corresp
BRANDON J. CAGE
Assistant Vice President, Counsel
Law Department
Phone: 949-219-3943
Fax: 949-219-6952
Brandon.Cage@pacificlife.com
September 21, 2010
Michael L. Kosoff
Senior Counsel
Office of Insurance Products
Division of Investment Management
U.S. Securities & Exchange Commission
100 F Street, NE
Washington, DC 20549-0506
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Re:
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Separate Account A of Pacific Life Insurance Company |
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Initial Registration Statement on Form N-4 (Pacific Journey Select) |
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File Nos. 333-168026, 811-08946 |
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Separate Account A of Pacific Life & Annuity Company |
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Initial Registration Statement on Form N-4 (Pacific Journey Select NY) |
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File Nos. 333-168027, 811-09203 |
Dear Mr. Kosoff:
On behalf of Pacific Life Insurance Company (Pacific Life), Separate Account A of Pacific Life
(811-08946), Pacific Life & Annuity Company (PLA) and Separate Account A of PLA (811-09203)
(hereinafter collectively referred to as Registrants), set forth below are responses to Staff
comments dated September 1, 2010, in connection with the above referenced Registration Statements
on Form N-4, filed with the SEC on July 8, 2010. The changes made in connection with this response
will be reflected in a Pre-Effective Amendment to the above referenced Registration Statements.
1. Staff Comment: An Overview of Pacific Journey Select (p. 3). Please confirm
supplementally that the prospectus describes all material rights and obligations owed to the
contract owner, including all material state variations.
Response: We hereby confirm that the prospectus describes all material rights and obligations owed
to the contract owners, including all state variations that we believe are material.
2. Staff Comment: Four Year Withdrawal Charge Option (p. 5). If the Four Year Withdrawal
Charge Option is selected, the contract owner can only make premium payments during the first
contract year. Please clarify the extent to which this restriction is applicable to loan
repayments.
Mr. Kosoff
September 21, 2010
Page 2
Response: We added the following sentence to the first paragraph of that section [new disclosure is
underlined for your reference]:
This option allows you to reduce the withdrawal charge schedule from 6 years to 4 years. You may
only purchase this option at the time your application is completed. If you purchase this option
you may only make subsequent Purchase Payments during your first Contract Year. If you take a
loan, any loan repayments are not considered Purchase Payments and may be made after the First
Contract Year.
3. Staff Comment: Expenses (pp. 9-10).
a. Please confirm supplementally that the charge for the four-year withdrawal charge
option is not assessed against amounts allocated to the fixed account.
Response: We hereby confirm that the four-year withdrawal charge option charge is not
assessed against amounts allocated to the fixed account; the charge is only assessed
against variable accounts.
b. With respect to footnote 9, for consistency between the footnotes and clarity, please
disclose that the charge is equal to the current charge percentage multiplied by the
Contract Value.
Response: We modified the first sentence of footnote 9 as follows:
If you buy the EEG Rider, the annual charge is equal to the current charge percentage
multiplied by the Contract Value, deducted on an annual basis. We deduct this charge
proportionately from your Investment Options...
c. Please revise the headings in the withdrawal chart to clarify the applicable charge
when a payment is more than n but less than n+1 years old (e.g., at least 1 year old).
Please make a conforming change on page 26 of the prospectus.
Response: We respectfully decline to make the requested disclosure change. The
existing disclosure in this section is clear and already goes beyond what is required by
Item 3, instruction 9 on Form N-4. In addition, the existing table and narrative
disclosure on or about page 26 of the prospectus is clear as well.
d. The captions in the Periodic Table are confusing. Please insert the word only at
the end of the 2nd and 3rd column headings, and change none to
not applicable.
Response: We made the requested disclosure changes.
e. With respect to footnote 16, for consistency between the footnotes and clarity,
please disclose that the charge is equal to the current charge percentage multiplied by
the greater of the Contract Value or the Guaranteed Income Base.
Response: We made the requested disclosure change.
Mr. Kosoff
September 21, 2010
Page 3
4. Staff Comment: Expense Example (p. 12). Please revise the expense example to reflect
the Four Year Withdrawal Charge Option.
a. The narrative preceding the expense examples states that the minimum amounts do not
reflect optional riders. To accurately reflect the minimum amount of expenses, the Four
Year Withdrawal Charge Option should be reflected in the expense example for year 5 in
the surrender and annuitization examples. Please revise the narrative and examples
accordingly.
Response: The minimum amounts do not reflect optional riders, including the Four Year
Withdrawal Option. Given that this is an option at an additional expense, we included
the Four Year Withdrawal Option in the maximum amounts along with the other optional
benefits that can be elected.
b. The illustration of maximum charges in the examples should reflect the election of
the Four Year Withdrawal Charge Option, except in year 5 in the surrender and
annuitization examples. Please revise the examples accordingly.
Response: For the maximum charges in the examples, we will include the charge for the
Four Year Withdrawal Charge Option in all periods presented in the examples.
c. The annual charge for the Four Year Withdrawal Charge Option extends out for four
years. Please explain supplementally whether the Four Year Withdrawal Charge Options
charge will be reflected for four years or all ten years in the expense examples. See
item 3, instr. 21(a) of Form N-4.
Response: The 0.35% charge for the Four Year Withdrawal Charge Option is included in
the maximum amounts for the entire 10 year period. We modified the disclosure in the
narrative preceding the expense examples to explain that the charge is included in the
maximum amounts.
5. Staff Comment: Your Investment Options (p. 13). The prospectus states that [s]ome
broker-dealers may not allow or may limit the amount you may allocate to certain Investment
Options. The optional living benefits offered through this prospectus impose stringent investment
restrictions. Please explain supplementally the extent to which and why a broker-dealer may not
allow a contract owner to own investment options or maintain investment allocations required for
eligibility to own the optional living benefits, and what are the consequences for the rider.
Response: Broker-dealers and their respective registered representatives, working with
their clients, determine which investment options are suitable for their clients; we do
not make such determinations or recommendations. As a result, we cannot explain why a
particular broker-dealer or registered representative may not allow or recommend that
their client allocate contract value to certain investment options.
As for rider eligibility implications, there is a broad range of investment option
choices including the Portfolio Optimization Models (Models A through D), asset
allocation investment options and the Custom Model program for a Contract Owner to
select from. On information and belief, there have been no adverse ramifications for
rider eligibility with the
Mr. Kosoff
September 21, 2010
Page 4
few broker-dealers that may limit certain rider eligible investment options.
6. Staff Comment: Your Fixed Option (p. 16). Please clarify that the DCA Plus Fixed
Option, the only fixed option offered under the contract, only accepts allocation from premium
payments, premium payments can only be held in the account for a term of up to one year (the
Guaranteed Term); and that premium payments must be automatically transferred to the variable
investment account monthly during the Guaranteed Term.
Response: We replaced the sole paragraph in the Your Fixed Option subsection with the
following disclosure:
The DCA Plus Fixed Option offers you a guaranteed minimum interest rate on amounts that
you allocate to this option. You may only allocate Purchase Payments and you may choose
a Guarantee Term of 6 or 12 months. Any amount allocated to this option will be
transferred monthly (over the Guarantee Term) to one or more of the Variable Investment
Option(s) you selected. Amounts you allocate to this option, and your earnings credited
are held in our General Account. For more detailed information about this option, see
THE GENERAL ACCOUNT.
7. Staff Comment: Custom Model (p. 22). In the parameters disclosure, please clarify that
the percentage allocation requirements apply to Variable Account Value.
Response: We added the following sentence to the parameters paragraph [new disclosure
is underlined for your reference]:
Allocation percentages among the Categories must total 100%. The percentage
allocation requirements only apply to your Variable Account Value .The model you
create will be...
8. Staff Comment: Exchanges of Annuity Units (p. 25). Please clarify whether, for purposes
of limitations on exchanges of annuity units, an exchange refers to allocations to multiple
subaccounts made on a single business day or does an exchange refer to a single allocation from one
subaccount to another subaccount.
Response: We added the following disclosure :
For purposes of applying the limitations, multiple exchanges that occur on the same day
are considered 1 exchange.
9. Staff Comment: Withdrawal Charge (p. 26).
a. Please clarify the first sentence of this section to read that [n]o
Front-end sales charge is imposed... as the structure of the withdrawal charge
assessed in this product (a CDSC) is also generally considered to be a sales charge.
Response: We added the requested disclosure.
b. Please indent the new language regarding the nursing home waiver under the bullet
point describing that waiver.
Mr. Kosoff
September 21, 2010
Page 5
Response: We indented the new language so it is under the bullet point.
10. Staff Comment: How the Withdrawal Charge is Determined (p. 27). Please make reference
to the 10% free withdrawal right in the discussion of how the withdrawal charge is determined.
Response: We added the following disclosure to the second paragraph of the How the
Withdrawal Charge is Determined subsection [new disclosure is underlined for your
reference]:
We calculate your withdrawal charge by assuming that your Earnings are withdrawn first,
followed by amounts attributed to Purchase Payments with the oldest Purchase Payment
withdrawn first and before any deduction for other charges due or taxes are made. We
also account for any eligible Purchase Payments that are still in the surrender charge
period that may be withdrawn without incurring a withdrawal charge (e.g. free 10%). See
WITHDRAWALS Optional Withdrawals Withdrawals Free of a Withdrawal
Charge.
11. Staff Comment: Mortality and Risk Expense Charge (p. 28).
a. The Mortality and Risk Expense Charge section states that the Risk Charge is assessed
daily at an annual rate equal to 0.95% and may not be increased for the duration of your
Contract. This section later states that the Risk Charge may be increased (with the
election of the Four Year Withdrawal Charge Option and the Optional Death Benefit).
Please resolve this inconsistency.
Response: We removed the sentence that stated This charge may not be increased for the
duration of your Contract.
b. Please explain supplementally why the Four Year Withdrawal Charge Option charge and
the Optional Death Benefit charge are included in the concept of Risk Charge instead of
being treated as separate stand-alone charges.
Response: The optional Death Benefit and Four Year Withdrawal Option charges are
assessed on a daily basis and are deducted at the separate account level (different from
other living benefit riders). From an administrative and accounting standpoint, it is
added to the Risk Charge and a separate class of Accumulation Unit Value is created for
each combination that can be purchased. In addition to the current section, in the
fees and expenses section (p. 9) we present the charge as a separate line item so it is
clear exactly what is being charged for the optional benefit.
12. Staff Comment: Withdrawals Free of a Withdrawal Charge (p. 39).
a. Please explain whether the 10% free withdrawal amount also applies to amounts being
annuitized.
Response: Amounts being annuitized are not assessed a withdrawal charge upon
Annuitization. A withdrawal charge may be applied during the annuitization phase if
guaranteed variable annuity payments under certain annuity options are subsequently
redeemed.
Mr. Kosoff
September 21, 2010
Page 6
For this scenario, we have existing disclosure with a cross reference in the
Withdrawals Free of a Withdrawal Charge section (See ANNUITIZATION Choosing Your
Annuity Option Annuity Option for Free Withdrawal amounts that apply to redemptions
after the Annuity Date) which directs the reader to a detailed explanation of what may
happen when the guaranteed variable annuity payments are redeemed. We do not want to
imply that there is a withdrawal charge assessment determination for all annuity
payments that are made.
We believe to add additional disclosure about the effects of the 10% free withdrawal
during Annuitization in this subsection will create confusion. However, we did modify
the cross reference sentence as follows:
The free 10% may also apply to redemptions made after the Annuity Date. See
ANNUITIZATION - Choosing Your Annuity Option Annuity Options for Free Withdrawal
amounts that apply to redemptions made after the Annuity Date.
b. Please describe how the Four Year Withdrawal Charge Option affects the 10% free
withdrawal amount.
c. Please clarify whether eligible purchase payments refers to net premium payments
(premium payments less withdrawals that are treated as purchase payments) or total
premium payments. The narrative suggests the calculation is based on total premium
payments. The example suggests that the calculation is based on net premium payments
(since the example, in year four, is taking 10% of $15,300 instead of $17,000).
Response to b and c: The 10% free withdrawal amount is based on the total amount of
purchase payments made into the contract and is adjusted for amounts withdrawn that were
attributed to purchase payments (remaining purchase payments). In the example, since
all earnings were withdrawn and $1,700 of purchase payments were withdrawn, that left a
remaining purchase payment value of $15,300. For clarity and to address comments b and
c, we added the following disclosure to the first paragraph and the example [new
disclosure is underlined for your reference]:
Subject to the amount available for withdrawal provisions described above, during a
Contract Year you may withdraw your Earnings plus your eligible Purchase Payments
without incurring a withdrawal charge. Eligible Purchase Payments include 10% of all
remaining Purchase Payments at the beginning of a Contract Year that have an age of
less than 7 years (less than 5 years if you purchased the Four Year Withdrawal
Charge Option), plus 10% of any Purchase Payments received during the Contract Year
plus 100% of any remaining Purchase Payments that have an age of 7 years or more (5
years or more if you purchased the Four Year Withdrawal Charge Option). Our
calculations of the withdrawal charge...
Example: You make an initial Purchase Payment of $10,000 in Contract Year 1, and make
additional Purchase Payments of $1,000 and $6,000 in Contract Year 2. With Earnings,
your Contract Value in Contract Year 3 is $19,000. In Contract Year 3, you may withdraw
$3,700 free of the withdrawal charge (your total Purchase Payments were $17,000, so 10%
of that
Mr. Kosoff
September 21, 2010
Page 7
total equals $1,700, plus you had $2,000 of Earnings). After this withdrawal,
your Contract Value is $15,300 (equal to remaining Purchase Payments). In
Contract Year 4, your Contract Value falls to $12,500; you may withdraw $1,530 (10% of
$15,300; $15,300 represents the remaining Purchase Payments) free of any
withdrawal charges.
13. Staff Comment: Investment Allocation Requirements (p. 41). Please clarify whether
having contract value allocated to the loan account violates the investment allocation
requirements.
Response: We removed the existing disclosure regarding loans and rider eligibility and
replaced it with the following:
Taking a loan while an optional living benefit Rider is in effect will terminate your
Rider. Work with your financial professional before taking a loan.
In addition, we replaced the existing disclosure in the Summary section with the above
disclosure.
14. Staff Comment: Allowable Investment Options (p. 42). This section states that Pacific
Life reserves the right to add, remove or change allowable asset allocation programs or allowable
Investment Options at any time when it believes a change is necessary to protect its ability to
provide the guarantees under the riders. Please clarify supplementally whether these changes can be
applied by Pacific Life in its own discretion or whether the change in allowable investment options
would somehow be mandated by state insurance regulators. In either case, please highlight in bold
that the investment restrictions can be changed at any time in the Summary on p. 6.
Response: Changes to allowable investment options that are not made by fund
substitutions, reorganizations, closures, etc., would be made at our discretion and not
mandated by any state insurance regulator. To the best of my knowledge, we have not had
any state insurance regulator dictate what investment options are allowed when
purchasing optional benefits.
We added the following disclosure, in bold, to the Summary section [new disclosure is
underlined for your reference]:
At initial purchase and during the entire time that you own an optional living benefit
Rider, you must invest your entire Contract Value in an asset allocation program or in
Investment Options we make available for these Riders. The allocation limitations
associated with these Riders may limit the number of Investment Options that are
otherwise available to you under your Contract. See OTHER OPTIONAL RIDERS General
Information Investment Allocation Requirements. Failure to adhere to the Investment
Allocation Requirements may cause your Rider to terminate. We reserve the right to
add, remove or change asset allocation programs or Investment Options we make available
for these Riders at any time. We may make such a change due to a fund reorganization,
fund substitution, or when we believe a change is necessary to protect our ability to
provide the guarantees under these Riders.
15. Staff Comment: Optional Living Benefits (pp. 40-43). Please consider adding a table
that compares the salient features of each of the Optional Living Benefits.
Mr. Kosoff
September 21, 2010
Page 8
Response: Thank you, we will take your request into consideration.
16. Staff Comment: Loans (p. 75). Please explain whether the contract provides for loan
repayments, whether loan repayments are considered premium payments for purposes of a withdrawal
charge, and how loan and any repayment affect the benefits under the optional benefit riders.
Response: We added the following disclosure to the next to last paragraph and added a
new paragraph to the loans subsection [new disclosure underlined for your reference]:
Interest earned on the Loan Account Value accrues daily beginning on the day following
the effective date of the loan, and those earnings will be transferred once a year to
your Investment Options in accordance with your most recent allocation instructions.
Your loan, including principal and accrued interest, generally must be repaid in
quarterly installments and loan repayments are not considered Purchase Payments. For
more information about loans, including the consequences of loans, loan procedures, loan
terms and repayment terms, see the SAI.
Taking a loan while an optional living benefit Rider is in effect will terminate your
Rider. Work with your financial professional before taking a loan.
17. Staff Comment: Financial Statements (p. 84). Please revise the last sentence of this
section for readability.
Response: We modified the last sentence as follows:
Pacific Lifes consolidated statements of financial condition as of December 31, 2009
and 2008, and the related consolidated statements of operations, equity and cash flows
for each of the three years in the period ended December 31, 2009 are contained in the
Statement of Additional Information.
18. Staff Comment: DCA Plus Fixed Option (p. 85). One component used in calculating the
DCA Plus Fixed Option Value is any additional amounts allocated to the DCA Plus Fixed Option.
Given the restrictions on allocating money to the DCA Plus Fixed account, please explain
supplementally what this component might include.
Response: This component generally comes into play in our bonus/credit contracts
whereby an additional amount is credited to the contract based on the amount of Purchase
Payment that was applied to the contract. We did not create different versions of the
fixed option so the disclosure remains in all products. It also provides latitude for
any future changes that would add additional amounts.
19. Staff Comment: Terms Used in this Prospectus (p. 87). Please revise the definition of
the DCA Plus Fixed Option definition to emphasize its limited (short lived) use as part of a dollar
cost averaging program.
Response: We added the following disclosure to the end of the definition:
This fixed option may be used for dollar cost averaging over a 6 or 12 month period.
Mr. Kosoff
September 21, 2010
Page 9
20. Staff Comment: Examples (various Appendices). In the tables in the examples, please
revise the column heading Contract Value after Activity to read Contract Value. The timing of
the values in the table seem to be described in the caption for each row in the table.
Response: We made the requested disclosure changes where applicable.
21. Staff Comment: Back Cover Page. Please revise the reference to the FINRA Public
Disclosure Program. This program was renamed in 2003 to NASD (now FINRA) BrokerCheck. (See
12/2/2003 NASD News Release, http://www.finra.org/Newsroom/NewsReleases/2003/p002816.)
Response: We changed the reference so that it states FINRA BrokerCheck.
22. Staff Comment: Powers of Attorney. Please provide powers of attorney that
relate specifically to this registration statement as required by Rule 483(b) of the 1933
Act. This means that each power of attorney must either (a) specifically list the 33 Act
registration number of the initial filing, or (b) specifically name the contract or fund
whose prospectus and/or SAI is being registered.
Response: Updated Powers of Attorney will be included in the next Pre-Effective Amendment.
23. Staff Comment: Series and Class Identifiers. Please confirm supplementally
that the contract name on the front cover page of the prospectus is and will continue to
be the same as the EDGAR class identifiers.
Response: We hereby confirm that the contract name [Pacific Journey Select] will continue to be the
same as the EDGAR class identifiers.
24. Staff Comment: Guarantees and Support Agreements. Please clarify
supplementally whether there are any types of guarantees or support agreements with third
parties to support any of the companys guarantees under the policy or whether the
company will be primarily responsible for paying out on any guarantees associated with
the policy.
Response: There are no guarantees or support agreements with third parties to support the companys
guarantees under the policy. The company will be primarily responsible for paying out any
guarantees associated with the policy. If any such agreements are entered into in the future, such
agreement will be added as an exhibit under Item 24(b)(7) of Form N-4.
25. Staff Comment: Financial Statements, Exhibits, and Other Information. Please confirm
that the financial statements and exhibits will be filed by a pre-effective amendment to the
registration statement.
Response: We hereby confirm that the applicable Financial Statements, Exhibits and/or Other
Information will be filed via a Pre-Effective Amendment to the Registration Statement.
26. Staff Comment: Tandy Representation. We urge all persons who are responsible for the
accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that
they have provided all information investors require for an informed decision. Since the
registrant is in possession of all facts
relating to the registrants disclosure, it is responsible for the accuracy and adequacy of the
disclosures it has made.
Mr. Kosoff
September 21, 2010
Page 10
Notwithstanding our comments, in the event the registrant requests acceleration of the effective
date of the pending registration statement, it should furnish a letter, at the time of such
request, acknowledging that:
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should the Commission or the staff, acting pursuant to delegated authority, declare the
filing effective, it does not foreclose the Commission from taking any action with respect
to the filing; |
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the action of the Commission or the staff, acting pursuant to delegated authority, in
declaring the filing effective, does not relieve the registrant from its full
responsibility for the adequacy and accuracy of the disclosure in the filing; and |
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the registrant may not assert this action as defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States. |
Response: We will make the appropriate acknowledgements when a request for acceleration is made.
I believe that the foregoing is responsive to the SEC Staffs comments. If you have any questions,
please call me at (949) 219-3943. Thank you.
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Sincerely,
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/s/ BRANDON J. CAGE
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Brandon J. Cage |
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