200
Index Performance(l) 20%
Cap Rate 10%
Shield Rate Shield 10
Performance Rate (one year)(2) 10%
Performance Rate Adjustment(3) $5,000
Investment Amount at Term End Date (February 1, 2015)(4) $55,000
--------
Notes to the table above:
(1)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the Term End Date. Index Performance is
calculated as follows:
(1,200 [Index Value at Term End Date] - 1,000 [Index Value at Term Start Date])
/ 1000 [Index Value at Term Start Date]) = 20%
(2)Since Index Performance is greater than zero and exceeds the Cap Rate, the
Performance Rate equals the Cap Rate.
(3)The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$50,000 [Investment Amount at Term Start Date] x 10% [Performance Rate] = $5,000
35
(4)The Investment Amount at Term End Date is equal to the Investment Amount at
Term Start Date adjusted for any withdrawals (there are no withdrawals in
the example) plus the Performance Rate Adjustment. The Investment Amount is
calculated as follows:
$50,000 [Investment Amount at Term Start Date] + $5,000 [Performance Rate
Adjustment] = $55,000
Shield Options after Transfer:
CONTRACT YEAR 2
------------- -----------------------------------------------------------------------
One Year Term / Shield 15 / S&P One Year Term / Shield 10 / S&P
500(R) Index with a Cap Rate of 10% 500(R) Index with a Cap Rate of 15%
----------------------------------- -----------------------------------
Investment Amount
at Term Start
Date (February 1,
20l5)(l) $27,500 $27,500
--------
Notes to the table above:
(1)The Investment Amount at Term End Date on February 1, 2015 is reallocated so
that 50% is rolled over and 50% is allocated to a new Shield Option.
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 optional death
benefit, except for a Shield Option with the Shield 100. The reduction in the
Cap Rates and Step Rates will not exceed 60%. For example if you purchase a
Contract without the Return of Premium death benefit and you choose a Shield
Option with a Cap Rate, such Cap Rate may be set at 10% compared to that same
Shield Option purchased with the Return of Premium death benefit where such Cap
Rate may be set as low as 4%. 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 72 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
36
APPENDIX B
INDEX SUBSTITUTION INVESTMENT AMOUNT EXAMPLE
The following example illustrates how we would calculate your Investment Amount
on a Term End Date when there is an Index substitution. We assume no
withdrawals and a $100,000 Purchase Payment into a Shield Option with a 3-Year
Term / Shield 10 / S&P 500(R) Index with a Cap Rate.
INITIAL ACCOUNT VALUE:
Investment Amount at Term Start Date $100,000
Term Start Date 1/1/2014
Term End Date 1/1/2017
Term 3 Year
Initial Index S&P 500(R) Index
S&P 500(R) Index Index Value on Term Start Date 1,400
Cap Rate 30%
Shield Rate 10%
ON DATE OF INDEX SUBSTITUTION:
Index substitution date 1/1/2015
Number of days since Term Start Date 365
Index Value for S&P 500(R) Index 1,330
Index Performance for S&P 500(R) Index(1) -5%
Substituted Index Russell 2000(R) Index
Index Value for Russell 2000(R) Index on
substitution date 1,250
--------
Notes to the table above:
(1)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Index substitution.
Index Performance is calculated as follows:
(1330 [Index Value on date of substitution] - 1400 [Index Value at Term Start
Date]) / 1400 [Index Value at Term Start
Date]) = -5%
CALCULATION OF INVESTMENT AMOUNT AT TERM END DATE:
Term End Date 1/1/2017
Index Value for Russell 2000(R) Index 1,375
Index Performance for S&P 500(R) Index(l) -5%
Index Performance for Russell 2000(R) Index(2) 10%
Total Index Performance for the Term(3) 4.50%
Cap Rate 30%
Shield Rate 10%
Performance Rate(4) 4.50%
Performance Rate Adjustment(5) $4,500
Investment Amount at Term End Date(6) $104,500
--------
Notes to the table above:
(1)Index Performance is equal to the percentage change in the Index Value
measured from the Term Start Date to the date of the Index substitution.
Index Performance is calculated as follows:
(1330 [Index Value at date of substitution] - 1400 [Index Value at Term Start
Date]) / 1400 [Index Value at Term Start
Date]) = -5%
(2)Index Performance is equal to the percentage change in the Index Value
measured from the date of the Index substitution to the Term End Date. Index
Performance is calculated as follows:
(1375 [Index Value at Term End Date] - 1250 [Index Value at date of the
substitution]) / 1250 [Index Value at date of substitution]) = 10%
B-1
(3)Since there was an Index substitution, the Index Performance is equal to the
Index Performance of the S&P 500(R) Index (from the Term Start Date to the
Index substitution date) multiplied by the Index Performance of the Russell
2000(R) Index (from the Index substitution date to the Term End Date) - 1.
Total Index Performance for the Term is calculated as follows:
(initial Index at Index substitution date / initial Index at Term Start Date)
x (substituted Index at Term End Date / substituted Index at
substitution date) - 1
(1330/1400) x (1375/1250) - 1= 4.50%
(4)The Performance Rate is equal to the Index Performance (4.50%) because the
total Index Performance for the Term is greater than zero and less than the
Cap Rate.
(5)The Performance Rate Adjustment is equal to the product of the Investment
Amount at the Term Start Date adjusted for any withdrawals (there are no
withdrawals in the example) multiplied by the Performance Rate. The
Performance Rate Adjustment is calculated as follows:
$100,000 [Investment Amount at Term Start Date] x 4.50% [Performance
Rate] = $4,500
(6)The Investment Amount at Term End Date is equal to the Investment Amount at
the Term Start Date adjusted for any withdrawals plus the Performance Rate
Adjustment. The Investment Amount at Term End Date is calculated as follows:
$100,000 [Investment Amount at Term Start Date] + $4,500 [Performance Rate
Adjustment] = $104,500
B-2