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BRANDON J. CAGE
Assistant Vice President, Counsel
Law Department
Phone: 949-219-3943
Fax: 949-219-6952
Brandon.Cage@pacificlife.com
September 23, 2010
Mr. 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
Initial Registration Statement on Form N-4 (Pacific Destinations B)
File Nos. 333-168284, 811-08946
Separate Account A of Pacific Life & Annuity Company
Initial Registration Statement on Form N-4 (Pacific Destinations B NY)
File Nos. 333-168285, 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 23, 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: General Comment. Please confirm supplementally that there are no
recapture provisions associated with the persistency credit.
Response: We hereby confirm that there are no recapture provisions for the persistency
credit.
2. Staff Comment: An Overview of Pacific Destinations B (pp. 3-6).
a. 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.
Mr. Kosoff
September 23, 2010
Page 2
b. Please remove the references to an owner elected step-up as there is no such step-up offered by
the optional benefits described in the registration statement.
Response:
We respectfully decline to make the deletion. The optional living benefits do offer an
Owner-Elected Reset and that election is disclosed in the Reset of Protected Payment Base and
Remaining Protected Balance subsection of each optional living benefit.
3. Staff Comment: Periodic Expenses (p. 8).
a. With respect to footnote 8, please clarify how the charge is calculated and deducted. (i.e., The
annual charge is equal to the current charge multiplied by the Protected Payment Base. Dividing the
annual charge by 4 is used to determine the amount that is deducted on a quarterly basis.)
Response: We believe the disclosure is accurate and precise in its current form. However, we did
rearrange and make a slight alteration to clarify the deduction part of the footnote. The first
two sentences will be the following:
If you buy the CoreIncome Advantage 5 Rider, the annual charge is equal to the current charge
percentage (divided by 4) multiplied by the Protected Payment Base. The charge is deducted from
your Contract Value on a quarterly basis.
b. With respect to footnote 9, please clarify how the charge is calculated and deducted. (i.e., The
annual charge is equal to the current charge multiplied by the Protected Payment Base. Dividing the
annual charge by 4 is used to determine the amount that is deducted on a quarterly basis.)
Response: We believe the disclosure is accurate and precise in its current form. However, we did
rearrange and make a slight alteration to clarify the deduction part of the footnote. The first
two sentences will be the following:
If you buy the Automatic Income Builder Rider, the annual charge is equal to the current charge
percentage (divided by 4) multiplied by the Protected Payment Base. The charge is deducted from
your Contract Value on a quarterly basis.
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.
4. Staff Comment: Your Investment Options (p. 12). 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 option living benefits, and what are the consequences for the rider.
Mr. Kosoff
September 23, 2010
Page 3
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. To the best of my
knowledge, the asset allocation focused investment options or model programs which are
required for rider eligibility are not limited by broker-dealers.
5. Staff Comment: Your Fixed Option (p.15). 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.
6. Staff Comment: Persistency Credit (pp. 16-17).
a. Please clarify how the persistency credit is treated for purposes of the death
benefit, optional death benefit and optional living benefits.
c. There appear to be several calculations that take place on a contract anniversary.
Please clarify what calculation takes place first, the crediting of the persistency
credit, or any step-ups (for the optional death benefit) and rider resets (for the
optional living benefits).
Response to a and c: The persistency credit is added to the Contract Value and will be
included in any benefit calculations that concern Contract Value. To provide
clarification, we added the following disclosure:
Since the persistency credit is added to your Contract Value, any calculation that may
be based on Contract Value (e.g. optional rider benefits or death benefit) will already
include any persistency credit that was added (subject to investment performance). In
addition, the persistency credit is added to the Contract Value before any
Resets/Step-Ups are determined under the optional benefit riders.
b. Please confirm supplementally that the persistency credit is calculated against
Contract
Mr. Kosoff
September 23, 2010
Page 4
Value, as opposed to Net Contract Value.
Response: We hereby confirm that the persistency credit calculation is based on the
Contract Value not the Net Contract Value.
7. Staff Comment: Custom Model (p. 21). 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. 24). 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 one exchange.
9. Staff Comment: Withdrawal Charge (p. 25).
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.
Response: We indented the new language so it is under the bullet point.
10. Staff Comment: How the Withdrawal Charge is Determined (p. 26). 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.
Mr. Kosoff
September 23, 2010
Page 5
11. Staff Comment: Mortality and Risk Expense Charge (p. 27). The Mortality and
Risk Expense Charge section states that the Risk Charge is assessed daily at an annual
rate equal to 1.15% 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
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.
12. Staff Comment: Withdrawals Free of a Withdrawal Charge (p. 36).
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.
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 clarify whether eligible purchase payments refer to net premium payments (premium
payments less withdrawals that are treated as purchase payments) or total premium payments. The
narrative and example suggests the calculation is based on total premium payments. However,
identical narrative disclosure is used in the Pacific Journey Select registration statement (filed
July 8, 2010), but the example in that registration statement shows the free withdrawal amount
being calculated off of the $15,300 figure.
Response: The disclosure in the Pacific Journey Select registration statement differs slightly from
the disclosure in Pacific Destinations B. In Pacific Destinations B, eligible Purchase Payments
include 10% of all Purchase Payments at the beginning of a Contract Year that have an age of
less than 8 years, while in Pacific Journey Select, 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. That is why there is a difference in the calculation. For clarity, we removed
all equal to Purchase Payments and modified the example disclosure as follows [new disclosure is
underlined for your reference]:
Mr. Kosoff
September 23, 2010
Page 6
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 total equals $1,700, plus you had $2,000 of Earnings). After this withdrawal,
your Contract Value is $15,300. In Contract Year 4, your Contract Value falls to
$12,500; you may withdraw $1,700 (10% of $17,000; $17,000 represents Purchase
Payments) free of any withdrawal charges.
13. Staff Comment: Other Optional Riders (p. 38). Please remove the references to an owner
elected step-up as there is no such step-up is offered by the optional benefits described in the
registration statement.
Response:
We respectfully decline to make the deletion. The optional living benefits do offer an
Owner-Elected Reset and that election is disclosed in the Reset of Protected Payment Base and
Remaining Protected Balance subsection of each optional living benefit.
14. Staff Comment: Investment
Allocation Requirements (pp. 38-39). 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.
15. Staff Comment: Allowable Investment Options (p. 39). 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 these
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.
5.
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]:
Mr. Kosoff
September 23, 2010
Page 7
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.
16. Staff Comment: Loans (p. 58). Please explain whether the contract provides for loan
repayments, whether loan repayments are considered premium payments for purposes of a withdrawal
charge, and how loans 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: Service Arrangements (p. 65). This section generally
describes the payments Pacific Life and Pacific Life & Annuity receive from the
distributor of the underlying funds. However, in the last paragraph, there is
disclosure about payments being made from Pacific Life and Pacific Life & Annuity to
American Funds Distributors, Inc. Please confirm supplementally the accuracy of this
disclosure.
Response: We hereby confirm that the disclosure in the prospectus is correct in that
the distributor (Pacific Select Distributors (PSD)) of the Pacific Select Fund and the
contracts pays American Funds Distributors, Inc. as outlined in the prospectus.
18. Staff Comment: Financial Statements (p. 67). 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
Mr. Kosoff
September 23, 2010
Page 8
Additional Information.
19. Staff Comment: DCA Plus Fixed Option (p. 67). 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.
20. Staff Comment: Terms Used in this Prospectus (p. 69). 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.
21. 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.
22. 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.
23. 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.
24. 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 Destinations B] will continue to be the
same as the EDGAR class identifiers.
Mr. Kosoff
September 23, 2010
Page 9
25. 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.
26. 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.
27. 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.
Notwithstanding our comments, in the event the registration 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 a 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.
Sincerely,
/s/ BRANDON J. CAGE
Brandon J. Cage