July 31, 2002
Mr. Jonathan G. Katz
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
RE: File No. S7-17-02
Dear Mr. Katz:
On behalf of GE Life and Annuity Assurance Company and GE Capital Life Assurance Company of New York, I would like to thank you for the opportunity to comment on the Securities Exchange Commission's (the "Commission's") proposal dated May 14, 2002 to amend rule 134, rule 156 and rule 482 under the Securities Act of 1933 (the "Securities Act") and rule 34b-1 under the Investment Company Act of 1940 (the "Investment Company Act").
GE Life and Annuity Assurance Company and GE Capital Life Assurance Company support the Commission's position that it is necessary to provide investors with more timely information - whether that information is conveyed in the statutory prospectus or in fund advertisements. We believe that the removal of the "substance of which" from rule 482 would allow standardized performance to be provided on a "real-time basis" which is clearly beneficial in today's economic environment. The proposed amendments would require funds to make available total return performance information to investors current as of the most recent month-end; the proposed amendments require such performance information to be available by toll-free or collect telephone number within three days after the end of the month. In addition, the proposed amendments would require companies to add narrative disclosure that is "required to accompany performance advertisements in order to help investors understand the limitations of past performance data and enhance the ability of investors to obtain updated performance information."
In a letter dated July 30, 2002 to Mr. Jonathan Katz of the Securities and Exchange Commission ("SEC"), the National Association for Variable Annuities ("NAVA")1 recommended that "insurance companies issuing variable contracts be provided with the flexibility to comply with the currentness requirements of rule 482 by other means in addition to a toll-free (or collect) telephone number, such as making returns current to the most recent month-end available by website access." In its letter to the SEC, NAVA stated that that the use of an "automated telephone response system to obtain current month-end performance information on variable contract funds would [also likely] be inefficient, burdensome and confusing for investors." We agree with NAVA's position and believe that having such information available via a toll-free or collect telephone number within three days after the end of the month may not be the most "user friendly" to the contract owners and may unintentionally cause customer frustration and confusion. Currently, GE Life and Annuity Assurance Company and GE Capital Life Assurance Company of New York have over 20 variable annuity and variable life insurance products that have over 30 underlying mutual funds available in each product. In addition, several of the variable annuity products have rider options that may be elected by the contract owner at the time of application creating a myriad of pricing variances within the same annuity product. It is our belief that the use of a telephone voice response system would be onerous in nature once you add all the required disclosure about the products, required fund disclosure, and the 1, 5 and 10 year performance for each available underlying mutual fund. Overall, we feel that the contract owner would find obtaining fund performance for underlying mutual funds available in a variable annuity or variable life insurance product from an automated voice response system overly time consuming and not "user-friendly." In addition, without being given any specifics as to the technical requirements of the toll-free or collect telephone system, it is difficult to determine how much time would be needed or the specific costs that would be incurred in order to implement such a system. We believe that an automatic voice response system for fund performance could cost as high as $500,000.00. This amount could be higher or lower once specific technical requirements for fund performance via the telephone are provided (assuming the requirement for fund performance via a toll-free or collect telephone number is adopted).
We also agree with NAVA in that an alternative method for obtaining "real time" performance, such as Internet access is necessary and is a more efficient method for obtaining fund performance for variable annuity and variable life insurance policy owners.
We must state that having information available via the telephone and/or Internet within three days of the end of a calendar month is cumbersome and could be problematic especially if the end of the calendar month falls on a Friday. Like NAVA, we believe a calendar week is a sufficient amount of time in order to have month-end performance information available to the contract owner via the telephone and/or Internet.
The Commission is proposing in its amendments to rule 482 that a notation be made in a fund advertisement that additional information about charges and expenses about the fund may be found in the fund's statutory prospectus. There is no mention in the proposal about how this change would work with variable products in light of recently adopted Form N-6 and the SEC's proposed changes to the fee tables in Form N-4.
We appreciate the Commission's efforts to provide mutual funds with better flexibility to provide more current performance information with clearer disclosure to investors. Should you have any questions, please call me at (804) 281-6910.
/s/ HEATHER HARKER
Heather Harker, Esq.
Vice President, Associate General Counsel
and Assistant Secretary
GE Life and Annuity Assurance Company
GE Capital Life Assurance Company of New York
|1||NAVA is a not-for profit organization dedicated to the growth and understanding of annuity and variable life insurance products. NAVA represents all segments of the annuity and variable life industry with over 350 member organizations, including GE Life and Annuity Assurance Company and GE Capital Life Assurance Company of New York.|