0000950123-12-006430.txt : 20120424 0000950123-12-006430.hdr.sgml : 20120424 20120424132400 ACCESSION NUMBER: 0000950123-12-006430 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20120424 DATE AS OF CHANGE: 20120424 EFFECTIVENESS DATE: 20120501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT A OF PACIFIC LIFE INSURANCE CO CENTRAL INDEX KEY: 0000935823 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-148865 FILM NUMBER: 12775437 BUSINESS ADDRESS: STREET 1: P O BOX 7500 CITY: NEWPORT BEACH STATE: CA ZIP: 92658-7500 BUSINESS PHONE: 7146403743 MAIL ADDRESS: STREET 1: P O BOX 7500 CITY: NEWPORT BEACH STATE: CA ZIP: 92658-7500 FORMER COMPANY: FORMER CONFORMED NAME: SEPARATE ACCOUNT A OF PACIFIC MUTUAL LIFE INS CO DATE OF NAME CHANGE: 19950119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEPARATE ACCOUNT A OF PACIFIC LIFE INSURANCE CO CENTRAL INDEX KEY: 0000935823 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08946 FILM NUMBER: 12775438 BUSINESS ADDRESS: STREET 1: P O BOX 7500 CITY: NEWPORT BEACH STATE: CA ZIP: 92658-7500 BUSINESS PHONE: 7146403743 MAIL ADDRESS: STREET 1: P O BOX 7500 CITY: NEWPORT BEACH STATE: CA ZIP: 92658-7500 FORMER COMPANY: FORMER CONFORMED NAME: SEPARATE ACCOUNT A OF PACIFIC MUTUAL LIFE INS CO DATE OF NAME CHANGE: 19950119 0000935823 S000006314 SEPARATE ACCOUNT A OF PACIFIC LIFE INSURANCE CO (811-08946) C000062185 Pacific Value Edge 485BPOS 1 a59719be485bpos.htm 485BPOS e485bpos
 
 

As filed with the Securities and Exchange Commission on April 24, 2012.

Registration Nos.

333-148865
811-08946

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-4

     
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933   x
Pre-Effective Amendment No.   o
Post-Effective Amendment No. 11   x

and/or

     
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940   x
Amendment No. 336   x

(Check appropriate box or boxes)

SEPARATE ACCOUNT A

(Exact Name of Registrant)

PACIFIC LIFE INSURANCE COMPANY

(Name of Depositor)

700 Newport Center Drive
Newport Beach, California 92660
(Address of Depositor’s Principal Executive Offices) (Zip Code)

(949) 219-3943
(Depositor’s Telephone Number, including Area Code)
Brandon J. Cage
Assistant Vice President
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
(Name and address of agent for service)

Approximate Date of Proposed Public Offering:

It is proposed that this filing will become effective (check appropriate box)
o immediately upon filing pursuant to paragraph (b) of Rule 485

þ on May 1, 2012 pursuant to paragraph (b) of Rule 485
o 60 days after filing pursuant to paragraph (a)(1) of Rule 485
o on ___________ pursuant to paragraph (a)(1) of Rule 485

If appropriate, check the following box:

     
o   this post-effective amendment designates a new effective date for a previously filed post-effective amendment.

Title of Securities Being Registered: Interests in the Separate Account under Pacific Value Edge individual flexible premium variable annuity contracts.

Filing Fee: None

 
 

 

 

     
PACIFIC VALUE EDGE
 		  PROSPECTUS MAY 1, 2012
 
Pacific Value Edge is an individual flexible premium deferred variable annuity contract issued by Pacific Life Insurance Company (Pacific Life) through Separate Account A of Pacific Life.
 
This Prospectus provides information you should know before buying a Contract. Please read the Prospectus carefully, and keep it for future reference.
 
Pacific Life will add a Credit Enhancement to your Contract Value each time you make a Purchase Payment. Some of the expenses for this Contract may be higher than the expenses for an annuity without the Credit Enhancement.
 
Here’s a list of all the Investment Options currently available under your Contract; the Variable Investment Options are listed according to the underlying Funds:
 
VARIABLE INVESTMENT OPTIONS
 
Pacific Select Fund
             
Emerging Markets Debt
International Small-Cap
Mid-Cap Value
Equity Index
Small-Cap Index
Small-Cap Equity
American Funds® Asset Allocation
American Funds® Growth-Income
American Funds® Growth
Large-Cap Value
Technology 		  Floating Rate Loan
Small-Cap Growth
Comstock
Growth LT
Focused 30
Health Sciences
International Value
Long/Short Large-Cap
Mid-Cap Equity
International Large-Cap
Mid-Cap Growth 		  Real Estate
Small-Cap Value
Main Street® Core
Emerging Markets
Cash Management
High Yield Bond
Managed Bond
Inflation Managed
Pacific Dynamix – Conservative Growth
Pacific Dynamix – Moderate Growth
Pacific Dynamix – Growth 		  Portfolio Optimization Conservative
Portfolio Optimization Moderate-Conservative
Portfolio Optimization Moderate
Portfolio Optimization Growth
Portfolio Optimization Aggressive-Growth
Dividend Growth
Short Duration Bond
Large-Cap Growth
Diversified Bond
Inflation Protected
 
         
AIM Variable Insurance Funds
(Invesco Variable Insurance Funds)
Invesco V.I. Balanced-Risk Allocation Fund Series II 		  AllianceBernstein Variable Products Series Fund, Inc.
AllianceBernstein VPS Balanced Wealth Strategy Portfolio Class B 		  BlackRock Variable Series Funds, Inc.
BlackRock Global Allocation V.I. Fund Class III
         
Fidelity® Variable Insurance Products Funds
Fidelity VIP FundsManager® 60% Portfolio Service Class 2 		  First Trust Variable Insurance Trust
First Trust/Dow Jones Dividend & Income Allocation Portfolio 		  Franklin Templeton Variable Insurance Products Trust
Franklin Templeton VIP Founding Funds Allocation Fund Class 4
         
GE Investments Funds, Inc.
GE Investments Total Return Fund Class 3 		  MFS® Variable Insurance Trust
MFS® Total Return Series – Service Class 		  PIMCO Variable Insurance Trust
PIMCO Global Multi-Asset Portfolio – Advisor Class
 
FIXED OPTION
DCA Plus Fixed Option
 
 
You will find more information about the Contract and Separate Account A in the Statement of Additional Information (SAI) dated May 1, 2012. The SAI has been filed with the Securities and Exchange Commission (SEC) and is considered to be part of this Prospectus because it’s incorporated by reference. You will find a table of contents for the SAI on page 93 of this Prospectus. You can get a copy of the SAI without charge by calling or writing to Pacific Life or you can visit our website at www.pacificlife.com. You can also visit the SEC’s website at www.sec.gov, which contains the SAI, material incorporated into this Prospectus by reference, and other information about registrants that file electronically with the SEC.
 
This Contract is not available in all states. This Prospectus is not an offer in any state or jurisdiction where we are not legally permitted to offer the Contract.
 
The Contract is described in detail in this Prospectus and its SAI. A Fund is described in its Prospectus and its SAI. No one has the right to describe the Contract or a Fund any differently than they have been described in these documents.
 
You should be aware that the SEC has not approved or disapproved of the securities or passed upon the accuracy or adequacy of the disclosure in this Prospectus. Any representation to the contrary is a criminal offense.
 
This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. Pacific Life, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
 
This Contract is not a deposit or obligation of, or guaranteed or endorsed by, any bank. It’s not federally insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other government agency. Investment in a Contract involves risk, including possible loss of principal.

 

 
YOUR GUIDE TO THIS PROSPECTUS
 
     
An Overview of Pacific Value Edge   3
     
  15
  15
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  Back Cover


2

 

 
AN OVERVIEW OF PACIFIC VALUE EDGE
 
 
This overview tells you some key things you should know about your Contract. It’s designed as a summary only – please read this Prospectus, your Contract and the Statement of Additional Information (SAI) for more detailed information.
 
In this Prospectus, you and your mean the Contract Owner or Policyholder. Pacific Life, we, us and our refer to Pacific Life Insurance Company. Contract means a Pacific Value Edge variable annuity contract, unless we state otherwise.
 
Certain Contract features described in this Prospectus may vary or may not be available in your state. The state in which your Contract is issued governs whether or not certain features, Riders, charges or fees are allowed or will vary under your Contract. These variations are reflected in your Contract and in Riders or Endorsements to your Contract. See your financial advisor or contact us for specific information that may be applicable to your state. See ADDITIONAL INFORMATION – State Considerations. This prospectus provides a description of the material rights and obligations under the Contract. Your Contract (including any riders and/or endorsements) represents the contractual agreement between you and us. Any guarantees provided for under your Contract or through optional riders are backed by our financial strength and claims-paying ability. You must look to the strength of the insurance company with regard to such guarantees. Your financial advisor or financial advisor’s firm is not responsible for any Contract guarantees.
 
Some of the Terms used in this Prospectus may be new to you. You will find a glossary of certain terms in the TERMS USED IN THIS PROSPECTUS section.
 
Pacific Value Edge Basics
 
An annuity contract may be appropriate if you are looking for retirement income or you want to meet other long-term financial objectives. Discuss with your financial advisor whether a variable annuity, optional benefits and which underlying Investment Options are appropriate for you, taking into consideration your age, income, net worth, tax status, insurance needs, financial objectives, investment goals, liquidity needs, time horizon, risk tolerance and other relevant information. Together you can decide if a variable annuity is right for you.
 
This Contract may not be the right one for you if you need to withdraw money for short-term needs, because withdrawal charges and tax penalties for early withdrawal may apply.
 
You should consider the Contract’s investment and income benefits, as well as its costs.
 
Pacific Value Edge is an annuity contract between you and Pacific Life. Annuity contracts have two phases, the accumulation phase and the annuitization phase. The two phases are discussed below.
 
This Contract is designed for long-term financial planning. It allows you to invest money on a tax-deferred basis for retirement or other goals, and/or to receive income in a variety of ways, including a series of income payments for life or for a specified period of years.
 
Non-Qualified and Qualified Contracts are available. You buy a Qualified Contract under a qualified retirement or pension plan, or some form of an individual retirement annuity or account (IRA). It is important to know that IRAs and qualified plans are already tax-deferred which means the tax deferral feature of a variable annuity does not provide a benefit in addition to that already offered by an IRA or qualified plan. An annuity contract should only be used to fund an IRA or qualified plan to benefit from the annuity’s features other than tax deferral.
 
Pacific Value Edge is a variable annuity, which means that your Contract Value fluctuates depending on the performance of the Investment Options you choose. The Contract allows you to choose how often you make Investments (“Purchase Payments”) and how much you add each time, subject to certain limitations.


3

 

 
AN OVERVIEW OF PACIFIC VALUE EDGE
 
Your Right to Cancel (“Free Look”)
 
During the Free Look period, you have the right to cancel your Contract and return it with instructions to us or to your financial advisor for a refund. The amount refunded may be more or less than the Purchase Payments you have made and the length of the Free Look period may vary, depending on the state where you signed your application and the type of Contract you purchased.
 
For more information about the Right to Cancel (“Free Look”) period see WITHDRAWALS – Right to Cancel (“Free Look”).
 
The Accumulation Phase
 
The Investment Options you choose and how they perform will affect your Contract Value during the accumulation phase, as well as the amount available to annuitize on the Annuity Date.
 
The accumulation phase begins on your Contract Date and continues until your Annuity Date. During the accumulation phase, you can put money in your Contract by making Purchase Payments subject to certain limitations, and choose Investment Options in which to allocate them. You can also take money out of your Contract by making a withdrawal.
 
Investments (“Purchase Payments”)
 
Your initial Purchase Payment must be at least $10,000 for a Non-Qualified Contract and at least $2,000 for a Qualified Contract. Additional Purchase Payments must be at least $250 for a Non-Qualified Contract and $50 for a Qualified Contract. Currently, we are not enforcing the minimum initial Purchase Payment on Qualified Contracts or the minimum additional Purchase Payment amounts on Qualified and Non-Qualified Contracts, but we reserve the right to enforce such minimums in the future.
 
For more information about Making Your Investments (“Purchase Payments”) see PURCHASING YOUR CONTRACT – Making Your Investments (“Purchase Payments”).
 
Credit Enhancement
 
We will add an amount called a Credit Enhancement to your Contract Value each time you make a Purchase Payment.
 
For more information about the Credit Enhancement see PURCHASING YOUR CONTRACT – Credit Enhancements.
 
Investment Options
 
Ask your financial advisor to help you choose the right Investment Options for your goals and risk tolerance. Any financial firm or financial advisor you engage to provide advice and/or make transfers for you is not acting on our behalf. We are not responsible for any investment decisions or allocations you make, recommendations such financial advisors make or any allocations or specific transfers they choose to make on your behalf. Some broker-dealers may not allow or may limit the amount you may allocate to certain Investment Options.
 
You can choose from a selection of Variable Investment Options (also called Subaccounts), each of which invests in a corresponding Fund Portfolio. The value of each Portfolio will fluctuate with the value of the investments it holds, and returns are not guaranteed.
 
You can also choose any available fixed option that earns a guaranteed rate of interest that will never be less than the minimum guaranteed interest rate specified in your Contract.
 
We allocate your Purchase Payments to the Investment Options you choose. Your Contract Value will fluctuate during the accumulation phase depending on the Investment Options you have chosen. You bear the investment risk of any Variable Investment Options you choose.
 
For more information about the Investment Options and the Investment Advisers see YOUR INVESTMENT OPTIONS – Your Variable Investment Options.
 
Transferring Among Investment Options
 
You can transfer among Investment Options any time, subject to certain limitations, until your Annuity Date without paying any current income tax. Transfers are limited to 25 for each calendar year. Only 2 transfers per month may involve the Invesco V.I. Balanced-Risk Allocation Fund, BlackRock Global Allocation V.I. Fund, GE Investments Total Return Fund, International Value, International Small-Cap, International Large-Cap, Emerging Markets, Emerging Markets Debt, First Trust/Dow Jones Dividend & Income Allocation Portfolio, Fidelity VIP FundsManager 60% Portfolio, or PIMCO Global Multi-Asset Investment Options. In addition, only 2 transfers into or out of each American Funds Investment Option (American Funds Asset Allocation, American Funds Growth or American Funds Growth-Income) may occur in any calendar month. If you have used all 25 transfers in a calendar year, you may make 1 additional transfer of all


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or a portion of your Variable Account Value to the Cash Management Investment Option before the start of the next calendar year. You can also make systematic transfers by enrolling in our dollar cost averaging, portfolio rebalancing or earnings sweep programs. Transfers made under these systematic transfer programs or automatic quarterly rebalancing under the Custom Model program are excluded from these limitations. Some restrictions may apply to transfers to or from any fixed option.
 
For more information about transfers and transfer limitations see HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED – Transfers and Market-timing Restrictions.
 
Withdrawals
 
You can make full and partial withdrawals to supplement your income or for other purposes. You can withdraw a certain amount each year without paying a withdrawal charge, but any amount withdrawn in excess of this amount may incur a withdrawal charge on Purchase Payments that are less than 10 years old. Some restrictions may apply to making partial withdrawals from any fixed option.
 
In general, you may have to pay income taxes on withdrawals or other distributions from your Contract. If you are under age 591/2, a 10% federal tax penalty may also apply to taxable withdrawals.
 
For more information about withdrawals and withdrawal minimums see WITHDRAWALS – Optional Withdrawals.
 
The Annuitization Phase
 
The annuitization phase of your Contract begins on your Annuity Date. Generally, you can choose to surrender your Contract and receive a single payment or you can annuitize your Contract and receive a series of income payments over a fixed period or for life.
 
You can choose fixed or variable annuity payments, or a combination of both. Variable annuity payments may not be available in all states. You can choose monthly, quarterly, semi-annual or annual payments. We will make the income payments to you or your designated payee. The Owner is responsible for any tax consequences of any annuity payments.
 
If you choose variable annuity payments, the amount of the payments will fluctuate depending on the performance of the Variable Investment Options you choose. After your Annuity Date, if you choose variable annuity payments, you can exchange your Subaccount Annuity Units among the Variable Investment Options up to 4 times in any 12-month period.
 
For more information about annuitization see ANNUITIZATION and annuity options available under the Contract see ANNUITIZATION – Choosing Your Annuity Option – Annuity Options.
 
The Death Benefit
 
Generally, the Contract provides a death payout upon the first death of an Owner or the death of the sole surviving Annuitant, whichever occurs first, during the accumulation phase. Death benefit proceeds are payable when we receive proof of death and payment instructions In Proper Form. To whom we pay a death benefit, and how we calculate the death benefit amount depends on who dies first and the type of Contract you own.
 
For more information about the death benefit see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits.
 
Optional Riders
 
Optional Riders are subject to availability (including state availability). Before purchasing any optional Rider, make sure you understand all of the terms and conditions and consult with your financial advisor for advice on whether an optional Rider is appropriate for you. We reserve the right to restrict the purchase of an optional living benefit Rider to only Contract issue in the future. Your election to purchase an optional Rider must be received In Proper Form.
 
Stepped-Up Death Benefit
 
This optional Rider offers you the ability to lock in market gains for your beneficiaries with a stepped-up death benefit, which is the highest Contract Value on any previous Contract Anniversary (prior to the Annuitant’s 81st birthday) adjusted for additional Purchase Payments and withdrawals. You can only buy this Rider when you buy your Contract.
 
For more information about the Stepped-Up Death Benefit see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Stepped-Up Death Benefit.


5

 

 
AN OVERVIEW OF PACIFIC VALUE EDGE
 
Earnings Enhancement Guarantee (EEG)
 
This optional Rider may provide for an additional amount (EEG Amount) to be included in the death benefit proceeds when such proceeds become payable as a result of the sole surviving Annuitant’s death or first death of an Owner who is also an Annuitant. You may buy EEG on the Contract Date or on the first Contract Anniversary.
 
If you buy EEG within 60 days after the Contract Date or within 60 days after the first Contract Anniversary, we will make the EEG effective date coincide with that Contract Date or Contract Anniversary.
 
The Earnings Enhancement Guarantee (EEG), EEG Amount and EEG Charge are called the Guaranteed Earnings Enhancement (GEE), GEE Amount, and GEE Charge, respectively, in the Rider attached to your Contract.
 
For more information about EEG see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Earnings Enhancement Guarantee (EEG).
 
Optional Living Benefit Riders
 
You may purchase an optional Rider on the Contract Date or on any Contract Anniversary (if available). In addition, if you purchase a Rider within 60 days after the Contract Date or, if available, within 60 days after any Contract Anniversary, the Rider Effective Date will be that Contract Date or Contract Anniversary. Your election to purchase an optional Rider must be received In Proper Form.
 
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 OPTIONAL LIVING BENEFIT 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.
 
Distributions made due to divorce instructions or under Code Section 72(t)/72(q) (substantially equal periodic payments) are treated as withdrawals for Contract purposes and may adversely affect Rider benefits.
 
Taking a withdrawal before a certain age or a withdrawal that is greater than the annual withdrawal amount (“excess withdrawal”) under a particular Rider may result in adverse consequences such as a permanent reduction in Rider benefits or the failure to receive lifetime withdrawals under a Rider.
 
Some optional riders allow for owner elected Resets/Step-Ups. If you elect to Reset/Step-Up, your election must be received, In Proper Form, within 60 days after the Contract Anniversary (“60 day period”) on which the Reset/Step-Up is effective. We may, at our sole discretion, allow Resets/Step-Ups after the 60 day period. We reserve the right to refuse a Reset/Step-Up request after the 60 day period regardless of whether we may have allowed you or others to Reset/Step-Up in the past. Each Contract Anniversary starts a new 60 day period in which a Reset/Step-Up may be elected.
 
Taking a loan while an optional living benefit Rider is in effect will terminate your Rider. Work with your financial advisor before taking a loan.
 
CoreIncome Advantage Plus (Single)
 
This optional Rider lets you, before the Annuity Date, withdraw up to 4% of your Protected Payment Base per year (once age 591/2 is reached), lock in market gains, and provides the potential to withdraw up to the Protected Payment Amount for life, if certain conditions are met. If your total withdrawals in a Contract Year exceed the annual withdrawal amount allowed under the Rider, then the Protected Payment Base may decrease and the amount you may withdraw in the future under the Rider may be reduced.
 
Beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Resets or Owner-Elected Resets of the Protected Payment Base to an amount equal to 100% of the Contract Value. Any reset may include a change in the annual charge percentage (up to a maximum of 1.20%) associated with the Rider. Protected Payment Base, Protected Payment Amount, Automatic Reset, Owner-Elected Reset and Reset Date are described in OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage Plus (Single).
 
This Rider is called the Guaranteed Withdrawal Benefit VII Rider – Single Life in the Rider attached to your Contract.
 
For more information about CoreIncome Advantage Plus (Single) see OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage Plus (Single).


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CoreIncome Advantage Plus (Joint)
 
This optional Rider lets you, before the Annuity Date, withdraw up to 4% of your Protected Payment Base per year (once age 591/2 is reached), lock in market gains, and provides the potential to withdraw up to the Protected Payment Amount, until the Rider terminates, if certain conditions are met. If your total withdrawals in a Contract Year exceed the annual withdrawal amount allowed under the Rider, then the Protected Payment Base may decrease and the amount you may withdraw in the future under the Rider may be reduced.
 
Beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Resets or Owner-Elected Resets of the Protected Payment Base to an amount equal to 100% of the Contract Value. Any reset may include an increase in the annual charge percentage (up to a maximum of 1.50%) associated with the Rider. Protected Payment Base, Protected Payment Amount, Automatic Reset, Owner-Elected Reset and Reset Date are described in OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage Plus (Joint).
 
Changes to the Contract Owner, Annuitant and/or Beneficiary designations and changes in marital status may adversely affect the benefits of this Rider (see CoreIncome Advantage Plus (Joint) – Ownership and Beneficiary Changes).
 
This Rider is called the Guaranteed Withdrawal Benefit VII Rider – Joint Life in the Rider attached to your Contract.
 
For more information about CoreIncome Advantage Plus (Joint) see OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage Plus (Joint).
 
CoreIncome Advantage 5 Plus (Single)
 
This optional Rider lets you, before the Annuity Date, withdraw up to 5% of your Protected Payment Base per year (once age 591/2 is reached), lock in market gains, and provides the potential to withdraw up to the Protected Payment Amount for life, if certain conditions are met. If your total withdrawals in a Contract Year exceed the annual withdrawal amount allowed under the Rider, then the Protected Payment Base may decrease and the amount you may withdraw in the future under the Rider may be reduced.
 
Beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Resets or Owner-Elected Resets of the Protected Payment Base to an amount equal to 100% of the Contract Value. Any reset may include a change in the annual charge percentage (up to a maximum of 1.50%) associated with the Rider. Protected Payment Base, Protected Payment Amount, Automatic Reset, Owner-Elected Reset and Reset Date are described in OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage 5 Plus (Single).
 
This Rider is called the Guaranteed Withdrawal Benefit V Rider – Single Life in the Rider attached to your Contract.
 
For more information about CoreIncome Advantage 5 Plus (Single) see OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage 5 Plus (Single).
 
CoreIncome Advantage 5 Plus (Joint)
 
This optional Rider lets you, before the Annuity Date, withdraw up to 5% of your Protected Payment Base per year (once age 591/2 is reached), lock in market gains, and provides the potential to withdraw up to the Protected Payment Amount, until the Rider terminates, if certain conditions are met. If your total withdrawals in a Contract Year exceed the annual withdrawal amount allowed under the Rider, then the Protected Payment Base may decrease and the amount you may withdraw in the future under the Rider may be reduced.
 
Beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Resets or Owner-Elected Resets of the Protected Payment Base to an amount equal to 100% of the Contract Value. Any reset may include an increase in the annual charge percentage (up to a maximum of 1.75%) associated with the Rider. Protected Payment Base, Protected Payment Amount, Automatic Reset, Owner-Elected Reset and Reset Date are described in OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage 5 Plus (Joint).
 
Changes to the Contract Owner, Annuitant and/or Beneficiary designations and changes in marital status may adversely affect the benefits of this Rider (see CoreIncome Advantage 5 Plus (Joint) – Ownership and Beneficiary Changes).
 
This Rider is called the Guaranteed Withdrawal Benefit V Rider – Joint Life in the Rider attached to your Contract.
 
For more information about CoreIncome Advantage 5 Plus (Joint) see OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage 5 Plus (Joint).


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AN OVERVIEW OF PACIFIC VALUE EDGE
 
Income Access
 
This optional Rider lets you, before the Annuity Date, withdraw up to 7% of your Protected Payment Base per year and lock in market gains, if certain conditions are met. If your total withdrawals in a Contract Year exceed the annual withdrawal amount allowed under the Rider, then the Protected Payment Base may decrease and the amount you may withdraw in the future under the Rider may be reduced. This Rider does not provide lifetime withdrawal benefits.
 
On any Contract Anniversary beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, this Rider provides for Automatic Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value. If you want to participate in Automatic Resets, you must make an affirmative election In Proper Form. Any Reset may include a change in the annual charge percentage (up to a maximum of 0.75%) associated with the Rider. Protected Payment Base, Remaining Protected Balance, Automatic Reset, Owner-Elected Reset, and Reset Date are described in OPTIONAL LIVING BENEFIT RIDERS – Income Access.
 
For more information about Income Access see OPTIONAL LIVING BENEFIT RIDERS – Income Access.
 
Guaranteed Protection Advantage 3 (GPA 3)
 
This optional Rider allows for an additional amount that may be added to your Contract Value at the end of a 10-year period (the “Term”), if certain conditions are met. The Rider also provides for an additional option (the “Step-Up”) on any Contract Anniversary beginning with the 3rd anniversary of the Rider Effective Date and before the Annuity Date. If the Step-Up is elected, your 10-year Term would begin again as of the effective date of the Step-Up election, and may include a change in the annual charge percentage (up to a maximum of 1.00%) associated with the Rider.
 
For more information about GPA 3 see OPTIONAL LIVING BENEFIT RIDERS – Guaranteed Protection Advantage 3 (GPA 3).
 
Guaranteed Protection Advantage 5 (GPA 5)
 
This optional Rider allows for an additional amount that may be added to your Contract Value at the end of a 10-year period (the “Term”), if certain conditions are met. The Rider also provides for an additional option (the “Step-Up”) on any Contract Anniversary beginning with the 5th anniversary of the Effective Date of the Rider and before the Annuity Date. If the Step-Up is elected, your 10-year Term would begin again as of the effective date of the Step-Up election, and may include a change in the annual charge percentage (up to a maximum of 0.75%) associated with the Rider.
 
For more information about GPA 5 see OPTIONAL LIVING BENEFIT RIDERS – Guaranteed Protection Advantage 5 (GPA 5).


8

 

 
 
Fees and Expenses
 
This section of the overview explains the fees and expenses that you will pay when buying, owning and surrendering your Pacific Value Edge Contract.
 
Contract Transaction Expenses
 
The following describes the transaction fees and expenses that you may pay when you make withdrawals or surrender your Contract. Expenses are fixed under the terms of your Contract. Premium taxes and/or other taxes may also apply to your Contract. We generally charge state premium taxes and/or other taxes when you annuitize your Contract, but there are other times when we charge them to your Contract instead. Please see your Contract for details.
 
         
• Maximum Withdrawal Charge (as a percentage of Purchase Payment withdrawn)1
       
 
                                         
“Age” of Payment in Years:
  1   2   3   4   5   6   7   8   9   10 or more
Withdrawal Charge Percentage:
  9%   9%   8%   7%   6%   5%   4%   2%   1%   0%
 
Periodic Expenses
 
The following describes the fees and expenses that you will pay periodically during the time you own your Contract not including Portfolio fees and expenses.
 
Separate Account A Annual Expenses (as a percentage of the average daily Variable Account Value2):
 
                 
    Without Stepped-Up
 		  With Stepped-Up
    Death Benefit Rider   Death Benefit Rider
     
• Mortality and Expense Risk Charge3
    1.50%       1.50%  
• Administrative Fee3
    0.25%       0.25%  
• Stepped-Up Death Benefit Rider Charge3,4
    N/A       0.20%  
                 
• Total Separate Account A Annual Expenses
    1.75%       1.95%  
                 
 
Loan Expenses (interest on Contract Debt) (Loans are only available with certain Qualified Contracts. See FEDERAL TAX ISSUES – Qualified Contracts – General Rules – Loans):
                 
• Loan Interest Rate (net)5
            2.00%  
 
Optional Rider6 Annual Expenses:
 
                 
    Current Charge
 		  Maximum Charge
    Percentage   Percentage
     
• Earnings Enhancement Guarantee (EEG) Charge7
    0.25%       0.25%  
• CoreIncome Advantage Plus Charge (Single)8
    0.30%       1.20%  
• CoreIncome Advantage Plus Charge (Joint)8
    0.50%       1.50%  
• CoreIncome Advantage 5 Plus Charge (Single)9
    0.60%       1.50%  
• CoreIncome Advantage 5 Plus Charge (Joint)9
    0.80%       1.75%  
• CoreIncome Advantage 5 Charge10
    0.60%       1.20%  
• CoreProtect Advantage Charge11
    0.95%       1.50%  
• CoreIncome Advantage Charge12
    0.30%       1.00%  
• Flexible Lifetime Income Plus Charge (Single)13
    1.50%       1.50%  
• Flexible Lifetime Income Plus Charge (Joint)13
    1.75%       1.75%  
• Foundation 10 Charge14
    1.50%       1.50%  
• Automatic Income Builder Charge15
    1.25%       1.50%  
• Flexible Lifetime Income Charge (Single)16
    1.20%       1.20%  
• Flexible Lifetime Income Charge (Joint)16
    1.20%       1.20%  
• Income Access Charge17
    0.75%       0.75%  
• Guaranteed Protection Advantage 3 (GPA 3) Charge18
    1.00%       1.00%  
• Guaranteed Protection Advantage 5 (GPA 5) Charge19
    0.75%       0.75%  
• Guaranteed Income Advantage Plus (GIA Plus) Charge20
    0.75%       0.75%  
 
1 The withdrawal charge may or may not apply or may be reduced under certain circumstances. The age is measured from the date of each Purchase Payment. For situations where a withdrawal charge may not apply, see CHARGES, FEES AND DEDUCTIONS and see WITHDRAWALS – Withdrawals Free of a Withdrawal Charge for situations where the withdrawal charge amount may be reduced.


9

 

 
AN OVERVIEW OF PACIFIC VALUE EDGE
 
2 The Variable Account Value is the value of your Variable Investment Options on any Business Day.
 
3 This is an annual rate and is assessed on a daily basis. The daily rate is calculated by dividing the annual rate by 365.
 
4 If you buy the Stepped-Up Death Benefit, we will add this charge to the Mortality and Expense Risk Charge until your Annuity Date.
 
5 If we process a loan on your Contract, we will charge you a gross interest rate of 5.00% on your outstanding principal amount. We will credit you the amount of 3.00% on any Contract Value attributed to your Loan Account. The net amount of interest you pay on your loan will be 2.00% annually. See FEDERAL TAX ISSUES – Qualified Contracts – General Rules – Loans.
 
6 Only one withdrawal benefit rider (CoreIncome Advantage Plus (Single), CoreIncome Advantage Plus (Joint), CoreIncome Advantage 5 Plus (Single), CoreIncome Advantage 5 Plus (Joint), CoreIncome Advantage 5, CoreProtect Advantage, CoreIncome Advantage, Flexible Lifetime Income Plus (Single), Flexible Lifetime Income Plus (Joint), Foundation 10, Automatic Income Builder, Flexible Lifetime Income (Single), Flexible Lifetime Income (Joint), or Income Access) may be owned or in effect at the same time. Only one accumulation benefit rider (GPA 3 or GPA 5) may be owned or in effect at the same time.
 
7 If you buy EEG, 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 on each Contract Anniversary following the date you purchase the Rider, and when you make a full withdrawal, if EEG is in effect on that date. See CHARGES, FEES AND DEDUCTIONS.
 
8 If you buy CoreIncome Advantage Plus (Single) or (Joint), the annual charge is deducted from your Contract Value on a quarterly basis. The quarterly charge is the current charge percentage (divided by 4) multiplied by the Protected Payment Base. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see the OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage Plus (Single) or (Joint). The quarterly amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments, decrease due to withdrawals or also change due to Resets. We deduct the charge proportionately from your Investment Options (excluding the DCA Plus Fixed Option) every quarter following the Rider Effective Date, during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. Under the Single version, we will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant, upon full annuitization of your Contract, or if your Contract Value is zero. Under the Joint version, we will waive the annual charge if the Rider terminates as a result of the death of the surviving Designated Life, upon full annuitization of your Contract, or if your Contract Value is zero. Upon annuitization, the annual charge is only waived for the quarter that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges.
 
9 If you buy CoreIncome Advantage 5 Plus (Single) or (Joint), the annual charge is deducted from your Contract Value on a quarterly basis. The quarterly charge is the current charge percentage (divided by 4) multiplied by the Protected Payment Base. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see the OPTIONAL LIVING BENEFIT RIDERS – CoreIncome Advantage 5 Plus (Single) or (Joint). The quarterly amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments, decrease due to withdrawals or also change due to Resets. We deduct the charge proportionately from your Investment Options (excluding the DCA Plus Fixed Option) every quarter following the Rider Effective Date, during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. Under the Single version, we will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant, upon full annuitization of your Contract, or if your Contract Value is zero. Under the Joint version, we will waive the annual charge if the Rider terminates as a result of the death of the surviving Designated Life, upon full annuitization of your Contract, or if your Contract Value is zero. Upon annuitization, the annual charge is only waived for the quarter that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges.
 
10 If you purchased CoreIncome Advantage 5, the annual charge is deducted from your Contract Value on a quarterly basis. The quarterly charge is the current charge percentage (divided by 4) multiplied by the Protected Payment Base. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see APPENDIX G. The quarterly amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments, decrease due to withdrawals or also change due to Resets. We deduct the charge proportionately from your Investment Options (excluding the DCA Plus Fixed Option) every quarter following the Rider Effective Date, during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. We will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant, upon full annuitization of your Contract, or if your Contract Value is zero. Upon annuitization, the annual charge is only waived for the quarter that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges. CoreIncome Advantage 5 is no longer available for purchase.
 
11 If you purchased CoreProtect Advantage, the annual charge is deducted from your Contract Value on a quarterly basis. The quarterly charge is the current charge percentage (divided by 4) multiplied by the Protected Payment Base. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see APPENDIX G. The quarterly amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments, increases to the Annual Credit Value or Highest Anniversary Value, decrease due to withdrawals or also change due to Resets. We deduct this charge proportionately from your Investment Options (excluding the DCA Plus Fixed Option) every quarter following the Rider Effective Date, during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. We will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant, upon full annuitization of your Contract or if your Contract Value is zero. Upon annuitization, the annual charge is only waived for the quarter that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges. CoreProtect Advantage is no longer available for purchase.
 
12 If you purchased CoreIncome Advantage, the annual charge is deducted from your Contract Value on a quarterly basis. The quarterly charge is the current charge percentage (divided by 4) multiplied by the Protected Payment Base. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see APPENDIX G. The quarterly amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments, decrease due to withdrawals or also change due to Resets. We deduct the charge proportionately from your Investment Options (excluding the DCA Plus Fixed Option) every quarter following the Rider Effective Date, during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. We will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant, upon full annuitization of your Contract, or if your Contract Value is zero. Upon annuitization, the annual charge is only waived for the quarter that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges. CoreIncome Advantage is no longer available for purchase.


10

 

 
 
13 If you purchased Flexible Lifetime Income Plus (Single or Joint), the annual charge is equal to the current charge percentage multiplied by the Protected Payment Base. The charge is deducted from your Contract Value on an annual basis. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see APPENDIX G. The amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments and Annual Credits, decrease due to withdrawals or also change due to Resets. We deduct this charge proportionately from your Investment Options on each Contract Anniversary following the Effective Date of the Rider during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. Under the Single version, we will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant, upon full annuitization of your Contract or after the Contract Value is zero. Under the Joint version, we will waive the annual charge if the Rider terminates as a result of the death of the surviving Designated Life, upon full annuitization of the Contract or after the Contract Value is zero. Upon annuitization, the annual charge is only waived for the Contract Year that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges. Flexible Lifetime Income Plus (Single or Joint) is no longer available for purchase.
 
14 If you purchased Foundation 10, the annual charge is equal to the current charge percentage multiplied by the Protected Payment Base. The charge is deducted from your Contract Value on an annual basis. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see the APPENDIX G. The amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments and Annual Credits, decrease due to withdrawals or also change due to Resets. We deduct this charge proportionately from your Investment Options on each Contract Anniversary following the Effective Date of the Rider during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. We will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant or upon full annuitization of your Contract. Upon annuitization, the annual charge is only waived for the Contract Year that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges. Foundation 10 is no longer available for purchase.
 
15 If you purchased Automatic Income Builder, the annual charge is equal to the current charge percentage multiplied by the Protected Payment Base. The charge is deducted from your Contract Value on an annual basis. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see APPENDIX G. The amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments, decrease due to withdrawals or also change due to Resets. We deduct this charge proportionately from your Investment Options on each Contract Anniversary following the Rider Effective Date, during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. We will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant, upon full annuitization of your Contract or after the Contract Value is zero. Upon annuitization, the annual charge is only waived for the Contract Year that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges. Automatic Income Builder is no longer available for purchase.
 
16 If you purchased Flexible Lifetime Income (Single or Joint), the annual charge is equal to the current charge percentage multiplied by the Protected Payment Base. The charge is deducted from your Contract Value on an annual basis. The initial Protected Payment Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to the Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Protected Payment Base, see APPENDIX G. The amount deducted may increase or decrease due to changes in your Protected Payment Base. Your Protected Payment Base may increase due to additional Purchase Payments and Annual Credits, decrease due to withdrawals or also change due to Resets. We deduct this charge proportionately from your Investment Options on each Contract Anniversary following the Effective Date of the Rider during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. Under the Single version, we will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant or upon full annuitization of your Contract. Under the Joint version, we will waive the annual charge if the Rider terminates as a result of the death of the surviving Designated Life or upon full annuitization of the Contract. Upon annuitization, the annual charge is only waived for the Contract Year that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges. Flexible Lifetime Income (Single or Joint) is no longer available for purchase.
 
17 If you buy Income Access, the annual charge is equal to the current charge percentage multiplied by the Contract Value. The charge is deducted from your Contract Value on an annual basis. We deduct this charge proportionately from your Investment Options on each Contract Anniversary following the Effective Date of the Rider during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. Under the terms and conditions of the Rider, the annual charge percentage may change to the current charge percentage if an Automatic Reset or Owner-Elected Reset occurs, but will never be more than the maximum charge percentage. We will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant or upon full annuitization of your Contract. Upon annuitization, the annual charge is only waived for the Contract Year that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges.
 
18 If you buy GPA 3, the annual charge is equal to the current charge percentage multiplied by the Guaranteed Protection Amount. The charge is deducted from your Contract Value on an annual basis. The initial Guaranteed Protection Amount is equal to the initial Purchase Payment if purchased at Contract issue or is equal to Contract Value if the Rider is purchased on a Contract Anniversary. For a complete explanation of the Guaranteed Protection Amount, see OPTIONAL LIVING BENEFIT RIDERS – Guaranteed Protection Advantage 3 (GPA 3). We deduct this charge proportionately from your Investment Options on each Contract Anniversary following the Effective Date of the Rider during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. Under the terms and conditions of the Rider, the annual charge percentage may change to the current charge percentage if a Step-Up is elected but will never be more than the maximum charge percentage. We will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant or upon full annuitization of your Contract. Upon annuitization, the annual charge is only waived for the Contract Year that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges.
 
19 If you buy GPA 5, the annual charge is equal to the current charge percentage multiplied by the Contract Value. The charge is deducted from your Contract Value on an annual basis. We deduct this charge proportionately from your Investment Options on each Contract Anniversary following the Effective Date of the Rider during the term of the Rider and while the Rider is in effect, and when the Rider is terminated. Under the terms and conditions of the Rider, the annual charge percentage may change to the current charge percentage if a Step-Up is elected but will never be more than the maximum charge percentage. We will waive the annual charge if the Rider terminates as a result of the death of an Owner or sole surviving Annuitant or upon full annuitization of your Contract. Upon annuitization, the annual charge is only waived for the Contract Year that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges.


11

 

 
AN OVERVIEW OF PACIFIC VALUE EDGE
 
20 If you purchased GIA Plus, the annual charge is equal to the current charge percentage multiplied by the greater of the Contract Value or the Guaranteed Income Base. The charge is deducted from your Contract Value on an annual basis. The initial Guaranteed Income Base is equal to the initial Purchase Payment if purchased at Contract issue or is equal to Contract Value if the Rider is purchased on a Contract Anniversary. The Guaranteed Income Base is the amount invested to date grown at 5% annually (until the Contract Anniversary prior to the youngest Annuitant’s 81st birthday) that may be used for fixed annuity payments starting on the Annuity Date. For a complete explanation of the Guaranteed Income Base, see APPENDIX G. We deduct this charge proportionately from your Investment Options on each Contract Anniversary and when you make a full withdrawal if the Rider is in effect on that date, and when the Rider is terminated. We will waive the annual charge if the Rider terminates as a result of death of an Owner or sole surviving Annuitant or upon full annuitization of your Contract. Upon annuitization, the annual charge is only waived for the Contract Year that annuitization occurs. If the Rider terminates as a result of death, any annual charge deducted between the date of death and the Notice Date will be prorated as applicable to the date of death and added to the Contract Value on the Notice Date. See CHARGES, FEES, AND DEDUCTIONS – Optional Rider Charges. GIA Plus is no longer available for purchase.


12

 

 
 
Total Annual Fund Operating Expenses
 
For more about the underlying Funds see YOUR INVESTMENT OPTIONS – Your Variable Investment Options, and see each underlying Fund Prospectus.
 
This table shows the minimum and maximum total annual operating expenses incurred by the Portfolios that you indirectly pay during the time you own the Contract. This table shows the range (minimum and maximum) of fees and expenses (including management fees, shareholder servicing and/or distribution (12b-1) fees, and other expenses) charged by any of the Portfolios, expressed as an annual percentage of average daily net assets. The amounts are based on expenses paid in the year ended December 31, 2011, adjusted to reflect anticipated changes in fees and expenses, or, for new Portfolios, are based on estimates for the current fiscal year.
 
Each Variable Account of the Separate Account purchases shares of the corresponding Fund Portfolio at net asset value. The net asset value reflects the investment advisory fees and other expenses that are deducted from the assets of the Portfolio. The advisory fees and other expenses are not fixed or specified under the terms of the Contract, and they may vary from year to year. These fees and expenses are described in each Fund Prospectus.
 
                 
    Minimum     Maximum  
   
 
Range of total annual portfolio operating expenses before any waivers or expense reimbursements     0.29%       1.97%  
Range of total annual portfolio operating expenses after any waivers or expense reimbursements     0.29%       1.97%  
 
To help limit Fund expenses, Fund advisers have contractually agreed to reduce investment advisory fees or otherwise reimburse certain Portfolios of their respective Funds which may reduce the Portfolio’s expenses. The range of expenses in the first row above does not include the effect of any waiver and/or expense reimbursement arrangement. The range of expenses in the second row above includes the effect of Fund waiver and/or expense reimbursement arrangements that are in effect. The waiver and/or reimbursement arrangements vary in length. There can be no assurance that Fund expense waivers or reimbursements will be extended beyond their current terms as outlined in each Fund prospectus, and they may not cover certain expenses such as extraordinary expenses. See each Fund prospectus for complete information regarding annual operating expenses and any waivers or reimbursements in effect for a particular Fund.


13

 

 
AN OVERVIEW OF PACIFIC VALUE EDGE
 
Examples
 
The following examples are intended to help you compare the cost of investing in your Contract with the cost of investing in other variable annuity contracts. The maximum amounts reflected below include the maximum periodic Contract expenses, Contract Transaction Expenses, Separate Account annual expenses and the Portfolio with the highest fees and expenses for the year ended December 31, 2011. The maximum amounts also include the combination of optional Riders whose cumulative maximum charge expenses totaled more than any other optional Rider combination. The optional Riders included are Stepped-Up Death Benefit, EEG, CoreIncome Advantage 5 Plus (Joint), GPA 3 and GIA Plus. The minimum amounts reflected below include the minimum periodic Contract expenses, Separate Account annual expenses and the Portfolio with the lowest fees and expenses for the year ended December 31, 2011. The minimum amounts do not include any optional Riders.
 
The examples assume that you invest $10,000 in the Contract for the time periods indicated. They also assume that your Purchase Payment has a 5% return each year and assumes the maximum and minimum fees and expenses of all of the Investment Options available. Although your actual costs may be higher or lower, based on these assumptions, your maximum and minimum costs would be:
 
•  If you surrendered your Contract:
 
                 
    1 Year   3 Years   5 Years   10 Years
Maximum*
  $1,583   $3,053   $4,448   $7,878
Minimum*
  $1,017   $1,360   $1,638   $2,369
 
 
•  If you annuitized your Contract:
 
                 
    1 Year   3 Years   5 Years   10 Years
Maximum*
  $,1583   $2,333   $3,908   $7,878
Minimum*
  $1,017   $640   $1,098   $2,369
 
 
•  If you did not surrender or annuitize, but left the money in your Contract:
 
                 
    1 Year   3 Years   5 Years   10 Years
Maximum*
  $773   $2,333   $3,908   $7,878
Minimum*
  $207   $640   $1,098   $2,369
 
* In calculating the examples above, we used the maximum and minimum total operating expenses of all the Portfolios as shown in the Fees And Expenses section of each Fund Prospectus. For more information on Contract fees and expenses, see CHARGES, FEES AND DEDUCTIONS in this Prospectus, and see each Fund Prospectus. See the FINANCIAL HIGHLIGHTS section in this Prospectus for condensed financial information about the Subaccounts.


14

 

 
YOUR INVESTMENT OPTIONS
 
Some broker-dealers may not allow or may limit the amount you may allocate to certain Investment Options. Work with your financial advisor to help you choose the right Investment Options for your investment goals and risk tolerance.
 
You may choose among the different Variable Investment Options and the DCA Plus Fixed Option.
 
Your Variable Investment Options
 
Each Variable Investment Option invests in a separate Fund Portfolio. For your convenience, the following chart summarizes some basic data about each Portfolio. This chart is only a summary. For more complete information on each Portfolio, including a discussion of the Portfolio’s investment techniques and the risks associated with its investments, see the applicable Fund Prospectus. No assurance can be given that a Portfolio will achieve its investment objective. YOU SHOULD READ EACH FUND PROSPECTUS CAREFULLY BEFORE INVESTING.
 
         
PACIFIC SELECT FUND   INVESTMENT GOAL   MANAGER
Emerging Markets Debt   Seeks to maximize total return consistent with prudent investment management.   Ashmore Investment Management Limited
International Small-Cap   Seeks long-term growth of capital.   Batterymarch Financial Management, Inc.
Mid-Cap Value   Seeks long-term growth of capital.   BlackRock Capital Management, Inc.
Equity Index   Seeks investment results that correspond to the total return of common stocks that are publicly traded in the U.S.   BlackRock Investment Management, LLC
Small-Cap Index   Seeks investment results that correspond to the total return of an index of small-capitalization companies.   BlackRock Investment Management, LLC
Small-Cap Equity   Seeks long-term growth of capital.   Franklin Advisory Services, LLC &
BlackRock Investment Management, LLC
American Funds Asset Allocation   Seeks high total returns (including income and capital gains) consistent with preservation of capital over the long-term.   Capital Research and Management Company
  (adviser to the Master Asset Allocation
  Fund)
American Funds
Growth-Income 		  Seeks long-term growth of capital and income.   Capital Research and Management Company
  (adviser to the Master Growth-Income
  Fund)
American Funds
Growth 		  Seeks long-term growth of capital.   Capital Research and Management Company
  (adviser to the Master Growth Fund)
Large-Cap Value   Seeks long-term growth of capital; current income is of secondary importance.   ClearBridge Advisors, LLC
Technology   Seeks long-term growth of capital.   Columbia Management Investment Advisers, LLC
Floating Rate Loan   Seeks a high level of current income.   Eaton Vance Management
Small-Cap Growth   Seeks capital appreciation; no consideration is given to income.   Fred Alger Management, Inc.
Comstock   Seeks long-term growth of capital.   Invesco Advisers, Inc.
Growth LT   Seeks long-term growth of capital.   Janus Capital Management LLC
Focused 30   Seeks long-term growth of capital.   Janus Capital Management LLC
Health Sciences   Seeks long-term growth of capital.   Jennison Associates LLC
International Value   Seeks long-term capital appreciation primarily through investment in equity securities of corporations domiciled in countries with developed economies and markets other than the U.S. Current income from dividends and interest will not be an important consideration.   J.P. Morgan Investment Management Inc.
Long/Short Large-Cap   Seeks above-average total returns.   J.P. Morgan Investment Management Inc.
Mid-Cap Equity   Seeks capital appreciation.   Lazard Asset Management LLC


15

 

         
PACIFIC SELECT FUND   INVESTMENT GOAL   MANAGER
 
International Large-Cap   Seeks long-term growth of capital.   MFS Investment Management
Mid-Cap Growth   Seeks long-term growth of capital.   Morgan Stanley Investment Management Inc.
Real Estate   Seeks current income and long-term capital appreciation.   Morgan Stanley Investment Management Inc.
Small-Cap Value   Seeks long-term growth of capital.   NFJ Investment Group LLC
Main Street Core   Seeks long-term growth of capital and income.   OppenheimerFunds, Inc.
Emerging Markets   Seeks long-term growth of capital.   OppenheimerFunds, Inc.
Cash Management   Seeks current income consistent with preservation of capital.   Pacific Asset Management
High Yield Bond   Seeks a high level of current income.   Pacific Asset Management
Managed Bond   Seeks to maximize total return consistent with prudent investment management.   Pacific Investment Management Company LLC
Inflation Managed   Seeks to maximize total return consistent with prudent investment management.   Pacific Investment Management Company LLC
Pacific Dynamix –
Conservative Growth 		  Seeks current income and moderate growth of capital.   Pacific Life Fund Advisors LLC
Pacific Dynamix –
Moderate Growth 		  Seeks long-term growth of capital and low to moderate income.   Pacific Life Fund Advisors LLC
Pacific Dynamix –
Growth 		  Seeks moderately high, long-term growth of capital with low, current income.   Pacific Life Fund Advisors LLC
Portfolio Optimization Conservative   Seeks current income and preservation of capital.   Pacific Life Fund Advisors LLC
Portfolio Optimization Moderate-Conservative   Seeks current income and moderate growth of capital.   Pacific Life Fund Advisors LLC
Portfolio Optimization Moderate   Seeks long-term growth of capital and low to moderate income.   Pacific Life Fund Advisors LLC
Portfolio Optimization Growth   Seeks moderately high, long-term capital appreciation with low, current income.   Pacific Life Fund Advisors LLC
Portfolio Optimization Aggressive-Growth   Seeks high, long-term capital appreciation.   Pacific Life Fund Advisors LLC
Dividend Growth   Seeks long-term growth of capital.   T. Rowe Price Associates, Inc.
Short Duration Bond   Seeks current income; capital appreciation is of secondary importance.   T. Rowe Price Associates, Inc.
Large-Cap Growth   Seeks long-term growth of capital; current income is of secondary importance.   UBS Global Asset Management (Americas) Inc.
Diversified Bond   Seeks to maximize total return consistent with prudent investment management.   Western Asset Management Company
Inflation Protected   Seeks to maximize total return consistent with prudent investment management.   Western Asset Management Company


16

 

         
AIM VARIABLE
INSURANCE FUNDS (INVESCO VARIABLE INSURANCE FUNDS) 		  INVESTMENT GOAL   MANAGER
         
Invesco V.I. Balanced-Risk Allocation Fund Series II   Total return with a low to moderate correlation to traditional financial market indices.   Invesco Advisers, Inc.
 
         
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS
SERIES FUND, INC. 		  INVESTMENT GOAL   MANAGER
         
AllianceBernstein VPS
Balanced Wealth
Strategy Portfolio
Class B 		  Maximize total return consistent with the adviser’s determination of reasonable risk.   AllianceBernstein L.P.
 
         
BLACKROCK VARIABLE
SERIES FUNDS, INC. 		  INVESTMENT GOAL   MANAGER
         
BlackRock Global
Allocation V.I. Fund
Class III 		  Seeks high total investment return.   BlackRock Advisors, LLC
 
         
FIDELITY VARIABLE INSURANCE
PRODUCTS FUNDS 		  INVESTMENT GOAL   MANAGER
         
Fidelity VIP FundsManager 60%
Portfolio Service Class 2 		  Seeks high total return.   Strategic Advisers, Inc.
 
         
FIRST TRUST
VARIABLE INSURANCE
TRUST 		  INVESTMENT GOAL   MANAGER
         
First Trust/Dow Jones
Dividend & Income
Allocation Portfolio 		  Seeks to provide total return by allocating among dividend-paying stocks and investment grade bonds.   First Trust Advisors L.P.
 
         
FRANKLIN TEMPLETON
VARIABLE INSURANCE
PRODUCTS TRUST 		  INVESTMENT GOAL   MANAGER
         
Franklin Templeton VIP
Founding Funds
Allocation Fund
Class 4 		  Seeks capital appreciation, with income as a secondary goal.   Franklin Templeton Services, LLC serves as the Fund’s administrator.
 
         
GE INVESTMENTS
FUNDS, INC. 		  INVESTMENT GOAL   MANAGER
         
GE Investments Total Return Fund
Class 3 		  Highest total return, composed of current income and capital appreciation, as is consistent with prudent investment risk.   GE Asset Management Incorporated


17

 

         
MFS VARIABLE
INSURANCE TRUST 		  INVESTMENT GOAL   MANAGER
         
MFS Total Return Series –
Service Class 		  Seeks total return.   Massachusetts Financial Services Company
 
         
PIMCO VARIABLE
INSURANCE TRUST 		  INVESTMENT GOAL   MANAGER
         
PIMCO Global
Multi-Asset Portfolio – Advisor Class 		  Seeks total return which exceeds that of a blend of 60% MSCI World Index/40% Barclays Capital U.S. Aggregate Index.   Pacific Investment Management Company, LLC


18

 

The Investment Advisers
 
Pacific Life Fund Advisors LLC (PLFA), a subsidiary of Pacific Life Insurance Company, is the investment adviser for the Pacific Select Fund. PLFA and the Pacific Select Fund’s Board of Trustees oversee the management of all the Pacific Select Fund’s Portfolios, and PLFA also manages certain portfolios directly. PLFA also does business under the name “Pacific Asset Management” and manages the Pacific Select Fund’s Cash Management and High Yield Bond Portfolios under that name.
 
AllianceBernstein L.P. is the investment adviser for the AllianceBernstein Variable Products Series Fund, Inc.
 
The Fund’s investment manager is BlackRock Advisors, LLC (“BlackRock”). The Fund’s sub-advisers are BlackRock Investment Management, LLC and BlackRock International Limited. Where applicable, the use of the term BlackRock also refers to the Fund’s sub-advisers.
 
Strategic Advisers, Inc., an affiliate of Fidelity Management & Research Company, is the investment adviser for the Fidelity Variable Insurance Products Funds.
 
First Trust Advisors L.P. is the investment advisor for the First Trust Variable Insurance Trust.
 
Franklin Templeton Services, LLC is the fund administrator for the Franklin Templeton VIP Founding Funds Allocation Fund of the Franklin Templeton Variable Insurance Products Trust.
 
GE Asset Management Incorporated is the investment adviser for the GE Investments Funds, Inc.
 
Invesco Advisers, Inc. is the investment adviser for the AIM Variable Insurance Funds (Invesco Variable Insurance Funds).
 
Massachusetts Financial Services Company is the investment adviser for the MFS Variable Insurance Trust.
 
Pacific Investment Management Company LLC is the investment adviser for the PIMCO Variable Insurance Trust.
 
Your Fixed Option
 
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 to the DCA Plus Fixed Option (you cannot make transfers from other Investment Options to the DCA Plus Fixed Option) and you may choose a Guarantee Term of up to 24 months, depending on what Guarantee Terms we offer. Please contact us for the Guarantee Terms currently available. 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.
 
PURCHASING YOUR CONTRACT
 
How to Apply for Your Contract
 
To purchase a Contract, you must work with your financial advisor to fill out an application and submit it along with your initial Purchase Payment to Pacific Life Insurance Company at P.O. Box 2290, Omaha, Nebraska 68103-2290. In those instances when we receive electronic transmission of the information on the application from your financial advisor’s broker-dealer firm and our administrative procedures with your broker-dealer so provide, we consider the application to be received on the Business Day we receive the transmission. If your application and Purchase Payment are complete when received, or once they have become complete, we will issue your Contract within 2 Business Days. If some information is missing from your application, we may delay issuing your Contract while we obtain the missing information. However, we will not hold your initial Purchase Payment for more than 5 Business Days without your permission. In any case, we will not hold your initial Purchase Payment after 20 Business Days.
 
You may also purchase a Contract by exchanging your existing annuity. Call your financial advisor or call us at (800) 722-4448. Financial advisors may call us at (800) 722-2333.
 
We reserve the right to reject any application or Purchase Payment for any reason, subject to any applicable nondiscrimination laws and to our own standards and guidelines. On your application, you must provide us with a valid U.S. tax identification number for federal and state tax reporting purposes.
 
The maximum age of a Contract Owner/Annuitant, including Joint and Contingent Owners/Annuitants, for which a Contract will be issued is 80. The Contract Owner’s age is calculated as of his or her last birthday. If any Contract Owner or any sole Annuitant named in the application for a Contract dies and we are notified of the death before we issue the Contract, then we will return the amount we received. If we are not notified of the death and we issue the Contract, then the application for the Contract and/or any Contract issued will be deemed cancelled and a refund will be issued. Depending on the state where your application was signed, the refund amount may be more or less than the initial Purchase Payment received, or any other Purchase Payment we received in connection with an exchange or transfer. In most states, the refund will be the Contract Value based upon the next determined Accumulated Unit Value (AUV) after


19

 

we receive proof of death, In Proper Form, of the Contract Owner or Annuitant, plus a refund of any amount used to pay premium taxes and/or any other taxes, minus any Credit Enhancement. Any refund may subject the refunded assets to probate.
 
Making Your Investments (“Purchase Payments”)
 
Making Your Initial Purchase Payment
 
Your initial Purchase Payment must be at least $10,000 if you are buying a Non-Qualified Contract, and at least $2,000 if you are buying a Qualified Contract. Currently, we are not enforcing the minimum initial Purchase Payment on Qualified Contracts but we reserve the right to enforce the minimum initial Purchase Payment on Qualified Contracts in the future. For Non-Qualified Contracts, if the entire minimum initial Purchase Payment is not included when you submit your application, you must submit a portion of the required Contract minimum and/or establish a pre-authorized checking plan (PAC). A PAC allows you to pay the remainder of the required initial Purchase Payment in equal installments over the first Contract Year. Further requirements for PAC are discussed in the PAC form.
 
You must obtain our consent before making an initial or additional Purchase Payment that will bring your aggregate Purchase Payments over $1,000,000.
 
Making Additional Purchase Payments
 
If your Contract is Non-Qualified, you may choose to invest additional amounts in your Contract at any time. If your Contract is Qualified, the method of contribution and contribution limits may be restricted by the Qualified Plan or the Internal Revenue Code (“the Code”). Each additional Purchase Payment must be at least $250 for Non-Qualified Contracts and $50 for Qualified Contracts. Currently, we are not enforcing the minimum additional Purchase Payment amounts but we reserve the right to enforce the minimum additional Purchase Payment amounts in the future. Additional Purchase Payments will be allocated according to the instructions we have on file unless we receive specific allocation instructions. Contracts issued in certain states may limit additional Purchase Payments. If your Contract is in closed status (e.g. Purchase Payments are no longer accepted under the terms of your Contract, the Contract was surrendered, a Free Look was exercised, or death of an Owner or Annuitant occurred, etc.) and we receive additional Purchase Payments that are equal to or less than $10.00 (“residual payments”), the residual payments will not be refunded to you. Instead, the funds will be donated to the Pacific Life Foundation. We reserve the right to adjust the designated threshold amount ($10.00) as deemed necessary. We will refund any residual payment that is greater than $10.00.
 
Forms of Purchase Payment
 
Your initial and additional Purchase Payments may be sent by personal or bank check or by wire transfer. Purchase Payments must be made in a form acceptable to us before we can process it. Acceptable forms of Purchase Payments are:
 
  •  personal checks or cashier’s checks drawn on a U.S. bank,
 
  •  money orders and traveler’s checks in single denominations of more than $10,000 if they originate in a U.S. bank,
 
  •  third party payments when there is a clear connection of the third party to the underlying transaction, and
 
  •  wire transfers that originate in U.S. banks.
 
We will not accept Purchase Payments in the following forms:
 
  •  cash,
 
  •  credit cards or checks drawn against a credit card account,
 
  •  money orders or traveler’s checks in single denominations of $10,000 or less,
 
  •  starter checks,
 
  •  home equity checks,
 
  •  cashier’s checks, money orders, traveler’s checks or personal checks drawn on non-U.S. banks, even if the payment may be effected through a U.S. bank,
 
  •  third party payments if there is not a clear connection of the third party to the underlying transaction, and
 
  •  wire transfers that originate from foreign bank accounts.
 
All unacceptable forms of Purchase Payments will be returned to the payor along with a letter of explanation. We reserve the right to reject or accept any form of payment. Any unacceptable Purchase Payment incidentally invested may be returned and the amount returned may be more or less than the amount submitted. If you make Purchase Payments by check other than a cashier’s check, your payment of any withdrawal proceeds and any refund during the “Right to Cancel” period may be delayed until we receive confirmation in our Annuities administrative office that your check has cleared.


20

 

 
Credit Enhancements
 
We will add a Credit Enhancement to your Contract Value at the time each Purchase Payment is applied to the Contract. The amount of a Credit Enhancement is determined as a percentage of each Purchase Payment applied to the Contract. The Credit Enhancement will be applied at the time the Purchase Payment is effective. The Credit Enhancement will be allocated among Investment Options in the same proportion as the applicable Purchase Payment. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. See OPTIONAL LIVING BENEFIT RIDERS. Any Credit Enhancement applied to the Contract is considered earnings for tax purposes and will be treated as earnings when determining withdrawal charges and the free withdrawal amount under your Contract.
 
The Credit Enhancement with respect to each Purchase Payment will be based on total Purchase Payments made into the Contract less total withdrawals, including any withdrawal charges, from the Contract as of the date the Purchase Payment is applied. The Credit Enhancement as a percentage of the Purchase Payment is set forth below:
 
         
    Credit
Total Purchase Payments Less Total Withdrawals
 
Enhancement
Less than $100,000
    6.0 %
$100,000 or more
    8.0 %
 
During the first Contract Year, the Credit Enhancement percentage of the most recent Purchase Payment will apply to all prior Purchase Payments, if any. This will be accomplished by applying an additional Credit Enhancement to the prior Purchase Payments (if applicable) effective on the date of the most recent Purchase Payment. In no event will these additional Credit Enhancements be less than zero. We will allocate any additional Credit Enhancements among Investment Options in the same proportion as the most recent Purchase Payment.
 
Example: You make an initial Purchase Payment of $90,000. The Credit Enhancement added to your Contract Value will be $5,400 ($90,000 × 6%). If you made an additional Purchase Payment of $30,000 before the end of your first Contract Year, the total Purchase Payments made during the first Contract Year would equal $120,000 ($90,000 + $30,000). Since your total Purchase Payments are $100,000 or more, an 8% Credit Enhancement will apply. A Credit Enhancement of $2,400 ($30,000 × 8%) will be added to your Contract Value based on the additional Purchase Payment. In addition, we will also add $1,800 ($90,000 × 2%) to your Contract Value, on the date we receive the $30,000 Purchase Payment, so that your initial Purchase Payment receives the 8% (6% + 2%) Credit Enhancement. As a result, the total Credit Enhancement added to your Contract Value for the Purchase Payments made during the first Contract Year equals $9,600.
 
From time to time, at our discretion, we may offer increased Credit Enhancement percentages (“promotional rate”) for new Contracts issued during the promotional rate period. The promotional rate will only be available to such Contracts for initial and subsequent Purchase Payments made during the first Contract Year. At the end of the first Contract Year, the promotional rate for such Contracts will cease and the rates indicated in the table above will be in effect.
 
In the event that a Contract Owner or sole surviving Annuitant dies before the Annuity Date, we may deduct from the death benefit proceeds the amount of any Credit Enhancement added to the Contract during the 12-month period prior to the date of death. The Contract Owner bears the investment risk on any Credit Enhancement and therefore, if the value of such Credit Enhancement declined, the death benefit proceeds could be less than the proceeds would have been if there had been no Credit Enhancement added to the Contract during such 12-month period. The Credit Enhancement will not be deducted from the death benefit proceeds if the Contract is continued through spousal continuation. See DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death benefits – Spousal Continuation.
 
An Owner may be adversely affected because of the Credit Enhancement. For example, the amount returned, if you exercise your right to return the Contract during your Free Look period, will be reduced by any Credit Enhancement added to the Contract. The Contract Owner bears the investment risk on any Credit Enhancement and, therefore, the amount returned could be less than your Purchase Payment(s). See WITHDRAWALS – Right to Cancel (“Free Look”).
 
HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED
 
Choosing Your Investment Options
 
You may allocate your Purchase Payments among any of the available Investment Options. Allocations of your initial Purchase Payment to the Investment Options you selected will be effective on your Contract Date. Each additional Purchase Payment will be allocated to the Investment Options according to your allocation instructions in your application, or most recent instructions, if any, subject to the terms described in WITHDRAWALS – Right to Cancel (“Free Look”). We reserve the right to require that your allocation to any particular


21

 

Investment Option must be at least $500. We also reserve the right to transfer any remaining Account Value that is not at least $500 to your other Investment Options on a pro rata basis relative to your most recent allocation instructions.
 
If your Contract is issued in exchange for another annuity contract or a life insurance policy, our administrative procedures may vary depending on the state in which your Contract is delivered.
 
Custom Model
 
The Custom Model program is only available for Contracts issued before May 1, 2012 and for use with optional living benefit riders with a Rider Effective Date before May 1, 2012.
 
The Custom Model program allows you, with the help of your financial advisor, to create your own asset allocation model that will comply with the Investment Allocation Requirements for certain optional living benefit Riders. (See OPTIONAL LIVING BENEFIT RIDERS – General Information – Investment Allocation Requirements.) You will create your own model using the parameters listed below.
 
Parameters. To create your model, you may select Investment Options from the 4 Categories (Categories A, B, C and D) listed below. You must allocate at least 25% into each of Categories A, B, and C. You may not allocate more than 15% into any one Investment Option within Category A, B, or C. Category D is optional and you are not required to allocate any part of your Purchase Payment or Contract Value to this Category. If you choose to allocate your Purchase Payment or Contract Value to Category D, you are allowed to allocate up to 25% into any one Investment Option within Category D. 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 automatically rebalanced on a quarterly basis.
 
Example: Assume a $100,000 Purchase Payment. Following the parameters and using the Investment Options listed from the Categories below, you may allocate your Purchase Payment as follows:
 
  •  Category A – 15% to Diversified Bond, 10% to Managed Bond and 5% to Cash Management,
 
  •  Category B – 15% to Focused 30, 10% to Small-Cap Index, 10% to Mid-Cap Growth, 5% to Large-Cap Growth and 5% to Large-Cap Value, and
 
  •  Category C – 10% to International Value, 10% to International Large-Cap and 5% to Emerging Markets.
 
The total allocated is 100%: Category A = 30%, Category B = 45% and Category C = 25%. If you want to include all 4 Categories when creating your model, you could adjust your allocation percentages in Categories A, B and C and allocate up to 25% to any combination of the Investment Options in Category D. Keep in mind that you may select any Investment Option within a Category and the allocation percentages among the Categories must total 100%.
 
             
Category A – Fixed Income Investment Options
Cash Management   Diversified Bond   Emerging Markets Debt   Floating Rate Loan
             
High Yield Bond   Inflation Managed   Inflation Protected   Managed Bond
             
Short Duration Bond            
 
             
Category B – Domestic Equity Investment Options
American Funds Growth   American Funds Growth-Income   Comstock   Dividend Growth
             
Equity Index   Focused 30   Growth LT   Large-Cap Growth
             
Large-Cap Value   Long/Short Large-Cap   Main Street Core   Mid-Cap Equity
             
Mid-Cap Growth   Mid-Cap Value   Small-Cap Equity   Small-Cap Growth
             
Small-Cap Index   Small-Cap Value        
 
             
Category C – International Equity and Sector Investment Options
Emerging Markets   Health Sciences   International Large-Cap   International Small-Cap
             
International Value   Real Estate   Technology    
 


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Category D – Asset Allocation Investment Options
AllianceBernstein VPS Balanced Wealth Strategy Portfolio   American Funds Asset Allocation   BlackRock Global Allocation V.I. Fund   Fidelity VIP FundsManager 60% Portfolio
             
First Trust/Dow Jones Dividend & Income Allocation Portfolio   Franklin Templeton VIP Founding Funds
Allocation Fund 		  GE Investments Total Return Fund   Invesco V.I. Balanced-Risk Allocation Fund
             
MFS Total Return Series   Pacific Dynamix – Conservative Growth   Pacific Dynamix – Growth   Pacific Dynamix – Moderate Growth
             
PIMCO Global Multi-Asset Portfolio   Portfolio Optimization Aggressive-Growth   Portfolio Optimization Conservative   Portfolio Optimization Growth
             
Portfolio Optimization Moderate   Portfolio Optimization Moderate-Conservative        
 
You may make transfers between Investment Options within a particular Category or from one Category to another Category as long as you follow the Custom Model parameters. Transfers made will be subject to any transfer and market timing restrictions (see HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED – Transfers and Market-timing Restrictions). Subsequent Purchase Payments will be allocated according to your current model allocation instructions. Any withdrawals must be made on a pro rata basis from each of the Investment Options you selected for your model.
 
You may terminate your participation in the Custom Model program at any time. However, if you own an optional living benefit rider and do not allocate your entire Contract Value to another asset allocation model or Investment Options we make available for the Riders, your Rider will terminate. If you allocate any subsequent Purchase Payment or Contract Value inconsistent with the Custom Model parameters, make transfers between Investment Options outside the Custom Model parameters, or do not make a withdrawal on a pro rata basis, you will no longer be participating in the Custom Model program and your Rider will terminate. Work with your financial advisor and consider your options before making any Investment Option transfers. Any changes in the allocation percentages due to market performance will not be a violation of the program, since the model you created will automatically be rebalanced on a quarterly basis.
 
We are under no contractual obligation to continue this program and have the right to terminate or change the Custom Model program at any time.
 
Investing in Variable Investment Options
 
Each time you allocate your Purchase Payment, and any Credit Enhancement, to a Variable Investment Option, your Contract is credited with a number of “Subaccount Units” in that Subaccount. The number of Subaccount Units credited is equal to the amount you have allocated to that Subaccount, including any Credit Enhancement, divided by the “Unit Value” of one Unit of that Subaccount.
 
Example: You allocate $600 to Subaccount A. At the end of the Business Day on which your allocation is effective, the value of one Unit in Subaccount A is $15. As a result, 40 Subaccount Units are credited to your Contract for your $600 ($600 / $15 = 40).
 
Your Variable Account Value Will Change
 
After we credit your Contract with Subaccount Units, the value of those Units will usually fluctuate. This means that, from time to time, your Purchase Payments allocated to the Variable Investment Options may be worth more or less than the original Purchase Payments to which those amounts can be attributed. Fluctuations in Subaccount Unit Value will not change the number of Units credited to your Contract.
 
Subaccount Unit Values will vary in accordance with the investment performance of the corresponding Portfolio. For example, the value of Units in the Equity Index Subaccount will change to reflect the performance of the Equity Index Portfolio (including that Portfolio’s investment income, its capital gains and losses, and its expenses). Subaccount Unit Values are also adjusted to reflect the Administrative Fee and applicable Risk Charge imposed on the Separate Account.
 
We calculate the value of all Subaccount Units on each Business Day.

23

 

Calculating Subaccount Unit Values
 
We calculate the Unit Value of the Subaccount Units in each Variable Investment Option at the close of the New York Stock Exchange which usually closes at 4:00 p.m. Eastern Time on each Business Day. At the end of each Business Day, the Unit Value for a Subaccount is equal to:
 
Y × Z
 
             
where
  (Y)   =   the Unit Value for that Subaccount as of the end of the preceding Business Day; and
    (Z)   =   the Net Investment Factor for that Subaccount for the period (a “valuation period”) between that Business Day and the immediately preceding Business Day.
 
The “Net Investment Factor” for a Subaccount for any valuation period is equal to:
 
(A ¸ B) − C
 
             
where
  (A)   =   the “per share value of the assets” of that Subaccount as of the end of that valuation period, which is equal to: a + b + c
 
             
where
  (a)   =   the net asset value per share of the corresponding Portfolio shares held by that Subaccount as of the end of that valuation period;
    (b)   =   the per share amount of any dividend or capital gain distributions made by each Fund for that Portfolio during that valuation period; and
    (c)   =   any per share charge (a negative number) or credit (a positive number) for any income taxes and/or any other taxes or other amounts set aside during that valuation period as a reserve for any income and/or any other taxes which we determine to have resulted from the operations of the Subaccount or Contract, and/or any taxes attributable, directly or indirectly, to Purchase Payments;
 
             
    (B)   =   the net asset value per share of the corresponding Portfolio shares held by the Subaccount as of the end of the preceding valuation period; and
    (C)   =   a factor that assesses against the Subaccount net assets for each calendar day in the valuation period the basic Risk Charge plus the Administrative Fee and any applicable increase in the Risk Charge (see CHARGES, FEES AND DEDUCTIONS).
 
The Subaccount Unit Value may increase or decrease from one valuation period to another.
 
When Your Purchase Payment is Effective
 
Your initial Purchase Payment is effective on the day we issue your Contract. Any additional Purchase Payment is effective on the day we receive it In Proper Form. See ADDITIONAL INFORMATION – Inquiries and Submitting Forms and Requests.
 
The day your Purchase Payment is effective determines the Unit Value at which Subaccount Units are attributed to your Contract. In the case of transfers, withdrawals, or Credit Enhancements, the effective day determines the Unit Value at which affected Subaccount Units are debited and/or credited under your Contract. That Unit Value is the value of the Subaccount Units next calculated after your transaction is effective. Your Variable Account Value begins to reflect the investment performance results of your new allocations on the day after your transaction is effective.
 
Transfers and Market-timing Restrictions
 
Transfers
 
Transfers are allowed 30 days after the Contract Date. Currently, we are not enforcing this restriction but we reserve the right to enforce it in the future. Once your Purchase Payments are allocated to the Investment Options you selected, you may transfer your Account Value less Loan Account Value from any Investment Option to any other Investment Option, except the DCA Plus Fixed Option. Transfers are limited to 25 for each calendar year. Only 2 transfers in any calendar month may involve any of the following Investment Options: Invesco V.I. Balanced-Risk Allocation Fund, BlackRock Global Allocation V.I. Fund, GE Investments Total Return Fund, International Value, International Small-Cap, International Large-Cap, Emerging Markets, Emerging Markets Debt, First Trust/Dow Jones Dividend & Income Allocation Portfolio, Fidelity VIP FundsManager 60% Portfolio, or PIMCO Global Multi-Asset. In addition, only 2 transfers into or out of each American Funds Investment Option (American Funds Asset Allocation, American Funds Growth or American Funds Growth-Income) may occur in any calendar month.
 
Transfers to or from a Variable Investment Option cannot be made before the seventh calendar day following the last transfer to or from the same Variable Investment Option. If the seventh calendar day is not a Business Day, then a transfer may not occur until the next Business Day. The day of the last transfer is not considered a calendar day for purposes of meeting this requirement. For example, if you make a transfer into the Equity Index Variable Investment Option on Monday, you may not make any transfers to or from that Variable Investment Option before the following Monday. Transfers to or from the Cash Management Variable Investment Option are excluded from this limitation.


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For the purpose of applying the limitations, multiple transfers that occur on the same day are considered 1 transfer. A transfer of Account Value from the Loan Account back into your Investment Options following a loan repayment is not considered a transfer under these limitations. Transfers that occur as a result of the DCA Plus program, the dollar cost averaging program, the portfolio rebalancing program, the earnings sweep program, approved corporate owned life insurance policy rebalancing programs or automatic quarterly rebalancing under the Custom Model program are excluded from these limitations. Also, allocations of Purchase Payments are not subject to these limitations.
 
If you have used all 25 transfers available to you in a calendar year, you may no longer make transfers between the Investment Options until the start of the next calendar year. However, you may make 1 transfer of all or a portion of the Account Value remaining in the Variable Investment Options into the Cash Management Investment Option prior to the start of the next calendar year.
 
There are no exceptions to the above transfer limitations in the absence of an error by us, a substitution of Investment Options, or reorganization of underlying Portfolios, or other extraordinary circumstances.
 
If we deny a transfer request, we will notify your financial advisor via telephone. If you (or your financial advisor) request a transfer via telephone that exceeds the above limitations, we will notify you (or your financial advisor) immediately.
 
Certain restrictions apply to any available fixed option. See THE GENERAL ACCOUNT. Transfer requests are generally effective on the Business Day we receive them In Proper Form, unless you request a systematic transfer program with a future date.
 
We have the right, at our option (unless otherwise required by law), to require certain minimums in the future in connection with transfers. These may include a minimum transfer amount and a minimum Account Value, if any, for the Investment Option from which the transfer is made or to which the transfer is made. If your transfer request results in your having a remaining Account Value in an Investment Option that is less than $500 immediately after such transfer, we may transfer that Account Value to your other Investment Options on a pro rata basis, relative to your most recent allocation instructions.
 
We reserve the right (unless otherwise required by law) to limit the size of transfers, to restrict transfers, to require that you submit any transfer requests in writing, to suspend transfers, and to impose further limits on the number and frequency of transfers you can make. We also reserve the right to reject any transfer request. Any policy we may establish with regard to the exercise of any of these rights will be applied uniformly to all Contract Owners.
 
Market-timing Restrictions
 
The Contract is not designed to serve as a vehicle for frequent trading in response to short-term fluctuations in the market. Accordingly, organizations or individuals that use market-timing investment strategies and make frequent transfers should not purchase the Contract. Such frequent trading can disrupt management of the underlying Portfolios and raise expenses. The transfer limitations set forth above are intended to reduce frequent trading. In addition, we monitor certain large transaction activity in an attempt to detect trading that may be disruptive to the Portfolios. In the event transfer activity is found to be disruptive, certain future transactions by such Contract Owners, or by a financial advisor or other party acting on behalf of one or more Contract Owners, will require preclearance. Frequent trading and large transactions that are disruptive to portfolio management can have an adverse effect on Portfolio performance and therefore your Contract’s performance. Such trading may also cause dilution in the value of the Investment Options held by long-term Contract Owners. While these issues can occur in connection with any of the underlying Portfolios, Portfolios holding securities that are subject to market pricing inefficiencies are more susceptible to abuse. For example, Portfolios holding international securities may be more susceptible to time-zone arbitrage which seeks to take advantage of pricing discrepancies occurring between the time of the closing of the market on which the security is traded and the time of pricing of the Portfolios.
 
Our policies and procedures which limit the number and frequency of transfers and which may impose preclearance requirements on certain large transactions are applied uniformly to all Contract Owners. However, there is a risk that these policies and procedures will not detect all potentially disruptive activity or will otherwise prove ineffective in whole or in part. Further, we and our affiliates make available to our variable annuity and variable life insurance Contract Owners underlying funds not affiliated with us. We are unable to monitor or restrict the trading activity with respect to shares of such funds not sold in connection with our Contracts. In the event the Board of Trustees/Directors of any underlying fund imposes a redemption fee or trading (transfer) limitations, we will pass them on to you.
 
We reserve the right to restrict, in our sole discretion and without prior notice, transfers initiated by a market timing organization or individual or other party authorized to give transfer instructions on behalf of multiple Contract Owners. Such restrictions could include:
 
  •  not accepting transfer instructions from a financial advisor acting on behalf of more than one Contract Owner, and
 
  •  not accepting preauthorized transfer forms from market timers or other entities acting on behalf of more than one Contract Owner at a time.


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We further reserve the right to impose, without prior notice, restrictions on transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other Contract Owners; or to comply with any applicable federal and state laws, rules and regulations.
 
Exchanges of Annuity Units
 
Exchanges of Annuity Units in any Subaccount(s) to any other Subaccount(s) after the Annuity Date are limited to 4 in any 12-month period. For purposes of applying the limitations, multiple exchanges that occur on the same day are considered 1 exchange. See THE GENERAL ACCOUNT section in this Prospectus and THE CONTRACTS AND THE SEPARATE ACCOUNT section in the SAI.
 
Systematic Transfer Options
 
We offer 4 systematic transfer options: dollar cost averaging, DCA Plus, portfolio rebalancing, and earnings sweep. There is no charge for these options and transfers under these options are not counted towards your total transfers in a calendar year. However, they are subject to the same requirements and restrictions as non-systematic transfers. You can have only one DCA Plus, dollar cost averaging, or earnings sweep program in effect at one time. Only portfolio rebalancing is available after you annuitize.
 
Dollar Cost Averaging
 
Dollar cost averaging is a method in which you buy securities in a series of regular purchases instead of in a single purchase. This allows you to average the securities’ prices over time, and may permit a “smoothing” of abrupt peaks and drops in price. Prior to your Annuity Date, you may use dollar cost averaging to transfer amounts, over time, from any Investment Option with an Account Value of at least $5,000 to one or more Variable Investment Options. Each transfer must be for at least $250. Currently, we are not enforcing the minimum Account Value and/or transfer amounts but we reserve the right to enforce such minimum amounts in the future. Detailed information appears in the SAI.
 
DCA Plus
 
DCA Plus provides a way to transfer amounts monthly from the DCA Plus Fixed Option to one or more Variable Investment Option(s) over a period of up to 24 months, depending on what Guarantee Terms we offer. Please contact us for the Guarantee Terms currently available. The initial minimum amount that you may allocate to the DCA Plus Fixed Option is $5,000. The minimum amount for subsequent Purchase Payments is $250. Currently, we are not enforcing the initial or subsequent Purchase Payment minimum amounts but we reserve the right to enforce such minimum amounts in the future. Amounts allocated to the DCA Plus Fixed Option are held in our General Account and receive interest at rates declared periodically by us, but not less than the minimum guaranteed interest rate specified in your Contract (the “Guaranteed Interest Rate”). The DCA Plus program can also be used with allowable Asset Allocation Models or allowable Investment Options to qualify for certain optional benefit riders offered under your Contract. See THE GENERAL ACCOUNT.
 
Portfolio Rebalancing
 
You may instruct us to maintain a specific balance of Variable Investment Options under your Contract (e.g. 30% in Subaccount A, 40% in Subaccount B, and 30% in Subaccount C). Periodically, we will “rebalance” your values in the elected Subaccounts to the percentages you have specified. Rebalancing may result in transferring amounts from a Subaccount earning a relatively higher return to one earning a relatively lower return. You may choose to have rebalances made quarterly, semi-annually or annually until your Annuity Date. Only Variable Investment Options are available for rebalancing. Detailed information appears in the SAI.
 
Earnings Sweep
 
You may instruct us to make automatic periodic transfers of your earnings from the Cash Management Subaccount to one or more Variable Investment Options (other than the Cash Management Subaccount). Detailed information appears in the SAI.
 
CHARGES, FEES AND DEDUCTIONS
 
Withdrawal Charge
 
No front-end sales charge is imposed on any Purchase Payment which means the entire amount of your Purchase Payment is allocated to the Investment Options you selected. Your Purchase Payments may, however, be subject to a withdrawal charge. This charge may apply to amounts you withdraw under your Contract prior to the Annuity Date, depending on the length of time each Purchase Payment has been invested and on the amount you withdraw. This amount is deducted proportionately among all Investment Options from which the


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withdrawal occurs. See the Choosing Your Annuity Option – Annuity Options section for withdrawal charges that may apply to redemptions after the Annuity Date. No withdrawal charge is imposed on:
 
  •  the free withdrawal amount (see WITHDRAWALS – Withdrawals Free of a Withdrawal Charge),
 
  •  death benefit proceeds, except as provided under the DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Non-Natural Owner section for certain Non-Natural Owners,
 
  •  amounts converted after the 1st  Contract Anniversary to a life contingent Annuity Option or an Annuity Option with a period certain of at least 7 years that is offered under the Contract, unless guaranteed variable annuity payments under Annuity Option 2 or 4 are subsequently redeemed (see ANNUITIZATION – Choosing Your Annuity Option),
 
  •  withdrawals by Owners to meet the minimum distribution rules for Qualified Contracts as they apply to amounts held under the Contract, or
 
  •  withdrawals after the 1st Contract Anniversary, if the Owner or Annuitant has been diagnosed with a medically determinable condition that results in a life expectancy of 12 months or less and we are provided with medical evidence In Proper Form.
 
If you annuitize your Contract by electing the GIA Plus Annuity Option, the waiver of withdrawal charges described above will not apply.
 
Transfers of all or part of your Account Value from one Investment Option to another are not considered a withdrawal of an amount from your Contract, so no withdrawal charge is imposed at the time of transfer. See HOW YOUR INVESTMENTS ARE ALLOCATED – Transfers and Market-timing Restrictions and THE GENERAL ACCOUNT.
 
How the Withdrawal Charge is Determined
 
The amount of the withdrawal charge depends on how long each Purchase Payment was held under your Contract. Each Purchase Payment you make is considered to have a certain “age,” depending on the length of time since that Purchase Payment was effective. A Purchase Payment is “one year old” or has an “age of one” from the day it is effective until the beginning of the day preceding your next Contract Anniversary. Beginning on the day preceding that Contract Anniversary, your Purchase Payment will have an “age of two” and increases in age on the day preceding each Contract Anniversary. When you withdraw an amount subject to the withdrawal charge, the “age” of the Purchase Payment you withdraw determines the level of withdrawal charge as follows:
 
         
    Withdrawal
    Charge as a
    percentage of the
“Age” of Payment
 		  Purchase Payment
in Years   withdrawn
1
    9 %
2
    9 %
3
    8 %
4
    7 %
5
    6 %
6
    5 %
7
    4 %
8
    2 %
9
    1 %
10 or more
    0 %
 
We calculate your withdrawal charge by assuming your withdrawal is applied to Purchase Payments first, in the order your Purchase Payments were received and before any deductions 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. The withdrawal charge will be deducted proportionately among all Investment Options from which your withdrawal occurs. Unless you specify otherwise, a partial withdrawal amount requested will be processed as a “gross” amount, which means that applicable charges and taxes will be deducted from the requested amount. If a partial withdrawal amount is requested to be a “net” amount, applicable charges and taxes will be added to the requested amount and the withdrawal charges and taxes will be calculated on the grossed up amount.
 
Example: You make an initial Purchase Payment of $10,000 in Contract Year 1 and make an additional Purchase Payment of $7,000 in Contract Year 2. With Earnings, your Contract Value in Contract Year 3 is $19,000. In Contract Year 3 you make a withdrawal of $9,000. At this point, total Purchase Payments equal $17,000, and the “age” of the applicable Purchase Payments withdrawn is 3 Years. 10% of all Purchase Payments made ($1,700) may be withdrawn free of a withdrawal charge per Contract Year. The amount of the withdrawal charge applied would be $584 ($9,000 − $1,700 = $7,300; $7,300 × 8% = $584).
 
Contracts with a Credit Enhancement will have a longer surrender charge period and the charges (including withdrawal charges) under the Contract may be higher than other variable annuity contracts we offer. We anticipate these Contracts, over the long term, will be


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profitable for us. The amount of the Credit Enhancement may, over time, be more than offset by the fees and charges under the Contract. Consult with your financial advisor to determine if this Contract is right for you.
 
The withdrawal charge is designed to reimburse us for sales commissions and other expenses associated with the promotion and solicitation of offers for the Contracts, although our actual expenses may be greater or less than the withdrawal charge amount. See ADDITIONAL INFORMATION – Distribution Arrangements for information regarding commissions and other amounts paid to broker-dealers in connection with Contract distribution.
 
Mortality and Expense Risk Charge
 
We assess a charge against the assets of each Subaccount to compensate for certain mortality and expense risks that we assume under the Contract (the “Risk Charge”). The risk that an Annuitant will live longer (and therefore receive more annuity payments) than we predict through our actuarial calculations at the time the Contract is issued is “mortality risk.” We also bear mortality risk in connection with death benefit payable under the Contract. The risk that the expense charges and fees under the Contract and Separate Account are less than our actual administrative and operating expenses is called “expense risk.”
 
This Risk Charge is assessed daily at an annual rate equal to 1.50% of each Subaccount’s assets.
 
The Risk Charge will stop at the Annuity Date if you select fixed annuity payments. The base Risk Charge will continue after the Annuity Date if you choose variable annuity payments, even though we do not bear mortality risk if your Annuity Option is Period Certain Only.
 
We will realize a gain if the Risk Charge exceeds our actual cost of expenses and benefits, and will suffer a loss if such actual costs exceed the Risk Charge. Any gain will become part of our General Account. We may use it for any reason, including covering sales and Credit Enhancement expenses on the Contracts.
 
Increase in Risk Charge if an Optional Death Benefit Rider is Purchased
 
We increase your Risk Charge by an annual rate equal to 0.20% of each Subaccount’s assets if you purchase the Stepped-Up Death Benefit. The total Risk Charge annual rate will be 1.70% if the Stepped-Up Death Benefit is purchased. Any increase in your Risk Charge will not continue after the Annuity Date. See DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits.
 
Administrative Fee
 
We charge an Administrative Fee as compensation for costs we incur in operating the Separate Account, issuing and administering the Contracts, including processing applications and payments, and issuing reports to you and to regulatory authorities.
 
The Administrative Fee is assessed daily at an annual rate equal to 0.25% of the assets of each Subaccount. This rate is guaranteed not to increase for the life of your Contract. A correlation will not necessarily exist between the actual administrative expenses attributable to a particular Contract and the Administrative Fee paid in respect of that particular Contract. The Administrative Fee will continue after the Annuity Date if you choose any variable payout option. We do not intend to realize a profit from this fee.
 
Optional Rider Charges
 
If you purchase an optional Rider listed in the table below, we will deduct an annual charge from your Investment Options (excluding the DCA Plus Fixed Option if you own CoreIncome Advantage Plus (Single or Joint), CoreIncome Advantage 5 Plus (Single or Joint), CoreIncome Advantage, CoreProtect Advantage or CoreIncome Advantage 5) on a proportionate basis.
 
Depending on which Rider you own, the charge is deducted each Contract Anniversary or every 3 months following the Rider Effective Date (“Quarterly Rider Anniversary”). The Rider charge will be deducted while the Rider remains in effect and when the Rider terminates. The charge is deducted in arrears each Contract Anniversary or Quarterly Rider Anniversary.
 
If your Rider charge is deducted each Contract Anniversary and your Rider terminates on a Contract Anniversary, the entire charge for the prior year will be deducted on that anniversary. If the Rider terminates prior to a Contract Anniversary, a prorated charge will be deducted on the earlier of the day your Contract terminates or the Contract Anniversary immediately following the day your Rider terminates. The charge will be determined as of the day your Rider terminates.
 
If your Rider charge is deducted each Quarterly Rider Anniversary and your Rider terminates on a Quarterly Rider Anniversary, the entire charge for the prior quarter will be deducted on that anniversary. If the Rider terminates prior to a Quarterly Rider Anniversary, a prorated charge will be deducted on the earlier of the day the Contract terminates or on the Quarterly Rider Anniversary immediately following the day your Rider terminates. The charge will be determined as of the day your Rider terminates.
 
Any portion of the Rider’s charge we deduct from any fixed option will not be greater than the annual interest credited in excess of the minimum guaranteed interest rate specified in your Contract. If you make a full withdrawal of the amount available for withdrawal during a Contract Year, we will deduct the charge from the final payment made to you.


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An optional Rider annual charge percentage may change if a Step-Up/Reset occurs under the Rider provisions. However, the annual charge percentage will not exceed the maximum annual charge percentage (indicated in the table below) for the applicable Rider. You may elect to opt-out of a Reset and your annual charge percentage will remain the same as it was before the Reset. If an Automatic Reset or Owner-Elected Reset never occurs, the annual charge percentage established on the Rider Effective Date is guaranteed not to change. You can find more information about Protected Payment Base, Step-Up/Reset, Automatic Reset and Owner-Elected Reset for each applicable rider in the OPTIONAL LIVING BENEFIT RIDERS section.
 
Annual Charge Percentage Table
 
                               
          Maximum
 		           
    Current
 		    Annual Charge
 		    To determine the amount to be
 		     
    Annual Charge
 		    Percentage
 		    deducted, the Annual Charge
 		    The Charge is
Optional Rider   Percentage     Under the Rider     Percentage is multiplied by the:     deducted on each:
 
Earnings Enhancement Guarantee (EEG)
    0.25%         0.25%       Contract Value     Contract Anniversary
                           
CoreIncome Advantage Plus (Single)
    0.30%         1.20%       Protected Payment Base     Quarterly Rider Anniversary
                           
CoreIncome Advantage Plus (Joint)
    0.50%         1.50%       Protected Payment Base     Quarterly Rider Anniversary
                           
CoreIncome Advantage 5 Plus (Single)
    0.60%         1.50%       Protected Payment Base     Quarterly Rider Anniversary
                           
CoreIncome Advantage 5 Plus (Joint)
    0.80%         1.75%       Protected Payment Base     Quarterly Rider Anniversary
                           
CoreIncome Advantage 5
    0.60%         1.20%       Protected Payment Base     Quarterly Rider Anniversary
                           
CoreProtect Advantage1
    0.95%         1.50%       Protected Payment Base     Quarterly Rider Anniversary
                           
CoreIncome Advantage2
    0.30%         1.00%       Protected Payment Base     Quarterly Rider Anniversary
                           
Flexible Lifetime Income Plus (Single)3
    1.50%         1.50%       Protected Payment Base     Contract Anniversary
                           
Flexible Lifetime Income Plus (Joint)4
    1.75%         1.75%       Protected Payment Base     Contract Anniversary
                           
Foundation 105
    1.50%         1.50%       Protected Payment Base     Contract Anniversary
                           
Automatic Income Builder6
    1.25%         1.50%       Protected Payment Base     Contract Anniversary
                           
Flexible Lifetime Income (Single)7
    1.20%         1.20%       Protected Payment Base     Contract Anniversary
                           
Flexible Lifetime Income (Joint)8
    1.20%         1.20%       Protected Payment Base     Contract Anniversary
                           
Income Access9
    0.75%         0.75%       Contract Value     Contract Anniversary
                           
Guaranteed Protection Advantage 3 (GPA 3)10
    1.00%         1.00%       Guaranteed Protection Amount     Contract Anniversary
                           
Guaranteed Protection Advantage 5 (GPA 5)11
    0.75%         0.75%       Contract Value     Contract Anniversary
                           
Guaranteed Income Advantage Plus (GIA Plus)12
    0.75%         0.75%       Greater of Contract Value or
Guaranteed Income Base 		    Contract Anniversary
 
 
1 If you purchased CoreProtect Advantage and the Rider Effective Date is before May 2, 2011, the charge percentage is equal to 1.05% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after May 2, 2011 and before May 1, 2012, the charge percentage is equal to 0.85% unless a Reset occurs.
 
2 If you purchased CoreIncome Advantage and the Rider Effective Date is before June 1, 2010, the charge percentage is equal to 0.40%. A Reset must occur on or after June 1, 2010 to receive the reduced charge percentage of 0.30%.
 
3 If you purchased Flexible Lifetime Income Plus (Single) and the Rider Effective Date is before January 1, 2009, the charge percentage is equal to 0.85% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after January 1, 2009 and before May 1, 2009, the charge percentage is equal to 0.95% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after May 1, 2009 and before October 1, 2009, the charge percentage is equal to 1.25% unless a Reset occurs.
 
4 If you purchased Flexible Lifetime Income Plus (Joint) and the Rider Effective Date is before January 1, 2009, the charge percentage is equal to 1.00% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after January 1, 2009 and before May 1, 2009, the charge percentage is equal to 1.10% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after May 1, 2009 and before October 1, 2009, the charge percentage is equal to 1.40% unless a Reset occurs.
 
5 If you purchased Foundation 10 and the Rider Effective Date is before January 1, 2009, the charge percentage is equal to 0.85% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after January 1, 2009 and before October 1, 2009, the charge percentage is equal to 1.35% unless a Reset occurs.
 
6 If you purchased Automatic Income Builder and the Rider Effective Date is before January 1, 2009, the charge percentage is equal to 0.85% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after January 1, 2009 and before November 1, 2010, the charge percentage is equal to 0.95% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after November 1, 2010 and before May 1, 2012, the charge percentage is equal to 1.05% unless a Reset occurs.


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7 If you purchased Flexible Lifetime Income (Single) and the Rider Effective Date is before November 1, 2010, the charge percentage is equal to 0.65% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after November 1, 2010 and before May 1, 2012, the charge percentage is equal to 0.90% unless a Reset occurs.
 
8 If you purchased Flexible Lifetime Income (Joint) and the Rider Effective Date is before November 1, 2010, the charge percentage is equal to 0.85% unless a Reset occurs. If you purchased this Rider and the Rider Effective Date is on or after November 1, 2010 and before May 1, 2012, the charge percentage is equal to 1.10% unless a Reset occurs.
 
9 If you purchased Income Access and the Rider Effective Date is before May 1, 2009, the charge percentage is equal to 0.40% unless a Step-Up occurs. If you purchased this Rider and the Rider Effective Date is on or after May 1, 2009 and before October 1, 2009, the charge percentage is equal to 0.65% unless a Step-Up occurs.
 
10 If you purchased GPA 3 and the Rider Effective Date is before January 1, 2009, the charge percentage is equal to 0.45% unless a Step-Up occurs. If you purchased this Rider and the Rider Effective Date is on or after January 1, 2009 and before May 1, 2009, the charge percentage is equal to 0.55% unless a Step-Up occurs. If you purchased this Rider and the Rider Effective Date is on or after May 1, 2009 and before October 1, 2009, the charge percentage is equal to 0.75% unless a Step-Up occurs. If you purchased this Rider and the Rider Effective Date is on or after October 1, 2009 and before May 1, 2012, the charge percentage is equal to 0.95% unless a Step-Up occurs.
 
11 If you purchased GPA 5 and the Rider Effective Date is before January 1, 2009, the charge percentage is equal to 0.40% unless a Step-Up occurs. If you purchased this Rider and the Rider Effective Date is on or after January 1, 2009 and before November 1, 2010, the charge percentage is equal to 0.55% unless a Step-Up occurs.
 
12 If you purchased GIA Plus and the Rider Effective Date is before May 1, 2009, the charge percentage is equal to 0.50%.
 
See Mortality and Expense Risk Charge for the Stepped-Up Death Benefit charge information.
 
Premium Taxes
 
Depending on your state of residence (among other factors), a tax may be imposed on your Purchase Payments (“premium tax”) at the time your Investment is made, at the time of a partial or full withdrawal, at the time any death benefit proceeds are paid, at annuitization or at such other time as taxes may be imposed. Tax rates ranging from 0% to 3.5% are currently in effect, but may change in the future. Premium tax is subject to state requirements. Some local jurisdictions also impose a tax.
 
If we pay any premium taxes attributable to Purchase Payments, we will impose a similar charge against your Contract Value. We normally will charge you when you annuitize some or all of your Contract Value. We reserve the right to impose this charge for applicable premium taxes and/or other taxes when you make a full or partial withdrawal, at the time any death benefit proceeds are paid, or when those taxes are incurred. For these purposes, “premium taxes” include any state or local premium or retaliatory taxes and any federal, state or local income, excise, business or any other type of tax (or component thereof) measured by or based upon, directly or indirectly, the amount of Purchase Payments we have received. We currently base this charge on your Contract Value, but we reserve the right to base this charge on the transaction amount, the aggregate amount of Purchase Payments we receive under your Contract, or any other amount, that in our sole discretion we deem appropriately reimburses us for premium taxes paid on this Contract.
 
We may also charge the Separate Account or your Contract Value for taxes attributable to the Separate Account or the Contract, including income taxes attributable to the Separate Account or to our operations with respect to the Contract, or taxes attributable, directly or indirectly, to Purchase Payments. Any such charge deducted from the Contract Value will be deducted on a proportionate basis. See HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED – Investing in Variable Investment Options – Calculating Subaccount Unit Values to see how such charges are deducted from the Separate Account. Currently, we do not impose any such charges.
 
Waivers and Reduced Charges
 
We may agree to waive or reduce charges under our Contracts, in situations where selling and/or maintenance costs associated with the Contracts are reduced, such as the sale of several Contracts to the same Contract Owner(s), sales of large Contracts, sales of Contracts in connection with a group or sponsored arrangement or mass transactions over multiple Contracts.
 
We will only waive or reduce such charges on any Contract where expenses associated with the sale or distribution of the Contract and/or costs associated with administering and maintaining the Contract are reduced. We reserve the right to terminate waiver and reduced charge programs at any time, including for issued Contracts.
 
Fund Expenses
 
Your Variable Account Value reflects advisory fees and other expenses incurred by the various Fund Portfolios, net of any applicable reductions and/or reimbursements. These fees and expenses may vary. Each Fund is governed by its own Board of Trustees, and your Contract does not fix or specify the level of expenses of any Portfolio. A Fund’s fees and expenses are described in detail in the applicable Fund Prospectus and SAI.
 
Some Investment Options available to you are “fund of funds”. A fund of funds portfolio is a fund that invests in other funds in addition to other investments that the portfolio may make. Expenses of fund of funds Investment Options may be higher than non fund of funds Investment Options due to the two tiered level of expenses. See the Fund prospectuses for detailed portfolio expenses and other information before investing.


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ANNUITIZATION
 
Selecting Your Annuitant
 
When you submit your Contract application, you must choose a sole Annuitant or Joint Annuitants. If you are buying a Qualified Contract, you must be the sole Annuitant. If you are buying a Non-Qualified Contract you may choose yourself and/or another person as Annuitant. Whether you have a sole or Joint Annuitants, you may choose a Contingent Annuitant. The Contingent Annuitant will not have any Contract benefits, including death benefit proceeds, until becoming the sole surviving Annuitant. You will not be able to add or change a sole or Joint Annuitant after your Contract is issued. However, if you are buying a Qualified Contract, you may add a Joint Annuitant on the Annuity Date. You will be able to add or change a Contingent Annuitant until your Annuity Date or the death of your sole Annuitant or both Joint Annuitants, whichever occurs first. However, once your Contingent Annuitant has become the Annuitant under your Contract, no additional Contingent Annuitant may be named. No Annuitant (Primary, Joint or Contingent) may be named upon or after reaching his or her 81st birthday. We reserve the right to require proof of age or survival of the Annuitant(s).
 
Annuitization
 
Annuitization occurs on the Annuity Date when you convert your Contract from the accumulation phase to the annuitization (income) phase. You may choose both your Annuity Date and your Annuity Option. At the Annuity Date, you may elect to annuitize some or all of your Net Contract Value, less any applicable charge for premium taxes and/or other taxes, (the “Conversion Amount”), as long as such Conversion Amount annuitized is at least $10,000. We will send the annuity payments to the payee that you designate.
 
If you annuitize only a portion of this available Contract Value, you may have the remainder distributed, less any Contract Debt, any applicable charge for premium taxes and/or other taxes, any optional Rider charge, and any applicable withdrawal charge. This option of distribution may or may not be available, or may be available for only certain types of Contracts. Any such distribution will be made to you in a single sum if the remaining Conversion Amount is less than $10,000 on your Annuity Date. Distributions under your Contract may have tax consequences. You should consult a qualified tax adviser for information on full or partial annuitization.
 
If you annuitize only a portion of your Net Contract Value on your Annuity Date, you may, at that time, have the option to elect not to have the remainder of your Contract Value distributed, but instead to continue your Contract with that remaining Contract Value (a “continuing Contract”). If this option is available, you would then choose a second Annuity Date for your continuing Contract, and all references in this Prospectus to your “Annuity Date” would, in connection with your continuing Contract, be deemed to refer to that second Annuity Date. The second Annuity Date may not be later than the date specified in the Choosing Your Annuity Date section of this Prospectus. This option may not be available, or may be available only for certain types of Contracts. You should be aware that some or all of the payments received before the second Annuity Date may be fully taxable. If you annuitize a portion of your Net Contract Value for a period certain of at least 10 years or for the life or life expectancy of the annuitant(s), the annuitized portion will be treated as a separate Contract for the purpose of determining the taxable amount of the payments. We recommend that you contact a qualified tax adviser for more information if you are interested in this option.
 
Choosing Your Annuity Date
 
You should choose your Annuity Date when you submit your application or we will apply a default Annuity Date to your Contract. You may change your Annuity Date by notifying us, In Proper Form, at least ten Business Days prior to the earlier of your current Annuity Date or your new Annuity Date. Your Annuity Date cannot be earlier than your first Contract Anniversary. Adverse federal tax consequences may result if you choose an Annuity Date that is prior to an Annuitant’s attained age 591/2. See FEDERAL TAX ISSUES.
 
If you have a sole Annuitant, your Annuity Date cannot be later than the sole Annuitant’s 95th birthday. If you have Joint Annuitants, your Annuity Date cannot be later than your younger Joint Annuitant’s 95th birthday. Different requirements may apply as required by any applicable state law or the Code. We may, at our sole discretion, allow you to extend your Annuity Date. We reserve the right, at any time, to not offer any extension to your Annuity Date regardless of whether we may have granted any extensions to you or to any others in the past. Some Broker/Dealers may not allow their clients to extend the Annuity Date beyond age 95.
 
If your Contract is a Qualified Contract, you may also be subject to additional restrictions. In order to meet the Code minimum distribution rules, your Required Minimum Distributions (RMDs) may begin earlier than your Annuity Date. For instance, under Section 401 of the Code (for Qualified Plans) and Section 408 of the Code (for IRAs), the entire interest under the Contract must be distributed to the Owner/Annuitant not later than the Owner/Annuitant’s Required Beginning Date (“RBD”), or distributions over the life of the Owner/Annuitant (or the Owner/Annuitant and his or her Beneficiary) must begin no later than the RBD. For more information see FEDERAL TAX ISSUES.
 
Default Annuity Date and Options
 
If you have a Non-Qualified Contract and you do not choose an Annuity Date when you submit your application, your Annuity Date will be your Annuitant’s 95th birthday or your younger Joint Annuitant’s 95th birthday, whichever applies. If you have a Qualified


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Contract and you do not choose an Annuity Date when you submit your application, your Annuity Date will be your Annuitant’s 95th birthday. However some states’ laws may require a different Annuity Date. Certain Qualified Contracts may require distributions to occur at an earlier age.
 
If you have not specified an Annuity Option or do not instruct us otherwise, at your Annuity Date your Net Contract Value, less any charges for premium taxes and/or other taxes, will be annuitized (if this net amount is at least $10,000) as follows:
 
  •  the net amount from a fixed option will be converted into fixed annuity payments, and
 
  •  the net amount from your Variable Account Value will be converted into variable annuity payments directed to the Subaccounts proportionate to your Account Value in each.
 
Additionally:
 
  •  If you have a Non-Qualified Contract, your default Annuity Option will be Life with a ten year Period Certain.
 
  •  If you have a Qualified Contract, your default Annuity Option will be Life with a five year Period Certain (seven year Period Certain if annuitization occurs prior to age 99) or a shorter period certain as may be required by federal regulation. If you are married, different requirements may apply. Please contact your plan administrator for further information, if applicable.
 
  •  If the net amount is less than $10,000, the entire amount will be distributed in one lump sum.
 
Choosing Your Annuity Option
 
You should carefully review the Annuity Options with a qualified tax adviser, and, for Qualified Contracts, reference should be made to the terms of the particular plan and the requirements of the Code for pertinent limitations regarding annuity payments, Required Minimum Distributions (“RMDs”), and other matters.
 
You may make 3 basic decisions about your annuity payments. First, you may choose whether you want those payments to be a fixed-dollar amount and/or a variable-dollar amount. Second, you may choose the form of annuity payments (see Annuity Options below). Third, you may decide how often you want annuity payments to be made (the “frequency” of the payments). You may not change these selections after the Annuity Date.
 
Fixed and Variable Payment Options
 
You may choose fixed annuity payments based on a fixed rate and the 1983a Annuity Mortality Table with the ages set back 10 years, variable annuity payments that vary with the investment results of the Subaccounts you select, or you may choose both, converting one portion of the net amount you annuitize into fixed annuity payments and another portion into variable annuity payments.
 
If you select fixed annuity payments, each periodic annuity payment received will be equal to the initial annuity payment, unless you select a Joint and Survivor Life annuity with reduced survivor payments when the Primary Annuitant dies. Any net amount you convert to fixed annuity payments will be held in our General Account (but not under any fixed option).
 
If you select variable annuity payments, you may choose as many Variable Investment Options as you wish. The amount of the periodic annuity payments will vary with the investment results of the Variable Investment Options selected and may be more or less than a fixed payment option. After the Annuity Date, Annuity Units may be exchanged among available Variable Investment Options up to 4 times in any 12 month period. How your Contract converts into variable annuity payments is explained in more detail in THE CONTRACTS AND THE SEPARATE ACCOUNT section in the SAI.
 
Annuity Options
 
Four Annuity Options are currently available under the Contract, although additional options may become available in the future. For other Annuity Options see OPTIONAL LIVING BENEFIT RIDERS.
 
1.  Life Only. Periodic payments are made to the designated payee during the Annuitant’s lifetime. Payments stop when the Annuitant dies.
 
2.  Life with Period Certain. Periodic payments are made to the designated payee during the Annuitant’s lifetime, with payments guaranteed for a specified period. You may choose to have payments guaranteed from 7 through 30 years (in full years only). The guaranteed period may be limited on Qualified Contracts based on your life expectancy.
 
3.  Joint and Survivor Life. Periodic payments are made to the designated payee during the lifetime of the Primary Annuitant. After the death of the Primary Annuitant, periodic payments will continue to be made during the lifetime of the secondary Annuitant named in the election. You may choose to have the payments during the lifetime of the surviving secondary Annuitant equal 50%, 662/3% or 100% of the original amount payable made during the lifetime of the Primary Annuitant (you must make this election when you choose your Annuity Option). If you elect a reduced payment based on the life of the secondary Annuitant, fixed annuity payments


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will be equal to 50% or 662/3% of the original fixed payment payable during the lifetime of the Primary Annuitant; variable annuity payments will be determined using 50% or 662/3%, as applicable, of the number of Annuity Units for each Subaccount credited to the Contract as of the date of death of the Primary Annuitant. Payments stop when both Annuitants have died.
 
4.  Period Certain Only. Periodic payments are made to the designated payee, guaranteed for a specified period. You may choose to have payments guaranteed from 7 through 30 years (in full years only). The guaranteed period may be limited on Qualified Contracts based on your life expectancy.
 
Periodic payment amounts will differ based on the Annuity Option selected. Generally, the longer the possible payment period, the lower the payment amount.
 
Additionally, if payments are elected under Annuity Options 2 and 4, you may redeem all remaining guaranteed payments after the Annuity Date. Also, under Option 4, partial redemptions of remaining guaranteed payments after the Annuity Date are available. If you elect to redeem all remaining guaranteed payments in a single sum, we will not make any additional annuity payments during the Annuitant’s lifetime or the remaining guaranteed period after the redemption. The amount available upon full redemption would be the present value of any remaining guaranteed payments at the assumed investment return. Any applicable withdrawal charge will be deducted from the present value as if you made a full withdrawal, or if applicable, a partial withdrawal. For purposes of calculating the withdrawal charge and Free Withdrawal amount, it will be assumed that the Contract was never converted to provide annuity payments and any prior annuity payments in that Contract Year will be treated as if they were partial withdrawals from the Contract (see CHARGES, FEES AND DEDUCTIONS – Withdrawal Charge).
 
For example, assume that a Contract was issued with a single investment of $10,000 and in Contract Year 2 the Owner elects to receive variable annuity payments under Annuity Option 4. In Contract Year 3, the Owner elects to make a partial redemption of $5,000. The withdrawal charge as a percentage of the Purchase Payments with an age of 3 years is 8%. Assuming the Free Withdrawal amount immediately prior to the partial redemption is $200, the withdrawal charge for the partial redemption will be $384 (($5,000 − $200) × 8% = $384). No withdrawal charge will be imposed on a redemption if:
 
  •  the Annuity Option is elected as the form of payments of death benefit proceeds, or
 
  •  the Annuitant dies before the period certain has ended and the Beneficiary requests a redemption of the variable annuity payments.
 
Full or partial redemptions of remaining guaranteed variable payments are explained in more detail in the SAI under THE CONTRACTS AND THE SEPARATE ACCOUNT.
 
If the Annuitant dies before the guaranteed payments under Annuity Options 2 and 4 are completed, we will pay the remainder of the guaranteed payments to the first person among the following who is (1) living; or (2) an entity or corporation entitled to receive the remainder of the guaranteed payments:
 
  •  the Owner;
 
  •  the Joint Owner;
 
  •  the Contingent Owner;
 
  •  the Beneficiary; or
 
  •  the Contingent Beneficiary.
 
If none are living (or if there is no entity or corporation entitled to receive the remainder of the guaranteed payments), we will pay the remainder of the guaranteed payments to the Owner’s estate.
 
If the Owner dies on or after the Annuity Date, but payments have not yet been completed, then distributions of the remaining amounts payable under the Contract must be made at least as rapidly as the method of distribution that was being used at the date of the Owner’s death. All of the Owner’s rights granted by the Contract will be assumed by the first among the following who is (1) living; or (2) an entity or corporation entitled to assume the Owner’s rights granted by the Contract:
 
  •  the Joint Owner;
 
  •  the Contingent Owner;
 
  •  the Beneficiary; or
 
  •  the Contingent Beneficiary.
 
If none are living (or if there is no entity or corporation entitled to assume the Owner’s rights granted by the Contract), all of the Owner’s rights granted by the Contract will be assumed by the Owner’s estate.


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For Qualified Contracts, please refer to the Choosing Your Annuity Date section in this Prospectus. If your Contract was issued in connection with a Qualified Plan subject to Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), your spouse’s consent may be required when you seek any distribution under your Contract, unless your Annuity Option is Joint and Survivor Life with survivor payments of at least 50%, and your spouse is your Joint Annuitant.
 
Your Annuity Payments
 
Frequency of Payments
 
You may choose to have annuity payments made monthly, quarterly, semi-annually, or annually. The variable payment amount will be determined in each period on the date corresponding to your Annuity Date, and payment will be made on the next Business Day.
 
Your initial annuity payment must be at least $250. Depending on the net amount you annuitize, this requirement may limit your options regarding the period and/or frequency of annuity payments.
 
Amount of the First Payment
 
Your Contract contains tables that we use to determine the amount of the first annuity payment under your Contract, taking into consideration the annuitized portion of your Net Contract Value at the Annuity Date. This amount will vary, depending on the annuity period and payment frequency you select. This amount will be larger in the case of shorter Period Certain annuities and smaller for longer Period Certain annuities. Similarly, this amount will be greater for a Life Only annuity than for a Joint and Survivor Life annuity, because we will expect to make payments for a shorter period of time on a Life Only annuity. If you do not choose the Period Certain Only annuity, this amount will also vary depending on the age of the Annuitant(s) on the Annuity Date and, for some Contracts in some states, the sex of the Annuitant(s).
 
For fixed annuity payments, the guaranteed income factors in our tables are based on an annual interest rate of 3% and the 1983a Annuity Mortality Table with the ages set back 10 years. If you elect a fixed annuity, fixed annuity payments will be based on the periodic income factors in effect for your Contract on the Annuity Date which are at least the guaranteed income factors under the Contract.
 
For variable annuity payments, the tables are based on an assumed annual investment return of 5% and the 1983a Annuity Mortality Table with the ages set back 10 years. If you elect a variable annuity, your initial variable annuity payment will be based on the applicable variable annuity income factors in effect for your Contract on the Annuity Date which are at least the variable annuity income factors under the Contract. You may choose any other annuity option we may offer on the option’s effective date. A higher assumed investment return would mean a larger first variable annuity payment, but subsequent payments would increase only when actual net investment performance exceeds the higher assumed rate and would fall when actual net investment performance is less than the higher assumed rate. A lower assumed rate would mean a smaller first payment and a more favorable threshold for increases and decreases. If the actual net investment performance is a constant 5% annually, annuity payments will be level. The assumed investment return is explained in more detail in the SAI under THE CONTRACTS AND THE SEPARATE ACCOUNT.
 
DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS
 
Death Benefits
 
Death benefit proceeds may be payable before the Annuity Date on proof of the sole surviving Annuitant’s death or of any Contract Owner while the Contract is in force. Any death benefit payable will be calculated on the “Notice Date”, which is the day on which we receive, In Proper Form, proof of death and instructions regarding payment of death benefit proceeds. If a Contract has multiple Beneficiaries, death benefit proceeds will be calculated when we first receive proof of death and instructions, In Proper Form, from any Beneficiary. The death benefit proceeds still remaining to be paid to other Beneficiaries will fluctuate with the performance of the underlying Investment Options.
 
Death Benefit Proceeds
 
Death benefit proceeds will be payable on the Notice Date. Such proceeds will be reduced by any charge for premium taxes and/or other taxes, any Contract Debt and any Credit Enhancement that was added to the Contract during the 12 month period before the date of death. Currently, unless the death benefit is payable as a result of the death of an Owner who is not an Annuitant, the death benefit proceeds payable on the Notice Date will not be less than the aggregate Purchase Payments less adjustment for withdrawals, reduced by any charges for premium taxes and/or other taxes, and any Contract Debt. The death benefit proceeds may be payable in a single sum, as an Annuity Option available under the Contract, towards the purchase of any other Annuity Option we then offer, or in any other manner permitted by the IRS and approved by us. The Owner’s spouse may continue the Contract (see Death Benefits – Spousal Continuation). In addition, there may be legal requirements that limit the recipient’s Annuity Options and the timing of any payments. A recipient should consult a qualified tax adviser before making a death benefit election.


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The death benefit proceeds will be paid to the first among the following who is (1) living; or (2) an entity or corporation entitled to receive the death benefit proceeds, in the following order:
 
  •  Owner,
 
  •  Joint Owner,
 
  •  Contingent Owner,
 
  •  Beneficiary, or
 
  •  Contingent Beneficiary.
 
If none are living (or if there is no entity or corporation entitled to receive the death benefit proceeds), the proceeds will be payable to the Owner’s Estate.
 
Death Benefit Amount
 
The Death Benefit Amount as of any Business Day before the Annuity Date is equal to the greater of:
 
  •  your Contract Value as of that day, or
 
  •  your aggregate Purchase Payments reduced by an amount for each withdrawal, which is calculated by multiplying the aggregate Purchase Payments received before each withdrawal by the ratio of the amount of the withdrawal, including any withdrawal charge, to the Contract Value immediately prior to each withdrawal. The reduction made, when the Contract Value is less than aggregate Purchase Payments made into the Contract, may be greater than the actual amount withdrawn.
 
We calculate the Death Benefit Amount as of the Notice Date and the death benefit will be paid in accordance with the Death Benefit Proceeds section above.
 
See APPENDIX E: DEATH BENEFIT AMOUNT AND STEPPED-UP DEATH BENEFIT SAMPLE CALCULATIONS.
 
Spousal Continuation
 
Generally, a sole designated recipient who is the Owner’s spouse may elect to become the Owner (and sole Annuitant if the deceased Owner had been the Annuitant) and continue the Contract until the earliest of the spouse’s death, the death of the Annuitant, or the Annuity Date, except in the case of a Qualified Contract issued under section 403 of the Code. The spousal continuation election must be made by the fifth anniversary of the death of the Contract Owner for Non-Qualified Contracts, or by December 31 of the calendar year in which the fifth anniversary of the Contract Owner’s death falls for Qualified Contracts. On the Notice Date, if the surviving spouse is deemed to have continued the Contract, we will set the Contract Value equal to the death benefit proceeds (which will not include any Credit Enhancement recapture) that would have been payable to the spouse as the deemed Beneficiary/designated recipient of the death benefit proceeds.
 
This “Add-In Amount” is the difference between the Contract Value and the death benefit proceeds that would have been payable. The Add-In Amount will be added to the Contract Value on the Notice Date. There will not be an adjustment to the Contract Value if the Contract Value is equal to or greater than the death benefit proceeds as of the Notice Date. The Add-In Amount will be allocated among Investment Options in accordance with the current allocation instructions for the Contract and may be, under certain circumstances, considered earnings. The Add-In Amount is not treated as a new Purchase Payment.
 
A Joint Owner who is the designated recipient, but not the Owner’s spouse, may not continue the Contract. Under IRS Guidelines, once a surviving spouse continues the Contract, the Contract may not be continued again in the event the surviving spouse remarries. If you have purchased an optional living benefit Rider, please refer to the Rider attached to your Contract to determine how any guaranteed amounts may be affected when a surviving spouse continues the Contract.
 
Example: On the Notice Date, the Owner’s surviving spouse elects to continue the Contract. On that date, the death benefit proceeds were $100,000 and the Contract Value was $85,000. Since the surviving spouse elected to continue the Contract in lieu of receiving the death benefit proceeds, we will increase the Contract Value by an Add-In Amount of $15,000 ($100,000 − $85,000 = $15,000). If the Contract Value on the Notice Date was $100,000 or higher, then nothing would be added to the Contract Value.
 
The continuing spouse is subject to the same fees, charges and expenses applicable to the deceased Owner of the Contract.
 
Death of Annuitant
 
If a sole surviving Annuitant dies before the Annuity Date, the amount of the death benefit will be equal to the Death Benefit Amount as of the Notice Date and will be paid in accordance with the Death Benefit Proceeds section.


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If there is more than one Annuitant and an Annuitant who is not an Owner dies, no death benefit proceeds will be payable. The designated sole Annuitant will then be the first living person in the following order:
 
  •  a surviving Joint Annuitant, or
 
  •  a surviving Contingent Annuitant.
 
Death of Owner
 
The amount of the death benefit will be the Death Benefit Amount as of the Notice Date and will be paid in accordance with the Death Benefit Proceeds section if:
 
  •  a Contract Owner who is an Annuitant dies before the Annuity Date, or
 
  •  a Contract Owner, who is not an Annuitant, and the Annuitant die simultaneously.
 
If a Contract Owner who is not an Annuitant dies before the Annuity Date, the death benefit proceeds will be equal to your Contract Value as of the Notice Date and will be paid in accordance with the Death Benefit Proceeds section and in accordance with the federal income tax distribution at death rules discussed in the FEDERAL TAX ISSUES section.
 
Non-Natural Owner
 
If you are a Non-Natural Owner of a Contract other than a Contract issued under a Qualified Plan as defined in Section 401 or 403 of the Code, the Primary Annuitant will be treated as the Owner of the Contract for purposes of the Non-Qualified Contract Distribution Rules. If there are Joint or Contingent Annuitants, the death benefit proceeds will be payable on proof of death of the first annuitant. If there is a change in the Primary Annuitant prior to the Annuity Date, such change will be treated as the death of the Owner (however, under the terms of your Contract, you cannot change the Primary Annuitant). The Death Benefit Amount will be: (a) the Contract Value, if the Non-Natural Owner elects to maintain the Contract and reinvest the Contract Value into the contract in the same amount as immediately prior to the distribution; or (b) the Contract Value, less any withdrawal charge and charges for premium taxes and/or other taxes, if the Non-Natural Owner elects a cash distribution and will be paid in accordance with the Death Benefits Proceeds section and in accordance with the federal income tax distribution at death rules discussed in the FEDERAL TAX ISSUES section.
 
Non-Qualified Contract Distribution Rules
 
The Contract is intended to comply with all applicable provisions of Code Section 72(s) and any successor provision, as deemed necessary by us to qualify the Contract as an annuity contract for federal income tax purposes. If an Owner of a Non-Qualified Contract dies before the Annuity Date, distribution of the death benefit proceeds must begin within 1 year after the Owner’s death or complete distribution within 5 years after the Owner’s death. In order to satisfy this requirement, the designated recipient must receive a final lump sum payment by the 5th anniversary of the Contract Owner’s death, or elect to receive an annuity for life or over a period that does not exceed the life expectancy of the designated recipient with annuity payments that start within 1 year after the Owner’s death or, if permitted by the IRS, elect to receive a systematic distribution over a period not exceeding the beneficiary’s life expectancy using a method that would be acceptable for purposes of calculating the minimum distribution required under section 401(a)(9) of the Code. If an election to receive an annuity is not made within 60 days of our receipt of proof, In Proper Form, of the Owner’s death or, if earlier, 60 days (or shorter period as we permit) prior to the 1st anniversary of the Owner’s death, the option to receive annuity payments is no longer available. If a Non-Qualified Contract has Joint Owners, this requirement applies to the first Contract Owner to die.
 
The Owner may designate that the Beneficiary will receive death benefit proceeds through annuity payments for life or life with Period Certain. The Owner must designate the payment method in writing in a form acceptable to us. The Owner may revoke the designation only in writing and only in a form acceptable to us. Once the Owner dies, the Beneficiary cannot revoke or modify the Owner’s designation.
 
Qualified Contract Distribution Rules
 
Under Internal Revenue Service regulations and our administrative procedures, if the Contract is owned under a Qualified Plan as defined in Sections 401, 403, 457(b) or Sections 408, or 408A of the Code and the Annuitant dies before the Required Beginning Date, the payment of any death benefit proceeds must be made to the designated recipient in accordance with one of two rules. One rule generally requires the death benefit proceeds to commence distribution by December 31 of the calendar year following the calendar year of the Annuitant’s death and continue over the life of his or her Beneficiary (the “life expectancy method”). The second rule requires distribution of the entire death benefit proceeds no later than December 31 of the calendar year in which the 5th anniversary of the Annuitant’s death falls (the “five-year rule”).
 
However, the life expectancy method and the five-year rule are modified if the sole primary Beneficiary is a surviving spouse. If the surviving spouse elects not to do an eligible rollover to an IRA or another existing eligible plan in his or her name, then he or she will be subject to the five-year rule. However, the surviving spouse may waive the five-year requirement and elect to take distributions over his or


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her life expectancy. If the surviving spouse elects to defer the commencement of required distributions beyond the 1st anniversary of the Annuitant’s death, the surviving spouse may defer required distributions until the later of:
 
  •  December 31 of the year following the year the Annuitant died, or
 
  •  December 31 of the year in which the deceased Annuitant would have turned 701/2.
 
You are responsible for monitoring distributions that must be taken to meet IRS guidelines.
 
If the Annuitant dies after the commencement of RMDs (except in the case of a Roth IRA when RMDs do not apply) but before the Annuitant’s entire interest in the Contract (other than a Roth IRA) has been distributed, the remaining interest in the Contract must be distributed to the designated recipient at least as rapidly as under the distribution method in effect at the time of the Annuitant’s death.
 
Stepped-Up Death Benefit
 
This optional Rider offers you the ability to lock in market gains for your beneficiaries with a stepped-up death benefit, which is the highest Contract Value on any previous Contract Anniversary (prior to the Annuitant’s 81st birthday) increased by the amount of additional Purchase Payments and decreased by withdrawals that you make.
 
Purchasing the Rider
 
You may purchase this optional Rider at the time your application is completed. You may not purchase this Rider after the Contract Date. This Rider may only be purchased if the age of each Annuitant is 75 or younger on the Contract Date.
 
How the Rider Works
 
If you purchase this Rider at the time your application is completed, upon the death of the sole surviving Annuitant (first Annuitant for Non-Natural Owners), or the first Owner who is also an Annuitant, prior to the Annuity Date, the death benefit proceeds will be equal to the greater of (a) or (b) below:
 
  (a)  the Death Benefit Amount as of the Notice Date.
 
The Death Benefit Amount as of any day before the Annuity Date is equal to the greater of:
 
  •  your Contract Value as of that day, or
 
  •  your aggregate Purchase Payments reduced by an amount for each withdrawal, which is calculated by multiplying the aggregate Purchase Payments received before each withdrawal by the ratio of the amount of the withdrawal, including any withdrawal charge, to the Contract Value immediately prior to each withdrawal. The reduction made, when the Contract Value is less than aggregate Purchase Payments made into the Contract, may be greater than the actual amount withdrawn.
 
  (b)  the Guaranteed Minimum Death Benefit Amount as of the Notice Date.
 
The actual Guaranteed Minimum Death Benefit Amount is calculated only when death benefit proceeds become payable as a result of the death of the sole surviving Annuitant (first Annuitant for Non-Natural Owners), or the first death of an Owner who is also an Annuitant, prior to the Annuity Date and is determined as follows:
 
First we calculate what the Death Benefit Amount would have been as of your first Contract Anniversary and each subsequent Contract Anniversary that occurs while the Annuitant is living and before the Annuitant reaches his or her 81st birthday (each of these Contract Anniversaries is a “Milestone Date”).
 
We then adjust the Death Benefit Amount for each Milestone Date by:
 
  •  adding the aggregate amount of any Purchase Payments received by us since the Milestone Date, and
 
  •  subtracting an amount for each withdrawal that has occurred since that Milestone Date, which is calculated by multiplying the Death Benefit Amount before the withdrawal by the ratio of the amount of each withdrawal that has occurred since that Milestone Date, including any withdrawal charge, to the Contract Value immediately prior to the withdrawal. The reduction made, when the Contract Value is less than aggregate Purchase Payments made into the Contract, may be greater than the actual amount withdrawn.
 
The highest of these adjusted Death Benefit Amounts for each Milestone Date, as of the Notice Date, is your Guaranteed Minimum Death Benefit Amount if you purchase this Rider. Calculation of any actual Guaranteed Minimum Death Benefit Amount is only made once death benefit proceeds become payable under your Contract.
 
Any death benefit paid under this Rider will be paid in accordance with the Death Benefit Proceeds section above.
 
See APPENDIX E: DEATH BENEFIT AMOUNT AND STEPPED-UP DEATH BENEFIT SAMPLE CALCULATIONS.


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Termination
 
The Rider will remain in effect until the earlier of:
 
  •  the date a full withdrawal of the amount available for withdrawal is made under the Contract,
 
  •  the date death benefit proceeds become payable under the Contract,
 
  •  the date the Contract is terminated in accordance with the provisions of the Contract, or
 
  •  the Annuity Date.
 
The Rider may not otherwise be cancelled.
 
Earnings Enhancement Guarantee (EEG)
 
Purchasing the Rider
 
You may purchase this Rider on the Contract Date or on the first Contract Anniversary. If you buy this Rider within 60 days after the Contract Date or within 60 days after the first Contract Anniversary, we will make the Rider Effective Date coincide with that Contract Date or Contract Anniversary. EEG is also called the Guaranteed Earnings Enhancement (GEE) and the EEG Amount is called the GEE Amount in the Rider attached to your Contract.
 
You may purchase this Rider only if the age of each Annuitant is 75 years or younger on the date of purchase. The date of purchase is the Rider Effective Date as shown in your Contract.
 
Any Credit Enhancement added to the Contract Value is considered earnings and will be treated as earnings for purposes of this Rider.
 
How the Rider Works
 
If you purchase this Rider, an Earnings Enhancement Guarantee amount (EEG Amount) is added to the death benefit proceeds when such proceeds become payable as a result of the sole surviving Annuitant’s death or the first death of an Owner who is also an Annuitant (first Annuitant for Non-Natural Owners).
 
The EEG amount is calculated as follows:
 
If the age of the oldest Annuitant was age 69 or younger on the Rider Effective Date, the EEG amount is equal to the lesser of:
 
  •  40% of Earnings, or
 
  •  40% of Remaining Purchase Payments, excluding any Purchase Payments made in the 12 months prior to the date of death, adjusted for withdrawals.
 
If the age of the oldest Annuitant was age 70 to 75 on the Rider Effective Date, the EEG Amount is equal to the lesser of:
 
  •  25% of Earnings, or
 
  •  25% of Remaining Purchase Payments, excluding any Purchase Payments made in the 12 months prior to the date of death, adjusted for withdrawals.
 
For purposes of calculating the EEG Amount, Earnings are equal to the Contract Value as of the date of death minus Remaining Purchase Payments. Remaining Purchase Payments is defined as (a) or (b) below:
 
  (a)  If the Rider is effective on the Contract Date, Remaining Purchase Payments are equal to:
 
  •  the Initial Purchase Payments, plus
 
  •  any additional Purchase Payments added, minus
 
  •  the amount that each withdrawal exceeds the amount of Earnings in the Contract immediately prior to such withdrawal. Withdrawals are assumed to be taken from Earnings first, then from Purchase Payments in the order they were received.
 
  (b)  If the Rider is effective after the Contract Date, Remaining Purchase Payments are equal to:
 
  •  the Contract Value on the Effective Date, plus
 
  •  any additional Purchase Payments added since the Rider Effective Date, minus
 
  •  the amount that each withdrawal taken after the Rider Effective Date exceeds the amount of Earnings in the Contract accumulated since that date. Withdrawals are assumed to be taken first from Earnings accumulated since the Rider Effective Date, then from Purchase Payments in the order that they were received.


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See APPENDIX F: EARNINGS ENHANCEMENT GUARANTEE (EEG) SAMPLE CALCULATIONS.
 
If the Surviving Spouse of the deceased Owner continues the Contract in accordance with its terms and conditions, then all provisions of the Rider for the Surviving Spouse will be based on the age of the Surviving Spouse on the date of death of the deceased Owner. If the Surviving Spouse is over age 75 on the date of death, the Rider will not be continued for such Surviving Spouse and the benefits and charges provided by the Rider will no longer be applied.
 
Termination
 
Once purchased, the Rider will remain in effect until the earlier of:
 
  •  the date a full withdrawal of the amount available for withdrawal is made under the Contract,
 
  •  the date death benefit proceeds become payable under the Contract,
 
  •  the date the Contract is terminated in accordance with the provisions of the Contract, or
 
  •  the Annuity Date.
 
The Rider may not otherwise be cancelled.
 
WITHDRAWALS
 
Optional Withdrawals
 
You may, on or prior to your Annuity Date, withdraw all or a portion of the amount available under your Contract while the Annuitant is living and your Contract is in force. You may surrender your Contract and make a full withdrawal at any time. If you surrender your Contract it will be terminated as of the Effective Date of the withdrawal. Beginning 30 days after your Contract Date, you also may make partial withdrawals from your Investment Options at any time. Currently, we are not requiring the 30-day waiting period on partial withdrawals, but we reserve the right to require a 30-day waiting period on partial withdrawals in the future. You may request to withdraw a specific dollar amount or a specific percentage of an Account Value or your Net Contract Value. You may choose to make your withdrawal from specified Investment Options. If you do not specify Investment Options, your withdrawal will be made from all of your Investment Options proportionately.
 
Each partial withdrawal must be for $500 or more. Pre-authorized partial withdrawals must be at least $250, except for pre-authorized withdrawals distributed by Electronic Funds Transfer (EFT), which must be at least $100. If your partial withdrawal from an Investment Option would leave a remaining Account Value in that Investment Option of less than $500, we also reserve the right, at our option, to transfer that remaining amount to your other Investment Options on a proportionate basis relative to your most recent allocation instructions.
 
If your partial withdrawal leaves you with a Net Contract Value of less than $1,000, or if your partial withdrawal request is for an amount exceeding the amount available for withdrawal, as described in the Amount Available for Withdrawal section below, we have the right, at our option, to terminate your Contract and send you the withdrawal proceeds. However, we will not terminate your Contract if you own an optional withdrawal benefit rider and a partial withdrawal reduces the Net Contract Value to an amount less than $1,000. Partial withdrawals from any fixed option in any Contract Year may be subject to restrictions.
 
Distributions made due to divorce instructions or under Code Section 72(t)/72(q) (substantially equal periodic payments) are treated as withdrawals for Contract purposes and may result in a withdrawal charge assessment.
 
Amount Available for Withdrawal
 
The amount available for withdrawal is your Net Contract Value (Contract Value less Contract Debt) at the end of the Business Day on which your withdrawal request is effective, less any applicable optional Rider Charges, withdrawal charge, and any charge for premium taxes and/or other taxes. The amount we send to you (your “withdrawal proceeds”) will also reflect any required or requested federal and state income tax withholding. See FEDERAL TAX ISSUES and THE GENERAL ACCOUNT. If you own optional Riders, taking a withdrawal before a certain age or a withdrawal that is greater than the allowed annual withdrawal amount under a Rider, may result in adverse consequences such as a reduction in Rider benefits or the failure to receive lifetime withdrawals under the Rider.
 
You assume investment risk on Purchase Payments in the Subaccounts. As a result, the amount available to you for withdrawal from any Subaccount may be more or less than the total Purchase Payments you have allocated to that Subaccount.
 
Withdrawals Free of a Withdrawal Charge
 
Subject to the amount available for withdrawal provisions as described above, during a Contract Year you may withdraw amounts up to your “eligible Purchase Payments” without incurring a withdrawal charge. Eligible Purchase Payments include 10% of all Purchase


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Payments that have an “age” of less than 10 years, plus 100% of all remaining Purchase Payments that have an “age” of 10 years or more. For purposes of determining the free withdrawal amounts, withdrawal of mandatory required minimums from certain Qualified Plans are included within the calculations. Any portion of your eligible Purchase Payments not withdrawn during a Contract Year may not be carried over to the next Contract Year.
 
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 (Credit Enhancements included), your Contract Value in Contract Year 3 is $19,000. In Contract Year 3, you may withdraw $1,700 free of the withdrawal charge (your total Purchase Payments were $17,000, so 10% of that equals $1,700). After this withdrawal, your Contract Value is $17,300. In Contract Year 4, you may withdraw another $1,700 (10% of the total Purchase Payments of $17,000) free of any withdrawal charge.
 
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 after the Annuity Date.
 
Qualified Contracts have special restrictions on withdrawals. For purposes of determining the free withdrawal amounts, withdrawal of mandatory required minimums from certain Qualified Contracts are included within the calculations. For additional information, see Special Restrictions Under Qualified Plans below. For those Contracts issued to a Charitable Remainder Trust (CRT), the amount available for withdrawal free of withdrawal charges during a Contract Year includes all eligible Purchase Payments plus all earnings even if all Purchase Payments have not been deemed withdrawn.
 
Pre-Authorized Withdrawals
 
If your Contract Value is at least $5,000, you may select the pre-authorized withdrawal option, and you may choose monthly, quarterly, semi-annual or annual withdrawals. Currently, we are not enforcing the minimum Contract Value amount but we reserve the right to enforce the minimum amount in the future. Each withdrawal must be for at least $250, except for withdrawals distributed by Electronic Funds Transfer (EFT), which must be at least $100. Each pre-authorized withdrawal is subject to federal income tax on its taxable portion and may be subject to a tax penalty of 10% if you have not reached age 591/2. Pre-authorized withdrawals cannot be used to continue the Contract beyond the Annuity Date. See FEDERAL TAX ISSUES and THE GENERAL ACCOUNT. Additional information and options are set forth in the SAI.
 
Special Requirements for Full Withdrawals and Payments to Third Party Payees
 
Instructions for a full withdrawal and surrender of your Contract In Proper Form includes, among other things, a return of the original Contract or a lost contract affidavit. For your convenience, our Withdrawal Request form includes a lost contract affidavit for your use in providing us with your full withdrawal and surrender instructions. If you wish to have a full or partial withdrawal check made payable to a third-party payee, you must provide complete instructions and an original signature is required on the Withdrawal Request form or your withdrawal request instructions. If you wish to withdraw the entire amount available under your Contract, you must either return your Contract to us or sign and submit a Withdrawal Request form or a Lost Contract Affidavit if no Withdrawal Request form is completed.
 
Special Restrictions Under Qualified Plans
 
Qualified Plans may have additional rules regarding withdrawals from a Contract purchased under such a Plan. In general, if your Contract was issued under certain Qualified Plans, you may not withdraw amounts attributable to contributions made pursuant to a salary reduction agreement (as defined in Section 402(g)(3)(A) of the Code) or to transfers from a custodial account (as defined in Section 403(b)(7) of the Code) except in cases of your:
 
  •  severance from employment,
 
  •  death,
 
  •  disability as defined in Section 72(m)(7) of the Code,
 
  •  reaching age 591/2, or
 
  •  hardship as defined for purposes of Section 401 of the Code.
 
These limitations do not affect certain rollovers or exchanges between Qualified Plans, and do not apply to rollovers from these Qualified Plans to an individual retirement account or individual retirement annuity. In the case of a 403(b) plan, these limitations do not apply to certain salary reduction contributions made, and investment results earned, prior to dates specified in the Code.
 
Hardship withdrawals under the exception provided above are restricted to amounts attributable to salary reduction contributions, and do not include investment results. This additional restriction does not apply to salary reduction contributions made, or investment results earned, prior to dates specified in the Code.


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Certain distributions, including rollovers, may be subject to mandatory withholding of 20% for federal income tax and to a tax penalty of 10% if the distribution is not transferred directly to the trustee of another Qualified Plan, or to the custodian of an individual retirement account or issuer of an individual retirement annuity. See FEDERAL TAX ISSUES. Distributions may also trigger withholding for state income taxes. The tax and ERISA rules relating to withdrawals from Contracts issued to Qualified Plans are complex. We are not the administrator of any Qualified Plan. You should consult your qualified tax adviser and/or your Plan Administrator before you withdraw any portion of your Contract Value.
 
Effective Date of Withdrawal Requests
 
Withdrawal requests are normally effective on the Business Day we receive them In Proper Form. If you make Purchase Payments by check and submit a withdrawal request immediately afterwards, payment of your withdrawal proceeds may be delayed until we receive confirmation in our Annuities administrative office that your check has cleared.
 
Tax Consequences of Withdrawals
 
All withdrawals, including pre-authorized withdrawals, will generally have federal income tax consequences, which could include tax penalties. You should consult with a qualified tax adviser before making any withdrawal or selecting the pre-authorized withdrawal option. See FEDERAL TAX ISSUES.
 
Right to Cancel (“Free Look”)
 
You may return your Contract for cancellation and a refund during your Free Look period. Your Free Look period is usually the 10-day period beginning on the day you receive your Contract, but may vary if required by state law. The amount of your refund may be more or less than the Purchase Payments you have made. If you return your Contract and it is post-marked during the Free Look period, it will be cancelled as of the date we receive your Contract. In most states, you will then receive a refund of your Contract Value, based upon the next determined Accumulated Unit Value (AUV) after we receive your Contract for cancellation, plus a refund of any amount that may have been deducted as Contract fees and charges, and minus any Credit Enhancement as described in PURCHASING YOUR CONTRACT – Credit Enhancements. You bear the investment risk on any Credit Enhancement added to the Contract.
 
In some states we are required to refund your Purchase Payments. If your Contract was issued in such a state and you cancel your Contract during the Free Look period, we will return the greater of your Purchase Payments (less any withdrawals made) or the Contract Value (less any Credit Enhancement). In addition, if your Contract was issued as an IRA and you return your Contract within 7 days after you receive it, we will return the greater of your Purchase Payments (less any withdrawals made) or the Contract Value (less any Credit Enhancement).
 
Your Purchase Payments are allocated to the Investment Options you indicated on your application, unless otherwise required by state law. If state law requires that your Purchase Payments must be allocated to Investment Options different than you requested, we will comply with state requirements. At the end of the Free Look period, we will allocate your Purchase Payments (and any Credit Enhancement) based on your allocation instructions.
 
See ADDITIONAL INFORMATION – State Considerations.
 
For replacement business, the Free Look period may be extended and the amount returned (Purchase Payment versus Contract Value) may be different than for non-replacement business. Please consult with your financial advisor if you have any questions regarding your state’s Free Look period and the amount of any refund.
 
You will find a complete description of the Free Look period and amount to be refunded that applies to your Contract on the Contract’s cover page, or on a notice that accompanies your Contract.
 
If your Contract is issued in exchange for another annuity contract or a life insurance policy, our administrative procedures may vary, depending on the state in which your Contract is issued.
 
OPTIONAL LIVING BENEFIT RIDERS
 
General Information
 
Optional Riders are subject to availability (including state availability). Before purchasing any optional Rider, make sure you understand all of the terms and conditions and consult with your financial advisor for advice on whether an optional Rider is appropriate for you. We reserve the right to restrict the purchase of an optional living benefit Rider to only Contract issue in the future. Your election to purchase an optional Rider must be received In Proper Form.


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You may purchase an optional Rider on the Contract Date or on any Contract Anniversary (if available). In addition, if you purchase a Rider within 60 days after the Contract Date or, if available, within 60 days after any Contract Anniversary, the Rider Effective Date will be that Contract Date or Contract Anniversary. Your election to purchase an optional Rider must be received In Proper Form.
 
Distributions made due to divorce instructions or under Code Section 72(t)/72(q) (substantially equal periodic payments) are treated as withdrawals for Contract purposes and may adversely affect Rider benefits.
 
Taking a withdrawal before a certain age or a withdrawal that is greater than the annual withdrawal amount (“excess withdrawal”) under a particular Rider may result in adverse consequences such as a permanent reduction in Rider benefits or the failure to receive lifetime withdrawals under a Rider.
 
Some optional riders allow for owner elected Resets/Step-Ups. If you elect to Reset/Step-Up, your election must be received, In Proper Form, within 60 days after the Contract Anniversary (“60 day period”) on which the Reset/Step-Up is effective. We may, at our sole discretion, allow Resets/Step-Ups after the 60 day period. We reserve the right to refuse a Reset/Step-Up request after the 60 day period regardless of whether we may have allowed you or others to Reset/Step-Up in the past. Each Contract Anniversary starts a new 60 day period in which a Reset/Step-Up may be elected.
 
Some broker/dealers may limit their clients from purchasing some optional Riders based upon the client’s age or other factors. You should work with your financial advisor to decide whether an optional Rider is appropriate for you.
 
Taking a loan while an optional living benefit Rider is in effect will terminate your Rider. Work with your financial advisor before taking a loan.
 
Investment Allocation Requirements
 
At initial purchase and during the entire time that you own an optional living benefit Rider, you must allocate your entire Contract Value to an asset allocation program or Investment Options we make available for these Riders. You may allocate your Contract Value according to the following requirements:
 
  •  100% to one allowable Asset Allocation Model, OR
 
  •  100% among allowable Investment Options.
 
You may also use the DCA Plus program to transfer amounts to an Asset Allocation Model or among the Investment Options listed below. Currently, the allowable Asset Allocation Models and Investment Options are as follows:
 
     
Allowable Asset Allocation Models    
 
Custom Model2
   
 
     
Allowable Investment Options    
 
AllianceBernstein VPS Balanced Wealth Strategy Portfolio2

American Funds Asset Allocation

BlackRock Global Allocation V.I. Fund

Fidelity VIP FundsManager 60% Portfolio

First Trust/Dow Jones Dividend & Income Allocation
  Portfolio

Franklin Templeton VIP Founding Funds Allocation Fund2

GE Investments Total Return Fund

Invesco V.I. Balanced-Risk Allocation Fund

MFS Total Return Series
  
Pacific Dynamix – Conservative Growth

Pacific Dynamix – Moderate Growth

Pacific Dynamix – Growth2

Portfolio Optimization Conservative

Portfolio Optimization Moderate-Conservative

Portfolio Optimization Moderate

Portfolio Optimization Growth2

Portfolio Optimization Aggressive-Growth1

PIMCO Global Multi-Asset Portfolio
 
1 Only available for optional living benefit riders with a Rider Effective Date before January 1, 2009.
 
2 Only available for optional living benefit riders with a Rider Effective Date before May 1, 2012.
 
You may transfer your entire Contract Value between an allowable Asset Allocation Model and allowable Investment Options, between allowable Asset Allocation Models or between allowable Investment Options, subject to certain transfer limitations and availability. See HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED – Transfers and Market-timing Restrictions. Keep in mind that you must allocate your entire Contract Value to either one allowable Asset Allocation Model or among the allowable Investment Options. If you do not allocate your entire Purchase Payment or Contract Value according to the requirements above, your Rider will terminate.
 
Allowable Asset Allocation Models – Custom Model. You may also make transfers between the Investment Options available under the Custom Model program as long as you follow the Custom Model parameters. However, if you make transfers, subsequent Purchase


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Payments or change the allocation percentages within your Custom Model and they do not comply with the Custom Model parameters, you will no longer be participating in the Custom Model program and your Rider will terminate. See HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED – Custom Model for information about the program.
 
Allowable Investment Options. You may allocate your entire Contract Value among any of the allowable Investment Options listed in the table above.
 
By adding an optional living benefit Rider to your Contract, you agree to the above referenced investment allocation requirements for the entire period that you own a Rider. These requirements may limit the number of Investment Options that are otherwise available to you under your Contract. We reserve the right to add, remove or change allowable asset allocation programs or allowable Investment Options at any time. We may make such a change due to a fund reorganization, fund substitution, to help protect our ability to provide the guarantees under these riders, or otherwise. If such a change is required, we will provide you with reasonable notice (generally 90 calendar days unless we are required to give less notice) prior to the effective date of such change to allow you to reallocate your Contract Value to maintain your rider benefits. If you do not reallocate your Contract Value your rider will terminate.
 
We will send you written notice in the event any transaction made by you will involuntarily cause the Rider to terminate for failure to invest according to the investment allocation requirements. However, you will have 10 Business Days after the date of our written notice (“10 day period”), to instruct us to take appropriate corrective action to continue participation in an allowable asset allocation program or allowable Investment Options to continue the Rider.
 
Asset allocation does not guarantee future results, ensure a profit, or protect against losses. The investment allocation requirements may reduce overall volatility in investment performance, may reduce investment returns, and may reduce the likelihood that we will be required to make payments under the optional living benefit riders.
 
Multiple Rider Ownership
 
Only one withdrawal benefit rider (CoreIncome Advantage Plus (Single), CoreIncome Advantage Plus (Joint), CoreIncome Advantage 5 Plus (Single), CoreIncome Advantage 5 Plus (Joint), CoreIncome Advantage 5, CoreProtect Advantage, CoreIncome Advantage, Flexible Lifetime Income Plus (Single), Flexible Lifetime Income Plus (Joint), Foundation 10, Automatic Income Builder, Flexible Lifetime Income (Single), Flexible Lifetime Income (Joint), or Income Access) may be owned or in effect at the same time. Only one accumulation benefit rider (GPA 3 or GPA 5) may be owned or in effect at the same time.
 
Withdrawal Benefit Rider Exchanges
 
Subject to availability, you may elect to exchange among the following withdrawal benefit Riders:
 
             
FROM     TO     WHEN
 
Income Access
    CoreIncome Advantage 5 Plus (Single) or (Joint)
CoreIncome Advantage Plus (Single) or (Joint) 		    On any Contract Anniversary.
             
CoreIncome Advantage Plus (Single) or (Joint)
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage 5 Plus (Single) or (Joint)     On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.
             
CoreIncome Advantage 5 Plus (Single) or (Joint)
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage Plus (Single) or (Joint)     On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.
             
CoreIncome Advantage 5
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage 5 Plus (Single) or (Joint)
CoreIncome Advantage Plus (Single) or (Joint) 		    On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.
             
CoreProtect Advantage
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage 5 Plus (Single) or (Joint)
CoreIncome Advantage Plus (Single) or (Joint) 		    On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.
             
CoreIncome Advantage
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage 5 Plus (Single) or (Joint)
CoreIncome Advantage Plus (Single) or (Joint) 		    On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.


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FROM     TO     WHEN
 
Flexible Lifetime Income (Single) or (Joint)
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage 5 Plus (Single) or (Joint)
CoreIncome Advantage Plus (Single) or (Joint) 		    On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.
             
Foundation 10
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage 5 Plus (Single) or (Joint)
CoreIncome Advantage Plus (Single) or (Joint) 		    On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.
             
Flexible Lifetime Income Plus (Single) or (Joint)
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage 5 Plus (Single) or (Joint)
CoreIncome Advantage Plus (Single) or (Joint) 		    On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.
             
Automatic Income Builder
    Income Access     On any Contract Anniversary.
     
      CoreIncome Advantage 5 Plus (Single) or (Joint)
CoreIncome Advantage Plus (Single) or (Joint) 		    On any Contract Anniversary beginning with the 5th Contract Anniversary measured from the Contract issue date.
 
 
When you elect an exchange, you are terminating your existing Rider and purchasing a new Rider. The Initial Protected Payment Base and Remaining Protected Balance (if applicable) under the new Rider will be equal to the Contract Value on that Contract Anniversary. Generally, if your Contract Value is lower than the Protected Payment Base under your existing Rider, your election to exchange from one rider to another may result in a reduction in the Protected Payment Base, Protected Payment Amount, any applicable Remaining Protected Balance and any Annual Credit that may be applied. In other words, your existing protected balances will not carryover to the new Rider. If you elect an exchange, you will be subject to the charge for the new Rider in effect at the time of the exchange. Only one exchange may be elected each Contract Year. In addition, there are withdrawal percentages, annual credit percentages, and lifetime income age requirements that differ between the Riders listed above. Work with your financial advisor prior to electing an exchange.
 
Accumulation Benefit Rider Exchanges
 
Subject to availability, you may elect to exchange among the following accumulation benefit Riders:
 
             
FROM     TO     WHEN
 
Guaranteed Protection Advantage 5 (GPA 5)
    Guaranteed Protection Advantage 3 (GPA 3)     On any Contract Anniversary.
 
 
When you elect an exchange, you are terminating your existing Rider and purchasing a new Rider. The initial Guaranteed Protection Amount under the new Rider will be equal to the Contract Value on that Contract Anniversary. Generally, if your Contract Value is lower than the Guaranteed Protection Amount under your existing Rider, your election to exchange from one rider to another may result in a reduction in the Guaranteed Protection Amount. In other words, your existing Guaranteed Protection Amount will not carryover to the new Rider. If you elect an exchange, you will be subject to the charge for the new Rider in effect at the time of the exchange. Only one exchange may be elected each Contract Year. In addition, there are Step-Up eligibility requirements that differ between the Riders listed above. Work with your financial advisor prior to electing an exchange.
 
Optional Riders Not Available for Purchase
 
The CoreProtect Advantage, CoreIncome Advantage 5, CoreIncome Advantage, Flexible Lifetime Income Plus (Single), Flexible Lifetime Income Plus (Joint), Automatic Income Builder, Flexible Lifetime Income (Single), Flexible Lifetime Income (Joint), Foundation 10 and GIA Plus Riders are no longer available for purchase. If you purchased one of these Riders, you will find more information about the Rider in APPENDIX G: OPTIONAL RIDERS NOT AVAILABLE FOR PURCHASE.
 
CoreIncome Advantage Plus (Single)
 
Purchasing the Rider
 
You may purchase this optional Rider on the Contract Date or on any Contract Anniversary if the age of each Annuitant is 85 years or younger on the date of purchase, the Contract is not issued as an Inherited IRA, Inherited Roth IRA or Inherited TSA, and you allocate your entire Contract Value according to the Investment Allocation Requirements.

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Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Early Withdrawal – Any withdrawal that occurs before the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is 591/2 years of age.
 
Excess Withdrawal – Any withdrawal (except an RMD Withdrawal) that occurs after the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is age 591/2 or older and exceeds the Protected Payment Amount.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is 591/2 years of age or older, the Protected Payment Amount is equal to 4% of the Protected Payment Base, less cumulative withdrawals during that Contract Year and will be reset to 4% of the Protected Payment Base each Contract Anniversary. If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is younger than 591/2 years of age, the Protected Payment Amount is equal to zero (0); however, once the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) reaches age 591/2, the Protected Payment Amount will equal 4% of the Protected Payment Base and will be reset each Contract Anniversary. The initial Protected Payment Amount will depend upon the age of the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California).
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Rider terminates. Beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base to an amount equal to 100% of the Contract Value. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is 591/2 years of age or older, the Protected Payment Amount is 4% of the Protected Payment Base. If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is younger than 591/2 years of age, the Protected Payment Amount is zero (0).
 
The Protected Payment Base may change over time. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, the Protected Payment Base will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including an IRA or TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.


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Withdrawal of Protected Payment Amount
 
When the oldest Owner (youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is 591/2 years of age or older, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. The Protected Payment Amount will be reduced by the amount withdrawn during the Contract Year and will be reset each Contract Anniversary to 4% of the Protected Payment Base. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year. If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. (See example 4 in APPENDIX A for a numerical example of the adjustments to the Protected Payment Base as a result of an Excess Withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, the Protected Payment Base will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Early Withdrawal
 
If an Early Withdrawal occurs, we will (immediately following the Early Withdrawal) reduce the Protected Payment Base either on a proportionate basis or by the total withdrawal amount, whichever results in a lower Protected Payment Base. See example 5 in APPENDIX A for a numerical example of the adjustments to the Protected Payment Base as a result of an Early Withdrawal.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
See example 6 in APPENDIX A for numerical examples that describe what occurs when only withdrawals of the Annual RMD Amount are made during a Contract Year and when withdrawals of the Annual RMD Amount plus other non-RMD Withdrawals are made during a Contract Year.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Depletion of Contract Value
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is younger than age 591/2 when the Contract Value is zero, the Rider will terminate.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is age 591/2 or older and the Contract Value was reduced to zero by a withdrawal that exceeds the Protected Payment Amount, the Rider will terminate.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is age 591/2 or older and the Contract Value was reduced to zero by a withdrawal (including an RMD Withdrawal) that did not exceed the Protected Payment Amount, the following will apply:
 
  •  the Protected Payment Amount will be paid each year until the date of death of an Owner or the date of death of the sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner),
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,


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  •  no additional Purchase Payments will be accepted under the Contract, and
 
  •  the Contract will cease to provide any death benefit.
 
Reset of Protected Payment Base
 
On and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of Rider charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base is changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.


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Continuation of Rider if Surviving Spouse Continues Contract
 
This Rider terminates upon the death of an Owner or sole surviving Annuitant. If the surviving spouse continues the Contract, the surviving spouse may re-purchase this Rider (if available) on any Contract Anniversary. The existing protected balances will not carry over to the new Rider.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the date of the death of an Owner or the date of death of the sole surviving Annuitant,
 
  •  for Contracts with a Non-Natural Owner, the date of death of any Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts or if this Rider is issued in California),
 
  •  the day the Contingent Annuitant becomes the Annuitant (if this Rider is issued in California),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information),
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount, or
 
  •  the day the Contract Value is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is younger than age 591/2.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero.
 
Sample Calculations
 
Hypothetical sample calculations are in the attached APPENDIX A. The examples are based on certain hypothetical assumptions and are for example purposes only. These examples are not intended to serve as projections of future investment returns.
 
CoreIncome Advantage Plus (Joint)
 
Purchasing the Rider
 
You may purchase this optional Rider on the Contract Date or on any Contract Anniversary if you meet the following eligibility requirements:
 
  •  the Contract is issued as:
 
  •  Non-Qualified Contract (this Rider is not available if the Owner is a trust or other entity), or
 
  •  Qualified Contract under Code Section 408(a), 408(k), 408A, 408(p) or 403(b), except for Inherited IRAs, Inherited Roth IRAs and Inherited TSAs,
 
  •  both Designated Lives are 85 years or younger on the date of purchase,
 
  •  you allocate your entire Contract Value according to the Investment Allocation Requirements,
 
  •  the Contract must be structured so that upon the death of one Designated Life, the surviving Designated Life may retain or assume ownership of the Contract, and
 
  •  any Annuitant must be a Designated Life.
 
For purposes of meeting the eligibility requirements, Designated Lives must be any one of the following:
 
  •  a sole Owner with the Owner’s Spouse designated as the sole primary Beneficiary,


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  •  Joint Owners, where the Owners are each other’s Spouses, or
 
  •  if the Contract is issued as a custodial owned IRA or TSA, the beneficial owner must be the Annuitant and the Annuitant’s Spouse must be designated as the sole primary Beneficiary under the Contract. The custodian, under a custodial owned IRA or TSA, for the benefit of the beneficial owner, may be designated as sole primary Beneficiary provided that the Spouse of the beneficial owner is the sole primary Beneficiary of the custodial account.
 
If this Rider is added on a Contract Anniversary, naming your Spouse as the Beneficiary to meet eligibility requirements will not be considered a change of Annuitant on the Contract.
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Designated Lives (each a “Designated Life”) – Designated Lives must be natural persons who are each other’s spouses on the Rider Effective Date. Designated Lives will remain unchanged while this Rider is in effect.
 
To be eligible for lifetime benefits, the Designated Life must:
 
  •  be the Owner (or Annuitant, in the case of a custodial owned IRA or TSA),
 
  •  remain the Spouse of the other Designated Life and be the first in line of succession, as determined under the Contract, for payment of any death benefit.
 
Early Withdrawal – Any withdrawal that occurs before the youngest Designated Life is 591/2 years of age.
 
Excess Withdrawal – Any withdrawal (except an RMD Withdrawal) that occurs after the youngest Designated Life is age 591/2 or older and exceeds the Protected Payment Amount.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. If the youngest Designated Life is 591/2 years of age or older, the Protected Payment Amount is equal to 4% of the Protected Payment Base, less cumulative withdrawals during that Contract Year and will be reset to 4% of the Protected Payment Base each Contract Anniversary. If the youngest Designated Life is younger than 591/2 years of age, the Protected Payment Amount is equal to zero (0). However, once the youngest Designated Life reaches age 591/2, the Protected Payment Amount will equal 4% of the Protected Payment Base and will be reset each Contract Anniversary. The initial Protected Payment Amount will depend upon the age of the youngest Designated Life.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
Spouse – The Owner’s spouse who is treated as the Owner’s spouse pursuant to federal law. If the Contract is a custodial owned IRA or TSA, the Annuitant’s spouse who is treated as the Annuitant’s spouse pursuant to federal law.
 
Surviving Spouse – The surviving spouse of a deceased Owner (or Annuitant in the case of a custodial owned IRA or TSA).
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Rider terminates. Beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base to an amount equal to 100% of the Contract Value. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
If the youngest Designated Life is 591/2 years of age or older, the Protected Payment Amount is 4% of the Protected Payment Base. If the youngest Designated Life is younger than 591/2 years of age, the Protected Payment Amount is zero (0).
 
The Protected Payment Base may change over time. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment


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Amount will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, the Protected Payment Base will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including an IRA or TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
When the youngest Designated Life is 591/2 years of age or older, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. The Protected Payment Amount will be reduced by the amount withdrawn during the Contract Year and will be reset each Contract Anniversary to 4% of the Protected Payment Base. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year. If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. (See example 4 in APPENDIX A for a numerical example of the adjustments to the Protected Payment Base as a result of an Excess Withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, the Protected Payment Base will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Early Withdrawal
 
If an Early Withdrawal occurs, we will (immediately following the Early Withdrawal) reduce the Protected Payment Base either on a proportionate basis or by the total withdrawal amount, whichever results in a lower Protected Payment Base. See example 5 in APPENDIX A for a numerical example of the adjustments to the Protected Payment Base as a result of an Early Withdrawal.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only,
 
  •  the youngest Designated Life is age 591/2 or older, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
See example 6 in APPENDIX A for numerical examples that describe what occurs when only withdrawals of the Annual RMD Amount are made during a Contract Year and when withdrawals of the Annual RMD Amount plus other non-RMD Withdrawals are made during a Contract Year.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.


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Depletion of Contract Value
 
If the youngest Designated Life is younger than age 591/2 when the Contract Value is zero, the Rider will terminate.
 
If the youngest Designated Life is age 591/2 or older and the Contract Value was reduced to zero by a withdrawal that exceeds the Protected Payment Amount, the Rider will terminate.
 
If the youngest Designated Life is age 591/2 or older and the Contract Value was reduced to zero by a withdrawal (including an RMD Withdrawal) that did not exceed the Protected Payment Amount, the following will apply:
 
  •  the Protected Payment Amount will be paid each year until the death of all Designated Lives eligible for lifetime benefits,
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract, and
 
  •  the Contract will cease to provide any death benefit.
 
Reset of Protected Payment Base
 
On and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of Rider charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base is changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval.


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Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only or Joint Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only or Joint Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies and the Surviving Spouse (who is also a Designated Life eligible for lifetime benefits) elects to continue the Contract in accordance with its terms, the Surviving Spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Rider terminates.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Ownership and Beneficiary Changes
 
Changes to the Contract Owner, Annuitant and/or Beneficiary designations and changes in marital status, including a dissolution of marriage, may adversely affect the benefits of this Rider. A particular change may make a Designated Life ineligible to receive lifetime income benefits under this Rider. As a result, the Rider may remain in effect and you may pay for benefits that you will not receive. You are strongly advised to work with your financial advisor and consider your options prior to making any Owner, Annuitant and/or Beneficiary changes to your Contract.
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the date of the death of all Designated Lives eligible for lifetime benefits,
 
  •  upon the death of the first Designated Life, if a death benefit is payable and a Surviving Spouse who chooses to continue the Contract is not a Designated Life eligible for lifetime benefits,
 
  •  upon the death of the first Designated Life, if a death benefit is payable and the Contract is not continued by a Surviving Spouse who is a Designated Life eligible for lifetime benefits,
 
  •  if both Designated Lives are Joint Owners and there is a change in marital status, the Rider will terminate upon the death of the first Designated Life who is a Contract Owner,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day that neither Designated Life is an Owner (or Annuitant, in the case of a custodial owned IRA or TSA) (this bullet does not apply if this Rider is issued in California),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information),
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount, or
 
  •  the day the Contract Value is reduced to zero if the youngest Designated Life is younger than age 591/2.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero.


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Sample Calculations
 
Hypothetical sample calculations are in the attached APPENDIX A. The examples are based on certain hypothetical assumptions and are for example purposes only. These examples are not intended to serve as projections of future investment returns.
 
CoreIncome Advantage 5 Plus (Single)
 
Purchasing the Rider
 
You may purchase this optional Rider on the Contract Date or on any Contract Anniversary if the age of each Annuitant is 85 years or younger on the date of purchase, the Contract is not issued as an Inherited IRA, Inherited Roth IRA or Inherited TSA, and you allocate your entire Contract Value according to the Investment Allocation Requirements.
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Early Withdrawal – Any withdrawal that occurs before the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is 591/2 years of age.
 
Excess Withdrawal – Any withdrawal (except an RMD Withdrawal) that occurs after the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is age 591/2 or older and exceeds the Protected Payment Amount.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is 591/2 years of age or older, the Protected Payment Amount is equal to 5% of the Protected Payment Base, less cumulative withdrawals during that Contract Year and will be reset on each Contract Anniversary to 5% of the Protected Payment Base computed on that date. If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is younger than 591/2 years of age, the Protected Payment Amount is equal to zero (0); however, once the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) reaches age 591/2, the Protected Payment Amount will equal 5% of the Protected Payment Base and will be reset each Contract Anniversary. The initial Protected Payment Amount will depend upon the age of the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California).
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
You will find information about an RMD Withdrawal in the Required Minimum Distributions subsection and information about Automatic Resets and Owner-Elected Resets in the Reset of Protected Payment Base subsection below.
 
How the Rider Works
 
Beginning at age 591/2, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Rider terminates. Beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base to an amount equal to 100% of the Contract Value. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is 591/2 years of age or older, the Protected Payment Amount is 5% of the Protected Payment Base. If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is younger than 591/2 years of age, the Protected Payment Amount is zero (0).
 
The Protected Payment Base may change over time. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value (less the Protected Payment Amount) is lower than the Protected Payment Base at the time of withdrawal, the Protected Payment


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Base will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including an IRA or TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
When the oldest Owner (youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is 591/2 years of age or older, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. The Protected Payment Amount will be reduced by the amount withdrawn during the Contract Year and will be reset each Contract Anniversary to 5% of the Protected Payment Base. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year. If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. (See example 4 in APPENDIX B for a numerical example of the adjustments to the Protected Payment Base as a result of an Excess Withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value (less the Protected Payment Amount) is lower than the Protected Payment Base, the Protected Payment Base will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Early Withdrawal
 
If an Early Withdrawal occurs, we will (immediately following the Early Withdrawal) reduce the Protected Payment Base either on a proportionate basis or by the total withdrawal amount, whichever results in a lower Protected Payment Base. See example 5 in APPENDIX B for a numerical example of the adjustments to the Protected Payment Base as a result of an Early Withdrawal.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
See example 6 in APPENDIX B for numerical examples that describe what occurs when only withdrawals of the Annual RMD Amount are made during a Contract Year and when withdrawals of the Annual RMD Amount plus other non-RMD Withdrawals are made during a Contract Year.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Depletion of Contract Value
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is younger than age 591/2 when the Contract Value is zero (due to withdrawals, fees, market decline, or otherwise), the Rider will terminate.


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If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is age 591/2 or older and the Contract Value was reduced to zero by a withdrawal that exceeds the Protected Payment Amount, the Rider will terminate.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is age 591/2 or older and the Contract Value was reduced to zero by a withdrawal (including an RMD Withdrawal) that did not exceed the Protected Payment Amount, the following will apply:
 
  •  the Protected Payment Amount will be paid each year until the date of death of an Owner or the date of death of the sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner),
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract, and
 
  •  the Contract will cease to provide any death benefit.
 
Reset of Protected Payment Base
 
On and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of Rider charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base is changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval.


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Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
This Rider terminates upon the death of an Owner or sole surviving Annuitant. If the surviving spouse continues the Contract, the surviving spouse may re-purchase this Rider (if available) on any Contract Anniversary. The existing protected balances will not carry over to the new Rider and will be based on the Contract Value at time of re-purchase.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the date of the death of an Owner or the date of death of the sole surviving Annuitant,
 
  •  for Contracts with a Non-Natural Owner, the date of death of any Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts or if this Rider is issued in California),
 
  •  the day the Contingent Annuitant becomes the Annuitant (if this Rider is issued in California),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information),
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount, or
 
  •  the day the Contract Value is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner or if this Rider is issued in California) is younger than age 591/2.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero.
 
Sample Calculations
 
Hypothetical sample calculations are in the attached APPENDIX B. The examples are based on certain hypothetical assumptions and are for example purposes only. These examples are not intended to serve as projections of future investment returns.
 
CoreIncome Advantage 5 Plus (Joint)
 
Purchasing the Rider
 
You may purchase this optional Rider on the Contract Date or on any Contract Anniversary if you meet the following eligibility requirements:
 
  •  the Contract is issued as:
 
  •  Non-Qualified Contract (this Rider is not available if the Owner is a trust or other entity), or


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  •  Qualified Contract under Code Section 408(a), 408(k), 408A, 408(p) or 403(b), except for Inherited IRAs, Inherited Roth IRAs and Inherited TSAs,
 
  •  both Designated Lives are 85 years or younger on the date of purchase,
 
  •  you allocate your entire Contract Value according to the Investment Allocation Requirements,
 
  •  the Contract must be structured so that upon the death of one Designated Life, the surviving Designated Life may retain or assume ownership of the Contract, and
 
  •  any Annuitant must be a Designated Life.
 
For purposes of meeting the eligibility requirements, Designated Lives must be any one of the following:
 
  •  a sole Owner with the Owner’s Spouse designated as the sole primary Beneficiary,
 
  •  Joint Owners, where the Owners are each other’s Spouses, or
 
  •  if the Contract is issued as a custodial owned IRA or TSA, the beneficial owner must be the Annuitant and the Annuitant’s Spouse must be designated as the sole primary Beneficiary under the Contract. The custodian, under a custodial owned IRA or TSA, for the benefit of the beneficial owner, may be designated as sole primary Beneficiary provided that the Spouse of the beneficial owner is the sole primary Beneficiary of the custodial account.
 
If this Rider is added on a Contract Anniversary, naming your Spouse as the Beneficiary to meet eligibility requirements will not be considered a change of Annuitant on the Contract.
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Designated Lives (each a “Designated Life”) – Designated Lives must be natural persons who are each other’s spouses on the Rider Effective Date. Designated Lives will remain unchanged while this Rider is in effect.
 
To be eligible for lifetime benefits, the Designated Life must:
 
  •  be the Owner (or Annuitant, in the case of a custodial owned IRA or TSA),
 
  •  remain the Spouse of the other Designated Life and be the first in line of succession, as determined under the Contract, for payment of any death benefit.
 
Early Withdrawal – Any withdrawal that occurs before the youngest Designated Life is 591/2 years of age.
 
Excess Withdrawal – Any withdrawal (except an RMD Withdrawal) that occurs after the youngest Designated Life is age 591/2 or older and exceeds the Protected Payment Amount.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. If the youngest Designated Life is 591/2 years of age or older, the Protected Payment Amount is equal to 5% of the Protected Payment Base, less cumulative withdrawals during that Contract Year and will be reset on each Contract Anniversary to 5% of the Protected Payment Base computed on that date. If the youngest Designated Life is younger than 591/2 years of age, the Protected Payment Amount is equal to zero (0). However, once the youngest Designated Life reaches age 591/2, the Protected Payment Amount will equal 5% of the Protected Payment Base and will be reset each Contract Anniversary. The initial Protected Payment Amount will depend upon the age of the youngest Designated Life.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
Spouse – The Owner’s spouse who is treated as the Owner’s spouse pursuant to federal law. If the Contract is a custodial owned IRA or TSA, the Annuitant’s spouse who is treated as the Annuitant’s spouse pursuant to federal law.
 
Surviving Spouse – The surviving spouse of a deceased Owner (or Annuitant in the case of a custodial owned IRA or TSA).


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You will find information about an RMD Withdrawal in the Required Minimum Distributions subsection and information about Automatic Resets and Owner-Elected Resets in the Reset of Protected Payment Base subsection below.
 
How the Rider Works
 
Beginning at age 591/2, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Rider terminates. Beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base to an amount equal to 100% of the Contract Value. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
If the youngest Designated Life is 591/2 years of age or older, the Protected Payment Amount is 5% of the Protected Payment Base. If the youngest Designated Life is younger than 591/2 years of age, the Protected Payment Amount is zero (0).
 
The Protected Payment Base may change over time. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value (less the Protected Payment Amount) is lower than the Protected Payment Base at the time of withdrawal, the Protected Payment Base will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including an IRA or TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
When the youngest Designated Life is 591/2 years of age or older, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. The Protected Payment Amount will be reduced by the amount withdrawn during the Contract Year and will be reset each Contract Anniversary to 5% of the Protected Payment Base. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year. If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. (See example 4 in APPENDIX B for a numerical example of the adjustments to the Protected Payment Base as a result of an Excess Withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value (less the Protected Payment Amount) is lower than the Protected Payment Base, the Protected Payment Base will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Early Withdrawal
 
If an Early Withdrawal occurs, we will (immediately following the Early Withdrawal) reduce the Protected Payment Base either on a proportionate basis or by the total withdrawal amount, whichever results in a lower Protected Payment Base. See example 5 in APPENDIX B for a numerical example of the adjustments to the Protected Payment Base as a result of an Early Withdrawal.


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Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only,
 
  •  the youngest Designated Life is age 591/2 or older, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
See example 6 in APPENDIX B for numerical examples that describe what occurs when only withdrawals of the Annual RMD Amount are made during a Contract Year and when withdrawals of the Annual RMD Amount plus other non-RMD Withdrawals are made during a Contract Year.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Depletion of Contract Value
 
If the youngest Designated Life is younger than age 591/2 when the Contract Value is zero (due to withdrawals, fees, market decline, or otherwise), the Rider will terminate.
 
If the youngest Designated Life is age 591/2 or older and the Contract Value was reduced to zero by a withdrawal that exceeds the Protected Payment Amount, the Rider will terminate.
 
If the youngest Designated Life is age 591/2 or older and the Contract Value was reduced to zero by a withdrawal (including an RMD Withdrawal) that did not exceed the Protected Payment Amount, the following will apply:
 
  •  the Protected Payment Amount will be paid each year until the death of all Designated Lives eligible for lifetime benefits,
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract, and
 
  •  the Contract will cease to provide any death benefit.
 
Reset of Protected Payment Base
 
On and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of Rider charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base is changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.


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If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only or Joint Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only or Joint Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies and the Surviving Spouse (who is also a Designated Life eligible for lifetime benefits) elects to continue the Contract in accordance with its terms, the Surviving Spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Rider terminates.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Ownership and Beneficiary Changes
 
Changes to the Contract Owner, Annuitant and/or Beneficiary designations and changes in marital status, including a dissolution of marriage, may adversely affect the benefits of this Rider. A particular change may make a Designated Life ineligible to receive lifetime income benefits under this Rider. As a result, the Rider may remain in effect and you may pay for benefits that you will not receive. You are strongly advised to work with your financial advisor and consider your options prior to making any Owner, Annuitant and/or Beneficiary changes to your Contract.
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the date of the death of all Designated Lives eligible for lifetime benefits,
 
  •  upon the death of the first Designated Life, if a death benefit is payable and a Surviving Spouse who chooses to continue the Contract is not a Designated Life eligible for lifetime benefits,
 
  •  upon the death of the first Designated Life, if a death benefit is payable and the Contract is not continued by a Surviving Spouse who is a Designated Life eligible for lifetime benefits,


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  •  if both Designated Lives are Joint Owners and there is a change in marital status, the Rider will terminate upon the death of the first Designated Life who is a Contract Owner,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day that neither Designated Life is an Owner (or Annuitant, in the case of a custodial owned IRA or TSA) (this bullet does not apply if this Rider is issued in California),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information),
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount, or
 
  •  the day the Contract Value is reduced to zero if the youngest Designated Life is younger than age 591/2.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero.
 
Sample Calculations
 
Hypothetical sample calculations are in the attached APPENDIX B. The examples are based on certain hypothetical assumptions and are for example purposes only. These examples are not intended to serve as projections of future investment returns.
 
Income Access
 
Purchasing the Rider
 
You may purchase this optional Rider on the Contract Date or on any Contract Anniversary if the age of each Annuitant is 85 years or younger on the date of purchase, the Contract is not issued as an Inherited IRA, Inherited Roth IRA or Inherited TSA, and you allocate your entire Contract Value according to the Investment Allocation Requirements.
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Protected Payment Amount – The maximum amount that can be withdrawn each Contract Year under this Rider without reducing the Protected Payment Base. The Protected Payment Amount on any day after the Rider Effective Date is equal to the lesser of:
 
  •  7% of the Protected Payment Base as of that day, or
 
  •  the Remaining Protected Balance as of that day.
 
The Protected Payment Amount for a Contract Year is determined at the beginning of that Contract Year and will remain unchanged throughout that Contract Year. The initial Protected Payment Amount on the Rider Effective Date is equal to 7% of the initial Protected Payment Base.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider. The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary beginning with the 1st Contract Anniversary after the Rider Effective Date or the most recent Reset Date, whichever is later, on which an Automatic Reset or Owner-Elected Reset occurs to Reset the Remaining Protected Balance to an amount equal to 100% of the Contract Value, determined as of that Contract Anniversary. The terms Reset and Step-Up have the same meaning for this Rider. The term Step-Up may be used in the Rider attached to your Contract.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.


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How the Rider Works
 
This Rider allows for withdrawals up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. This Rider does not provide lifetime withdrawal benefits. The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
The Income Access Rider also provides, on any Contract Anniversary beginning with the 1st anniversary of the Effective Date or most recent Reset Date, Automatic Annual Resets and Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value as of that Contract Anniversary.
 
The Protected Payment Base and Remaining Protected Balance may change over time. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under the Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
While the Rider is in effect, you may make cumulative withdrawals up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Remaining Protected Balance equals zero. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year.
 
Under your Contract, you may withdraw more than the Protected Payment Amount each Contract Year. However, withdrawals of more than the Protected Payment Amount in a Contract Year will cause an immediate adjustment to the Remaining Protected Balance, the Protected Payment Base, and, at the next Contract Anniversary, the Protected Payment Amount.
 
If a withdrawal does not cause the total amount withdrawn during the Contract Year to exceed the Protected Payment Amount, the Protected Payment Base will remain unchanged. The Remaining Protected Balance will decrease by the withdrawal amount immediately following the withdrawal.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) causes the total amount withdrawn during the Contract Year to exceed the Protected Payment Amount, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in APPENDIX C for a numerical example of the adjustments to the Protected Payment Base and Remaining Protected Balance as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The Protected Payment Amount will remain unchanged until the next Contract Anniversary, when the Protected Payment Amount for the new Contract Year is determined.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
A withdrawal may not exceed the amount available for withdrawal under the Contract, if such withdrawal would cause the cumulative withdrawals for that Contract Year to exceed the Protected Payment Amount and reduce the Contract Value to zero.


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Except as otherwise provided under the Required Minimum Distributions subsection below, if, immediately after a withdrawal, the cumulative withdrawals for that Contract Year do not exceed the Protected Payment Amount and the Contract Value is reduced to zero, the following will apply:
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency, as elected by you, but no less frequently than annually, until the Remaining Protected Balance is reduced to zero,
 
  •  no additional Purchase Payments will be accepted under the Contract,
 
  •  any Remaining Protected Balance will not be available for payment in a lump sum or may not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
If the Owner or sole surviving Annuitant dies and the Contract Value is zero as of the date of death, any Remaining Protected Balance will be paid to the designated Beneficiary under the series of pre-authorized withdrawals and payment frequency then in effect at the time of the Owner’s or sole surviving Annuitant’s death. If, however, the Remaining Protected Balance would be paid over a period that exceeds the life expectancy of the Beneficiary, the pre-authorized withdrawal amount will be adjusted so that the withdrawal payments will be paid over a period that does not exceed the Beneficiary’s life expectancy.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
If the Contract Value is reduced to zero, RMD Withdrawals will cease and any Remaining Protected Balance will be paid under a series of pre-authorized withdrawals in accordance with the terms of the Rider.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which Reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of annual Charges and any future Reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. Please discuss with your financial advisor your Contract’s maximum Annuity Date when considering Reset options. A Reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
If you want to participate in Automatic Resets, you must make an affirmative election In Proper Form. Otherwise, you may Reset the Protected Payment Base and Remaining Protected Balance as outlined under Owner-Elected Resets (Non-Automatic) below.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically Reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance and any change in the annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the Reset is effective.


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Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). On any Contract Anniversary beginning with the 1st Contract Anniversary, measured from the Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to Reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the Reset is effective. The Reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive any additional Purchase Payments to the Contract, we will immediately increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payment. However, the Protected Payment Amount will remain unchanged until the next Contract Anniversary, when the Protected Payment Amount for the new Contract Year is determined.
 
For purposes of this Rider, we reserve the right to restrict additional Purchase Payments.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies while this Rider is in effect and if the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, the surviving spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero (0). The surviving spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically end on the earliest of:
 
  •  the Contract Anniversary immediately following the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the Contract Anniversary immediately following the day the Remaining Protected Balance is reduced to zero,
 
  •  the date of the first death of an Owner or the date of death of the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract, except as otherwise provided in the paragraph below,
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date, or
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
The Rider and the Contract will not terminate on the first death of an Owner or death of the sole surviving Annuitant, or the day the Contract is terminated in accordance with the provisions of the Contract if, at the time of those events, the Contract Value is zero and we are making pre-authorized withdrawals of the Remaining Protected Balance under the provisions of the Rider. If we are making pre-


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authorized withdrawals, the Contract will terminate on the Contract Anniversary immediately following the day the Remaining Protected Balance is zero.
 
Sample Calculations
 
Hypothetical sample calculations are in the attached APPENDIX C. The examples provided are based on certain hypothetical assumptions and are for example purposes only. These examples are not intended to serve as projections of future investment returns.
 
Guaranteed Protection Advantage 3 (GPA 3)
 
Purchasing the Rider
 
You may purchase the optional Rider on the Contract Date or on any subsequent Contract Anniversary if:
 
  •  the age of each Annuitant is 85 years or younger on the date of purchase,
 
  •  the date of the purchase is at least 10 years before your selected Annuity Date, and
 
  •  you allocate your entire Contract Value according to the Investment Allocation Requirements.
 
How the Rider Works
 
The Rider will remain in effect, unless otherwise terminated, for a 10-year period (the “Term”) beginning on the Effective Date of the Rider.
 
On the last day of the Term, we will add an additional amount to your Contract Value if, on that day, the Contract Value is less than the Guaranteed Protection Amount. The additional amount will be equal to the difference between the Contract Value on the last day of the Term and the Guaranteed Protection Amount. The additional amount added to the Contract Value will be considered earnings and allocated to your Investment Options according to your most recent allocation instructions. Additional Purchase Payments that are not part of the Guaranteed Protection Amount (Purchase Payments made after the first year of a Term and not included in a Step-Up) will not be included in the benefit calculation at the end of Term.
 
The Guaranteed Protection Amount is equal to (a) plus (b) minus (c) as indicated below:
 
  (a)  is the Contract Value at the start of the Term,
 
  (b)  is the amount of each subsequent Purchase Payment received during the first year of the Term, and
 
  (c)  is a pro rata adjustment for withdrawals made from the Contract during the Term. The adjustment for each withdrawal is calculated by multiplying the Guaranteed Protection Amount prior to the withdrawal by the ratio of the amount of the withdrawal, including any applicable withdrawal charges, premium taxes, and/or other taxes, to the Contract Value immediately prior to the withdrawal.
 
For purposes of determining the Contract Value at the start of the Term, if the Effective Date of the Rider is the Contract Date, the Contract Value is equal to the initial Purchase Payment. If the Effective Date of the Rider is a Contract Anniversary, the Contract Value is equal to the Contract Value on that Contract Anniversary. Any subsequent Purchase Payments received after the first year of a Term are not included in the Guaranteed Protection Amount.
 
If, on the last day of the Term, the Contract is annuitized, the first death of an Owner or the death of the last surviving Annuitant occurs (death of any Annuitant for Non-Natural Owners), or a full withdrawal is made, the Contract Value will reflect any additional amount owed under the Rider before the payment of any annuity or death benefits, or full withdrawal. No additional amount will be made if the Contract Value on the last day of the Term is greater than or equal to the Guaranteed Protection Amount.
 
Optional Step-Up in the Guaranteed Protection Amount
 
On any Contract Anniversary beginning with the 3rd anniversary of the Effective Date of this Rider and before the Annuity Date, you may elect to increase (“Step-Up”) your Guaranteed Protection Amount.
 
If you elect the optional Step-Up, the following conditions will apply:
 
  •  your election of a Step-Up must be received, In Proper Form, within 60 days after the Contract Anniversary on which the Step-Up is effective,
 
  •  the Guaranteed Protection Amount will be equal to your Contract Value as of the Effective Date of the Step-Up (“Step-Up Date”),
 
  •  a new 10-year Term will begin as of the Step-Up Date, and
 
  •  you may not elect another Step-Up until on or after the 3rd anniversary of the latest Step-Up Date.


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We will not permit a Step-Up if the new 10-year Term will extend beyond the Annuity Date.
 
The annual charge percentage may change if you elect a Step-Up, but it will never be more than the maximum annual charge percentage associated with the Rider. If you do not elect any Step-Up of the Guaranteed Protection Amount during the Term of the Rider, your annual charge percentage will remain the same as it was on the Effective Date of the Rider.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies during the Term and the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, then the provisions of the Rider will continue until the end of the Term.
 
Termination
 
The Rider will automatically terminate at the end of the Term, or, if earlier on:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day we receive notification from the Owner to terminate the Rider,
 
  •  the date a full withdrawal of the amount available for withdrawal is made under the Contract,
 
  •  the date of the first death of an Owner or the date of death of the last surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the date the Contract is terminated according to the provisions of the Contract, or
 
  •  the Annuity Date.
 
If your request to terminate the Rider is received at our Service Center within 60 days after a Contract Anniversary, the Rider will terminate on that Contract Anniversary. If your request to terminate the Rider is received at our Service Center more than 60 days after a Contract Anniversary, the Rider will terminate the day we receive the request.
 
If the Rider is terminated, you must wait until a Contract Anniversary that is at least 1 year from the Effective Date of the termination before the Rider may be purchased again (if available).
 
Sample Calculations
 
Hypothetical sample calculations are in the attached APPENDIX D. The examples are based on certain hypothetical assumptions and are for example purposes only. These examples are not intended to serve as projections of future investment returns.
 
Guaranteed Protection Advantage 5 (GPA 5)
 
Purchasing the Rider
 
You may purchase this optional Rider on the Contract Date or on any subsequent Contract Anniversary if:
 
  •  the age of each Annuitant is 85 years or younger on the date of purchase,
 
  •  the date of the purchase is at least 10 years before your selected Annuity Date, and
 
  •  you allocate your entire Contract Value according to the Investment Allocation Requirements.
 
How the Rider Works
 
The Rider will remain in effect, unless otherwise terminated, for a 10-year period (the “Term”) beginning on the Effective Date of the Rider.
 
On the last day of the Term, we will add an additional amount to your Contract Value if, on that day, the Contract Value is less than a specified amount (the “Guaranteed Protection Amount”). The additional amount will be equal to the difference between the Contract Value on the last day of the Term and the Guaranteed Protection Amount. The additional amount added to the Contract Value will be considered earnings and allocated to your Investment Options according to your most recent allocation instructions.
 
The Guaranteed Protection Amount is equal to (a) plus (b) minus (c) as indicated below:
 
  (a)  is the Contract Value at the start of the Term,
 
  (b)  is the amount of each subsequent Purchase Payment received during the first year of the Term, and


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  (c)  is a pro rata adjustment for withdrawals made from the Contract during the Term. The adjustment for each withdrawal is calculated by multiplying the Guaranteed Protection Amount prior to the withdrawal by the ratio of the amount of the withdrawal, including any applicable withdrawal charges, premium taxes, and/or other taxes, to the Contract Value immediately prior to the withdrawal.
 
For purposes of determining the Contract Value at the start of the Term, if the Effective Date of the Rider is the Contract Date, the Contract Value is equal to the initial Purchase Payment. If the Effective Date of the Rider is a Contract Anniversary, the Contract Value is equal to the Contract Value on that Contract Anniversary. Any subsequent Purchase Payments received after the first year of the Term are not included in the Guaranteed Protection Amount. However, the Rider charge will be based on the Contract Value which may include any subsequent Purchase Payments that are not included in the Guaranteed Protection Amount.
 
If, on the last day of the Term, the Contract is annuitized, the first death of an Owner or the death of the last surviving Annuitant occurs (death of any Annuitant for Non-Natural Owners), or a full withdrawal is made, the Contract Value will reflect any additional amount owed under the Rider before the payment of any annuity or death benefits, or full withdrawal. No additional amount will be made if the Contract Value on the last day of the Term is greater than or equal to the Guaranteed Protection Amount.
 
Optional Step-Up in the Guaranteed Protection Amount
 
On any Contract Anniversary beginning with the 5th anniversary of the Effective Date of this Rider and before the Annuity Date, you may elect to increase (“Step-Up”) your Guaranteed Protection Amount.
 
If you elect the optional Step-Up, the following conditions will apply:
 
  •  your election of a Step-Up must be received, In Proper Form, within 60 days after the Contract Anniversary on which the Step-Up is effective,
 
  •  the Guaranteed Protection Amount will be equal to your Contract Value as of the Effective Date of the Step-Up (“Step-Up Date”),
 
  •  a new 10-year Term will begin as of the Step-Up Date, and
 
  •  you may not elect another Step-Up until on or after the 5th anniversary of the latest Step-Up Date.
 
We will not permit a Step-Up if the new 10-year Term will extend beyond the Annuity Date.
 
The Guaranteed Protection Charge (“GPA 5 Charge”) may change if you elect a Step-Up, but it will never be more than the GPA 5 Charge being charged under the then current terms and conditions of the Rider. If you do not elect any Step-Up of the Guaranteed Protection Amount during the lifetime of the Rider, your GPA 5 Charge will remain the same as it was on the Effective Date of the Rider.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies during the Term and the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, then the provisions of the Rider will continue until the end of the Term.
 
Termination
 
The Rider will automatically terminate at the end of the Term, or, if earlier on:
 
  •  the Contract Anniversary immediately following the date any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the Contract Anniversary immediately following the date we receive notification from the Owner to terminate the Rider,
 
  •  the date a full withdrawal of the amount available for withdrawal is made under the Contract,
 
  •  the date of the first death of an Owner or the date of death of the last surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the date the Contract is terminated according to the provisions of the Contract, or
 
  •  the Annuity Date.
 
If your request to terminate the Rider is received at our Service Center within 60 days after a Contract Anniversary, the Rider will terminate on that Contract Anniversary. If your request to terminate the Rider is received at our Service Center more than 60 days after a Contract Anniversary, the Rider will terminate the day we receive the request.


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If the Rider is terminated, you must wait until a Contract Anniversary that is at least 1 year from the Effective Date of the termination before the Rider may be purchased again (if available).
 
Sample Calculations
 
Hypothetical sample calculations are in the attached APPENDIX D. The examples are based on certain hypothetical assumptions and are for example purposes only. These examples are not intended to serve as projections of future investment returns.
 
PACIFIC LIFE AND THE SEPARATE ACCOUNT
 
Pacific Life
 
Pacific Life Insurance Company is a life insurance company domiciled in Nebraska. Along with our subsidiaries and affiliates, our operations include life insurance, annuity, pension and institutional products, mutual funds, broker-dealer operations, and investment advisory services. At the end of 2011, we had $296.3 billion of individual life insurance in force and total admitted assets of approximately $95.7 billion.
 
We are authorized to conduct our life insurance and annuity business in the District of Columbia and in all states except New York. Our executive office is located at 700 Newport Center Drive, Newport Beach, California 92660.
 
We were originally organized on January 2, 1868, under the name “Pacific Mutual Life Insurance Company of California” and reincorporated as “Pacific Mutual Life Insurance Company” on July 22, 1936. On September 1, 1997, we converted from a mutual life insurance company to a stock life insurance company ultimately controlled by a mutual holding company and were authorized by California regulatory authorities to change our name to Pacific Life Insurance Company. On September 1, 2005, Pacific Life changed from a California corporation to a Nebraska corporation. Pacific Life is a subsidiary of Pacific LifeCorp, a holding company, which, in turn, is a subsidiary of Pacific Mutual Holding Company, a mutual holding company. Under their respective charters, Pacific Mutual Holding Company must always hold at least 51% of the outstanding voting stock of Pacific LifeCorp, and Pacific LifeCorp must always own 100% of the voting stock of Pacific Life. Owners of Pacific Life’s annuity contracts and life insurance policies have certain membership interests in Pacific Mutual Holding Company, consisting principally of the right to vote on the election of the Board of Directors of the mutual holding company and on other matters, and certain rights upon liquidation or dissolutions of the mutual holding company.
 
Our subsidiary, Pacific Select Distributors, Inc. (PSD) serves as the principal underwriter (distributor) for the Contracts. PSD is located at 700 Newport Center Drive, Newport Beach, California 92660. We and PSD enter into selling agreements with broker-dealers, whose financial advisors are authorized by state insurance departments to sell the Contracts.
 
We may provide you with reports of our ratings both as an insurance company and as to our claims-paying ability with respect to our General Account assets.
 
Separate Account A
 
Separate Account A was established on September 7, 1994 as a separate account of ours, and is registered with the SEC under the Investment Company Act of 1940 (the “1940 Act”), as a type of investment company called a “unit investment trust.” We established the Separate Account under the laws of the state of California. The Separate Account is maintained under the laws of the state of Nebraska.
 
Obligations arising under your Contract are our general corporate obligations. We are also the legal owner of the assets in the Separate Account. Assets of the Separate Account attributed to the reserves and other liabilities under the Contract and other contracts issued by us that are supported by the Separate Account may not be charged with liabilities arising from any of our other business; any income, gain or loss (whether or not realized) from the assets of the Separate Account are credited to or charged against the Separate Account without regard to our other income, gain or loss.
 
We may invest money in the Separate Account in order to commence its operations and for other purposes, but not to support contracts other than variable annuity contracts. A portion of the Separate Account’s assets may include accumulations of charges we make against the Separate Account and investment results of assets so accumulated. These additional assets are ours and we may transfer them to our General Account at any time; however, before making any such transfer, we will consider any possible adverse impact the transfer might have on the Separate Account. Subject to applicable law, we reserve the right to transfer our assets in the Separate Account to our General Account.
 
The Separate Account may not be the sole investor in the Funds. Investment in a Fund by other separate accounts in connection with variable annuity and variable life insurance contracts may create conflicts. See the accompanying Prospectus and SAI for the Funds for more information.


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FINANCIAL HIGHLIGHTS
 
The table below is designed to help you understand how the Variable Investment Options have performed. It shows the value of a Subaccount Unit at the beginning and end of each period, as well as the number of Subaccount Units at the end of each period. A Subaccount Unit is also called an Accumulation Unit.
 
You should read the table in conjunction with the financial statements for Separate Account A, which are included in its annual report dated as of December 31, 2011.
 
                                                 
          With Stepped-Up
 		 
    With Standard Death Benefit     Death Benefit Rider  
                Number of
 		                Number of
 		 
                Subaccount
 		                Subaccount
 		 
    AUV at
 		    AUV
 		    Units
 		    AUV at
 		    AUV
 		    Units
 		 
    Beginning
 		    at End
 		    Outstanding
 		    Beginning
 		    at End
 		    Outstanding
 		 
    of Year     of Year     at End of Year     of Year     of Year     at End of Year  
   
International Small-Cap
                                               
2011
    $8.24       $7.11       25,065       $8.20       $7.06       12,453  
2010
    $6.72       $8.24       1,067,602       $6.70       $8.20       402,946  
2009
    $5.25       $6.72       1,125,982       $5.24       $6.70       440,361  
05/06/2008-12/31/2008
    $10.00       $5.25       599,732       $10.08       $5.24       240,799  
 
 
Mid-Cap Value
                                               
2011
    $15.58       $14.44       32,387       $15.53       $14.36       6,965  
2010
    $13.08       $15.58       698,552       $13.07       $15.53       247,061  
05/01/2009-12/31/2009
    $10.00       $13.08       708,074       $10.00       $13.07       278,918  
 
 
Equity Index
                                               
2011
    $9.00       $9.01       69,211       $8.95       $8.94       39,913  
2010
    $7.98       $9.00       1,851,163       $7.95       $8.95       742,178  
2009
    $6.42       $7.98       3,337,082       $6.42       $7.95       1,361,245  
05/06/2008-12/31/2008
    $9.87       $6.42       809,271       $10.08       $6.42       345,055  
 
 
Small-Cap Index
                                               
2011
    $10.61       $9.95       42,614       $10.55       $9.88       9,425  
2010
    $8.54       $10.61       154,095       $8.51       $10.55       21,918  
2009
    $6.78       $8.54       118,188       $6.77       $8.51       28,072  
05/13/2008-12/31/2008
    $10.18       $6.78       67,503       $10.24       $6.77       18,359  
 
 
Small-Cap Equity                                                
2011
    $11.04       $10.48       14,934       $10.98       $10.41       22.057  
2010
    $9.36       $11.04       832,325       $9.32       $10.98       332,128  
2009
    $7.31       $9.36       607,497       $7.30       $9.32       243,802  
05/06/2008-12/31/2008
    $9.99       $7.31       397,135       $10.07       $7.30       177,394  
 
 
American Funds® Asset Allocation
                                               
2011
    $14.07       $13.95       215,058       $14.01       $13.87       71,421  
2010
    $12.78       $14.07       259,899       $12.75       $14.01       122,729  
03/02/2009-12/31/2009
    $9.07       $12.78       262,059       $8.96       $12.75       82,296  
 
 
American Funds® Growth-Income
                                       
2011
    $8.86       $8.51       142,741       $8.81       $8.45       121,213  
2010
    $8.12       $8.86       1,398,606       $8.09       $8.81       578,179  
2009
    $6.32       $8.12       1,603,367       $6.31       $8.09       630,085  
05/06/2008-12/31/2008
    $9.90       $6.32       879,413       $10.10       $6.31       365,194  
 
 
American Funds® Growth
                                               
2011
    $9.10       $8.53       119,814       $9.05       $8.47       94,928  
2010
    $7.83       $9.10       943,636       $7.81       $9.05       371,946  
2009
    $5.74       $7.83       984,949       $5.73       $7.81       411,296  
05/06/2008-12/31/2008
    $10.00       $5.74       967,752       $10.12       $5.73       433,021  
 
 
Large-Cap Value
                                               
2011
    $8.74       $8.99       154,581       $8.69       $8.93       38,715  
2010
    $8.15       $8.74       3,065,579       $8.12       $8.69       1,249,542  
2009
    $6.74       $8.15       3,377,778       $6.73       $8.12       1,423,664  
05/06/2008-12/31/2008
    $9.89       $6.74       1,355,184       $10.06       $6.73       570,523  
 
 
Technology
                                               
2011
    $9.83       $9.19       32,949       $9.78       $9.12       20,738  
2010
    $8.23       $9.83       49,390       $8.21       $9.78       23,044  
2009
    $5.49       $8.23       67,097       $5.48       $8.21       36,051  
07/07/2008-12/31/2008
    $9.23       $5.49       18,094       $8.43       $5.48       4,972  
 
 
Floating Rate Loan
                                               
2011
    $9.26       $9.33       63,877       $9.21       $9.26       17,764  
2010
    $8.79       $9.26       1,329,902       $8.76       $9.21       576,603  
2009
    $7.19       $8.79       1,296,666       $7.19       $8.76       625,124  
05/13/2008-12/31/2008
    $9.99       $7.19       441,147       $9.99       $7.19       270,018  
 
 
Small-Cap Growth
                                               
2011
    $10.64       $10.13       23,831       $10.58       $10.06       18,797  
2010
    $8.59       $10.64       516,449       $8.56       $10.58       192,079  
2009
    $5.93       $8.59       588,683       $5.92       $8.56       205,562  
05/06/2008-12/31/2008
    $9.96       $5.93       448,386       $10.05       $5.92       168,245  
 
 


69

 

                                                 
          With Stepped-Up
 		 
    With Standard Death Benefit     Death Benefit Rider  
                Number of
 		                Number of
 		 
                Subaccount
 		                Subaccount
 		 
    AUV at
 		    AUV
 		    Units
 		    AUV at
 		    AUV
 		    Units
 		 
    Beginning
 		    at End
 		    Outstanding
 		    Beginning
 		    at End
 		    Outstanding
 		 
    of Year     of Year     at End of Year     of Year     of Year     at End of Year  
   
Comstock
                                               
2011
    $9.34       $8.98       72,118       $9.29       $8.92       20,869  
2010
    $8.23       $9.34       2,090,864       $8.21       $9.29       818,918  
2009
    $6.51       $8.23       2,183,416       $6.50       $8.21       884,284  
05/06/2008-12/31/2008
    $9.78       $6.51       1,069,331       $10.04       $6.50       459,258  
 
 
Growth LT
                                               
2011
    $9.01       $8.32       26,440       $8.97       $8.26       18,247  
2010
    $8.25       $9.01       1,125,835       $8.22       $8.97       437,454  
2009
    $6.11       $8.25       1,149,109       $6.10       $8.22       455,369  
05/06/2008-12/31/2008
    $9.92       $6.11       664,724       $10.08       $6.10       263,174  
 
 
Focused 30
                                               
2011
    $7.92       $7.03       33,115       $7.88       $6.98       41,518  
2010
    $7.31       $7.92       73,710       $7.28       $7.88       57,911  
2009
    $4.94       $7.31       118,051       $4.94       $7.28       72,838  
05/06/2008-12/31/2008
    $9.68       $4.94       335,015       $10.02       $4.94       140,175  
 
 
Health Sciences
                                               
2011
    $11.54       $12.70       27,778       $11.48       $12.60       29,799  
2010
    $9.52       $11.54       30,407       $9.49       $11.48       21,105  
2009
    $7.62       $9.52       33,530       $7.61       $9.49       23,094  
07/03/2008-12/31/2008
    $9.69       $7.62       11,566       $10.12       $7.61       7,056  
 
 
International Value
                                               
2011
    $6.71       $5.74       141,117       $6.67       $5.70       71,944  
2010
    $6.66       $6.71       1,970,183       $6.63       $6.67       820,423  
2009
    $5.29       $6.66       2,459,023       $5.29       $6.63       1,024,179  
05/06/2008-12/31/2008
    $9.88       $5.29       1,983,388       $10.05       $5.29       844,492  
 
 
Long/Short Large-Cap
                                               
2011
    $8.92       $8.53       25,281       $8.87       $8.47       11,115  
2010
    $8.08       $8.92       1,652,481       $8.06       $8.87       656,204  
2009
    $6.45       $8.08       1,672,090       $6.44       $8.06       689,625  
05/06/2008-12/31/2008
    $9.89       $6.45       594,934       $10.08       $6.44       244,789  
 
 
Mid-Cap Equity                                                
2011
    $10.29       $9.56       39,691       $10.23       $9.49       31,763  
2010
    $8.48       $10.29       1,493,341       $8.45       $10.23       632,838  
2009
    $6.18       $8.48       1,685,591       $6.17       $8.45       760,580  
05/06/2008-12/31/2008
    $9.92       $6.18       1,969,850       $10.09       $6.17       867,828  
 
 
International Large-Cap
                                               
2011
    $9.14       $8.07       100,053       $9.09       $8.01       64,950  
2010
    $8.42       $9.14       2,205,127       $8.40       $9.09       902,784  
2009
    $6.42       $8.42       2,501,519       $6.41       $8.40       1,048,841  
05/06/2008-12/31/2008
    $9.86       $6.42       1,454,934       $10.03       $6.41       647,546  
 
 
Mid-Cap Growth
                                               
2011
    $10.74       $9.73       52,689       $10.68       $9.66       64,803  
2010
    $8.20       $10.74       913,096       $8.17       $10.68       411,936  
2009
    $5.24       $8.20       1,092,267       $5.23       $8.17       467,611  
05/06/2008-12/31/2008
    $9.91       $5.24       511,201       $10.08       $5.23       194,141  
 
 
Real Estate
                                               
2011
    $8.92       $9.30       71,920       $8.87       $9.24       28,581  
2010
    $6.95       $8.92       449,813       $6.93       $8.87       163,822  
2009
    $5.35       $6.95       584,282       $5.34       $6.93       207,881  
05/06/2008-12/31/2008
    $9.66       $5.35       349,270       $10.05       $5.34       132,466  
 
 
Small-Cap Value
                                               
2011
    $10.69       $10.75       147,300       $10.64       $10.67       46,040  
2010
    $8.68       $10.69       422,809       $8.65       $10.64       179,216  
2009
    $6.95       $8.68       587,138       $6.94       $8.65       261,912  
05/06/2008-12/31/2008
    $10.00       $6.95       215,262       $10.07       $6.94       84,402  
 
 
Main Street® Core
                                               
2011
    $9.15       $9.04       39,148       $9.10       $8.97       56,880  
2010
    $8.02       $9.15       949,332       $7.99       $9.10       414,337  
2009
    $6.31       $8.02       1,136,253       $6.30       $7.99       461,469  
05/06/2008-12/31/2008
    $9.95       $6.31       947,387       $10.11       $6.30       423,256  
 
 
Emerging Markets
                                               
2011
    $11.82       $9.53       111,366       $11.76       $9.46       78,322  
2010
    $9.47       $11.82       1,139,545       $9.44       $11.76       465,147  
2009
    $5.21       $9.47       1,426,234       $5.21       $9.44       566,950  
05/06/2008-12/31/2008
    $9.80       $5.21       866,313       $10.05       $5.21       370,496  
 
 

70

 

                                                 
          With Stepped-Up
 		 
    With Standard Death Benefit     Death Benefit Rider  
                Number of
 		                Number of
 		 
                Subaccount
 		                Subaccount
 		 
    AUV at
 		    AUV
 		    Units
 		    AUV at
 		    AUV
 		    Units
 		 
    Beginning
 		    at End
 		    Outstanding
 		    Beginning
 		    at End
 		    Outstanding
 		 
    of Year     of Year     at End of Year     of Year     of Year     at End of Year  
   
Cash Management                                                
2011
    $9.68       $9.52       561,173       $9.63       $9.45       148,704  
2010
    $9.86       $9.68       671,395       $9.83       $9.63       229,309  
2009
    $10.02       $9.86       918,994       $10.00       $9.83       246,736  
06/10/2008-12/31/2008
    $10.00       $10.02       800,891       $10.00       $10.00       114,588  
 
 
High Yield Bond
                                               
2011
    $11.81       $12.00       136,740       $11.75       $11.91       94,305  
2010
    $10.49       $11.81       953,819       $10.46       $11.75       440,183  
2009
    $7.63       $10.49       1,041,460       $7.62       $10.46       487,931  
05/13/2008-12/31/2008
    $9.96       $7.63       313,110       $9.96       $7.62       177,648  
 
 
Managed Bond
                                               
2011
    $11.99       $12.24       382,440       $11.93       $12.15       191,307  
2010
    $11.20       $11.99       4,565,726       $11.16       $11.93       2,012,331  
2009
    $9.42       $11.20       3,901,148       $9.41       $11.16       1,861,388  
05/06/2008-12/31/2008
    $10.03       $9.42       1,744,700       $10.00       $9.41       871,248  
 
 
Inflation Managed
                                               
2011
    $11.07       $12.17       225,871       $11.01       $12.08       129,344  
2010
    $10.36       $11.07       3,847,009       $10.32       $11.01       1,758,353  
2009
    $8.72       $10.36       3,952,922       $8.71       $10.32       1,809,757  
05/06/2008-12/31/2008
    $10.11       $8.72       1,852,147       $9.99       $8.71       930,076  
 
 
Pacific Dynamix – Conservative Growth
                                               
2011
    $12.24       $12.38       198,248       $12.20       $12.31       16,146  
2010
    $11.29       $12.24       151,916       $11.28       $12.20       24,937  
05/13/2009-12/31/2009
    $10.05       $11.29       123,134       $10.67       $11.28       7,606  
 
 
Pacific Dynamix – Moderate Growth
                                               
2011
    $13.00       $12.84       197,273       $12.96       $12.77       42,868  
2010
    $11.82       $13.00       176,915       $11.81       $12.96       11,650  
07/30/2009-12/31/2009
    $11.05       $11.82       109,807       $10.87       $11.81       11,412  
 
 
Pacific Dynamix – Growth
                                               
2011
    $13.75       $13.26       203,387       $13.70       $13.19       85,578  
2010
    $12.29       $13.75       200,470       $12.27       $13.70       93,204  
05/20/2009-12/31/2009
    $10.32       $12.29       176,706       $11.12       $12.27       1,971  
 
 
Portfolio Optimization Conservative                                                
05/05/2011-12/31/2011
    $9.96       $9.83       5,628,578       $9.96       $9.82       3,199,924  
 
 
Portfolio Optimization Moderate-Conservative                                                
05/05/2011-12/31/2011
    $9.76       $9.56       5,386,623       $9.91       $9.55       2,017,213  
 
 
Portfolio Optimization Moderate                                                
06/06/2011-12/31/2011
    $9.70       $9.29       13,829,509       $9.57       $9.28       5,087,619  
 
 
Portfolio Optimization Growth                                                
05/17/2011-12/31/2011
    $9.75       $9.03       10,178,956       $9.46       $9.02       5,042,217  
 
 
Portfolio Optimization Aggressive-Growth                                                
06/24/2011-12/31/2011
    $9.34       $8.76       2,366,758       $9.33       $8.75       591,557  
 
 
Dividend Growth                                                
2011
    $8.79       $8.92       67,581       $8.74       $8.85       49,805  
2010
    $8.07       $8.79       994,576       $8.05       $8.74       407,445  
2009
    $6.21       $8.07       359,181       $6.20       $8.05       187,144  
05/06/2008-12/31/2008
    $9.89       $6.21       458,816       $10.05       $6.20       225,451  
 
 
Short Duration Bond
                                               
2011
    $10.31       $10.22       105,995       $10.26       $10.15       67,828  
2010
    $10.15       $10.31       1,747,466       $10.11       $10.26       821,765  
2009
    $9.50       $10.15       1,627,003       $9.49       $10.11       834,202  
05/06/2008-12/31/2008
    $10.02       $9.50       707,818       $10.01       $9.49       409,975  
 
 
Large-Cap Growth
                                               
2011
    $8.48       $8.42       43,581       $8.44       $8.36       19,334  
2010
    $7.54       $8.48       1,448,861       $7.51       $8.44       570,605  
2009
    $5.46       $7.54       1,476,894       $5.45       $7.51       575,491  
05/06/2008-12/31/2008
    $9.93       $5.46       421,078       $10.11       $5.45       161,363  
 
 
Diversified Bond
                                               
2011
    $11.03       $11.48       157,526       $10.97       $11.39       36,225  
2010
    $10.38       $11.03       2,863,529       $10.35       $10.97       1,277,622  
2009
    $9.26       $10.38       2,272,838       $9.25       $10.35       1,144,617  
05/06/2008-12/31/2008
    $10.04       $9.26       916,321       $10.01       $9.25       529,520  
 
 
Inflation Protected                                                
06/07/2011-12/31/2011
    $10.04       $10.68       19,470       $10.04       $10.67       12,282  
 
 

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          With Stepped-Up
 		 
    With Standard Death Benefit     Death Benefit Rider  
                Number of
 		                Number of
 		 
                Subaccount
 		                Subaccount
 		 
    AUV at
 		    AUV
 		    Units
 		    AUV at
 		    AUV
 		    Units
 		 
    Beginning
 		    at End
 		    Outstanding
 		    Beginning
 		    at End
 		    Outstanding
 		 
    of Year     of Year     at End of Year     of Year     of Year     at End of Year  
   
Invesco V.I. Balanced-Risk Allocation Fund Series II                                                
2011
    $13.51       $14.68       294,087       $13.45       $14.60       229,628  
2010
    $12.57       $13.51       90,985       $12.55       $13.45       52,685  
03/10/2009-12/31/2009
    $9.10       $12.57       92,128       $10.17       $12.55       77,879  
 
 
AllianceBernstein VPS Balanced Wealth Strategy Portfolio Class B
                                               
2011
    $9.32       $8.88       1,043,399       $9.27       $8.81       414,068  
2010
    $8.60       $9.32       1,101,847       $8.57       $9.27       460,876  
2009
    $7.03       $8.60       1,248,435       $7.02       $8.57       507,119  
05/16/2008-12/31/2008
    $10.09       $7.03       741,234       $9.61       $7.02       291,993  
 
 
BlackRock Global Allocation V.I. Fund Class III
                                               
2011
    $10.07       $9.53       5,820,259       $10.01       $9.46       2,528,149  
2010
    $9.33       $10.07       6,143,160       $9.30       $10.01       2,973,354  
2009
    $7.85       $9.33       6,487,717       $7.84       $9.30       3,247,287  
05/14/2008-12/31/2008
    $10.13       $7.85       3,520,670       $9.98       $7.84       1,562,762  
 
 
Franklin Templeton VIP Founding Funds Allocation Fund Class 4
                                               
2011
    $9.08       $8.78       1,779,212       $9.03       $8.71       580,799  
2010
    $8.38       $9.08       2,221,963       $8.36       $9.03       710,399  
2009
    $6.56       $8.38       2,516,860       $6.55       $8.36       798,909  
05/16/2008-12/31/2008
    $10.12       $6.56       1,798,265       $9.96       $6.55       525,215  
 
 
GE Investments Total Return Fund Class 3
                                               
2011
    $13.40       $12.76       189,761       $13.35       $12.69       27,599  
2010
    $12.47       $13.40       203,364       $12.45       $13.35       17,265  
02/09/2009-12/31/2009
    $10.29       $12.47       158,405       $10.12       $12.45       14,624  
 
 
MFS® Total Return Series – Service Class                                                
08/08/2011-12/31/2011
    $9.64       $9.48       62,660       $8.96       $9.47       48,392  
 
 
PIMCO Global Multi-Asset Portfolio – Advisor Class
                                               
2011
    $10.69       $10.32       88,849       $10.68       $10.28       126,024  
05/03/2010-12/31/2010
    $10.00       $10.69       41,494       $10.00       $10.68       120,406  
 
 

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FEDERAL TAX ISSUES
 
The following summary of federal income tax issues is based on our understanding of current tax laws and regulations, which may be changed by legislative, judicial or administrative action. The summary is general in nature and is not intended as tax advice. Moreover, it does not consider any applicable foreign, state or local tax laws. We do not make any guarantee regarding the tax status, federal, foreign, state or local, of any Contract or any transaction involving the Contracts. Accordingly, you should consult a qualified tax adviser for complete information and advice before purchasing a Contract. Additional tax information is included in the SAI.
 
Diversification Requirements and Investor Control
 
Section 817(h) of the Code provides that the investments underlying a variable annuity must satisfy certain diversification requirements in order for the contract to be treated as an annuity contract and qualify for tax deferral. We believe the underlying Variable Investment Options for the contract meet these requirements. Details on these diversification requirements appear in the Fund SAIs.
 
In addition, for a variable annuity contract to qualify for tax deferral, assets in the separate accounts supporting the contract must be considered to be owned by the insurance company and not by the contract owner. Under current U.S. tax law, if a contract owner has excessive control over the investments made by a separate account, or the underlying fund, the contract owner will be taxed currently on income and gains from the account or fund. In other words, in such a case of investor control the contract owner would not derive the tax benefits normally associated with variable annuities. For more information regarding investor control, please refer to the contract SAI.
 
Taxation of Annuities – General Provisions
 
Section 72 of the Code governs the taxation of annuities in general, and we designed the Contracts to meet the requirements of Section 72 of the Code. We believe that, under current law, the Contract will be treated as an annuity for federal income tax purposes if the Contract Owner is a natural person or an agent for a natural person, and that we (as the issuing insurance company), and not the Contract Owner(s), will be treated as the owner of the investments underlying the Contract. Accordingly, no tax should be payable by you as a Contract Owner as a result of any increase in Contract Value until you receive money under your Contract. You should, however, consider how amounts will be taxed when you do receive them. The following discussion assumes that your Contract will be treated as an annuity for federal income tax purposes.
 
Non-Qualified Contracts – General Rules
 
These general rules apply to Non-Qualified Contracts. As discussed below, however, tax rules may differ for Qualified Contracts and you should consult a qualified tax adviser if you are purchasing a Qualified Contract.
 
Taxes Payable
 
A Contract Owner is not taxed on the increases in the value of a Contract until an amount is received or deemed to be received. An amount could be received or deemed to be received, for example, if there is a partial distribution, a lump sum distribution, an Annuity payment or a material change in the Contract or if any portion of the Contract is pledged or assigned. See the Addition of Optional Rider or Material Change to Contract section below. Increases in Contract Value that are received or deemed to be received are taxable to the Contract Owner as ordinary income. Distributions of net investment income or capital gains that each Subaccount receives from its corresponding Portfolio are automatically reinvested in such Portfolio unless we, on behalf of the Separate Account, elect otherwise. As noted above, you will be subject to federal income taxes on the investment income from your Contract only when it is distributed to you.
 
Beginning in 2013, any taxable distribution of the investment income from your Contract may also be subject to a net investment income tax of 3.8%. This tax applies to various investment income such as interest, dividends, royalties, payments from annuities, and the disposition of property, but only to the extent a married taxpayer’s modified adjusted gross income exceeds $250,000 ($200,000 if single). Please speak to your tax advisor about this new tax.
 
Non-Natural Persons as Owners
 
If a contract is not owned or held by a natural person or as agent for a natural person, the contract generally will not be treated as an “annuity” for tax purposes, meaning that the contract owner will be subject to current tax on annual increases in Contract Value at ordinary income rates unless some other exception applies. Certain entities, such as some trusts, may be deemed to be acting as agents for natural persons. Corporations, including S corps, C corps, LLCs, partnerships and FLPs, and tax exempt entities are non-natural persons that will not be deemed to be acting as agents for natural persons.
 
Addition of Optional Rider or Material Change to Contract
 
The addition of a rider to the Contract, or a material change in the Contract’s provisions, such as a change in Contract ownership or an assignment of the Contract, could cause it to be considered newly issued or entered into for tax purposes, and thus could cause a taxable event or the Contract to lose certain grandfathered tax status. Please contact your tax adviser for more information.


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Taxes Payable on Withdrawals Prior to the Annuity Date
 
Amounts you withdraw before annuitization, including amounts withdrawn from your Contract Value in connection with partial withdrawals for payment of any charges and fees, will be treated first as taxable income to the extent that your Contract Value exceeds the aggregate of your Purchase Payments reduced by non-taxable amounts previously received (investment in the Contract), and then as non-taxable recovery of your Purchase Payments. Therefore, you include in your gross income the smaller of: a) the amount of the partial withdrawal, or b) the amount by which your Contract Value immediately before you receive the distribution exceeds your investment in the Contract at that time.
 
If at the time of a partial withdrawal your Contract Value does not exceed your investment in the Contract, then the withdrawal will not be includable in gross income and will simply reduce your investment in the Contract. Exceptions to this rule are distributions in full discharge of your Contract (a full surrender) or distributions from contracts issued and investments made before August 14, 1982.
 
The assignment or pledge of (or agreement to assign or pledge) the value of the Contract for a loan will be treated as a withdrawal subject to these rules. You should consult your tax adviser for additional information regarding taking a partial or a full distribution from your Contract.
 
Multiple Contracts (Aggregation Rule)
 
Multiple Non-Qualified Contracts that are issued after October 21, 1988, by us or our affiliates to the same Owner during the same calendar year are treated as one Contract for purposes of determining the taxation of distributions (the amount includible in gross income under Code Section 72(e)) prior to the Annuity Date from any of the Contracts. A Contract received in a tax-free exchange under Code Section 1035 may be treated as a new Contract for this purpose. For Contracts subject to the Aggregation Rule, the values of the Contracts and the investments in the Contracts should be added together to determine the taxation under Code Section 72(e). Withdrawals will be treated first as withdrawals of income until all of the income from all such Contracts is withdrawn. The Treasury Department has specific authority under Code Section 72(e)(11) to issue regulations to prevent the avoidance of the income-out-first rules for withdrawals prior to the Annuity Date through the serial purchase of Contracts or otherwise. As of the date of this Prospectus there are no regulations interpreting these aggregation provisions.
 
10% Tax Penalty Applicable to Certain Withdrawals and Annuity Payments
 
The Code provides that the taxable portion of a withdrawal or other distribution may be subject to a tax penalty equal to 10% of that taxable portion unless the withdrawal is:
 
  •  made on or after the date you reach age 591/2,
 
  •  made by a Beneficiary after your death,
 
  •  attributable to your becoming disabled,
 
  •  any payment made under an immediate annuity,
 
  •  attributable to an investment in the Contract made prior to August 14, 1982, or
 
  •  any distribution that is a part of a series of substantially equal periodic payments (Code Section 72(q) payments) made (at least annually) over your life (or life expectancy) or the joint lives (or life expectancies) of you and your designated beneficiary.
 
Additional exceptions may apply to certain Qualified Contracts (see Taxes Payable on Annuity Payments and the applicable Qualified Contracts).
 
Taxes Payable on Optional Rider Charges
 
It is our understanding that the charges relating to any optional death benefit rider are not subject to current taxation and we will not report them as such. However, the IRS may determine that these charges should be treated as partial withdrawals subject to current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report any optional death benefit rider charges as partial withdrawals if we believe that we would be expected to report them in accordance with IRS regulations.
 
Distributions After the Annuity Date
 
After you annuitize, a portion of each annuity payment you receive under a Contract generally will be treated as a partial recovery of Investments (as used here, “Investments” means the aggregate Purchase Payments less any amounts that were previously received under the Contract but not included in income) and will not be taxable. (In certain circumstances, subsequent modifications to an initially-established payment pattern may result in the imposition of a tax penalty.) The remainder of each annuity payment will be taxed as ordinary income. However, after the full amount of aggregate Investments has been recovered, the full amount of each annuity payment will be taxed as ordinary income. Exactly how an annuity payment is divided into taxable and non-taxable portions depends on the


74

 

period over which annuity payments are expected to be received, which in turn is governed by the form of annuity selected and, where a lifetime annuity is chosen, by the life expectancy of the Annuitant(s) or payee(s). Such a payment may also be subject to a tax penalty if taken prior to age 591/2.
 
For periodic (annuity) payments, we will default your state tax withholding (as applicable) based upon the marital status and allowance(s) provided for your federal taxes or, if no withholding instructions are provided, we will default to either a married person with 3 exemptions or your resident state’s prescribed withholding default (if applicable). Please consult with a tax advisor for additional information, including whether your resident state has a specific version of the W-4P form that should be submitted to us with state-specific income tax information.
 
Same-Sex Spouses
 
Pursuant to Section 3 of the federal Defense of Marriage Act (“DOMA”), same-sex marriages currently are not recognized for purposes of federal law. Therefore, the favorable income-deferral options afforded by federal tax law to an opposite-sex spouse under Internal Revenue Code sections 72(s) and 401(a)(9) are currently NOT available to a same-sex spouse. Same-sex spouses who own or are considering the purchase of annuity products that provide benefits based upon status as a spouse should consult a tax advisor. To the extent that an annuity contract or certificate accords to spouses other rights or benefits that are not affected by DOMA, same-sex spouses remain entitled to such rights or benefits to the same extent as any annuity holder’s spouse.
 
Distributions to Beneficiary After Contract Owner’s Death
 
Generally, the same tax rules apply to amounts received by the Beneficiary as those that apply to the Contract Owner, except that the early withdrawal tax penalty does not apply. Thus, any annuity payments or lump sum withdrawal will be divided into taxable and non-taxable portions.
 
If death occurs after the Annuity Date, but before the expiration of a period certain option, the Beneficiary will recover the balance of the Investments as payments are made and may be allowed a deduction on the final tax return for the unrecovered Investments. A lump sum payment taken by the Beneficiary in lieu of remaining monthly annuity payments is not considered an annuity payment for tax purposes. The portion of any lump sum payment to a Beneficiary in excess of aggregate unrecovered Investments would be subject to income tax.
 
Contract Owner’s Estate
 
Generally, any amount payable to a Beneficiary after the Contract Owner’s death, whether before or after the Annuity Date, will be included in the estate of the Contract Owner for federal estate tax purposes. If the inclusion of the value of the Contract triggers a federal estate tax to be paid, the Beneficiary may be able to use a deduction called Income in Respect of Decedent (IRD) in calculating the income taxes payable upon receipt of the death benefit proceeds. In addition, designation of a non-spouse Beneficiary who either is 371/2 or more years younger than a Contract Owner or is a grandchild of a Contract Owner may have Generation Skipping Transfer Tax (GSTT) consequences under section 2601 of the Code. You should consult with a qualified tax advisor if you have questions about federal estate tax, IRD, or GSTT.
 
Gifts of Annuity Contracts
 
Generally, gifts of Non-Qualified Contracts prior to the annuity start date will trigger tax reporting to the donor on the gain on the Contract, with the donee getting a stepped-up basis for the amount included in the donor’s income. The 10% early withdrawal tax penalty and gift tax also may be applicable. This provision does not apply to transfers between spouses or incident to a divorce, or transfers to and from a trust acting as agent for the Owner or the Owner’s spouse.
 
Tax Withholding for Non-Qualified Contracts
 
Unless you elect to the contrary, any amounts you receive under your Contract that are attributable to investment income will be subject to withholding to meet federal income tax obligations. For nonperiodic distributions, you will have the option to provide us with withholding information at the time of your withdrawal request. If you do not provide us with withholding information, we will generally withhold 10% of the taxable distribution amount and remit it to the IRS. For periodic (annuity) payments, the rate of withholding will be determined on the basis of the withholding information you provide to us. If you do not provide us with withholding information, we are required to determine the Federal income tax withholding, from every annuity payment, as if you are a married person with 3 exemptions. State and local withholding may apply different defaults and will be determined by applicable law.
 
Certain states have indicated that pension and annuity withholding will apply to payments made to residents.
 
Please call (800) 722-4448 with any questions about the required withholding information. Financial advisors may call us at (800) 722-2333.


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Tax Withholding for Non-resident Aliens or Non U.S. Persons
 
Taxable distributions to Contract Owners who are non-resident aliens or other non U.S. persons are generally subject to U.S. federal income tax withholding at a 30% rate, unless a lower treaty rate applies. Prospective foreign owners are advised to consult with a tax advisor regarding the U.S., state and foreign tax treatment of a Contract.
 
Exchanges of Non-Qualified Contracts (1035 Exchanges)
 
You may make your initial or an additional Purchase Payment through an exchange of an existing annuity contract or endowment life insurance contract pursuant to Section 1035 of the Code (a 1035 exchange). The exchange can be effected by completing the Transfer/Exchange form, indicating in the appropriate section of the form that you are making a 1035 exchange and submitting any applicable state replacement form. The form is available by calling your financial advisor or by calling our Contract Owner number at (800) 722-4448. Financial advisors can call (800) 722-2333. Once completed, the form should be mailed to us. If you are making an initial Purchase Payment, a completed Contract application should also be attached.
 
In general terms, Section 1035 of the Code provides that no gain or loss is recognized when you exchange one annuity or life insurance contract for another annuity contract. Transactions under Section 1035, however, may be subject to special rules and may require special procedures and record keeping, particularly if the exchanged annuity contract was issued prior to August 14, 1982. You should consult your tax adviser prior to effecting a 1035 exchange.
 
Partial 1035 Exchanges
 
A partial exchange is the direct transfer of only a portion of an existing annuity’s Contract Value to a new annuity contract. Rev. Proc. 2011-38 significantly eased the restrictions on partial transfers adopted by Rev. Proc. 2008-24. Under Rev. Proc. 2011-38, the 12 month period is reduced to 180 days, so that a partial exchange will be treated as tax-free under Code Section 1035 if there are no distributions, from either annuity, within 180 days of the partial 1035 exchange. In addition, annuity payments that satisfy the newly enacted partial annuitization rule of Code Section 72(a)(2) will not be treated as a distribution from either the old or new contract. Rev. Proc. 2011-38 also replaces Rev. Proc. 2008-24’s automatic characterization of a transfer as a distribution taxable under Code Section 72(e) if it did not qualify as a tax-free exchange under Code Section 1035 with an analysis by the IRS, using general tax principles, to determine the substance, and thus the treatment of, the transaction. Rev. Proc. 2011-38 applies to partial exchanges on or after October 24, 2011. Rev. Proc. 2008-24 applies to partial exchanges that were effective before October 24, 2011.
 
You should consult your tax adviser prior to effecting a partial 1035 exchange.
 
Impact of Federal Income Taxes
 
In general, in the case of Non-Qualified Contracts, if you are an individual and expect to accumulate your Contract Value over a relatively long period of time without making significant withdrawals, there may be federal income tax advantages in purchasing such a Contract. This is because any increase in Contract Value is not subject to current taxation. Income taxes are deferred until the money is withdrawn, at which point taxation occurs only on the gain from the investment in the Contract. With income taxes deferred, you may accumulate more money over the long term through a variable annuity than you may through non-tax-deferred investments. The advantage may be greater if you decide to liquidate your Contract Value in the form of monthly annuity payments after your retirement, or if your tax rate is lower at that time than during the period that you held the Contract, or both.
 
When withdrawals or distributions are taken from the variable annuity, the gain is taxed as ordinary income. This may be a potential disadvantage because money that had been invested in other types of assets may qualify for a more favorable federal tax rate. For example, in 2011 the tax rate applicable both to the sale of capital gain assets held more than 1 year and to the receipt of qualifying dividends by individuals is generally 15% (0% for lower-income individuals). In contrast, an ordinary income tax rate of up to 35% applies to taxable withdrawals on distributions from a variable annuity in 2011. Also, withdrawals or distributions taken from a variable annuity prior to attaining age 591/2 may be subject to a tax penalty equal to 10% of the taxable portion, although exceptions to the tax penalty may apply.
 
An owner of a variable annuity cannot deduct or offset losses on transfers to or from Subaccounts, or at the time of any partial withdrawals. If you surrender your Contract and your Net Contract Value is less than the aggregate of your investments in the Contract (reduced by any previous non-taxable distributions), there may be a deductible ordinary income loss, although the deduction may be limited. Consult with your tax adviser regarding the impact of federal income taxes on your specific situation.
 
Taxes on Pacific Life
 
Although the Separate Account is registered as an investment company, it is not a separate taxpayer for purposes of the Code. The earnings of the Separate Account are taxed as part of our operations. No charge is made against the Separate Account for our federal income taxes (excluding the charge for premium taxes), but we will review, periodically, the question of charges to the Separate Account or your Contract for such taxes. Such a charge may be made in future years for any federal income taxes that would be attributable to the


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Separate Account or to our operations with respect to your Contract, or attributable, directly or indirectly, to investments in your Contract.
 
Under current law, we may incur state and local taxes (in addition to premium taxes) in several states. At present, these taxes are not significant and they are not charged against the Contract or the Separate Account. If there is a material change in applicable state or local tax laws, the imposition of any such taxes upon us that are attributable to the Separate Account or to our operations with respect to your Contract may result in a corresponding charge against the Separate Account or your Contract.
 
Given the uncertainty of future changes in applicable federal, state or local tax laws, we cannot appropriately describe the effect a tax law change may have on taxes that would be attributable to the Separate Account or your Contract.
 
Qualified Contracts – General Rules
 
The Contracts are available to a variety of Qualified Plans and IRAs. Tax restrictions and consequences for Contracts under each type of Qualified Plan and IRAs differ from each other and from those for Non-Qualified Contracts. No attempt is made herein to provide more than general information about the use of the Contract with the various types of Qualified Plans and IRAs. Participants under such Qualified Plans, as well as Contract Owners, Annuitants and Beneficiaries, are cautioned that the rights of any person to any benefits under such Qualified Plans may be subject to the terms and conditions of the Plans themselves or limited by applicable law, regardless of the terms and conditions of the Contract issued in connection therewith.
 
Tax Deferral
 
It is important to know that Qualified Plans such as 401(k)s, as well as IRAs, are already tax-deferred. Therefore, an annuity contract should be used to fund an IRA or Qualified Plan to benefit from the annuity’s features other than tax deferral. Other benefits of using a variable annuity to fund a Qualified Plan or an IRA include the lifetime income options, guaranteed death benefit options and the ability to transfer among Investment Options without sales or withdrawal charges. You should consider if the Contract is a suitable investment if you are investing through a Qualified Plan or IRA.
 
Taxes Payable
 
Generally, amounts received from Qualified Contracts are taxed as ordinary income under Section 72, to the extent that they are not treated as a tax free recovery of contributions. Different rules apply for Roth IRAs. Consult your tax advisor before requesting a distribution from a Qualified Contract.
 
10% Tax Penalty for Early Withdrawals
 
Generally, distributions from IRAs and Qualified Plans that occur before you attain age 591/2 are subject to a 10% tax penalty imposed on the amount of the distribution that is includable in gross income, with certain exceptions. These exceptions include distributions:
 
  •  made to a beneficiary after the owner’s/participant’s death,
 
  •  attributable to the owner/participant becoming disabled under Section 72(m)(7),
 
  •  that are part of a series of substantially equal periodic payments (also referred to as SEPPs or 72(t) payments) made (at least annually) over your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary,
 
  •  for certain higher education expenses (IRAs only),
 
  •  used to pay for certain health insurance premiums or medical expenses (IRAs only),
 
  •  for costs related to the purchase of your first home (IRAs only), and
 
  •  (except for IRAs) made to an employee after separation from service after reaching age 55 (or age 50 in the case of a qualified public safety employee).
 
Tax Withholding for Qualified Contracts
 
Distributions from a Contract under a Qualified Plan (not including an individual retirement annuity subject to Code Section 408 or Code Section 408A) to an employee, surviving spouse, or former spouse who is an alternate payee under a qualified domestic relations order, in the form of a lump sum settlement or periodic annuity payments for a fixed period of fewer than 10 years are subject to mandatory income tax withholding of 20% of the taxable amount of the distribution, unless:
 
  •  the distributee directs the transfer of such amounts in cash to another Qualified Plan or a traditional IRA, or
 
  •  the payment is a minimum distribution required under the Code.


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The taxable amount is the amount of the distribution less the amount allocable to after-tax contributions. All other types of taxable distributions are subject to withholding unless the distributee elects not to have withholding apply.
 
For periodic (annuity) payments, the rate of withholding will be determined on the basis of the withholding information you provide to us. If you do not provide us with withholding information, we are required to determine the Federal income tax withholding, from every annuity payment, as if you are a married person with 3 exemptions. State and local withholding may apply different defaults and will be determined by applicable law.
 
Certain states have indicated that pension and annuity withholding will apply to payments made to residents.
 
IRAs and Other Qualified Contracts with Optional Benefit Riders
 
As of the date of this Prospectus, there are special considerations for purchases of any optional living or death benefit riders. IRS regulations state that Individual Retirement Accounts (IRAs) may generally not invest in life insurance contracts. We believe that these regulations do not prohibit the optional living or death benefit riders from being added to your Contract if it is issued as a Traditional IRA, Roth IRA, SEP IRA or SIMPLE IRA. However, the law is unclear and it is possible that a Contract that has optional living or death benefit riders and is issued as a Traditional IRA, Roth IRA, SEP IRA or SIMPLE IRA could be disqualified and may result in increased taxes to the Owner.
 
Similarly, section 401 plans, section 403(b), 457(b) annuities and IRAs (but not Roth IRAs) can only offer incidental death benefits. The Internal Revenue Service (IRS) could take the position that the enhanced death benefits provided by optional benefit riders are not incidental. In addition, to the extent that the optional benefit riders alter the timing or the amount of the payment of distributions under a Qualified Contract, the riders cannot be paid out in violation of the minimum distribution rules of the Code.
 
It is our understanding that the charges relating to the optional benefit riders are not subject to current taxation and we will not report them as such. However, the IRS may determine that these charges should be treated as partial withdrawals subject to current income taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report the rider charges as partial withdrawals if we believe that we would be expected to report them in accordance with IRS regulations.
 
Required Minimum Distributions
 
The regulations provide that you cannot keep assets in Qualified Plans or IRAs indefinitely. Eventually they are required to be distributed; at that time (the Required Beginning Date (RBD)), Required Minimum Distributions (RMDs) are the amount that must be distributed each year.
 
Under Section 401 of the Code (for Qualified Plans) and Section 408 of the Code (for IRAs), the entire interest under the Contract must be distributed to the Owner/Annuitant no later than the Owner/Annuitant’s RBD, or distributions over the life of the Owner/Annuitant (or the Owner/Annuitant and his beneficiary) must begin no later than the RBD.
 
The RBD for distributions from a Qualified Contract maintained for an IRA under Section 408 of the Code is generally April 1 of the calendar year following the year in which the Owner/Annuitant reaches age 701/2. The RBD for a Qualified Contract maintained for a qualified retirement or pension plan under Section 401 of the Code or a Section 403(b) annuity is April 1 of the calendar year following the later of the year in which the Owner/Annuitant reaches age 701/2, or, if the plan so provides, the year in which the Owner/Annuitant retires. There is no RBD for a Roth IRA maintained pursuant to Section 408A of the Code.
 
The IRS requires that all IRA holders and Qualified Plan Participants (with one exception discussed below) use the Uniform Lifetime Table to calculate their RMDs.
 
The Uniform Lifetime Table is based on a joint life expectancy and uses the IRA owner’s actual age and assumes that the beneficiary is 10 years younger than the IRA owner. Note that under these Final Regulations, the IRA owner does not need to actually have a named beneficiary when they turn age 701/2.
 
The exception noted above is for an IRA owner who has a spouse, who is more than 10 years younger, as the sole beneficiary on the IRA. In that situation, the spouse’s actual age (and life expectancy) will be used in the joint life calculation.
 
If the Owner/Annuitant dies prior to his RBD or complete distribution from the Qualified Contract, the remainder shall be distributed as provided in the “Qualified Contract Distribution Rules” section of this Prospectus. For non-spouse beneficiaries, life expectancy is initially computed by use of the Single Life Table of the Final Regulations (Regulation Section 1.401(a)(9)-9). Subsequent life expectancy shall be calculated by reducing the life expectancy of the Beneficiary by one in each following calendar year.
 
The method of distribution selected must comply with the minimum distribution rules of Code Section 401(a)(9), and the applicable Regulations thereunder.


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Actuarial Value
 
In accordance with recent changes in laws and regulations, RMDs and Roth IRA conversions may be calculated based on the sum of the contract value and the actuarial value of any additional death benefits and benefits from optional riders that you have purchased under the Contract. As a result, RMDs and taxes due on Roth IRA Conversions may be larger than if the calculation were based on the contract value only, which may in turn result in an earlier (but not before the required beginning date) distribution under the Contract and an increased amount of taxable income distributed to the contract owner, and a reduction of death benefits and the benefits of any optional riders.
 
RMDs and Annuity Options
 
Under the Final Regulations, for retirement plans that qualify under Section 401 or 408 of the Code, the period elected for receipt of RMDs as annuity payments under Annuity Options 2 and 4 generally may be:
 
  •  no longer than the joint life expectancy of the Annuitant and Beneficiary in the year that the Annuitant reaches age 701/2, and
 
  •  must be shorter than such joint life expectancy if the Beneficiary is not the Annuitant’s spouse and is more than 10 years younger than the Annuitant.
 
Under Annuity Option 3, if the Beneficiary is not the Annuitant’s spouse and is more than 10 years younger than the Annuitant, the 662/3% and 100% elections specified below may not be available. The restrictions on options for retirement plans that qualify under Sections 401 and 408 also apply to a retirement plan that qualifies under Section 403(b) with respect to amounts that accrued after December 31, 1986.
 
Loans
 
Certain Owners of Qualified Contracts may borrow against their Contracts. Otherwise loans from us are not permitted. You may request a loan from us, using your Contract Value as your only security if yours is a Qualified Contract that is:
 
  •  not subject to Title 1 of ERISA,
 
  •  issued under Section 403(b) of the Code, and
 
  •  issued under a Plan that permits Loans (a “Loan Eligible Plan”).
 
You may have only one loan outstanding at any time. The minimum loan amount is $1,000, subject to certain state limitations. Your Contract Debt at the effective date of your loan may not exceed the lesser of:
 
  •  50% of the amount available for withdrawal under this Contract (see WITHDRAWALS – Optional Withdrawals – Amount Available for Withdrawal), or
 
  •  $50,000 less your highest outstanding Contract Debt during the 12-month period immediately preceding the effective date of your loan.
 
If your request for a loan is processed, you will be charged interest on your Contract Debt at a fixed annual rate equal to 5%. The amount held in the Loan Account to secure your loan will earn a return equal to an annual rate of 3%. The net amount of interest you pay on your loan will be 2.00% annually. These rates may vary by state.
 
Interest charges accrue on your Contract Debt daily, beginning on the effective date of your loan. 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 advisor before taking a loan.
 
We may change these loan provisions to reflect changes in the Code or interpretations thereof. We urge you to consult with a qualified tax adviser prior to effecting any loan transaction under your Contract.
 
IRAs and Qualified Plans
 
The following is only a general discussion about types of IRAs and Qualified Plans for which the Contracts are available. We are not the administrator of any Qualified Plan. The plan administrator and/or custodian, whichever is applicable, (but not us) is responsible for all Plan administrative duties including, but not limited to, notification of distribution options, disbursement of Plan benefits, handling any processing and administration of Qualified Plan loans, compliance regulatory requirements and federal and state tax reporting of income/distributions from the Plan to Plan participants and, if applicable, Beneficiaries of Plan participants and IRA


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contributions from Plan participants. Our administrative duties are limited to administration of the Contract and any disbursements of any Contract benefits to the Owner, Annuitant, or Beneficiary of the Contract, as applicable. Our tax reporting responsibility is limited to federal and state tax reporting of income/distributions to the applicable payee and IRA contributions from the Owner of a Contract, as recorded on our books and records. The Qualified Plan (the plan administrator or the custodian) is required to provide us with information regarding individuals with signatory authority on the Contract(s) owned. If you are purchasing a Qualified Contract, you should consult with your plan administrator and/or a qualified tax adviser. You should also consult with a qualified tax adviser and/or plan administrator before you withdraw any portion of your Contract Value.
 
Individual Retirement Annuities (“IRAs”)
 
In addition to “traditional” IRAs established under Code 408, there are SEP IRAs under Code Section 408(k), Roth IRAs governed by Code Section 408A and SIMPLE IRAs established under Code Section 408(p). Also, Qualified Plans under Section 401, 403(b), or 457(b) of the Code that include after-tax employee contributions may be treated as deemed IRAs subject to the same rules and limitations as traditional IRAs. Contributions to each of these types of IRAs are subject to differing limitations. The following is a very general description of each type of IRA and other Qualified Plans.
 
Traditional IRAs
 
Traditional IRAs are subject to limitations on the amount that may be contributed each year, the persons who may be eligible to contribute, when rollovers are available and when distributions must commence. Depending upon the circumstances of the individual, contributions to a traditional IRA may be made on a deductible or non-deductible basis.
 
Annual contributions are generally allowed for persons who have not attained age 701/2 and who have compensation (as defined by the IRS) of at least the contribution amount. Distributions of minimum amounts specified by the Code must commence by April 1 of the calendar year following the calendar year in which you attain age 701/2. Failure to make mandatory minimum distributions may result in imposition of a 50% tax penalty on any difference between the required distribution amount and the amount actually distributed. Additional distribution rules apply after your death.
 
You (or your surviving spouse if you die) may rollover funds (such as proceeds from existing insurance policies, annuity contracts or securities) from certain existing Qualified Plans into your traditional IRA if those funds are in cash. This will require you to liquidate any value accumulated under the existing Qualified Plan. Mandatory withholding of 20% may apply to any rollover distribution from your existing Qualified Plan if the distribution is not transferred directly to your traditional IRA. To avoid this withholding you should have cash transferred directly from the insurance company or plan trustee to your traditional IRA.
 
SIMPLE IRAs
 
The Savings Incentive Match Plan for Employees of Small Employers (“SIMPLE Plan”) is a type of IRA established under Code Section 408(p)(2). Depending upon the SIMPLE Plan, employers may make plan contributions into a SIMPLE IRA established by each participant of the SIMPLE Plan. Like other IRAs, a 10% tax penalty is imposed on certain distributions that occur before an employee attains age 591/2. In addition, the tax penalty is increased to 25% for amounts received or rolled to another IRA or Qualified Plan during the 2-year period beginning on the date an employee first participated in a qualified salary reduction arrangement pursuant to a SIMPLE Plan maintained by their employer. Contributions to a SIMPLE IRA will generally include employee salary deferral contributions and employer contributions. Distributions from a SIMPLE IRA may be transferred to another SIMPLE IRA tax free or may be eligible for tax free rollover to a traditional IRA, a 403(b), a 457(b) or other Qualified Plan after the required 2-year period.
 
SEP-IRAs
 
A Simplified Employee Pension (SEP) is an employer sponsored retirement plan under which employers are allowed to make contributions toward their employees’ retirement, as well as their own retirement (if the employer is self-employed). A SEP is a type of IRA established under Code Section 408(k). Under a SEP, a separate IRA account called a SEP-IRA is set up by or for each eligible employee and the employer makes the contribution to the account. Like other IRAs, a 10% tax penalty is imposed on certain distributions that occur before an employee attains age 591/2.
 
Roth IRAs
 
Section 408A of the Code permits eligible individuals to establish a Roth IRA. Contributions to a Roth IRA are not deductible, but withdrawals of amounts contributed and the earnings thereon that meet certain requirements are not subject to federal income tax. In general, Roth IRAs are subject to limitations on the amount that may be contributed and the persons who may be eligible to contribute and are subject to certain required distribution rules on the death of the Contract Owner. Unlike a traditional IRA, Roth IRAs are not subject to minimum required distribution rules during the Contract Owner’s lifetime. Generally, however, the amount remaining in a Roth IRA must be distributed by the end of the fifth year after the death of the Contract Owner/Annuitant or distributed over the life expectancy of the Designated Beneficiary. The owner of a traditional IRA may convert a traditional IRA into a Roth IRA under certain


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circumstances. The conversion of a traditional IRA to a Roth IRA will subject the amount of the converted traditional IRA to federal income tax. Anyone considering the purchase of a Qualified Contract as a Roth IRA or a “conversion” Roth IRA should consult with a qualified tax adviser.
 
In accordance with recent changes in laws and regulations, at the time of either a full or partial conversion from a Traditional IRA annuity to a Roth IRA annuity, the determination of the amount to be reported as income will be based on the annuity contract’s “fair market value”, which will include all front-end loads and other non-recurring charges assessed in the 12 months immediately preceding the conversion, and the actuarial present value of any additional contract benefits.
 
Tax Sheltered Annuities (“TSAs”)
 
Employees of certain tax-exempt organizations, such as public schools or hospitals, may defer compensation through an eligible plan under Code Section 403(b). Salary deferral amounts received from employers for these employees are excludable from the employees’ gross income (subject to maximum contribution limits). Distributions under these Contracts must comply with certain limitations as to timing, or result in tax penalties. Distributions from amounts contributed to a TSA pursuant to a salary reduction arrangement, may be made from a TSA only upon attaining age 591/2, severance from employment, death, disability, or financial hardship. Section 403(b) annuity distributions can be rolled over to other Qualified Plans in a manner similar to those permitted by Qualified Plans that are maintained pursuant to Section 401 of the Code.
 
In accordance with Code Section 403(b) and final regulations published on July 26, 2007 (“Final Regulations”), as of January 1, 2009, we are required to provide information regarding contributions, loans, withdrawals, and hardship distributions from your Contract to your 403(b) employer or an agent of your 403(b) employer, upon request. In addition, prior to processing your request for certain transactions, we are required to verify certain information about you with your 403(b) employer (or if applicable, former 403(b) employer) which may include obtaining authorization from either your employer or your employer’s third party administrator.
 
Section 457(b) Non-Qualified Deferred Compensation Plans
 
Certain employees of governmental entities or tax exempt employers may defer compensation through an eligible plan under Code section 457(b). Contributions to a Contract of an eligible plan are subject to limitations. Subject to plan provisions and a qualifying triggering event, assets in a Section 457(b) plan established by a governmental entity may be transferred or rolled into an IRA or another Qualified Plan, if the Qualified Plan allows the transfer or rollover. If a rollover to an IRA is completed, the assets become subject to IRA rules, including the 10% penalty on distributions prior to age 591/2. Assets from other plans may be rolled into a governmental 457(b) plan if the 457(b) plan allows the rollover and if the investment provider is able to segregate the assets for tax reporting purposes. Consult both the distributing plan and the receiving plan prior to making this election. Assets in a 457(b) plan set up by a tax exempt employer may not be rolled to a different type of Qualified Plan or IRA at any time.
 
401(k) Plans; Pension and Profit-Sharing Plans
 
Qualified Plans may be established by an employer for certain eligible employees under Section 401 of the Code. These plans may be 401(k) plans, profit-sharing plans, or other pension or retirement plans. Contributions to these plans are subject to limitations. Rollover to other eligible plans may be available. Please consult your Qualified Plans Summary Plan description for more information.
 
ADDITIONAL INFORMATION
 
Voting Rights
 
We are the legal owner of the shares of the Portfolios held by the Subaccounts. We may vote on any matter voted on at shareholders’ meetings of the Funds. However, our current interpretation of applicable law requires us to vote the number of shares attributable to your Variable Account Value (your “voting interest”) in accordance with your directions.
 
We will pass proxy materials on to you so that you have an opportunity to give us voting instructions for your voting interest. You may provide your instructions by proxy or in person at the shareholders’ meeting. If there are shares of a Portfolio held by a Subaccount for which we do not receive timely voting instructions, we will vote those shares in the same proportion as all other shares of that Portfolio held by that Subaccount for which we have received timely voting instructions. If we do not receive any voting instructions for the shares in a Separate Account, we will vote the shares in that Separate Account in the same proportion as the total votes for all of our separate accounts for which we’ve received timely instructions. If we hold shares of a Portfolio in our General Account, we will vote such shares in the same proportion as the total votes cast for all of our separate accounts, including Separate Account A. We will vote shares of any Portfolio held by our non-insurance affiliates in the same proportion as the total votes for all separate accounts of ours and our insurance affiliates. As a result of proportional voting, the votes cast by a small number of Contract Owners may determine the outcome of a vote.
 
We may elect, in the future, to vote shares of the Portfolios held in Separate Account A in our own right if we are permitted to do so through a change in applicable federal securities laws or regulations, or in their interpretation.


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The number of Portfolio shares that form the basis for your voting interest is determined as of the record date set by the Board of Trustees of the Fund. It is equal to:
 
  •  your Contract Value allocated to the Subaccount corresponding to that Portfolio, divided by
 
  •  the net asset value per share of that Portfolio.
 
Fractional votes will be counted. We reserve the right, if required or permitted by a change in federal regulations or their interpretation, to amend how we calculate your voting interest.
 
After your Annuity Date, if you have selected a variable annuity, the voting rights under your Contract will continue during the payout period of your annuity, but the number of shares that form the basis for your voting interest, as described above, will decrease throughout the payout period.
 
Changes to Your Contract
 
Contract Owner(s) and Contingent Owner
 
Transfer of Contract ownership may involve federal income tax and/or gift tax consequences; you should consult a qualified tax adviser before effecting such a transfer. A change to or from joint Contract ownership is considered a transfer of ownership. If your Contract is Non-Qualified, you may change Contract ownership at any time while the Annuitant is living and prior to your Annuity Date. You may name a different Owner or add or remove a Joint Owner or Contingent Owner. A Contract cannot name more than two Contract Owners (either as Joint or Contingent Owners) at any time. Any newly-named Contract Owners, including Joint and/or Contingent Owners, must be under the age of 81 at the time of change or addition. The Contract Owner(s) may make all decisions regarding the Contract, including making allocation decisions and exercising voting rights. Transactions under a Contract with Joint Owners require approval from both Owners.
 
If your Contract is Qualified under Code Sections 401 or 457(b), the Qualified Plan must be the sole Owner of the Contract and the ownership cannot be changed unless and until a triggering event has been met under the terms of the Qualified Plan. Upon such event, the ownership can only be changed to the Annuitant. If your Contract is Qualified under Code Sections 408 and 403(b), you must be the sole Owner of the Contract and no changes can be made.
 
Annuitant and Contingent or Joint Annuitant
 
Your sole Annuitant cannot be changed, and Joint Annuitants cannot be added or changed, once your Contract is issued. Certain changes may be permitted in connection with Contingent Annuitants. See ANNUITIZATION – Selecting Your Annuitant. There may be limited exceptions for certain Qualified Contracts.
 
Beneficiaries
 
Your Beneficiary is the person(s) or entity who may receive death benefit proceeds under your Contract or any remaining annuity payments after the Annuity Date if the Annuitant or Owner dies. See the DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS section for additional information regarding death benefit payouts. You may change or remove your Beneficiary or add Beneficiaries at any time prior to the death of the Annuitant or Owner, as applicable. Any change or addition will generally take effect only when we receive all necessary documents, In Proper Form, and we record the change or addition. Any change or addition will not affect any payment made or any other action taken by us before the change or addition was received and recorded. Under our administrative procedures, a signature guarantee and/or other verification of identity or authenticity may be required when processing a claim payable to a Beneficiary.
 
Spousal consent may be required to change an IRA Beneficiary. If you are considering removing a spouse as a Beneficiary, it is recommended that you consult your legal or tax advisor regarding any applicable state or federal laws prior to requesting the change. If you have named your Beneficiary irrevocably, you will need to obtain that Beneficiary’s consent before making any changes. Qualified Contracts may have additional restrictions on naming and changing Beneficiaries. If your Contract was issued in connection with a Qualified Plan subject to Title I of ERISA, contact your Plan Administrator for details. We require that Contracts issued under Code Sections 401 and 457(b) name the Plan as Beneficiary. If you leave no surviving Beneficiary or Contingent Beneficiary, your estate will receive any death benefit proceeds under your Contract.
 
Changes to All Contracts
 
If, in the judgment of our management, continued investment by Separate Account A in one or more of the Portfolios becomes unsuitable or unavailable, we may seek to alter the Variable Investment Options available under the Contracts. We do not expect that a Portfolio will become unsuitable, but unsuitability issues could arise due to changes in investment policies, market conditions, tax laws, or due to marketing or other reasons.


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Alterations of Variable Investment Options may take differing forms. We reserve the right to substitute shares of any Portfolio that were already purchased under any Contract (or shares that were to be purchased in the future under a Contract) with shares of another Portfolio, shares of another investment company or series of another investment company, or another investment vehicle. Required approvals of the SEC and state insurance regulators will be obtained before any such substitutions are effected, and you will be notified of any planned substitution.
 
We may add new Subaccounts to Separate Account A and any new Subaccounts may invest in Portfolios of a Fund or in other investment vehicles. Availability of any new Subaccounts to existing Contract Owners will be determined at our discretion. We will notify you, and will comply with the filing or other procedures established by applicable state insurance regulators, to the extent required by applicable law. We also reserve the right, after receiving any required regulatory approvals, to do any of the following:
 
  •  cease offering any Subaccount;
 
  •  add or change designated investment companies or their portfolios, or other investment vehicles;
 
  •  add, delete or make substitutions for the securities and other assets that are held or purchased by the Separate Account or any Variable Account;
 
  •  permit conversion or exchanges between portfolios and/or classes of contracts on the basis of Owners’ requests;
 
  •  add, remove or combine Variable Accounts;
 
  •  combine the assets of any Variable Account with any other of our separate accounts or of any of our affiliates;
 
  •  register or deregister Separate Account A or any Variable Account under the 1940 Act;
 
  •  operate any Variable Account as a managed investment company under the 1940 Act, or any other form permitted by law;
 
  •  run any Variable Account under the direction of a committee, board, or other group;
 
  •  restrict or eliminate any voting rights of Owners with respect to any Variable Account or other persons who have voting rights as to any Variable Account;
 
  •  make any changes required by the 1940 Act or other federal securities laws;
 
  •  make any changes necessary to maintain the status of the Contracts as annuities under the Code;
 
  •  make other changes required under federal or state law relating to annuities;
 
  •  suspend or discontinue sale of the Contracts; and
 
  •  comply with applicable law.
 
Inquiries and Submitting Forms and Requests
 
You may reach our service representatives at (800) 722-4448 between the hours of 6:00 a.m. and 5:00 p.m., Pacific time. Financial advisors may call us at (800) 722-2333.
 
Please send your forms and written requests or questions to:
 
Pacific Life Insurance Company
P.O. Box 2378
Omaha, Nebraska 68103-2378
 
If you are submitting a Purchase Payment or other payment by mail, please send it, along with your application if you are submitting one, to the following address:
 
Pacific Life Insurance Company
P.O. Box 2290
Omaha, Nebraska 68103-2290
 
If you are using an overnight delivery service to send payments, please send them to the following address:
 
Pacific Life Insurance Company
1299 Farnam Street, 6th Floor, RSD
Omaha, Nebraska 68102
 
The effective date of certain notices or of instructions is determined by the date and time on which we receive the notice or instructions In Proper Form. In those instances when we receive electronic transmission of the information on the application from your financial advisor’s broker-dealer firm and our administrative procedures with your broker-dealer so provide, we consider the application to be


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received on the Business Day we receive the transmission. If the address on your Contract specification pages is different and our administrative procedures with your broker-dealer so provide, in those instances when information regarding your Purchase Payment is electronically transmitted to us by the broker-dealer, we will consider the Purchase Payment to be received by us on the Business Day we receive the transmission of the information. Please call us if you or your financial advisor have any questions regarding which address you should use.
 
We reserve the right to process any Purchase Payment received at an incorrect address when it is received at either the address indicated in your Contract specification pages or the appropriate address indicated in the Prospectus.
 
Purchase Payments after your initial Purchase Payment, loan requests, transfer requests, loan repayments and withdrawal requests we receive before the close of the New York Stock Exchange, which usually closes at 4:00 p.m. Eastern time, will normally be effective at the end of the same Business Day that we receive them In Proper Form unless the transaction or event is scheduled to occur on another day. Generally, whenever you submit any other form, notice or request, your instructions will be effective on the next Business Day after we receive them In Proper Form unless the transaction or event is scheduled to occur on another day. We may also require, among other things, a signature guarantee or other verification of authenticity. We do not generally require a signature guarantee unless it appears that your signature may have changed over time or the signature does not appear to be yours; or an executed application or confirmation of application, as applicable, In Proper Form is not received by us; or, to protect you or us. Requests regarding death benefit proceeds must be accompanied by both proof of death and instructions regarding payment In Proper Form. You should call your financial advisor or us if you have questions regarding the required form of a request.
 
Telephone and Electronic Transactions
 
You are automatically entitled to make certain transactions by telephone or, to the extent available, electronically. You may also authorize other people to make certain transaction requests by telephone or, to the extent available, electronically by so indicating on the application or by sending us instructions in writing in a form acceptable to us. We cannot guarantee that you or any other person you authorize will always be able to reach us to complete a telephone or electronic transaction; for example, all telephone lines may be busy or access to our website may be unavailable during certain periods, such as periods of substantial market fluctuations or other drastic economic or market change, or telephones or the Internet may be out of service or unavailable during severe weather conditions or other emergencies. Under these circumstances, you should submit your request in writing (or other form acceptable to us). Transaction instructions we receive by telephone or electronically before the close of the New York Stock Exchange, which usually closes at 4:00 p.m. Eastern time, on any Business Day will usually be effective at the end of that day, and we will provide you confirmation of each telephone or electronic transaction.
 
We have established procedures reasonably designed to confirm that instructions communicated by telephone or electronically are genuine. These procedures may require any person requesting a telephone or electronic transaction to provide certain personal identification upon our request. We may also record all or part of any telephone conversation with respect to transaction instructions. We reserve the right to deny any transaction request made by telephone or electronically. You are authorizing us to accept and to act upon instructions received by telephone or electronically with respect to your Contract, and you agree that, so long as we comply with our procedures, neither we, any of our affiliates, nor any Fund, or any of their directors, trustees, officers, employees or agents will be liable for any loss, liability, cost or expense (including attorneys’ fees) in connection with requests that we believe to be genuine. This policy means that so long as we comply with our procedures, you will bear the risk of loss arising out of the telephone or electronic transaction privileges of your Contract. If a Contract has Joint Owners, each Owner may individually make telephone and/or electronic transaction requests.
 
Electronic Information Consent
 
Subject to availability, you may authorize us to provide prospectuses, prospectus supplements, annual and semi-annual reports, annual statements, quarterly statements and immediate confirmations, proxy solicitation, privacy notice and other notices and documentation in electronic format when available instead of receiving paper copies of these documents by U.S. mail. You may enroll in this service by so indicating on the application, via our Internet website, or by sending us instructions in writing in a form acceptable to us to receive such documents electronically. Not all contract documentation and notifications may be currently available in electronic format. You will continue to receive paper copies of any documents and notifications not available in electronic format by U.S. mail. In addition, you will continue to receive paper copies of annual statements if required by state or federal law. By enrolling in this service, you consent to receive in electronic format any documents added in the future. For jointly owned contracts, both owners are consenting to receive information electronically. Documents will be available on our Internet website. As documents become available, we will notify you of this by sending you an e-mail message that will include instructions on how to retrieve the document. You must have ready access to a computer with Internet access, an active e-mail account to receive this information electronically, and the ability to read and retain it. You may access and print all documents provided through this service.
 
If you plan on enrolling in this service, or are currently enrolled, please note that:
 
  •  We impose no additional charge for electronic delivery, although your Internet provider may charge for Internet access.


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  •  You must provide a current e-mail address and notify us promptly when your e-mail address changes.
 
  •  You must update any e-mail filters that may prevent you from receiving e-mail notifications from us.
 
  •  You may request a paper copy of the information at any time for no charge, even though you consented to electronic delivery, or if you decide to revoke your consent.
 
  •  For jointly owned contracts, both owners are consenting that the primary owner will receive information electronically. (Only the primary owner will receive e-mail notices.)
 
  •  Electronic delivery will be cancelled if e-mails are returned undeliverable.
 
  •  This consent will remain in effect until you revoke it.
 
We are not required to deliver this information electronically and may discontinue electronic delivery in whole or in part at any time. If you are currently enrolled in this service, please call (800) 722-4448 if you would like to revoke your consent, wish to receive a paper copy of the information above, or need to update your e-mail address.
 
Timing of Payments and Transactions
 
For withdrawals, including exchanges under Code Section 1035 and other Qualified transfers, from the Variable Investment Options or for death benefit payments attributable to your Variable Account Value, we will normally send the proceeds within 7 calendar days after your request is effective or after the Notice Date, as the case may be. We will normally effect periodic annuity payments on the day that corresponds to the Annuity Date and will make payment on the following day. Payments or transfers may be suspended for a longer period under certain extraordinary circumstances. These include: a closing of the New York Stock Exchange other than on a regular holiday or weekend; a trading restriction imposed by the SEC; or an emergency declared by the SEC. Amounts withdrawn or transferred from any fixed-rate General Account Investment Option may be delayed for up to six months after the request is effective. See THE GENERAL ACCOUNT for more details.
 
Confirmations, Statements and Other Reports to Contract Owners
 
Confirmations will be sent out for unscheduled Purchase Payments and transfers, loans, loan repayments, unscheduled partial withdrawals, a full withdrawal, optional living benefit rider Automatic or Owner Elected Resets/Step-Ups, and on payment of any death benefit proceeds. Periodically, we will send you a statement that provides certain information pertinent to your Contract. These statements disclose Contract Value, Subaccount values, any fixed option values, fees and charges applied to your Contract Value, transactions made and specific Contract data that apply to your Contract. Confirmations of your transactions under the pre-authorized checking plan, dollar cost averaging, earnings sweep, portfolio rebalancing, and pre-authorized withdrawal options will appear on your quarterly account statements. Your fourth-quarter statement will contain annual information about your Contract Value and transactions. You may also access these statements online.
 
If you suspect an error on a confirmation or quarterly statement, you must notify us in writing as soon as possible to ensure proper accounting to your Contract. When you write, tell us your name, contract number and a description of the suspected error. We assume transactions are accurate unless you notify us otherwise within 30 days of receiving the transaction confirmation or, if the transaction is first confirmed on the quarterly statement, within 30 days of receiving the quarterly statement. All transactions are deemed final and may not be changed after the applicable 30 day period.
 
You will also be sent an annual report for the Separate Account and the Funds and a list of the securities held in each Portfolio of the Funds, as required by the 1940 Act; or more frequently if required by law.
 
Contract Owner Mailings. To help reduce expenses, environmental waste and the volume of mail you receive, only one copy of Contract Owner documents (such as the prospectus, supplements, announcements, and each annual and semi-annual report) may be mailed to Contract Owners who share the same household address (Householding). If you are already participating, you may opt out by contacting us. Please allow 30 calendar days for regular delivery to resume. You may also elect to participate in Householding by writing to us. The current documents are available on our website any time or an individual copy of any of these documents may be requested – see the last page of this Prospectus for more information.
 
Distribution Arrangements
 
PSD, a broker-dealer and our subsidiary, pays various forms of sales compensation to broker-dealers (including other affiliates) that solicit applications for the Contracts. PSD also may reimburse other expenses associated with the promotion and solicitation of applications for the Contracts.
 
We offer the Contracts for sale through broker-dealers that have entered into selling agreements with PSD. Broker-dealers sell the Contracts through their financial advisors. PSD pays compensation to broker-dealers for the promotion and sale of the Contracts. The individual financial advisor who sells you a Contract typically will receive a portion of the compensation, under the financial advisor’s


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own arrangement with his or her broker-dealer. Broker-dealers may receive aggregate commissions of up to 7.10% of your aggregate Purchase Payments. Under certain circumstances where PSD pays lower initial commissions, certain broker-dealers that solicit applications for Contracts may be paid an ongoing persistency trail commission (sometimes called a residual) which will take into account, among other things, the Account Value and the length of time Purchase Payments have been held under a Contract. A trail commission is not anticipated to exceed 1.50%, on an annual basis, of the Account Value considered in connection with the trail commission. Certain broker-dealers may also be paid an amount under a persistency program which will be based on assets under management and duration of Contracts. The amount under the persistency program for a financial advisor is not expected to exceed 0.25% of their total assets under management.
 
We may also provide compensation to broker-dealers for providing ongoing service in relation to Contracts that have already been purchased.
 
Additional Compensation and Revenue Sharing
 
To the extent permitted by SEC and FINRA rules and other applicable laws and regulations, selling broker-dealers may receive additional payments in the form of cash, other special compensation or reimbursement of expenses, sometimes called “revenue sharing”. These additional compensation or reimbursement arrangements may include, for example, payments in connection with the firm’s “due diligence” examination of the contracts, payments for providing conferences or seminars, sales or training programs for invited financial advisors and other employees, payments for travel expenses, including lodging, incurred by financial advisors and other employees for such seminars or training programs, seminars for the public, advertising and sales campaigns regarding the Contracts, and payments to assist a firm in connection with its administrative systems, operations and marketing expenses and/or other events or activities sponsored by the firms. Subject to applicable FINRA rules and other applicable laws and regulations, PSD and its affiliates may contribute to, as well as sponsor, various educational programs, sales contests and/or promotions in which participating firms and their salespersons may receive prizes such as merchandise, cash, or other awards. Such additional compensation may give us greater access to financial advisors of the broker-dealers that receive such compensation or may otherwise influence the way that a broker-dealer and financial advisor market the Contracts.
 
These arrangements may not be applicable to all firms, and the terms of such arrangements may differ between firms. We provide additional information on special compensation or reimbursement arrangements involving selling firms and other financial institutions in the Statement of Additional Information, which is available upon request. Any such compensation will not result in any additional direct charge to you by us.
 
The compensation and other benefits provided by PSD or its affiliates may be more or less than the overall compensation on similar or other products. This may influence your financial advisor or broker-dealer to present this Contract over other investment vehicles available in the marketplace. You may ask your financial advisor about these differing and divergent interests, how he/she is personally compensated and how his/her broker-dealer is compensated for soliciting applications for the Contract.
 
Service Arrangements
 
We have entered into services agreements with certain Funds, or Fund affiliates, which pay us for administrative and other services, including, but not limited to, certain communications and support services. The fees are based on an annual percentage of average daily net assets of certain Fund portfolios purchased by us at Contract Owner’s instructions. Currently, the fees received do not exceed an annual percentage of 0.30% and each Fund (or Fund affiliate) may not pay the same annual percentage (some may pay significantly less). Because we receive such fees, we may be subject to competing interests in making these Funds available as Investment Options under the Contracts.
 
AllianceBernstein Investments, Inc. pays us for each AllianceBernstein Variable Products Series Fund, Inc. portfolio (Class B) held by our separate accounts. BlackRock Distributors, Inc. pays us for each BlackRock Variable Series Funds, Inc. portfolio (Class III) held by our separate accounts. Fidelity Distributors Corporation pays us for each Fidelity Variable Insurance Products Fund portfolio (Service Class 2) held by our separate accounts. First Trust Variable Insurance Trust and First Trust Advisors L.P. pay us for each First Trust Variable Insurance Trust portfolio held by our separate accounts. Franklin Templeton Services, LLC pays us for each Franklin Templeton Variable Insurance Products Trust portfolio (Class 4) held by our separate accounts. Invesco Advisers, Inc. and its affiliates pay us for each AIM Variable Insurance Funds (Invesco Variable Insurance Funds) portfolio (Series II) held by our separate accounts. Massachusetts Financial Services Company pays us for each MFS Variable Insurance Trust portfolio (Service Class) held by our separate accounts. Pacific Investment Management Company LLC pays us for each PIMCO Variable Insurance Trust portfolio (Advisor Class) held by our separate accounts. GE Investments Funds, Inc. pays us for each GE Investments Funds, Inc. portfolio (Class 3) held by our separate accounts.
 
PSD shall pay American Funds Distributors, Inc. at a rate of 0.16% of Purchase Payments up to $1.5 billion, 0.14% on Purchase Payments on the next $1.5 billion and 0.10% on Purchase Payments made in excess, attributable to the Master Funds for certain marketing assistance.


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Replacement of Life Insurance or Annuities
 
The term “replacement” has a special meaning in the life insurance industry and is described more fully below. Before you make your purchase decision, we want you to understand how a replacement may impact your existing plan of insurance.
 
A policy “replacement” occurs when a new policy or contract is purchased and, in connection with the sale, an existing policy or contract is surrendered, lapsed, forfeited, assigned to the replacing insurer, otherwise terminated, or used in a financed purchase. A “financed purchase” occurs when the purchase of a new life insurance policy or annuity contract involves the use of funds obtained from the values of an existing life insurance policy or annuity contract through withdrawal, surrender or loan.
 
There are circumstances in which replacing your existing life insurance policy or annuity contract can benefit you. As a general rule, however, replacement is not in your best interest. Accordingly, you should make a careful comparison of the costs and benefits of your existing policy or contract and the proposed policy or contract to determine whether replacement is in your best interest.
 
State Considerations
 
Certain Contract features described in this Prospectus may vary or may not be available in your state. The state in which your Contract is issued governs whether or not certain features, Riders, charges or fees are available or will vary under your Contract. These variations are reflected in your Contract and in Riders or Endorsements to your Contract. See your financial advisor or contact us for specific information that may be applicable to your state.
 
For Contracts issued in the state of Pennsylvania, any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information or conceals for the purpose of misleading, information concerning any fact material thereto commits a fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties.
 
In addition, you understand that benefits and values provided under the Contract may be on a variable basis. Amounts directed into one or more variable Investment Options will reflect the investment experience of those Investment Options. These amounts may increase or decrease and are not guaranteed as to a dollar amount.
 
For Flexible Lifetime Income (Joint) and Foundation 10 issued in the state of Washington, the annual rider charge is the current charge percentage multiplied by the Contract Value. For Guaranteed Protection Advantage 5 (GPA 5) issued in the state of Washington, the current charge percentage is 0.55%.
 
California Applicants Age 60 or Older
 
For residents of the state of California 60 years of age or older, the Free Look period is a 30-day period beginning on the day you receive your Contract. If you are a California applicant age 60 or older and your Contract is delivered or issued for delivery on or after July 1, 2004, you must elect, at the time you apply for your Contract, to receive a return of either your Purchase Payments or your Contract Value proceeds if you exercise your Right to Cancel and return your Contract to us.
 
If you elect to receive the return of Purchase Payments option, the following will apply:
 
  •  We will allocate all or any portion of any Purchase Payment we receive to any available fixed option if you instruct us to do so. We will allocate all or any portion of any Purchase Payment designated for any Variable Investment Option to the Cash Management Subaccount until the Free Look Transfer Date. The Free Look Transfer Date is 30 days from the Contract Date. On the Free Look Transfer Date, we will automatically transfer your Cash Management Subaccount Value according to the instructions on your application, or your most recent instruction, if any. This automatic transfer to the Variable Investment Options according to your initial allocation instruction is excluded from the Transfer limitations. See HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED – Transfers and Market-timing Restrictions.
 
  •  If you specifically instruct us to allocate all or any portion of any additional Purchase Payments we receive to any Variable Investment Option other than the Cash Management Subaccount before the Free Look Transfer Date, you will automatically change your election to the return of your Contract Value proceeds option. This will automatically cancel your election of the “return of Purchase Payments” option for the entire Contract.
 
  •  If you request a transfer of all or any portion of your Contract Value from the Cash Management Subaccount to any other Variable Investment Option before the Free Look Transfer Date, you will automatically change your election to the return of your Contract Value proceeds option. This will automatically cancel your election of the “return of Purchase Payments” option for the entire Contract.
 
  •  If you exercise your Right to Cancel, we will send you your Purchase Payments.


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If you elect the return of Contract Value proceeds option, the following will apply:
 
  •  We will immediately allocate any Purchase Payments we receive to the Investment Options you select on your application or your most recent instructions, if any.
 
  •  If you exercise your Right to Cancel, we will send you your Contract Value proceeds described in the Right to Cancel (“Free Look”) section of this prospectus.
 
  •  Once you elect this option, it may not be changed.
 
Financial Statements
 
The statements of assets and liabilities of Separate Account A as of December 31, 2011, the related statements of operations for the periods presented, the statements of changes in net assets for each of the periods presented and the financial highlights for each of the periods presented are incorporated by reference in the Statement of Additional Information from the Annual Report of Separate Account A dated December 31, 2011. Pacific Life’s consolidated statements of financial condition as of December 31, 2011 and 2010, and the related consolidated statements of operations, equity and cash flows for each of the three years in the period ended December 31, 2011 are contained in the Statement of Additional Information.
 
Rule 12h-7 Representation
 
In reliance on the exemption provided by Rule 12h-7 of the Securities Exchange Act of 1934 (“34 Act”), we do not intend to file periodic reports as required under the 34 Act.
 
THE GENERAL ACCOUNT
 
General Information
 
All amounts allocated to a fixed option become part of our General Account. Subject to applicable law, we exercise sole discretion over the investment of General Account assets, and bear the associated investment risk. You will not share in the investment experience of General Account assets. Unlike the Separate Account, the General Account is subject to liabilities arising from any of our other business. Any guarantees provided for under the contract or through optional riders are backed by our financial strength and claims-paying ability. You must look to the strength of the insurance company with regard to such guarantees.
 
Because of exemptive and exclusionary provisions, interests in the General Account under the Contract are not registered under the Securities Act of 1933, as amended, and the General Account has not been registered as an investment company under the 1940 Act. Any interest you have in a fixed option is not subject to these Acts, and we have been advised that the SEC staff has not reviewed disclosure in this Prospectus relating to any fixed option. This disclosure may, however, be subject to certain provisions of federal securities laws relating to the accuracy and completeness of statements made in prospectuses.
 
Guarantee Terms
 
When you allocate any portion of your Purchase Payments or Contract Value to any fixed option, we guarantee you an interest rate (a “Guaranteed Interest Rate”) for a specified period of time (a “Guarantee Term”) of up to 24 months, depending on what Guarantee Terms we offer. Please contact us for the Guarantee Terms currently available. Guarantee Terms will be offered at our discretion.
 
Guaranteed Interest Rates for any fixed option may be changed periodically for new allocations. Your allocation will receive the Guaranteed Interest Rate in effect for that fixed option on the effective date of your allocation. All Guaranteed Interest Rates will credit interest daily at a rate that compounds over one year to equal the annual effective rate. The Guaranteed Interest Rate on your fixed option will remain in effect for the Guarantee Term and will never be less than the minimum guaranteed interest rate specified in your Contract.
 
Withdrawals and Transfers
 
Prior to the Annuity Date, you may withdraw or transfer amounts from any fixed option to one or more of the other Variable Investment Options. No partial withdrawal or transfer may be made from a fixed option within 30 days of the Contract Date. Currently, we are not requiring the 30-day waiting period on partial withdrawals and transfers, but we reserve the right to require the 30-day waiting period on partial withdrawals and transfers in the future. If your withdrawal leaves you with a Net Contract Value of less than $1,000, we have the right, at our option, to terminate your Contract and send you the withdrawal proceeds. However, we will not terminate your Contract if you own an optional withdrawal benefit rider and a partial withdrawal reduces the Net Contract Value to an amount less than $1,000.
 
Amounts transferred or withdrawn from any fixed option may be delayed, as described under ADDITIONAL INFORMATION – Timing of Payments and Transactions. Any amount delayed, so long as it is held under any fixed option, will continue to earn interest at the


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Guaranteed Interest Rate then in effect until that Guarantee Term has ended, and the minimum guaranteed interest rate specified in your Contract thereafter, unless state law requires a greater rate be paid.
 
DCA Plus Fixed Option
 
Before your Annuity Date, you can allocate all or some of your Purchase Payments to the DCA Plus Fixed Option. The initial minimum amount that you may allocate to the DCA Plus Fixed Option is $5,000. Currently, we are not enforcing the minimum amount you may allocate to the DCA Plus Fixed Option but we reserve the right to enforce the minimum amount in the future. You may not transfer any amount to the DCA Plus Fixed Option from any other Investment Option. All Purchase Payments allocated to the DCA Plus Fixed Option will earn interest at the then current Guaranteed Interest Rate declared by us.
 
The DCA Plus Fixed Option Value on any Business Day is the DCA Plus Fixed Option Value on the prior Business Day, increased by any additions to the DCA Plus Fixed Option on that day as a result of any:
 
  •  interest, plus
 
  •  Purchase Payments received by us then allocated to the DCA Plus Fixed Option, plus
 
  •  any additional amounts allocated to the DCA Plus Fixed Option, including Credit Enhancements if applicable,
 
and decreased by any deductions from the DCA Plus Fixed Option on that day as a result of any;
 
  •  transfers, including transfers to the Loan Account,
 
  •  withdrawals, including any applicable withdrawal charges,
 
  •  amounts applied to provide an annuity,
 
  •  charges for premium taxes and/or other taxes,
 
  •  proportionate reductions for annual charges for expenses relating to optional benefit riders attached to the Contract, and
 
  •  reduced by any Credit Enhancement as described in PURCHASING YOUR CONTRACT – Credit Enhancements.
 
The DCA Plus program will automatically terminate at the end of your DCA Plus Guarantee Term, or upon the earliest of:
 
  •  the date death benefit proceeds become payable under the Contract,
 
  •  the date you transfer the entire amount from the DCA Plus Fixed Option to another Investment Option,
 
  •  the date the Contract is terminated, or
 
  •  the Annuity Date.
 
At the end of the DCA Plus program, upon receipt of an additional Purchase Payment that satisfies our minimum allocation requirements, you may request, In Proper Form, a new DCA Plus program.
 
We reserve the right to change the terms and conditions of the DCA Plus program, but not a DCA Plus program you already have in effect.
 
Guarantee Terms
 
You can choose a Guarantee Term of up to 24 months, depending on what Guarantee Terms we offer. Please contact us for the Guarantee Terms currently available. The day that the first Purchase Payment allocation is made to the DCA Plus Fixed Option will begin your Guarantee Term. Monthly transfers will occur on the same day of each month thereafter to the Variable Investment Options that you selected. The amount transferred each month is equal to your DCA Plus Fixed Option Value on that day divided by the remaining number of monthly transfers in the Guarantee Term.
 
Example: On May 1, you submit a $10,000 Purchase Payment entirely to the DCA Plus Fixed Option at a then current Guaranteed Interest Rate of 5.00% with a Guarantee Term of 6 months. On June 1, the value of the DCA Plus Fixed Option is $10,041.52. On June 1, a transfer equal to $1,673.59 ($10,041.52 / 6) will be made according to your DCA Plus transfer instructions. Your remaining DCA Plus Fixed Option Value after the transfer is $8,367.93. On July 1, your DCA Plus Fixed Option has now increased to $8,401.56. We will transfer $1,680.31 ($8,401.56 / 5) to the Variable Investment Options, leaving a remaining value of $6,721.25 in the DCA Plus Fixed Option.
 
During the Guarantee Term, you can allocate all or a part of any additional Purchase Payments to the DCA Plus Fixed Option. Additional allocations must be at least $250. Each additional allocation will be transferred to the Variable Investment Options you select over the remaining Guarantee Term. Transfers will be made from the DCA Plus Fixed Option Value attributed to the oldest Investment allocation and each subsequent Purchase Payment in the order received.


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Example: (using the previous example): On July 15, an additional $5,000 is allocated to the DCA Plus Option at a Guaranteed Interest Rate of 4.00%. On August 1, your DCA Plus Fixed Option Value has increased to $11,758.30. An amount equal to $2,939.58 ($11,758.30 / 4) is transferred from the DCA Plus Fixed Option to the Variable Investment Options. The remaining DCA Plus Fixed Option Value is $8,818.72.
 
Transfers
 
DCA Plus transfers must be made on a monthly basis to the Variable Investment Options. No transfers to the DCA Plus Fixed Option may be made at any time. You cannot choose to transfer other than monthly. Unless otherwise instructed, any additional Purchase Payment we receive during a Guarantee Term will be allocated to the Investment Options, including the DCA Plus Fixed Option if so indicated, according to your most recent allocation instructions.
 
If the Owner dies while transfers are being made from the DCA Plus Fixed Option and the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, transfers will continue to be made from the DCA Plus Fixed Option to the selected Variable Investment Options, until the Guarantee Term ends.
 
DCA Plus Fixed Option interest is compounded annually and credited to your Contract daily. The Guaranteed Interest Rate is credited on a declining balance as money is transferred from the DCA Plus Fixed Option to the selected Variable Investment Options. The equivalent annual rate reflects the amount of interest that will be transferred to selected Variable Investment Options over the entire Guarantee Term divided by the amount originally invested in the DCA Plus Fixed Option.
 
Example: On May 1, you submit a $10,000 Purchase Payment entirely to the DCA Plus Fixed Option at a then current Guaranteed Interest Rate of 4.00% with a Guarantee Term of 12 months. Over the entire Guarantee Term, $215.40 of interest is transferred to the selected Variable Investment Options. The equivalent annual rate will equal 2.15% during the Guarantee Term.


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TERMS USED IN THIS PROSPECTUS
 
 
Some of the terms we’ve used in this Prospectus may be new to you. We’ve identified them in the Prospectus by capitalizing the first letter of each word. You will find an explanation of what they mean below.
 
If you have any questions, please ask your financial advisor or call us at (800) 722-4448. Financial advisors may call us at (800) 722-2333.
 
Account Value – The amount of your Contract Value allocated to a specified Variable Investment Option or any fixed option.
 
Annuitant – A person on whose life annuity payments may be determined. An Annuitant’s life may also be used to determine certain increases in death benefits, and to determine the Annuity Date. A Contract may name a single (“sole”) Annuitant or two (“Joint”) Annuitants, and may also name a “Contingent” Annuitant. If you name Joint Annuitants or a Contingent Annuitant, “the Annuitant” means the sole surviving Annuitant, unless otherwise stated.
 
Annuity Date – The date specified in your Contract, or the date you later elect, if any, for the start of annuity payments if the Annuitant (or Joint Annuitants) is (or are) still living and your Contract is in force; or if earlier, the date that annuity payments actually begin.
 
Annuity Option – Any one of the income options available for a series of payments after your Annuity Date.
 
Beneficiary – A person who may have a right to receive the death benefit payable upon the death of the Annuitant or a Contract Owner prior to the Annuity Date, or may have a right to receive remaining guaranteed annuity payments, if any, if the Annuitant dies after the Annuity Date.
 
Business Day – Any day on which the value of an amount invested in a Variable Investment Option is required to be determined, which currently includes each day that the New York Stock Exchange is open for trading and our administrative offices are open. The New York Stock Exchange and our administrative offices are closed on weekends and on the following holidays: New Year’s Day, Martin Luther King Jr. Day, President’s Day, Good Friday, Memorial Day, July Fourth, Labor Day, Thanksgiving Day and Christmas Day, and the Friday before New Year’s Day, July Fourth or Christmas Day if that holiday falls on a Saturday, the Monday following New Year’s Day, July Fourth or Christmas Day if that holiday falls on a Sunday, unless unusual business conditions exist, such as the ending of a monthly or yearly accounting period. In this Prospectus, “day” or “date” means Business Day unless otherwise specified. If any transaction or event called for under a Contract is scheduled to occur on a day that is not a Business Day, such transaction or event will be deemed to occur on the next following Business Day unless otherwise specified. Any systematic pre-authorized transaction scheduled to occur on December 30 or December 31 where that day is not a Business Day will be deemed an order for the last Business Day of the calendar year and will be calculated using the applicable Subaccount Unit Value at the close of that Business Day. Special circumstances such as leap years and months with fewer than 31 days are discussed in the SAI.
 
Code – The Internal Revenue Code of 1986, as amended.
 
Contingent Annuitant – A person, if named in your Contract, who will become your sole surviving Annuitant if your existing sole Annuitant (or both Joint Annuitants) should die before your Annuity Date.
 
Contingent Owner – A person, if named in your Contract, who will succeed to the rights as a Contract Owner of your Contract if all named Contract Owners die before your Annuity Date.
 
Contract Anniversary – The same date, in each subsequent year, as your Contract Date.
 
Contract Date – The date we issue your Contract. Contract Years, Contract Semi-Annual Periods, Contract Quarters and Contract Months are measured from this date.
 
Contract Debt – As of the end of any given Business Day, the principal amount you have outstanding on any loan under your Contract, plus any accrued and unpaid interest. Loans are only available on certain Qualified Contracts.
 
Contract Owner, Owner, Policyholder, you, or your – Generally, a person who purchases a Contract and makes the Investments. A Contract Owner has all rights in the Contract, including the right to make withdrawals, designate and change beneficiaries, transfer amounts among Investment Options, and designate an Annuity Option. If your Contract names Joint Owners, both Joint Owners are Contract Owners and share all such rights.
 
Contract Value – As of the end of any Business Day, the sum of your Variable Account Value, any fixed option value, the value of any other Investment Option added to the Contract by Rider or Endorsement, and any Loan Account Value. The Contract Value includes any Credit Enhancement applied to your Contract.
 
Contract Year – A year that starts on the Contract Date or on a Contract Anniversary.
 
Credit Enhancement – An amount we add to your Contract Value at the time a Purchase Payment is applied. Each Credit Enhancement will be counted as Earnings under your Contract.
 
DCA Plus Fixed Option – If you allocate all or part of your Purchase Payments to the DCA Plus Fixed Option, such amounts are held in our General Account and receive interest at rates declared periodically (the “Guaranteed Interest Rate”), but not less than the minimum guaranteed interest rate specified in your Contract. This fixed option may be used for dollar cost averaging up to a 24 month period. Please contact us for the Guarantee Terms currently available.
 
DCA Plus Fixed Option Value – The aggregate amount of your Contract Value allocated to the DCA Plus Fixed Option.
 
Earnings – As of the end of any Business Day, your Earnings equal your Contract Value less your aggregate Purchase Payments, which are reduced by withdrawals of prior Investments.
 
Fund – A registered open-end management investment company; collectively refers to Pacific Select Fund, AIM Variable Insurance Funds (Invesco Variable Insurance Funds), AllianceBernstein Variable Products Series Fund, Inc., BlackRock Variable Series Funds, Inc., Fidelity Variable Insurance Products Fund, First Trust Variable Insurance Trust, Franklin Templeton Variable Insurance Products Trust, GE Investments Funds, MFS Variable Insurance Trust, and/or PIMCO Variable Insurance Trust.
 
General Account – Our General Account consists of all of our assets other than those assets allocated to Separate Account A or to any of our other separate accounts.
 
Guarantee Term – The period during which an amount you allocate to any available fixed option earns interest at a Guaranteed Interest Rate.
 
Guaranteed Interest Rate – The interest rate guaranteed at the time of allocation (or rollover) for the Guarantee Term on amounts allocated to a fixed option. All Guaranteed Interest Rates are expressed as annual rates and interest is accrued daily. The rate will not be less than the minimum guaranteed interest rate specified in your Contract.
 
In Proper Form – This is the standard we apply when we determine whether an instruction is satisfactory to us. An instruction (in writing or by other means that we accept (e.g. via telephone or electronic submission)) is considered to be in proper form if it is received at our Service Center in a manner that is satisfactory to us, such that is sufficiently complete and clear so that we do not have to exercise any discretion to follow the instruction, including any information and supporting legal documentation necessary to effect the transaction. Any forms that we provide will identify any necessary supporting documentation. We may, in our sole discretion, determine whether any particular transaction request is in proper form, and we reserve the right to change or waive any in proper form requirements at any time.
 
Investment (“Purchase Payment”) – An amount paid to us by or on behalf of a Contract Owner as consideration for the benefits provided under the Contract. A Credit Enhancement is not considered a Purchase Payment or Investment as defined in your Contract.


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Investment Option – A Subaccount, any fixed option or any other Investment Option added to the Contract by Rider or Endorsement.
 
Joint Annuitant – If your Contract is a Non-Qualified Contract, you may name two Annuitants, called “Joint Annuitants,” in your application for your Contract. Special restrictions apply for Qualified Contracts.
 
Loan Account – The Account in which the amount equal to the principal amount of a loan and any interest accrued is held to secure any Contract Debt.
 
Loan Account Value – The amount, including any interest accrued, held in the Loan Account to secure any Contract Debt.
 
Net Contract Value – Your Contract Value less Contract Debt.
 
Non-Natural Owner – A corporation, trust or other entity that is not a (natural) person.
 
Non-Qualified Contract – A Contract other than a Qualified Contract.
 
Policyholder – The Contract Owner.
 
Portfolio – A separate portfolio of a Fund in which a Subaccount invests its assets.
 
Primary Annuitant – The individual that is named in your Contract, the events in the life of whom are of primary importance in affecting the timing or amount of the payout under the Contract.
 
Purchase Payment (“Investment”) – An amount paid to us by or on behalf of a Contract Owner as consideration for the benefits provided under the Contract. A Credit Enhancement is not considered a Purchase Payment or Investment as defined in your Contract.
 
Qualified Contract – A Contract that qualifies under the Code as an individual retirement annuity or account (IRA), or form thereof, or a Contract purchased by a Qualified Plan, qualifying for special tax treatment under the Code.
 
Qualified Plan – A retirement plan that receives favorable tax treatment under Section 401, 403, 408, 408A or 457 of the Code.
 
SEC – Securities and Exchange Commission.
 
Separate Account A (the “Separate Account”) – A separate account of ours registered as a unit investment trust under the Investment Company Act of 1940, as amended (the “1940 Act”).
 
Subaccount – An investment division of the Separate Account. Each Subaccount invests its assets in shares of a corresponding Portfolio.
 
Subaccount Annuity Unit – Subaccount Annuity Units (or “Annuity Units”) are used to measure variation in variable annuity payments. To the extent you elect to convert all or some of your Contract Value into variable annuity payments, the amount of each annuity payment (after the first payment) will vary with the value and number of Annuity Units in each Subaccount attributed to any variable annuity payments. At annuitization (after any applicable premium taxes and/or other taxes are paid), the amount annuitized to a variable annuity determines the amount of your first variable annuity payment and the number of Annuity Units credited to your annuity in each Subaccount. The value of Subaccount Annuity Units, like the value of Subaccount Units, is expected to fluctuate daily, as described in the definition of Unit Value.
 
Subaccount Unit – Before your Annuity Date, each time you allocate an amount to a Subaccount, your Contract is credited with a number of Subaccount Units in that Subaccount. These Units are used for accounting purposes to measure your Account Value in that Subaccount. The value of Subaccount Units is expected to fluctuate daily, as described in the definition of Unit Value.
 
Unit Value – The value of a Subaccount Unit (“Subaccount Unit Value”) or Subaccount Annuity Unit (“Subaccount Annuity Unit Value”). Unit Value of any Subaccount is subject to change on any Business Day in much the same way that the value of a mutual fund share changes each day. The fluctuations in value reflect the investment results, expenses of and charges against the Portfolio in which the Subaccount invests its assets. Fluctuations also reflect charges against the Separate Account. Changes in Subaccount Annuity Unit Values also reflect an additional factor that adjusts Subaccount Annuity Unit Values to offset our Annuity Option Table’s implicit assumption of an annual investment return of 5%. The effect of this assumed investment return is explained in detail in the SAI. Unit Value of a Subaccount Unit or Subaccount Annuity Unit on any Business Day is measured as of the close of the New York Stock Exchange on that Business Day, which usually closes at 4:00 p.m., Eastern time, although it occasionally closes earlier.
 
Variable Account Value – The aggregate amount of your Contract Value allocated to all Subaccounts.
 
Variable Investment Option – A Subaccount (also called a Variable Account).


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CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
 
     
PERFORMANCE
   
Total Returns
   
Yields
   
Performance Comparisons and Benchmarks
   
Power of Tax Deferral
   
     
DISTRIBUTION OF THE CONTRACTS
   
Pacific Select Distributors, Inc. (PSD)
   
     
THE CONTRACTS AND THE SEPARATE ACCOUNT
   
Calculating Subaccount Unit Values
   
Variable Annuity Payment Amounts
   
Redemptions of Remaining Guaranteed Variable Payments Under Options 2 and 4
   
Corresponding Dates
   
Age and Sex of Annuitant
   
Systematic Transfer Programs
   
Pre-Authorized Withdrawals
   
More on Federal Tax Issues
   
Safekeeping of Assets
   
     
FINANCIAL STATEMENTS
   
     
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND INDEPENDENT AUDITORS
   
 
You can receive a copy of the Pacific Value Edge SAI without charge by calling us at (800) 722-4448 or you can visit our website at www.pacificlife.com to download a copy. Financial advisors may call us at (800) 722-2333.


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APPENDIX A:
 
COREINCOME ADVANTAGE PLUS (SINGLE AND JOINT)
SAMPLE CALCULATIONS
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
The examples apply to CoreIncome Advantage Plus (Single) and (Joint) unless otherwise noted below.
 
Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (every Designated Life for Joint) is 64 years old.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 4% of Protected Payment Base = $4,000
 
Example #2 – Subsequent Purchase Payment.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (every Designated Life for Joint) is 64 years old.
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  No withdrawals taken.
  •  Automatic Reset at Beginning of Contract Year 2.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000
Activity
  $100,000       $216,000   $200,000   $8,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $8,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $8,280
 
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base is increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $8,000 (4% of the Protected Payment Base after the Purchase Payment).
 
An automatic reset takes place at Year 2 Contract Anniversary, since the Contract Value ($207,000) is higher than the Protected Payment Base ($200,000). This resets the Protected Payment Base to $207,000 and the Protected Payment Amount to $8,280 (4% × $207,000).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.


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Example #3 – Withdrawal Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (every Designated Life for Joint) is 64 years old.
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Year 2.
  •  Contract Value immediately before withdrawal = $221,490.
  •  Automatic Resets at Beginning of Contract Years 2 and 3.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000
Activity
  $100,000       $216,000   $200,000   $8,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $8,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $8,280
Activity
      $5,000   $216,490
(after $5,000 withdrawal) 		  $207,000   $3,280
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $216,490   $207,000   $8,280
Year 3 Contract Anniversary
  (After Automatic Reset)       $216,490   $216,490   $8,660
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
An automatic reset takes place at Year 2 Contract Anniversary, since the Contract Value ($207,000) is higher than the Protected Payment Base ($200,000). This reset increases the Protected Payment Base to $207,000 and the Protected Payment Amount to $8,280 (4% × $207,000).
 
Because the $5,000 withdrawal during Contract Year 2 did not exceed the $8,280 Protected Payment Amount immediately prior to the withdrawal, the Protected Payment Base remains unchanged.
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurs which increases the Protected Payment Base to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount after the automatic reset at the Year 3 Contract Anniversary is equal to $8,660 (4% of the reset Protected Payment Base).
 
Example #4 – Withdrawal Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (every Designated Life for Joint) is 64 years old.
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Contract Value immediately before withdrawal = $195,000.
  •  Automatic Resets at Beginning of Contract Years 2 and 3.


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  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000
Activity
  $100,000       $216,000   $200,000   $8,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $8,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $8,280
Activity
      $30,000   $165,000
(after $30,000 withdrawal) 		  $182,926   $0
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $192,000   $182,926   $7,317
Year 3 Contract Anniversary
  (After Automatic Reset)       $192,000   $192,000   $7,680
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $30,000 withdrawal during Contract Year 2 exceeds the $8,280 Protected Payment Amount immediately prior to the withdrawal, the Protected Payment Base immediately after the withdrawal will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount, which is the total withdrawal amount less the Protected Payment Amount: $30,000 − $8,280 = $21,720.
 
Second, determine the reduction percentage by dividing the excess withdrawal amount computed above by the difference between the Contract Value and the Protected Payment Amount immediately before the withdrawal: $21,720 ¸ ($195,000 − $8,280) = 0.1163 or 11.63%.
 
Third, determine the new Protected Payment Base by reducing the Protected Payment Base immediately prior to the withdrawal by the percentage computed above: $207,000 − ($207,000 × 11.63%) = $182,926.
 
The Protected Payment Amount immediately after the withdrawal is equal to $0. This amount is determined by multiplying the Protected Payment Base before the withdrawal by 4% and then subtracting all of the withdrawals made during that Contract Year: (4% × $207,000) − $30,000 = -$21,720 or $0, since the Protected Payment Amount can’t be less than zero.
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary, an automatic reset occurs that increases the Protected Payment Base to an amount equal to 100% of the Contract Value on that date. (Compare the balances at Year 3 Contract Anniversary Prior to and After Automatic Reset).
 
Example #5 – Early Withdrawal.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (youngest Designated Life for Joint) is 561/2 years old.
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Contract Value immediately before withdrawal = $221,490.
  •  Automatic Resets at Beginning of Contract Years 2, 3 and 4.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $0
Activity
  $100,000       $216,000   $200,000   $0
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $0
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $0
Activity
      $25,000   $196,490
(after $25,000 withdrawal) 		  $182,000   $0
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $196,490   $182,000   $0
Year 3 Contract Anniversary
  (After Automatic Reset)       $196,490   $196,490   $0
Year 4 Contract Anniversary
  (Prior to Automatic Reset)       $205,000   $196,490   $0
Year 4 Contract Anniversary
  (After Automatic Reset)       $205,000   $205,000   $8,200
 


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For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $25,000 withdrawal during Contract Year 2 exceeds the $0 Protected Payment Amount immediately prior to the withdrawal, the Protected Payment Base immediately after the withdrawal will be reduced based on the following calculation:
 
First, determine the early withdrawal amount. The early withdrawal amount is the total withdrawal amount of $25,000.
 
Second, determine the reduction percentage by dividing the early withdrawal amount determined by the Contract Value prior to the withdrawal: $25,000 ¸ $221,490 = 0.1129 or 11.29%.
 
Third, determine the new Protected Payment Base by reducing the Protected Payment Base immediately prior to the withdrawal by the greater of (a) the total withdrawal amount ($25,000) and (b) the reduction percentage ($207,000 × 11.29%) = $23,370. Since $25,000 is greater than $23,370, the new Protected Payment Base is computed by subtracting $25,000 from the prior Protected Payment Base: $207,000 − $25,000 = $182,000.
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary, an Automatic Reset occurs which increases the Protected Payment Base to an amount equal to 100% of the Contract Value (compare balances at Year 3 Contract Anniversary – Prior to and After Automatic Reset). The Protected Payment Amount remains at $0 since the oldest Owner (youngest Annuitant for Non-Natural Owner or if this Rider is issued in California; youngest Designated Life for Joint) has not reached age 591/2.
 
At Year 4 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary, an Automatic Reset occurs which increases the Protected Payment Base to an amount equal to 100% of the Contract Value (compare balances at Year 4 Contract Anniversary – Prior to and After Automatic Reset). The Protected Payment Amount is set to $8,200 (4% × $205,000) since the oldest Owner (youngest Annuitant for Non-Natural Owner or if this Rider is issued in California; youngest Designated Life for Joint) reached age 591/2.
 
Example #6 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.
 
This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                     
            Annual
 		  Protected
 		  Protected
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
Date   Withdrawal   Withdrawal   Amount   Base   Amount
 
05/01/2006               $100,000   $4,000
Contract
Anniversary 		                   
01/01/2007
          $7,500        
03/15/2007
  $1,875           $100,000   $2,125
05/01/2007
              $100,000   $4,000
Contract
Anniversary 		                   
06/15/2007
  $1,875           $100,000   $2,125
09/15/2007
  $1,875           $100,000   $250
12/15/2007
  $1,875           $100,000   $0
01/01/2008
          $8,000        
03/15/2008
  $2,000           $100,000   $0
05/01/2008
              $100,000   $4,000
Contract
Anniversary 		                   
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. In addition, each contract year the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.


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This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                     
            Annual
 		  Protected
 		  Protected
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
Date   Withdrawal   Withdrawal   Amount   Base   Amount
 
05/01/2006           $0   $100,000   $4,000
Contract
Anniversary 		                   
01/01/2007
          $7,500        
03/15/2007
  $1,875           $100,000   $2,125
04/01/2007
      $2,000       $100,000   $125
05/01/2007
              $100,000   $4,000
Contract
Anniversary 		                   
06/15/2007
  $1,875           $100,000   $2,125
09/15/2007
  $1,875           $100,000   $250
11/15/2007
      $4,000       $95,820   $0
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $4,000 there was no adjustment to the Protected Payment Base. On 5/1/07, the Protected Payment Amount was re-calculated (4% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($4,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $95,820.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $90,000
  •  Protected Payment Base = $100,000
  •  Protected Payment Amount = $250
 
A withdrawal of $4,000 was taken, which exceeds the Protected Payment Amount of $250. The Protected Payment Base will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $3,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $250 = $3,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount); the calculation is based on the Contract Value and the Protected Payment Amount values immediately before the excess withdrawal. Numerically, the ratio is 4.18% ($3,750 ¸ ($90,000 − $250); $3,750 ¸ $89,750 = 0.0418 or 4.18%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $95,820 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 4.18%); $100,000 × 95.82% = $95,820).
 
Example #7 – Lifetime Income.
 
This example applies to CoreIncome Advantage Plus (Single) only.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant is 64 years old.
  •  No subsequent Purchase Payments are received.
  •  Withdrawals, each equal to 4% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
  •  Death occurs during Contract Year 26 after the $4,000 withdrawal was made.


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            Protected
 		  Protected
Contract
 		      End of Year
 		  Payment
 		  Payment
Year   Withdrawal   Contract Value   Base   Amount
 
1
  $4,000   $96,489   $100,000   $4,000
2
  $4,000   $92,410   $100,000   $4,000
3
  $4,000   $88,543   $100,000   $4,000
4
  $4,000   $84,627   $100,000   $4,000
5
  $4,000   $80,662   $100,000   $4,000
6
  $4,000   $76,648   $100,000   $4,000
7
  $4,000   $72,583   $100,000   $4,000
8
  $4,000   $68,467   $100,000   $4,000
9
  $4,000   $64,299   $100,000   $4,000
10
  $4,000   $60,078   $100,000   $4,000
11
  $4,000   $55,805   $100,000   $4,000
12
  $4,000   $51,478   $100,000   $4,000
13
  $4,000   $47,096   $100,000   $4,000
14
  $4,000   $42,660   $100,000   $4,000
15
  $4,000   $38,168   $100,000   $4,000
16
  $4,000   $33,619   $100,000   $4,000
17
  $4,000   $29,013   $100,000   $4,000
18
  $4,000   $24,349   $100,000   $4,000
19
  $4,000   $19,626   $100,000   $4,000
20
  $4,000   $14,844   $100,000   $4,000
21
  $4,000   $10,002   $100,000   $4,000
22
  $4,000   $5,099   $100,000   $4,000
23
  $4,000   $0   $100,000   $4,000
24
  $4,000   $0   $100,000   $4,000
25
  $4,000   $0   $100,000   $4,000
26
  $4,000   $0   $100,000   $4,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 4% of Protected Payment Base = $4,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($4,000), the Protected Payment Base remains unchanged.
 
Withdrawals of 4% of the Protected Payment Base will continue to be paid each year (even after the Contract Value has been reduced to zero) until the date of death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
Example #8 – Lifetime Income.
 
This example applies to CoreIncome Advantage Plus (Joint) only.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  All Designated Lives are 64 years old.
  •  No subsequent Purchase Payments are received.
  •  Withdrawals, each equal to 4% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
  •  All Designated Lives remain eligible for lifetime income benefits while the Rider is in effect.
  •  Surviving Spouse continues Contract upon the death of the first Designated Life.


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  •  Surviving Spouse dies during Contract Year 26 after the $4,000 withdrawal was made.
 
                 
            Protected
 		  Protected
Contract
 		      End of Year
 		  Payment
 		  Payment
Year   Withdrawal   Contract Value   Base   Amount
 
1
  $4,000   $96,489   $100,000   $4,000
2
  $4,000   $92,410   $100,000   $4,000
3
  $4,000   $88,543   $100,000   $4,000
4
  $4,000   $84,627   $100,000   $4,000
5
  $4,000   $80,662   $100,000   $4,000
6
  $4,000   $76,648   $100,000   $4,000
7
  $4,000   $72,583   $100,000   $4,000
8
  $4,000   $68,467   $100,000   $4,000
9
  $4,000   $64,299   $100,000   $4,000
10
  $4,000   $60,078   $100,000   $4,000
11
  $4,000   $55,805   $100,000   $4,000
12
  $4,000   $51,478   $100,000   $4,000
13
  $4,000   $47,096   $100,000   $4,000
Activity (Death of first
Designated Life)
14 		  $4,000   $42,660   $100,000   $4,000
15
  $4,000   $38,168   $100,000   $4,000
16
  $4,000   $33,619   $100,000   $4,000
17
  $4,000   $29,013   $100,000   $4,000
18
  $4,000   $24,349   $100,000   $4,000
19
  $4,000   $19,626   $100,000   $4,000
20
  $4,000   $14,844   $100,000   $4,000
21
  $4,000   $10,002   $100,000   $4,000
22
  $4,000   $5,099   $100,000   $4,000
23
  $4,000   $0   $100,000   $4,000
24
  $4,000   $0   $100,000   $4,000
25
  $4,000   $0   $100,000   $4,000
26
  $4,000   $0   $100,000   $4,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 4% of Protected Payment Base = $4,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($4,000), the Protected Payment Base remains unchanged.
 
During Contract Year 13, the death of the first Designated Life occurred. Withdrawals of the Protected Payment Amount (4% of the Protected Payment Base) will continue to be paid each year (even after the Contract Value was reduced to zero) until the Rider terminates.
 
If there was a change in Owner, Beneficiary or marital status prior to the death of the first Designated Life that resulted in the surviving Designated Life (spouse) to become ineligible for lifetime income benefits, then the lifetime income benefits under the Rider would not continue for the surviving Designated Life and the Rider would terminate upon the death of the first Designated Life.


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APPENDIX B:
 
COREINCOME ADVANTAGE 5 PLUS (SINGLE AND JOINT)
SAMPLE CALCULATIONS
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
The examples apply to CoreIncome Advantage 5 Plus (Single) and (Joint) unless otherwise noted below.
 
Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (every Designated Life for Joint) is 64 years old.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $5,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Example #2 – Subsequent Purchase Payment.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (every Designated Life for Joint) is 64 years old.
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  No withdrawals taken.
  •  Automatic Reset at Beginning of Contract Year 2.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $5,000
Activity
  $100,000       $216,000   $200,000   $10,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $10,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $10,350
 
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base is increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $10,000 (5% of the Protected Payment Base after the Purchase Payment).
 
An automatic reset takes place at Year 2 Contract Anniversary, since the Contract Value ($207,000) is higher than the Protected Payment Base ($200,000). This resets the Protected Payment Base to $207,000 and the Protected Payment Amount to $10,350 (5% × $207,000).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.


101

 

 
Example #3 – Withdrawal Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (every Designated Life for Joint) is 64 years old.
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal lower than the Protected Payment Amount is taken during Contract Year 2.
  •  Contract Value immediately before withdrawal = $221,490.
  •  Automatic Resets at Beginning of Contract Years 2 and 3.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $5,000
Activity
  $100,000       $216,000   $200,000   $10,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $10,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $10,350
Activity
      $5,000   $216,490
(after $5,000 withdrawal) 		  $207,000   $5,350
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $216,490   $207,000   $10,350
Year 3 Contract Anniversary
  (After Automatic Reset)       $216,490   $216,490   $10,825
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
An automatic reset takes place at Year 2 Contract Anniversary, since the Contract Value ($207,000) is higher than the Protected Payment Base ($200,000). This reset increases the Protected Payment Base to $207,000 and the Protected Payment Amount to $10,350 (5% × $207,000).
 
Because the $5,000 withdrawal during Contract Year 2 did not exceed the $10,350 Protected Payment Amount immediately prior to the withdrawal, the Protected Payment Base remains unchanged.
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurs which increases the Protected Payment Base to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount after the automatic reset at the Year 3 Contract Anniversary is equal to $10,825 (5% of the reset Protected Payment Base).
 
Example #4 – Withdrawal Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (every Designated Life for Joint) is 64 years old.
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Contract Value immediately before withdrawal = $195,000.
  •  Automatic Resets at Beginning of Contract Years 2 and 3.


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  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $5,000
Activity
  $100,000       $216,000   $200,000   $10,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $10,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $10,350
Activity
      $30,000   $165,000
(after $30,000 withdrawal) 		  $184,975   $0
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $192,000   $184,975   $9,249
Year 3 Contract Anniversary
  (After Automatic Reset)       $192,000   $192,000   $9,600
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $30,000 withdrawal during Contract Year 2 exceeds the $10,350 Protected Payment Amount immediately prior to the withdrawal, the Protected Payment Base immediately after the withdrawal will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount, which is the total withdrawal amount less the Protected Payment Amount: $30,000 − $10,350 = $19,650.
 
Second, determine the reduction percentage by dividing the excess withdrawal amount computed above by the difference between the Contract Value and the Protected Payment Amount immediately before the withdrawal: $19,650 ¸ ($195,000 − $10,350) = 0.1064 or 10.64%.
 
Third, determine the new Protected Payment Base by reducing the Protected Payment Base immediately prior to the withdrawal by the percentage computed above: $207,000 − ($207,000 × 10.64%) = $184,975.
 
The Protected Payment Amount immediately after the withdrawal is equal to $0. This amount is determined by multiplying the Protected Payment Base before the withdrawal by 5% and then subtracting all of the withdrawals made during that Contract Year: (5% × $207,000) − $30,000 = -$19,650 or $0, since the Protected Payment Amount can’t be less than zero.
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary, an automatic reset occurs that increases the Protected Payment Base to an amount equal to 100% of the Contract Value on that date. (Compare the balances at Year 3 Contract Anniversary Prior to and After Automatic Reset).
 
Example #5 – Early Withdrawal.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant (youngest Designated Life for Joint) is 561/2 years old.
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Contract Value immediately before withdrawal = $221,490.
  •  Automatic Resets at Beginning of Contract Years 2, 3 and 4.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                     
                Protected
 		  Protected
    Purchase
 		      Contract
 		  Payment
 		  Payment
    Payment   Withdrawal   Value   Base   Amount
 
Rider Effective Date
  $100,000       $108,000   $100,000   $0
Activity
  $100,000       $216,000   $200,000   $0
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $0
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $0
Activity
      $25,000   $196,490
(after $25,000 withdrawal) 		  $182,000   $0
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $196,490   $182,000   $0
Year 3 Contract Anniversary
  (After Automatic Reset)       $196,490   $196,490   $0
Year 4 Contract Anniversary
  (Prior to Automatic Reset)       $205,000   $196,490   $0
Year 4 Contract Anniversary
  (After Automatic Reset)       $205,000   $205,000   $10,250
 


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For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $25,000 withdrawal during Contract Year 2 exceeds the $0 Protected Payment Amount immediately prior to the withdrawal, the Protected Payment Base immediately after the withdrawal will be reduced based on the following calculation:
 
First, determine the early withdrawal amount. The early withdrawal amount is the total withdrawal amount of $25,000.
 
Second, determine the reduction percentage by dividing the early withdrawal amount determined by the Contract Value prior to the withdrawal: $25,000 ¸ $221,490 = 0.1129 or 11.29%.
 
Third, determine the new Protected Payment Base by reducing the Protected Payment Base immediately prior to the withdrawal by the greater of (a) the total withdrawal amount ($25,000) and (b) the reduction percentage ($207,000 × 11.29%) = $23,370. Since $25,000 is greater than $23,370, the new Protected Payment Base is computed by subtracting $25,000 from the prior Protected Payment Base: $207,000 − $25,000 = $182,000.
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary, an Automatic Reset occurs which increases the Protected Payment Base to an amount equal to 100% of the Contract Value (compare balances at Year 3 Contract Anniversary – Prior to and After Automatic Reset). The Protected Payment Amount remains at $0 since the oldest Owner (youngest Annuitant for Non-Natural Owner or if this Rider is issued in California; youngest Designated Life for Joint) has not reached age 591/2.
 
At Year 4 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary, an Automatic Reset occurs which increases the Protected Payment Base to an amount equal to 100% of the Contract Value (compare balances at Year 4 Contract Anniversary – Prior to and After Automatic Reset). The Protected Payment Amount is set to $10,250 (5% × $205,000) since the oldest Owner (youngest Annuitant for Non-Natural Owner or if this Rider is issued in California; youngest Designated Life for Joint) reached age 591/2.
 
Example #6 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.
 
This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                     
            Annual
 		  Protected
 		  Protected
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
Date   Withdrawal   Withdrawal   Amount   Base   Amount
 
05/01/2006               $100,000   $5,000
Contract
Anniversary 		                   
01/01/2007
          $7,500        
03/15/2007
  $1,875           $100,000   $3,125
05/01/2007
              $100,000   $5,000
Contract
Anniversary 		                   
06/15/2007
  $1,875           $100,000   $3,125
09/15/2007
  $1,875           $100,000   $1,250
12/15/2007
  $1,875           $100,000   $0
01/01/2008
          $8,000        
03/15/2008
  $2,000           $100,000   $0
05/01/2008
              $100,000   $5,000
Contract
Anniversary 		                   
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. In addition, each contract year the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.


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This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                     
            Annual
 		  Protected
 		  Protected
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
Date   Withdrawal   Withdrawal   Amount   Base   Amount
 
05/01/2006           $0   $100,000   $5,000
Contract
Anniversary 		                   
01/01/2007
          $7,500        
03/15/2007
  $1,875           $100,000   $3,125
04/01/2007
      $2,000       $100,000   $1,125
05/01/2007
              $100,000   $5,000
Contract
Anniversary 		                   
06/15/2007
  $1,875           $100,000   $3,125
09/15/2007
  $1,875           $100,000   $1,250
11/15/2007
      $4,000       $96,900   $0
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $5,000 there was no adjustment to the Protected Payment Base. On 5/1/07, the Protected Payment Amount was re-calculated (5% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($5,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($1,250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $96,900.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $90,000
  •  Protected Payment Base = $100,000
  •  Protected Payment Amount = $1,250
 
A withdrawal of $4,000 was taken, which exceeds the Protected Payment Amount of $1,250. The Protected Payment Base will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $2,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $1,250 = $2,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount); the calculation is based on the Contract Value and the Protected Payment Amount values immediately before the excess withdrawal. Numerically, the ratio is 3.10% ($2,750 ¸ ($90,000 − $1,250); $2,750 ¸ $88,750 = 0.0310 or 3.10%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $96,900 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 3.10%); $100,000 × 96.90% = $96,900).
 
Example #7 – Lifetime Income.
 
This example applies to CoreIncome Advantage 5 Plus (Single) only.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Every Owner and Annuitant is 64 years old.
  •  No subsequent Purchase Payments are received.
  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
  •  Death occurred during Contract Year 26 after the $5,000 withdrawal was made.


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            Protected
 		  Protected
Contract
 		      End of Year
 		  Payment
 		  Payment
Year   Withdrawal   Contract Value   Base   Amount
 
1
  $5,000   $96,489   $100,000   $5,000
2
  $5,000   $92,410   $100,000   $5,000
3
  $5,000   $88,543   $100,000   $5,000
4
  $5,000   $84,627   $100,000   $5,000
5
  $5,000   $80,662   $100,000   $5,000
6
  $5,000   $76,648   $100,000   $5,000
7
  $5,000   $72,583   $100,000   $5,000
8
  $5,000   $68,467   $100,000   $5,000
9
  $5,000   $64,299   $100,000   $5,000
10
  $5,000   $60,078   $100,000   $5,000
11
  $5,000   $55,805   $100,000   $5,000
12
  $5,000   $51,478   $100,000   $5,000
13
  $5,000   $47,096   $100,000   $5,000
14
  $5,000   $42,660   $100,000   $5,000
15
  $5,000   $38,168   $100,000   $5,000
16
  $5,000   $33,619   $100,000   $5,000
17
  $5,000   $29,013   $100,000   $5,000
18
  $5,000   $24,349   $100,000   $5,000
19
  $5,000   $19,626   $100,000   $5,000
20
  $5,000   $14,844   $100,000   $5,000
21
  $5,000   $10,002   $100,000   $5,000
22
  $5,000   $5,099   $100,000   $5,000
23
  $5,000   $0   $100,000   $5,000
24
  $5,000   $0   $100,000   $5,000
25
  $5,000   $0   $100,000   $5,000
26
  $5,000   $0   $100,000   $5,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000), the Protected Payment Base remains unchanged.
 
Withdrawals of 5% of the Protected Payment Base will continue to be paid each year (even after the Contract Value has been reduced to zero) until the date of death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
Example #8 – Lifetime Income.
 
This example applies to CoreIncome Advantage 5 Plus (Joint) only.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  All Designated Lives are 64 years old.
  •  No subsequent Purchase Payments are received.
  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
  •  All Designated Lives remain eligible for lifetime income benefits while the Rider is in effect.
  •  Surviving Spouse continues Contract upon the death of the first Designated Life.
  •  Surviving Spouse died during Contract Year 26 after the $5,000 withdrawal was made.
 


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            Protected
 		  Protected
Contract
 		      End of Year
 		  Payment
 		  Payment
Year   Withdrawal   Contract Value   Base   Amount
 
1
  $5,000   $96,489   $100,000   $5,000
2
  $5,000   $92,410   $100,000   $5,000
3
  $5,000   $88,543   $100,000   $5,000
4
  $5,000   $84,627   $100,000   $5,000
5
  $5,000   $80,662   $100,000   $5,000
6
  $5,000   $76,648   $100,000   $5,000
7
  $5,000   $72,583   $100,000   $5,000
8
  $5,000   $68,467   $100,000   $5,000
9
  $5,000   $64,299   $100,000   $5,000
10
  $5,000   $60,078   $100,000   $5,000
11
  $5,000   $55,805   $100,000   $5,000
12
  $5,000   $51,478   $100,000   $5,000
13
  $5,000   $47,096   $100,000   $5,000
Activity (Death of first
Designated Life)
14 		  $5,000   $42,660   $100,000   $5,000
15
  $5,000   $38,168   $100,000   $5,000
16
  $5,000   $33,619   $100,000   $5,000
17
  $5,000   $29,013   $100,000   $5,000
18
  $5,000   $24,349   $100,000   $5,000
19
  $5,000   $19,626   $100,000   $5,000
20
  $5,000   $14,844   $100,000   $5,000
21
  $5,000   $10,002   $100,000   $5,000
22
  $5,000   $5,099   $100,000   $5,000
23
  $5,000   $0   $100,000   $5,000
24
  $5,000   $0   $100,000   $5,000
25
  $5,000   $0   $100,000   $5,000
26
  $5,000   $0   $100,000   $5,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000), the Protected Payment Base remains unchanged.
 
During Contract Year 13, the death of the first Designated Life occurred. Withdrawals of the Protected Payment Amount (5% of the Protected Payment Base) will continue to be paid each year (even after the Contract Value was reduced to zero) until the Rider terminates.
 
If there was a change in Owner, Beneficiary or marital status prior to the death of the first Designated Life that resulted in the surviving Designated Life (spouse) to become ineligible for lifetime income benefits, then the lifetime income benefits under the Rider would not continue for the surviving Designated Life and the Rider would terminate upon the death of the first Designated Life.

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APPENDIX C:
 
INCOME ACCESS
SAMPLE CALCULATIONS
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		      Contract
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $7,000   $100,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 7% of Protected Payment Base = $7,000
 
Example #2 – Subsequent Purchase Payments.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $20,000 is received during Contract Year 1.
  •  No withdrawals taken.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		      Contract
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $7,000   $100,000
Activity
  $20,000       $122,000   $120,000   $7,000   $120,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $122,000   $120,000   $8,400   $120,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $122,000   $122,000   $8,540   $122,000
 
 
Immediately after the $20,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $120,000 ($100,000 + $20,000). The Protected Payment Amount after the Purchase Payment remains at $7,000 until the Protected Payment Amount is determined at Year 2 Contract Anniversary.
 
At Year 2 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 2 Contract Anniversary – Prior to Automatic Reset), an Automatic Reset occurred which changes the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 2 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $8,540 (7% of the reset Protected Payment Base).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of additional amounts credited, charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.


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Example #3 – Withdrawals Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $20,000 is received during Contract Year 1.
  •  Automatic Reset at the Beginning of Contract Year 2.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Year 2.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $7,000   $100,000
Activity
  $20,000       $122,000   $120,000   $7,000   $120,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $122,000   $120,000   $8,400   $120,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $122,000   $122,000   $8,540   $122,000
Activity
      $8,540   $116,000   $122,000   $8,540   $113,460
Year 3 Contract Anniversary
          $116,000   $122,000   $8,540   $113,460
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
As the withdrawal during Contract Year 2 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($8,540):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $113,460 ($122,000 − $8,540).
 
Example #4 – Withdrawals Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Automatic Reset at Beginning of Contract Year 2 and 4.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		      Contract
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $7,000   $100,000
Activity
  $100,000       $216,000   $200,000   $7,000   $200,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $14,000   $200,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $14,490   $207,000
Activity
      $15,000   $206,490   $206,503   $14,490   $192,000
Year 3 Contract Anniversary
          $206,490   $206,503   $14,455   $192,000
Year 4 Contract Anniversary
  (Prior to Automatic Reset)       $220,944   $206,503   $14,455   $192,000
Year 4 Contract Anniversary
  (After Automatic Reset)       $220,944   $220,944   $15,466   $220,944
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $15,000 withdrawal during Contract Year 2 exceeds the Protected Payment Amount immediately prior to the withdrawal ($15,000 > $14,490), the Protected Payment Base and Remaining Protected Balance immediately after the withdrawal are reduced.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $221,490
  •  Protected Payment Base = $207,000
  •  Remaining Protected Balance = $207,000
  •  Protected Payment Amount = $14,490 (7% × Protected Payment Base; 7% × $207,000 = $14,490)
  •  No withdrawals were taken prior to the excess withdrawal


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A withdrawal of $15,000 was taken, which exceeds the Protected Payment Amount of $14,490 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $510 (total withdrawal amount − Protected Payment Amount; $15,000 − $14,490 = $510).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). The Contract Value prior to the withdrawal was $221,490, which equals the $206,490 after the withdrawal plus the $15,000 withdrawal amount. Numerically, the ratio is 0.24% ($510 ¸ ($221,490 − $14,490); $510 ¸ $207,000 = 0.0024 or 0.24%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $206,503 (Protected Payment Base × (1 − ratio); $207,000 × (1 − 0.24%); $207,000 × 99.76% = $206,503).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the new Remaining Protected Balance is $192,047 (Remaining Protected Balance immediately before the withdrawal − Protected Payment Amount) × (1 − ratio); ($207,000 − $14,490) × (1 − 0.24%); $192,510 × 99.76% = $192,047).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the new Remaining Protected Balance is $192,000 (Remaining Protected Balance immediately before the withdrawal − total withdrawal amount; $207,000 − $15,000 = $192,000).
 
Therefore, since $192,000 (total withdrawal amount method) is less than $192,047 (proportionate method) the new Remaining Protected Balance is $192,000.
 
The Protected Payment Amount immediately after the withdrawal is equal to $14,490, but at the Beginning on Contract Year 3, it is adjusted to $14,455 (7% of the Protected Payment Base (7% of $206,503 = $14,455).
 
At Year 4 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 4 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 4 Contract Anniversary – After Automatic Reset).
 
Example #5 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base and Remaining Protected Balance. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.


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This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
Contract
Anniversary 		              $100,000   $7,000   $100,000
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $7,000   $98,125
05/01/2007
Contract
Anniversary 		              $100,000   $7,000   $98,125
06/15/2007
  $1,875           $100,000   $7,000   $96,250
09/15/2007
  $1,875           $100,000   $7,000   $94,375
12/15/2007
  $1,875           $100,000   $7,000   $92,500
01/01/2008
          $8,000            
03/15/2008
  $2,000           $100,000   $7,000   $90,500
05/01/2008
Contract
Anniversary 		              $100,000   $7,000   $90,500
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. The only effect is a reduction in the Remaining Protected Balance equal to the amount of each withdrawal.
 
This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
Contract
Anniversary 		              $100,000   $7,000   $100,000
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $7,000   $98,125
04/01/2007
      $2,000       $100,000   $7,000   $96,125
05/01/2007
Contract
Anniversary 		              $100,000   $7,000   $96,125
06/15/2007
  $1,875           $100,000   $7,000   $94,250
09/15/2007
  $1,875           $100,000   $7,000   $92,375
11/15/2007
      $4,000       $99,140   $7,000   $88,358
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $7,000 there was no adjustment to the Protected Payment Base. The only effect is a reduction in the Remaining Protected Balance and the Protected Payment Amount equal to the amount of each withdrawal. On 5/1/07, the Protected Payment Amount was re-calculated (7% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($7,000). As the withdrawal exceeded the Protected Payment Amount and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $99,140 and the Remaining Protected Balance is reduced to $88,358.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $90,000
  •  Protected Payment Base = $100,000


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  •  Remaining Protected Balance = $92,375
  •  Protected Payment Amount less withdrawals already taken = $7,000 − $3,750 = $3,250
 
A withdrawal of $4,000 was taken, which exceeds the Protected Payment Amount for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount less withdrawals already taken. Numerically, the excess withdrawal amount is $750 (total withdrawal amount − Protected Payment Amount less withdrawals already taken; $4,000 − ($7,000 − $3,750) = $750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). Numerically, the ratio is 0.86% ($750 ¸ ($90,000 − $3,250); $750 ¸ $86,750 = 0.0086 or 0.86%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $99,140 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 0.86%); $100,000 × 99.14% = $99,140).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the Remaining Protected Balance is $88,358 (Remaining Protected Balance − Protected Payment Amount) × (1 − ratio); ($92,375 − $3,250) × (1 − 0.86%); $89,125 × 99.14% = $88,358).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the Remaining Protected Balance is $88,375 (Remaining Protected Balance − total withdrawal amount; $92,375 − $4,000 = $88,375).
 
Therefore, since $88,358 (proportionate method) is less than $88,375 (total withdrawal amount method) the new Remaining Protected Balance is $88,358.


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APPENDIX D:
 
GUARANTEED PROTECTION ADVANTAGE 3 (GPA 3) AND GUARANTEED PROTECTION ADVANTAGE 5 (GPA 5) SAMPLE CALCULATIONS
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. They have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments and withdrawals made from the Contract Prior to the end of a 10-Year Term effect the values and benefits under this Rider. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $20,000 is received in Contract Year 1 and $10,000 is received in Contract Year 4.
  •  A withdrawal of $10,000 is taken during Contract Year 7.
 
                     
Beginning
 		  Purchase
 		          Guaranteed
 		  Amount
of Contract
 		  Payments
 		  Withdrawal
 		  Contract
 		  Protection
 		  added to the
Year   Received   Amount   Value   Amount   Contract Value
 
1
  $100,000       $108,000   $100,000    
Activity
  $20,000       $118,119   $120,000    
2
          $117,374   $120,000    
3
          $114,439   $120,000    
4
          $111,578   $120,000    
Activity
  $10,000       $119,480   $120,000    
5
          $118,726   $120,000    
6
          $124,662   $120,000    
Step-Up
(New 10-
Year Term
Begins) 		          $124,662   $124,662    
7
          $121,546   $124,662    
Activity
      $10,000   $109,259   $114,209    
8
          $108,570   $114,209    
9
          $105,856   $114,209    
10
          $103,209   $114,209    
11
          $100,629   $114,209    
12
          $98,114   $114,209    
13
          $95,661   $114,209    
14
          $93,269   $114,209    
15
          $90,937   $114,209    
Values at
End of
15th Year 		          $88,664
$114,209 		  $114,209
$0 		 
$25,545
 
 
The Guaranteed Protection Amount is equal to (a) + (b) − (c) as indicated below:
 
  (a)  is the Contract Value at the start of the Term,
  (b)  is the amount of each subsequent Purchase Payment received during the first year of the Term, and
  (c)  is a pro rata adjustment for withdrawals made from the Contract during the Term. The adjustment for each withdrawal is calculated by multiplying the Guaranteed Protection Amount prior to the withdrawal by the ratio of the amount of the withdrawal, including any applicable withdrawal charges, premium taxes, and/or other taxes, to the Contract Value immediately prior to the withdrawal.
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Guaranteed Protected Amount = Initial Purchase Payment = $100,000 ($100,000 + 0 − 0 = $100,000)


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During Contract Year 1, an additional Purchase Payment of $20,000 was made. Since this Purchase Payment was made during the first Contract Year, the Guaranteed Protection Amount will be increased by $20,000 to $120,000. ($100,000 + $20,000 − 0 = $120,000)
 
During Contract Year 4, an additional Purchase Payment of $10,000 was made. However, this Purchase Payment will not increase the Guaranteed Protection Amount because it was not made during the first Contract Year (or first year of the 10-Year Term).
 
On the 6th Contract Anniversary, an optional Step-Up was elected. The Step-Up will reset the Guaranteed Protection Amount equal to the Contract Value ($124,662) as of that Contract Anniversary.
 
During Contract Year 7, a withdrawal of $10,000 was made. This withdrawal will reduce the Guaranteed Protection Amount on a pro rata basis and will result in a new Guaranteed Protection Amount. The pro rata adjustment is $10,453 and was determined by calculating the ratio of the withdrawal to the Contract Value immediately before the withdrawal ($10,000 / $119,259 = 0.08385) multiplied by the Guaranteed Protection Amount prior to the withdrawal ($124,662 * 0.08385 = $10,453). The new Guaranteed Protection Amount (a) + (b) − (c) = $114,209 ($124,662 + 0 − $10,453 = 114,209).
 
At the end of Contract Year 15 (end of the 10-Year Term) the Contract Value ($88,664) is less than the Guaranteed Protection Amount ($114,209). Therefore, $25,545 ($114,209 − $88,664 = $25,545) is added to the Contract Value and the Rider terminates.


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APPENDIX E:
 
DEATH BENEFIT AMOUNT AND STEPPED-UP DEATH BENEFIT SAMPLE CALCULATIONS
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. They have been provided to assist in understanding the death benefit amount under the Contract and the optional Stepped-Up Death Benefit and to demonstrate how Purchase Payments and withdrawals made from the Contract may effect the values and benefits. There may be minor differences in the calculations due to rounding. These examples are not intended to reflect what your actual death benefit proceeds will be or serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
Death Benefit Amount
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $25,000 is received in Contract Year 3.
  •  A withdrawal of $35,000 is taken during Contract Year 6.
  •  A withdrawal of $10,000 is taken during Contract Year 11.
 
                 
Beginning
 		  Purchase
 		          Return of
of Contract
 		  Payments
 		  Withdrawal
 		      Purchase
Year   Received   Amount   Contract Value1   Payments1
 
1
  $100,000       $108,000   $100,000
2
          $103,000   $100,000
3
          $106,090   $100,000
Activity
  $25,000       $133,468   $125,000
4
          $134,458   $125,000
5
          $138,492   $125,000
6
          $142,647   $125,000
Activity
      $35,000   $110,844   $95,000
7
          $111,666   $95,000
8
          $103,850   $95,000
9
          $96,580   $95,000
10           $89,820   $95,000
11
      $10,000   $73,530   $83,629
12
          $68,383   $83,629
13
          $63,596   $83,629
14
Death
Occurs 		          $59,144   $83,629
 
 
1 The greater of the Contract Value or the adjusted Return of Purchase Payments represents the Death Benefit Amount.
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Return of Purchase Payment = Initial Purchase Payment = $100,000
  •  Contract Value = Initial Purchase Payment = $100,000
 
During Contract Year 3, an additional Purchase Payment of $25,000 was made. The Return of Purchase Payment amount increased to $125,000. The Contract Value increased to $133,468.
 
During Contract Year 6, a withdrawal of $35,000 was made. This withdrawal reduced the Return of Purchase Payment amount on a pro rata basis to $95,000 and decreased the Contract Value to $110,844. Numerically, the new Return of Purchase Payment amount is calculated as follows:
 
First, determine the ratio for the proportionate reduction. The ratio is the withdrawal amount divided by the Contract Value prior to the withdrawal ($145,844, which equals the $110,844 Contract Value after the withdrawal plus the $35,000 withdrawal amount). Numerically, the ratio is 24.00% ($35,000 ¸ $145,844 = 0.2400 or 24.00%).
 
Second, determine the new Return of Purchase Payment amount. The Return of Purchase Payment amount prior to the withdrawal is multiplied by 1 less the ratio determined above. Numerically, the new Return of Purchase Payment amount is $95,000 (Return of Purchase Payment amount prior to the withdrawal × (1 − ratio); $125,000 × (1 − 24.00%); $125,000 × 76.00% = $95,000).


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During Contract Year 11, a withdrawal of $10,000 was made. This withdrawal reduced the Return of Purchase Payment amount on a pro rata basis to $83,629 and decreased the Contract Value to $73,530. Numerically, the new Return of Purchase Payment amount is calculated as follows:
 
First, determine the ratio for the proportionate reduction. The ratio is the withdrawal amount divided by the Contract Value prior to the withdrawal ($83,530, which equals the $73,530 Contract Value after the withdrawal plus the $10,000 withdrawal amount). Numerically, the ratio is 11.97% ($10,000 ¸ $83,530 = 0.1197 or 11.97%).
 
Second, determine the new Return of Purchase Payment amount. The Return of Purchase Payment amount prior to the withdrawal is multiplied by 1 less the ratio determined above. Numerically, the new Return of Purchase Payment amount is $83,629 (Return of Purchase Payment prior to the withdrawal × (1 − ratio); $95,000 × (1 − 11.97%); $95,000 × 88.03% = $83,629).
 
During Contract Year 14, death occurs. The Death Benefit Amount will be the Return of Purchase Payments reduced by an amount for each withdrawal ($83,629) because that amount is greater than the Contract Value ($59,144).
 
Using the table above, if death occurred in Contract Year 7, the Death Benefit Amount would be the Contract Value ($111,666) because that amount is greater than the Return of Purchase Payment (reduced by an amount for withdrawals) of $95,000.
 
Stepped-Up Death Benefit
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $25,000 is received in Contract Year 3.
  •  A withdrawal of $35,000 is taken during Contract Year 6.
  •  Annual Step-Ups occur on each of the first 7 Contract Anniversaries.
 
                     
                    Guaranteed
                    Minimum
Beginning
 		  Purchase
 		          Return of
 		  (Stepped-Up)
of Contract
 		  Payments
 		  Withdrawal
 		  Contract
 		  Purchase
 		  Death Benefit
Year   Received   Amount   Value1   Payments1   Amount
 
1
  $100,000       $108,000   $100,000   $100,000
2
          $103,000   $100,000   $103,000
3
          $106,090   $100,000   $106,090
Activity
  $25,000       $133,468   $125,000   $131,090
4
          $134,458   $125,000   $134,458
5
          $138,492   $125,000   $138,492
6
          $142,647   $125,000   $142,647
Activity
      $35,000   $110,844   $95,000   $108,412
7
          $111,666   $95,000   $111,666
8
          $103,850   $95,000   $111,666
9
          $96,580   $95,000   $111,666
Death
Occurs 		          $89,820   $95,000   $111,666
 
 
1 The greater of the Contract Value or the adjusted Return of Purchase Payments represents the Death Benefit Amount.
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Return of Purchase Payment = Initial Purchase Payment = $100,000
  •  Guaranteed Minimum (Stepped-Up) Death Benefit Amount = Initial Purchase Payment = $100,000
  •  Contract Value = Initial Purchase Payment = $100,000
 
During Contract Year 3, an additional Purchase Payment of $25,000 was made. This results in an increase in the Return of Purchase Payment amount to $125,000. The Contract Value increased to $133,468 and the Guaranteed Minimum (Stepped-Up) Death Benefit Amount increased to $131,090.
 
During Contract Year 6, a withdrawal of $35,000 was made. This withdrawal reduced the Return of Purchase Payment amount on a pro rata basis to $95,000 and decreased the Contract Value to $110,844. In addition, the Guaranteed Minimum (Stepped-Up) Death Benefit


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Amount was reduced on a pro rata basis to $108,412. Numerically, the new Return of Purchase Payment and Guaranteed Minimum (Stepped-Up) Death Benefit Amount is calculated as follows:
 
First, determine the ratio for the proportionate reduction. The ratio is the withdrawal amount divided by the Contract Value prior to the withdrawal ($145,844, which equals the $110,844 Contract Value after the withdrawal plus the $35,000 withdrawal amount). Numerically, the ratio is 24.00% ($35,000 ¸ $145,844 = 0.2400 or 24.00%)
 
Second, determine the new Return of Purchase Payment amount. The Return of Purchase Payment amount prior to the withdrawal is multiplied by 1 less the ratio determined above. Numerically, the new Return of Purchase Payment amount is $95,000 (Return of Purchase Payment amount prior to the withdrawal × (1 − ratio); $125,000 × (1 − 24.00%); $125,000 × 76.00% = $95,000).
 
Third, determine the new Guaranteed Minimum (Stepped-Up) Death Benefit Amount. The Guaranteed Minimum (Stepped-Up) Death Benefit Amount prior to the withdrawal is multiplied by 1 less the ratio determined above. Numerically, the new Guaranteed Minimum (Stepped-Up) Death Benefit Amount is $108,412 (Guaranteed Minimum (Stepped-Up) Death Benefit Amount prior to the withdrawal × (1 − ratio); $142,647 × (1 − 24.00%); $142,647 × 76.00% = $108,412).
 
During Contract Year 9, death occurs. The death benefit proceeds are the greater of the Death Benefit Amount (Contract Value or Return of Purchase Payments adjusted for withdrawals) or the Guaranteed Minimum (Stepped-Up) Death Benefit Amount. The Death Benefit Amount is $95,000 because the Return of Purchase Payment Amount ($95,000) is greater than the Contract Value ($89,820). The death benefit proceeds are equal to the Guaranteed Minimum (Stepped-Up) Death Benefit Amount of $111,666 because it is greater than the Death Benefit Amount (Return of Purchase Payments of $95,000).


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APPENDIX F:
 
EARNINGS ENHANCEMENT GUARANTEE (EEG)
SAMPLE CALCULATIONS
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. They have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments and withdrawals effect the values and benefits under this Rider. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider effective Date = Contract Date
  •  A subsequent Purchase Payment of $20,000 is received during Contract Year 3.
  •  A withdrawal of $20,000 is taken during Contract Year 7.
  •  A withdrawal of $10,000 is taken during Contract Year 8.
 
                                 
                        Adjustment to
 		       
Beginning
 		  Purchase
 		              Remaining
 		  Remaining
 		       
of Contract
 		  Payments
 		  Withdrawal
 		  Contract
 		      Purchase
 		  Purchase
 		       
Year   Received   Amount   Value   Earnings1   Payments   Payments   40% EEG2   25% EEG3
 
1
  $100,000       $100,000   $0   $100,000   —   $0   $0
2
          $103,000   $3,000   $100,000   —   $1,200   $750
3
          $106,090   $6,090   $100,000   —   $2,436   $1,523
Activity
  $20,000       $128,468   $8,468   $120,000   —   $3,387   $2,117
4
          $129,421   $9,421   $120,000   —   $3,768   $2,355
5
          $133,304   $13,304   $120,000   —   $5,321   $3,326
6
          $137,303   $17,303   $120,000   —   $6,921   $4,326
7
          $141,422   $21,422   $120,000   —   $8,569   $5,355
Activity
      $20,000   $124,592   $4,592   $120,000   —   $1,837   $1,148
8
          $125,516   $5,516   $120,000   —   $2,206   $1,379
Activity
      $10,000   $118,330   $0   $118,330   $1,670   $0   $0
9
          $119,208   $878   $118,330   —   $351   $219
Death at
the
beginning
of year 10 		          $126,360   $8,030   $118,330   —   $3,212   $2,008
 
 
1 For Rider purposes, Earnings are equal to the Contract Value less Remaining Purchase Payments.
 
2 40% EEG amount is applicable if the oldest Annuitant was age 69 or younger on the Rider Effective Date.
 
3 25% EEG amount is applicable if the oldest Annuitant was age 70 to 75 on the Rider Effective Date.
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Remaining Purchase Payments = Initial Purchase Payment = $100,000
 
During Contract Year 3, an additional Purchase Payment of $20,000 was made. As a result, the Remaining Purchase Payments increased to $120,000 ($100,000 + $20,000 = $120,000). The Contract Value increased to $128,468.
 
During Contract Year 7, a withdrawal of $20,000 was made. This will cause an adjustment to the Earnings amount on a dollar for dollar basis that results in a balance of $4,592. The $4,592 is the result of taking the Contract Value after the withdrawal less the Remaining Purchase Payments ($124,592 − $120,000 = $4,592). Since there are Earnings remaining after the withdrawal, there is no adjustment to the Remaining Purchase Payments.
 
During Contract Year 8, a withdrawal of $10,000 was made. Assuming the Earnings at the time of the withdrawal were $8,330, the withdrawal exceeds the Earnings. Since the $10,000 withdrawal exceeded the Earnings, an adjustment to the Remaining Purchase Payments will occur. The Remaining Purchase Payments will be reduced by $1,670 which is the difference between the amount of the withdrawal less the Earnings at the time of the withdrawal ($10,000 − $8,330 = $1,670). The Earnings will be reduced to zero.
 
During Contract Year 10 death occurs. The EEG amount added to the death benefit is based on the age of the oldest Annuitant on the Rider Effective Date and the lesser of the Earnings and Remaining Purchase Payments adjusted for withdrawals.


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Assuming the oldest Annuitant was 69 or younger on the Rider Effective Date, the EEG amount added to the death benefit would be $3,212. $3,212 represents 40% of the Earnings ($8,030 × 40% = $3,212) which is less than 40% of the Remaining Purchase Payments adjusted for withdrawals ($118,330 × 40% = $47,332).
 
Assuming the oldest Annuitant was 70 to 75 on the Rider Effective Date, the EEG amount added to the death benefit would be $2,008. $2,008 represents 25% of the Earnings ($8,030 × 25% = $2,008) which is less than 25% of the Remaining Purchase Payments adjusted for withdrawals ($118,330 × 25% = $29,583).


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APPENDIX G:
 
OPTIONAL RIDERS NOT AVAILABLE
FOR PURCHASE
 
CoreProtect Advantage
 
(This Rider is called the Guaranteed Withdrawal Benefit IV Rider in the Contract’s Rider.)
 
Rider Terms
 
Annual Credit – An amount added to the Annual Credit Value.
 
Annual Credit Value – One of two values (the other value is the Highest Anniversary Value) that determine the Protected Payment Base prior to the earlier of:
 
  •  the first withdrawal since the Rider Effective Date, or
 
  •  10 Contract Anniversaries from the Rider Effective Date.
 
The Annual Credit Value is increased each year by any Annual Credits, plus any subsequent Purchase Payments received from the most recent Contract Anniversary, during the periods described above.
 
The initial Annual Credit Value is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Highest Anniversary Value – One of two values (the other value is the Annual Credit Value) that determine the Protected Payment Base prior to the earlier of:
 
  •  the first withdrawal since the Rider Effective Date, or
 
  •  10 Contract Anniversaries from the Rider Effective Date.
 
On any day after the Rider Effective Date and during the periods described above, the Highest Anniversary Value is equal to:
 
  •  the Highest Anniversary Value as of the prior day, plus
 
  •  Purchase Payments received by us on that day.
 
On any Contract Anniversary after the Rider Effective Date, the Highest Anniversary Value is equal to the greater of:
 
  •  the Contract Value as of that Contract Anniversary (prior to the Rider fee assessment), or
 
  •  the Highest Anniversary Value immediately prior to that Contract Anniversary.
 
The initial Highest Anniversary Value is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is age 65 or older when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to 5% multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during the Contract Year.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is age 64 or younger when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to the lesser of:
 
  •  5% multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year, or
 
  •  the Remaining Protected Balance as of that day.
 
The Protected Payment Amount will never be less than zero. The initial Protected Payment Amount on the Rider Effective Date is equal to 5% of the initial Protected Payment Base.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will never be less than zero and will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base


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is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider, unless withdrawals are guaranteed until the death of an Owner or sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner). The Remaining Protected Balance will never be less than zero. The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
Adjustment to Protected Payment Base and Remaining Protected Balance Using the Annual Credit Value or Highest Anniversary Value
 
On each Contract Anniversary, while this Rider is in effect, before the Annuity Date, and before the earlier of:
 
  •  the first withdrawal since the Rider Effective Date, or
 
  •  10 Contract Anniversaries from the Rider Effective Date,
 
the Protected Payment Base and Remaining Protected Balance will be equal to the greater of the Annual Credit Value or the Highest Anniversary Value. An increase to the Annual Credit Value or Highest Anniversary Value is not considered an Automatic Reset or an Owner-Elected Reset and will not result in a change to the annual charge percentage. In addition, once resets become available (after the first withdrawal or 10 Contract Anniversaries as described above), eligibility for the Annual Credit Value or Highest Anniversary Value adjustment cannot be reinstated by any Automatic Reset or Owner-Elected Reset.
 
Subsequent Purchase Payments
 
Purchase Payments received after the Rider Effective Date and prior to the earlier of:
 
  •  the first withdrawal since the Rider Effective Date, or
 
  •  10 Contract Anniversaries from the Rider Effective Date,
 
will result in an increase in the Annual Credit Value, Highest Anniversary Value, Protected Payment Base, and Remaining Protected Balance equal to the Purchase Payment Amount.
 
Purchase Payments received after the Rider Effective Date and after the earlier of:
 
  •  the first withdrawal since the Rider Effective Date, or
 
  •  10 Contract Anniversaries from the Rider Effective Date,
 
will result in an increase in the Protected Payment Base and Remaining Protected Balance equal to the Purchase Payment Amount.
 
In addition, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached, permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount each contract year, regardless of market performance, until the Rider terminates. Lifetime withdrawals up to the Protected Payment Amount may continue after the Remaining Protected Balance is reduced to zero (0) if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) was age 65 or older when the first withdrawal was taken after the Rider Effective Date or the most recent Reset Date, whichever is later. If a withdrawal was taken at age 64 or younger and there was no subsequent Reset, the Rider will terminate once the Remaining Protected Balance is reduced to zero (0). This Rider also provides for a Highest Anniversary Value feature and for an amount (an “Annual Credit”) to be added to the Annual Credit Value. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
The Protected Payment Base and Remaining Protected Balance may change over time. The Annual Credit Value or the Highest Anniversary Value (whichever is greater) will increase the Protected Payment Base and the Remaining Protected Balance prior to the earlier of the first withdrawal since the Rider Effective Date or 10 Contract Anniversaries from the Rider Effective Date. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the


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Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year.
 
If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. The Remaining Protected Balance will decrease by the withdrawal amount immediately following the withdrawal.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations for a numerical example of the adjustments to the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – General Rules – Required Minimum Distributions.


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Depletion of Contract Value
 
If a withdrawal (including an RMD Withdrawal) does not exceed the Protected Payment Amount immediately prior to the withdrawal and reduces the Contract Value to zero, the following will apply:
 
  •  if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was age 64 or younger when the first withdrawal was taken under the Rider, after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the Remaining Protected Balance is reduced to zero, or
 
  •  was age 65 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the day of death of an Owner or sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner).
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract,
 
  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduced the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was age 64 or younger when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, this Rider will terminate, or
 
  •  was age 65 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to withdraw up to the Protected Payment Amount each year until the day of death of an Owner or the sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner). If an Automatic or Owner-Elected Reset occurs, the Remaining Protected Balance will be reinstated to an amount equal to the Contract Value as of that Contract Anniversary.
 
Before your Remaining Protected Balance is zero, if you took your first withdrawal at age 64 or younger and you would like to be eligible for lifetime payments under the Rider, an Automatic or Owner-Elected Reset must occur and your first withdrawal after that Reset must be taken on or after age 65. See the Reset of Protected Payment Base and Remaining Protected Balance subsection of this Rider. If you are age 64 or younger when the Remaining Protected Balance is zero and Contract Value remains, the Rider will terminate and there is no opportunity for a Reset.
 
If a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection.
 
Any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.
 
Annual Credit
 
On each Contract Anniversary after the Rider Effective Date, an Annual Credit will be added to the Annual Credit Value until the earlier of:
 
  •  the first withdrawal from the Contract since the Rider Effective Date, or
 
  •  10 Contract Anniversaries measured from the Rider Effective Date.
 
The Annual Credit is equal to 5% of either:
 
  •  total Purchase Payments if the Rider is purchased on the Contract Issue Date, or
 
  •  the Contract Anniversary Value at the time the Rider is added to the Contract plus any subsequent Purchase Payments received after the Rider Effective Date.


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Once a withdrawal (including an RMD Withdrawal) or 10 Contract Anniversaries has occurred, as measured from the Rider Effective Date, no Annual Credit will be added to the Annual Credit Value. In addition, Annual Credit eligibility cannot be reinstated by any Automatic Reset or Owner-Elected Reset.
 
The Annual Credit is not added to your Contract Value.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary, while this Rider is in effect, before the Annuity Date, and after the earlier of:
 
  •  the first withdrawal since the Rider Effective Date, or
 
  •  10 Contract Anniversaries from the Rider Effective Date,
 
we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary after the earlier of:
 
  •  the first withdrawal since the Rider Effective Date, or
 
  •  10 Contract Anniversaries from the Rider Effective Date,
 
elect to reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.


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The annuity payments described in this subsection are available to you even if your first withdrawal was taken prior to age 65 and no Resets have occurred.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Contract Value or Remaining Protected Balance is zero when the Owner dies, the Rider will terminate. If the Contract Value and Remaining Protected Balance are greater than zero and the Owner dies while this Rider is in effect, the surviving spouse of the deceased Owner may elect to continue the Contract in accordance with its terms and the surviving spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero.
 
The surviving spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries. If a reset takes place, then the provisions of this Rider will continue in full force and in effect for the surviving spouse. In addition, if the surviving spouse is age 65 or older when the first withdrawal is taken after the most recent Reset Date and this Reset Date occurred after the surviving spouse continued the Contract, then the surviving spouse may take withdrawals of the Protected Payment Amount (based on the new Protected Payment Base) for life.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day the Remaining Protected Balance is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner), was age 64 or younger when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later,
 
  •  the date of death of an Owner or the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero and see the Depletion of Remaining Protected Balance subsection for situations where the Rider will not terminate when the Remaining Protected Balance is reduced to zero.
 
Sample Calculations
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.


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Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s Age = 65 on the Contract Date
 
                                 
                Annual
 		  Highest
 		  Protected
 		  Protected
 		  Remaining
    Purchase
 		          Credit
 		  Anniversary
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Value   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $100,000   $100,000   $5,000   $100,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Annual Credit Value = $100,000
  •  Highest Anniversary Value = $100,000
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Example #2 – Subsequent Purchase Payments.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s Age = 65 on the Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  No withdrawals taken.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                                 
                Annual
 		  Highest
 		  Protected
 		  Protected
 		  Remaining
    Purchase
 		          Credit
 		  Anniversary
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Value   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $100,000   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000   $200,000   $200,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
          $208,000   $210,000   $208,000   $210,000   $10,500   $210,000
 
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Annual Credit Value, Highest Anniversary Value, Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $10,000 (5% of the Protected Payment Base after the Purchase Payment since there were no withdrawals during that Contract Year).
 
Since no withdrawal occurred prior to Year 2 Contract Anniversary, an annual credit of $10,000 (5% of total Purchase Payments) is applied to the Annual Credit Value on that Contract Anniversary, increasing it to $210,000. On Year 2 Contract Anniversary, the Protected Payment Base and Remaining Protected Balance are reset to $210,000, which is the greater of Annual Credit Value or Highest Anniversary Value. As a result, the Protected Payment Amount on that Contract Anniversary is equal to $10,500 (5% of the Protected Payment Base on that Contract Anniversary).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of additional amounts credited, charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.


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Example #3 – Withdrawals Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s Age = 65 on the Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Years 2 and 4.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                                 
                Annual
 		  Highest
 		  Protected
 		  Protected
 		  Remaining
    Purchase
 		          Credit
 		  Anniversary
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Value   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $100,000   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000   $200,000   $200,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
          $208,000   $210,000   $208,000   $210,000   $10,500   $210,000
Activity
      $10,500   $205,000           $210,000   $0   $199,500
Year 3 Contract Anniversary
          $205,000   NA   NA   $210,000   $10,500   $199,500
Year 4 Contract Anniversary
  (Prior to Automatic Reset)       $215,000   NA   NA   $210,000   $10,500   $199,500
Year 4 Contract Anniversary
  (After to Automatic Reset)       $215,000   NA   NA   $215,000   $10,750   $215,000
Activity
      $10,750   $212,000           $215,000   $0   $204,250
Year 5 Contract Anniversary
  (Prior to Automatic Reset)       $217,000   NA   NA   $215,000   $10,750   $204,250
Year 5 Contract Anniversary
  (After to Automatic Reset)       $217,000   NA   NA   $217,000   $10,850   $217,000
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
As the withdrawal during Contract Year 2 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($10,500):
 
  •  the Protected Payment Base remains unchanged;
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $199,500 ($210,000 − $10,500); and
  •  since a withdrawal occurred, the Annual Credit Value and Highest Anniversary Value are no longer applicable.
 
Because at Year 4 Contract Anniversary, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 4 Contract Anniversary – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 4 Contract Anniversary – After Automatic Reset). The Protected Payment Amount is equal to $10,750 (5% of the reset Protected Payment Base).
 
As the withdrawal during Contract Year 4 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($10,750):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $204,250 ($215,000 − $10,750).
 
Because at Year 5 Contract Anniversary, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 5 Contract Anniversary – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 5 Contract Anniversary – After Automatic Reset). The Protected Payment Amount is equal to $10,850 (5% of the reset Protected Payment Base).


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Example #4 – Withdrawals Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s Age = 65 on the Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                                 
                Annual
 		  Highest
 		  Protected
 		  Protected
 		  Remaining
    Purchase
 		          Credit
 		  Anniversary
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Value   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $100,000   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000   $200,000   $200,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
          $208,000   $210,000   $208,000   $210,000   $10,500   $210,000
Activity
      $20,000   $195,000           $200,235   $0   $190,000
Year 3 Contract Anniversary
          $195,000   NA   NA   $200,235   $10,011   $190,000
Year 4 Contract Anniversary
  (Prior to Automatic Reset)       $215,000   NA   NA   $200,235   $10,011   $190,000
Year 4 Contract Anniversary
  (After to Automatic Reset)       $215,000   NA   NA   $215,000   $10,750   $215,000
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $20,000 withdrawal during Contract Year 2 exceeds the Protected Payment Amount immediately prior to the withdrawal ($20,000 > $10,500), the Protected Payment Base and Remaining Protected Balance immediately after the withdrawal are reduced. Since a withdrawal occurred, the Annual Credit Value and Highest Anniversary Value are no longer applicable.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $215,000
  •  Protected Payment Base = $210,000
  •  Remaining Protected Balance = $210,000
  •  Protected Payment Amount = $10,500 (5% × Protected Payment Base; 5% × $210,000 = $10,500)
  •  No withdrawals were taken prior to the excess withdrawal
 
A withdrawal of $20,000 was taken, which exceeds the Protected Payment Amount of $10,500 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $9,500 (total withdrawal amount − Protected Payment Amount; $20,000 − $10,500 = $9,500).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). The Contract Value prior to the withdrawal was $215,000, which equals the $195,000 after the withdrawal plus the $20,000 withdrawal amount. Numerically, the ratio is 4.65% ($9,500 ¸ ($215,000 − $10,500); $9,500 ¸ $204,500 = 0.0465 or 4.65%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $200,235 (Protected Payment Base × (1 − ratio); $210,000 × (1 − 4.65%); $210,000 × 95.35% = $200,235).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the new Remaining Protected Balance is $190,223 ((Remaining Protected Balance immediately before the withdrawal − Protected Payment Amount) × (1 − ratio); ($210,000 − $10,500) × (1 − 4.65%); $199,500 × 95.35% = $190,223).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the new Remaining Protected Balance is $190,000 (Remaining Protected Balance immediately before the withdrawal − total withdrawal amount; $210,000 − $20,000 = $190,000).


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Therefore, since $190,000 (total withdrawal amount method) is less than $190,223 (proportionate method) the new Remaining Protected Balance is $190,000.
 
The Protected Payment Amount immediately after the withdrawal is equal to $0 (5% of the Protected Payment Base after the withdrawal (5% of $200,235 = $10,011), less cumulative withdrawals during that Contract Year ($20,000), but not less than zero).
 
Because at Year 4 Contract Anniversary, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 4 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 4 Contract Anniversary – After Automatic Reset). The Protected Payment Amount is equal to $10,750 (5% of the reset Protected Payment Base).
 
Example #5 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base and Remaining Protected Balance. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.
 
This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
              $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
05/01/2007
              $100,000   $5,000   $98,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $96,250
09/15/2007
  $1,875           $100,000   $1,250   $94,375
12/15/2007
  $1,875           $100,000   $0   $92,500
01/01/2008
          $8,000            
03/15/2008
  $2,000           $100,000   $0   $90,500
05/01/2008
              $100,000   $5,000   $90,500
Contract
Anniversary 		                       
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. The only effect is a reduction in the Remaining Protected Balance equal to the amount of each withdrawal. In addition, each contract year the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.
 
This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 


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            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
          $0   $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
04/01/2007
      $2,000       $100,000   $1,125   $96,125
05/01/2007
              $100,000   $5,000   $96,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $94,250
09/15/2007
  $1,875           $100,000   $1,250   $92,375
11/15/2007
      $4,000       $96,900   $0   $88,300
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $5,000 there was no adjustment to the Protected Payment Base. The only effect is a reduction in the Remaining Protected Balance and the Protected Payment Amount equal to the amount of each withdrawal. On 5/1/07, the Protected Payment Amount was re-calculated (5% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($5,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($1,250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $96,900 and the Remaining Protected Balance is reduced to $88,300. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $2,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $1,250 = $2,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). Numerically, the ratio is 3.10% ($2,750 ¸ ($90,000 − $1,250); $2,750 ¸ $88,750 = 0.0310 or 3.10%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $96,900 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 3.10%); $100,000 × 96.90% = $96,900).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the Remaining Protected Balance is $88,300 ((Remaining Protected Balance − Protected Payment Amount) × (1 − ratio); ($92,375 − $1,250) × (1 − 3.10%); $91,125 × 96.90% = $88,300).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the Remaining Protected Balance is $88,375 (Remaining Protected Balance − total withdrawal amount; $92,375 − $4,000 = $88,375).
 
Therefore, since $88,300 (proportionate method) is less than $88,375 (total withdrawal amount method) the new Remaining Protected Balance is $88,300.
 
Example #6 – Lifetime Income.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments are received.
  •  Owner is age 65 or older when the first withdrawal was taken.

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  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
 
                     
            Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Base   Amount   Balance
 
1
  $5,000   $96,489   $100,000   $5,000   $95,000
2
  $5,000   $94,384   $100,000   $5,000   $90,000
3
  $5,000   $92,215   $100,000   $5,000   $85,000
4
  $5,000   $89,982   $100,000   $5,000   $80,000
5
  $5,000   $87,681   $100,000   $5,000   $75,000
6
  $5,000   $85,311   $100,000   $5,000   $70,000
7
  $5,000   $82,871   $100,000   $5,000   $65,000
8
  $5,000   $80,357   $100,000   $5,000   $60,000
9
  $5,000   $77,768   $100,000   $5,000   $55,000
10
  $5,000   $75,101   $100,000   $5,000   $50,000
11
  $5,000   $72,354   $100,000   $5,000   $45,000
12
  $5,000   $69,524   $100,000   $5,000   $40,000
13
  $5,000   $66,610   $100,000   $5,000   $35,000
14
  $5,000   $63,608   $100,000   $5,000   $30,000
15
  $5,000   $60,517   $100,000   $5,000   $25,000
16
  $5,000   $57,332   $100,000   $5,000   $20,000
17
  $5,000   $54,052   $100,000   $5,000   $15,000
18
  $5,000   $50,674   $100,000   $5,000   $10,000
19
  $5,000   $47,194   $100,000   $5,000   $5,000
20
  $5,000   $43,610   $100,000   $5,000   $0
21
  $5,000   $39,918   $100,000   $5,000   $0
22
  $5,000   $36,115   $100,000   $5,000   $0
23
  $5,000   $32,199   $100,000   $5,000   $0
24
  $5,000   $28,165   $100,000   $5,000   $0
25
  $5,000   $24,010   $100,000   $5,000   $0
26
  $5,000   $19,730   $100,000   $5,000   $0
27
  $5,000   $15,322   $100,000   $5,000   $0
28
  $5,000   $10,782   $100,000   $5,000   $0
29
  $5,000   $6,105   $100,000   $5,000   $0
30
  $5,000   $1,288   $100,000   $5,000   $0
31
  $5,000   $0   $100,000   $5,000   $0
32
  $5,000   $0   $100,000   $5,000   $0
33
  $5,000   $0   $100,000   $5,000   $0
34
  $5,000   $0   $100,000   $5,000   $0
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000): (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.
 
Since a withdrawal occurred during Contract Year 1, no annual credit will be applied. Since it was assumed that the Owner was age 65 or older when the first withdrawal was taken, withdrawals of 5% of the Protected Payment Base will continue to be paid each year (even after the Contract Value and Remaining Protected Balance have been reduced to zero) until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
CoreIncome Advantage 5
 
(This Rider is called the Core Withdrawal Benefit II Rider in the Contract’s Rider.)


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Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) or older when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to 5% multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is younger than age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to the lesser of:
 
  •  5% of the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year, or
 
  •  the Remaining Protected Balance as of that day.
 
The initial Protected Payment Amount on the Rider Effective Date is equal to 5% of the initial Protected Payment Base.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider, unless withdrawals are guaranteed until the death of an Owner or sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner). The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Rider terminates. Lifetime withdrawals up to the Protected Payment Amount may continue after the Remaining Protected Balance is reduced to zero (0) if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) was age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) or older when the first withdrawal was taken after the Rider Effective Date or the most recent Reset Date, whichever is later. If a withdrawal was taken before age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) and there was no subsequent Reset, the Rider will terminate once the Remaining Protected Balance is reduced to zero (0). Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
In addition, beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value.
 
The Protected Payment Base and Remaining Protected Balance may change over time. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.


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If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year. If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. The Remaining Protected Balance will decrease by the withdrawal amount immediately following the withdrawal.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations for a numerical example of the adjustments to the Protected Payment Base and Remaining Protected Balance as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Depletion of Contract Value
 
If a withdrawal (including an RMD Withdrawal) does not exceed the Protected Payment Amount and reduces the Contract Value to zero, the following will apply:
 
  •  if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) when the first withdrawal was taken under the Rider, after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the Remaining Protected Balance is reduced to zero, or
 
  •  was age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner).
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract,


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  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduced the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, this Rider will terminate, or
 
  •  was age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to withdraw up to the Protected Payment Amount each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner). If an Automatic or Owner-Elected Reset occurs, the Remaining Protected Balance will be reinstated to an amount equal to the Contract Value as of that Contract Anniversary.
 
Before your Remaining Protected Balance is zero, if you took your first withdrawal before 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) and you would like to be eligible for lifetime payments under the Rider, an Automatic or Owner-Elected Reset must occur and your first withdrawal after that Reset must be taken on or after age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California). See the Reset of Protected Payment Base and Remaining Protected Balance subsection of this Rider. If you are younger than 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) when the Remaining Protected Balance is zero and Contract Value remains, the Rider will terminate and there is no opportunity for a Reset.
 
If a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the withdrawal will be treated as an excess withdrawal and the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection.
 
Any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of Rider charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.


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If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached, permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
The annuity payments described in this subsection are available to you even if your first withdrawal was taken prior to age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) and no Resets have occurred.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Contract Value or Remaining Protected Balance is zero when the Owner dies, this Rider will terminate. If the Contract Value and Remaining Protected Balance are greater than zero and the Owner dies while this Rider is in effect, the surviving spouse of the deceased Owner may elect to continue the Contract in accordance with its terms, and the surviving spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero.
 
The surviving spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries. If a reset takes place then the provisions of this Rider will continue in full force and in effect for the surviving spouse. In addition, if the surviving spouse is age 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) or older when the first withdrawal is taken after the most recent Reset Date and this Reset Date occurred after the surviving spouse continued the Contract, then the surviving spouse may take withdrawals of the Protected Payment Amount (based on the new Protected Payment Base) for life.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,


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  •  the day the Remaining Protected Balance is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner), was younger than 65 (591/2 if the Rider Effective Date is on or after March 14, 2011 and your Rider was issued in California) when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later,
 
  •  the date of the first death of an Owner or the date of death of the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero and see the Depletion of Remaining Protected Balance subsection for situations where the Rider will not terminate when the Remaining Protected Balance is reduced to zero.
 
Sample Calculations
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $5,000   $100,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Example #2 – Subsequent Purchase Payments.
 
The values shown below are based on the following assumptions:
 
  •  Rider purchased at Contract issue by a 64-year old.
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.


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  •  No withdrawals taken.
  •  Automatic Reset at Beginning of Contract Year 2.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $10,350   $207,000
 
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $10,000 (5% of the Protected Payment Base after the Purchase Payment).
 
An automatic reset takes place at Year 2 Contract Anniversary, since the Contract Value ($207,000) is higher than the Protected Payment Base ($200,000). This resets the Protected Payment Base and Remaining Protected Balance to $207,000 and the Protected Payment Amount to $10,350 (5% × $207,000).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.
 
Example #3 – Withdrawals Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Year 2.
  •  Automatic Resets at Beginning of Contract Years 2 and 3.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $10,350   $207,000
Activity
      $5,000   $216,490   $207,000   $5,350   $202,000
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $216,490   $207,000   $10,350   $202,000
Year 3 Contract Anniversary
  (After Automatic Reset)       $216,490   $216,490   $10,825   $216,490
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
As the withdrawal during Contract Year 2 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($10,350):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $202,000 ($207,000 − $5,000) and the Protected Payment Amount is reduced by the amount of the withdrawal to $5,350 ($10,350 − $5,000).
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $10,825 (5% of the reset Protected Payment Base).


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Example #4 – Withdrawals Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Automatic Resets at Beginning of Contract Years 2 and 3.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		      Contract
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $10,000   $200,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $10,350   $207,000
Activity
      $25,000   $196,490   $192,634   $0   $182,000
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $196,490   $192,634   $9,632   $182,000
Year 3 Contract Anniversary
  (After Automatic Reset)       $196,490   $196,490   $9,825   $196,490
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $25,000 withdrawal during Contract Year 2 exceeds the Protected Payment Amount immediately prior to the withdrawal ($25,000 > $10,350), the Protected Payment Base and Remaining Protected Balance immediately after the withdrawal are reduced.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $221,490
  •  Protected Payment Base = $207,000
  •  Remaining Protected Balance = $207,000
  •  Protected Payment Amount = $10,350 (5% × Protected Payment Base; 5% × $207,000 = $10,350)
  •  No withdrawals were taken prior to the excess withdrawal
 
A withdrawal of $25,000 was taken, which exceeds the Protected Payment Amount of $10,350 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $14,650 (total withdrawal amount − Protected Payment Amount; $25,000 − $10,350 = $14,650).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). The Contract Value prior to the withdrawal was $221,490, which equals the $196,490 after the withdrawal plus the $25,000 withdrawal amount. Numerically, the ratio is 6.94% ($14,650 ¸ ($221,490 − $10,350); $14,650 ¸ $211,140 = 0.0694 or 6.94%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $192,634 (Protected Payment Base × (1 − ratio); $207,000 × (1 − 6.94%); $207,000 × 93.06% = $192,634).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the new Remaining Protected Balance is $183,002 ((Remaining Protected Balance immediately before the withdrawal − Protected Payment Amount) × (1 − ratio); ($207,000 − $10,350) × (1 − 6.94%); $196,650 × 93.06% = $183,002).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the new Remaining Protected Balance is $182,000 (Remaining Protected Balance immediately before the withdrawal − total withdrawal amount; $207,000 − $25,000 = $182,000).


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Therefore, since $182,000 (total withdrawal amount method) is less than $183,002 (proportionate method) the new Remaining Protected Balance is $182,000.
 
The Protected Payment Amount immediately after the withdrawal is equal to $0 (5% of the Protected Payment Base after the withdrawal (5% of $192,634 = $9,632), less cumulative withdrawals during that Contract Year ($25,000), but not less than zero).
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset).
 
Example #5 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base and Remaining Protected Balance. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.
 
This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006               $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
05/01/2007
              $100,000   $5,000   $98,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $96,250
09/15/2007
  $1,875           $100,000   $1,250   $94,375
12/15/2007
  $1,875           $100,000   $0   $92,500
01/01/2008
          $8,000            
03/15/2008
  $2,000           $100,000   $0   $90,500
05/01/2008
              $100,000   $5,000   $90,500
Contract
Anniversary 		                       
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. The only effect is a reduction in the Remaining Protected Balance equal to the amount of each withdrawal. In addition, each contract year the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.


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This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006           $0   $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
04/01/2007
      $2,000       $100,000   $1,125   $96,125
05/01/2007
              $100,000   $5,000   $96,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $94,250
09/15/2007
  $1,875           $100,000   $1,250   $92,375
11/15/2007
      $4,000       $96,900   $0   $88,300
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $5,000 there was no adjustment to the Protected Payment Base. The only effect is a reduction in the Remaining Protected Balance and the Protected Payment Amount equal to the amount of each withdrawal. On 5/1/07, the Protected Payment Amount was re-calculated (5% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($5,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($1,250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $96,900 and the Remaining Protected Balance is reduced to $88,300.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $90,000
  •  Protected Payment Base = $100,000
  •  Remaining Protected Balance = $92,375
  •  Protected Payment Amount = $1,250
 
A withdrawal of $4,000 was taken, which exceeds the Protected Payment Amount of $1,250. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $2,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $1,250 = $2,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). Numerically, the ratio is 3.10% ($2,750 ¸ ($90,000 − $1,250); $2,750 ¸ $88,750 = 0.0310 or 3.10%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $96,900 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 3.10%); $100,000 × 96.90% = $96,900).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the Remaining Protected Balance is $88,300 ((Remaining Protected Balance − Protected Payment Amount) × (1 − ratio); ($92,375 − $1,250) × (1 − 3.10%); $91,125 × 96.90% = $88,300).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the Remaining Protected Balance is $88,375 (Remaining Protected Balance − total withdrawal amount; $92,375 − $4,000 = $88,375).


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Therefore, since $88,300 (proportionate method) is less than $88,375 (total withdrawal amount method) the new Remaining Protected Balance is $88,300.
 
Example #6 – Lifetime Income.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments are received.
  •  Owner is age 65 when the first withdrawal was taken.
  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
 
                     
            Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Base   Amount   Balance
 
1
  $5,000   $96,489   $100,000   $5,000   $95,000
2
  $5,000   $94,384   $100,000   $5,000   $90,000
3
  $5,000   $92,215   $100,000   $5,000   $85,000
4
  $5,000   $89,982   $100,000   $5,000   $80,000
5
  $5,000   $87,681   $100,000   $5,000   $75,000
6
  $5,000   $85,311   $100,000   $5,000   $70,000
7
  $5,000   $82,871   $100,000   $5,000   $65,000
8
  $5,000   $80,357   $100,000   $5,000   $60,000
9
  $5,000   $77,768   $100,000   $5,000   $55,000
10
  $5,000   $75,101   $100,000   $5,000   $50,000
11
  $5,000   $72,354   $100,000   $5,000   $45,000
12
  $5,000   $69,524   $100,000   $5,000   $40,000
13
  $5,000   $66,610   $100,000   $5,000   $35,000
14
  $5,000   $63,608   $100,000   $5,000   $30,000
15
  $5,000   $60,517   $100,000   $5,000   $25,000
16
  $5,000   $57,332   $100,000   $5,000   $20,000
17
  $5,000   $54,052   $100,000   $5,000   $15,000
18
  $5,000   $50,674   $100,000   $5,000   $10,000
19
  $5,000   $47,194   $100,000   $5,000   $5,000
20
  $5,000   $43,610   $100,000   $5,000   $0
21
  $5,000   $39,918   $100,000   $5,000   $0
22
  $5,000   $36,115   $100,000   $5,000   $0
23
  $5,000   $32,199   $100,000   $5,000   $0
24
  $5,000   $28,165   $100,000   $5,000   $0
25
  $5,000   $24,010   $100,000   $5,000   $0
26
  $5,000   $19,730   $100,000   $5,000   $0
27
  $5,000   $15,322   $100,000   $5,000   $0
28
  $5,000   $10,782   $100,000   $5,000   $0
29
  $5,000   $6,105   $100,000   $5,000   $0
30
  $5,000   $1,288   $100,000   $5,000   $0
31
  $5,000   $0   $100,000   $5,000   $0
32
  $5,000   $0   $100,000   $5,000   $0
33
  $5,000   $0   $100,000   $5,000   $0
34
  $5,000   $0   $100,000   $5,000   $0
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000


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Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000): (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.
 
Since it was assumed that the Owner was age 65 when the first withdrawal was taken, withdrawals of 5% of the Protected Payment Base will continue to be paid each year (even after the Contract Value and Remaining Protected Balance have been reduced to zero) until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
CoreIncome Advantage
 
(This Rider is called the Core Withdrawal Benefit Rider in the Contract’s Rider).
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is age 65 or older when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to 4% multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is younger than age 65 when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to the lesser of:
 
  •  4% of the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year, or
 
  •  the Remaining Protected Balance as of that day.
 
The initial Protected Payment Amount on the Rider Effective Date is equal to 4% of the initial Protected Payment Base.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider, unless withdrawals are guaranteed until the death of an Owner or sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner). The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Rider terminates. Lifetime withdrawals up to the Protected Payment Amount may continue after the Remaining Protected Balance is reduced to zero (0) if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) was age 65 or older when the first withdrawal was taken after the Rider Effective Date or the most recent Reset Date, whichever is later. If a withdrawal was taken before age 65 and there was no subsequent Reset, the Rider will terminate once the Remaining Protected Balance is reduced to zero (0). Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
In addition, beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value.


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The Protected Payment Base and Remaining Protected Balance may change over time. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year. If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. The Remaining Protected Balance will decrease by the withdrawal amount immediately following the withdrawal.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations below for a numerical example of the adjustments to the Protected Payment Base and Remaining Protected Balance as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.


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Depletion of Contract Value
 
If a withdrawal (including an RMD Withdrawal) does not exceed the Protected Payment Amount and reduces the Contract Value to zero, the following will apply:
 
  •  if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 65 when the first withdrawal was taken under the Rider, after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the Remaining Protected Balance is reduced to zero, or
 
  •  was age 65 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner).
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract,
 
  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduced the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 65 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, this Rider will terminate, or
 
  •  was age 65 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to withdraw up to the Protected Payment Amount each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (first Annuitant in the case of a Non-Natural Owner). If an Automatic or Owner-Elected Reset occurs, the Remaining Protected Balance will be reinstated to an amount equal to the Contract Value as of that Contract Anniversary.
 
Before your Remaining Protected Balance is zero, if you took your first withdrawal before 65 and you would like to be eligible for lifetime payments under the Rider, an Automatic or Owner-Elected Reset must occur and your first withdrawal after that Reset must be taken on or after age 65. See the Reset of Protected Payment Base and Remaining Protected Balance subsection of this Rider. If you are younger than 65 when the Remaining Protected Balance is zero and Contract Value remains, the Rider will terminate and there is no opportunity for a Reset.
 
If a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the withdrawal will be treated as an excess withdrawal and the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection.
 
Any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of Rider charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).


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Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached, permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
The annuity payments described in this subsection are available to you even if your first withdrawal was taken prior to age 65 and no Resets have occurred.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Contract Value or Remaining Protected Balance is zero when the Owner dies, this Rider will terminate. If the Owner dies while this Rider is in effect and if the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, the surviving spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero.
 
The surviving spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries. If a reset takes place then the provisions of this Rider will continue in full force and in effect for the surviving spouse. In addition, if the surviving spouse is age 65 or older when the first withdrawal is taken after the most recent Reset Date and this Reset Date occurred after the surviving spouse continued the Contract, then the surviving spouse may take withdrawals of the Protected Payment Amount (based on the new Protected Payment Base) for life.


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The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day the Remaining Protected Balance is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner), was younger than 65 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later,
 
  •  the date of the first death of an Owner or the date of death of the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero and see the Depletion of Remaining Protected Balance subsection for situations where the Rider will not terminate when the Remaining Protected Balance is reduced to zero.
 
Sample Calculations
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000   $100,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 4% of Protected Payment Base = $4,000


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Example #2 – Subsequent Purchase Payments.
 
The values shown below are based on the following assumptions:
 
  •  Rider purchased at Contract issue by a 64-year old.
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  No withdrawals taken.
  •  Automatic Reset at Beginning of contract Year 2.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000   $100,000
Activity
  $100,000       $216,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $8,280   $207,000
 
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $8,000 (4% of the Protected Payment Base after the Purchase Payment).
 
An automatic reset takes place at Year 2 Contract Anniversary, since the Contract Value ($207,000) is higher than the Protected Payment Base ($200,000). This resets the Protected Payment Base and Remaining Protected Balance to $207,000 and the Protected Payment Amount to $8,280 (4% × $207,000). Also, the Protected Payment Amount will now be paid for life.
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.
 
Example #3 – Withdrawals Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Year 2.
  •  Automatic Resets at Beginning of Contract Years 2 and 3.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000   $100,000
Activity
  $100,000       $216,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $8,280   $207,000
Activity
      $5,000   $216,490   $207,000   $3,280   $202,000
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $216,490   $207,000   $8,280   $202,000
Year 3 Contract Anniversary
  (After Automatic Reset)       $216,490   $216,490   $8,660   $216,490
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
As the withdrawal during Contract Year 2 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($8,280):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $202,000 ($207,000 − $5,000) and the Protected Payment Amount is reduced by the amount of the withdrawal to $3,280 ($8,280 − $5,000).
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment


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Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $8,660 (4% of the reset Protected Payment Base).
 
Example #4 – Withdrawals Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Automatic Resets at Beginning of Contract Years 2 and 3.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		      Contract
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000   $100,000
Activity
  $100,000       $216,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  (Prior to Automatic Reset)       $207,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  (After Automatic Reset)       $207,000   $207,000   $8,280   $207,000
Activity
      $25,000   $196,490   $190,750   $0   $182,000
Year 3 Contract Anniversary
  (Prior to Automatic Reset)       $196,490   $190,750   $7,630   $182,000
Year 3 Contract Anniversary
  (After Automatic Reset)       $196,490   $196,490   $7,860   $196,490
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $25,000 withdrawal during Contract Year 2 exceeds the Protected Payment Amount immediately prior to the withdrawal ($25,000 > $8,280), the Protected Payment Base and Remaining Protected Balance immediately after the withdrawal are reduced.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $221,490
  •  Protected Payment Base = $207,000
  •  Remaining Protected Balance = $207,000
  •  Protected Payment Amount = $8,280 (4% × Protected Payment Base; 4% × $207,000 = $8,280)
  •  No withdrawals were taken prior to the excess withdrawal
 
A withdrawal of $25,000 was taken, which exceeds the Protected Payment Amount of $8,280 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $16,720 (total withdrawal amount − Protected Payment Amount; $25,000 − $8,280 = $16,720).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). The Contract Value prior to the withdrawal was $221,490, which equals the $196,490 after the withdrawal plus the $25,000 withdrawal amount. Numerically, the ratio is 7.85% ($16,720 ¸ ($221,490 − $8,280); $16,720 ¸ $213,210 = 0.0785 or 7.85%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $190,750 (Protected Payment Base × (1 − ratio); $207,000 × (1 − 7.85%); $207,000 × 92.15% = $190,750).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the new Remaining Protected Balance is $183,120 ((Remaining Protected Balance immediately before the withdrawal − Protected Payment Amount) × (1 − ratio); ($207,000 − $8,280) × (1 − 7.85%); $198,720 × 92.15% = $183,120).


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To determine the total withdrawal amount reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the new Remaining Protected Balance is $182,000 (Remaining Protected Balance immediately before the withdrawal − total withdrawal amount; $207,000 − $25,000 = $182,000).
 
Therefore, since $182,000 (total withdrawal amount method) is less than $183,120 (proportionate method) the new Remaining Protected Balance is $182,000.
 
The Protected Payment Amount immediately after the withdrawal is equal to $0 (4% of the Protected Payment Base after the withdrawal (4% of $190,750 = $7,630), less cumulative withdrawals during that Contract Year ($25,000), but not less than zero).
 
At Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset).
 
Example #5 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base and Remaining Protected Balance. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.
 
This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006               $100,000   $4,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $2,125   $98,125
05/01/2007
              $100,000   $4,000   $98,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $2,125   $96,250
09/15/2007
  $1,875           $100,000   $250   $94,375
12/15/2007
  $1,875           $100,000   $0   $92,500
01/01/2008
          $8,000            
03/15/2008
  $2,000           $100,000   $0   $90,500
05/01/2008
              $100,000   $4,000   $90,500
Contract
Anniversary 		                       
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. The only effect is a reduction in the Remaining Protected Balance equal to the amount of each withdrawal. In addition, each contract year the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.


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This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006           $0   $100,000   $4,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $2,125   $98,125
04/01/2007
      $2,000       $100,000   $125   $96,125
05/01/2007
              $100,000   $4,000   $96,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $2,125   $94,250
09/15/2007
  $1,875           $100,000   $250   $92,375
11/15/2007
      $4,000       $95,820   $0   $88,274
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $4,000 there was no adjustment to the Protected Payment Base. The only effect is a reduction in the Remaining Protected Balance and the Protected Payment Amount equal to the amount of each withdrawal. On 5/1/07, the Protected Payment Amount was re-calculated (4% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($4,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $95,820 and the Remaining Protected Balance is reduced to $88,274.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $90,000
  •  Protected Payment Base = $100,000
  •  Remaining Protected Balance = $92,375
  •  Protected Payment Amount = $250
 
A withdrawal of $4,000 was taken, which exceeds the Protected Payment Amount of $250. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $3,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $250 = $3,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). Numerically, the ratio is 4.18% ($3,750 ¸ ($90,000 − $250); $3,750 ¸ $89,750 = 0.0418 or 4.18%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $95,820 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 4.18%); $100,000 × 95.82% = $95,820).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the Remaining Protected Balance is $88,274 ((Remaining Protected Balance − Protected Payment Amount) × (1 − ratio); ($92,375 − $250) × (1 − 4.18%); $92,125 × 95.82% = $88,274).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the Remaining Protected Balance is $88,375 (Remaining Protected Balance − total withdrawal amount; $92,375 − $4,000 = $88,375).


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Therefore, since $88,274 (proportionate method) is less than $88,375 (total withdrawal amount method) the new Remaining Protected Balance is $88,274.
 
Example #6 – Lifetime Income.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments are received.
  •  Owner is age 65 or older when the first withdrawal was taken.
  •  Withdrawals, each equal to 4% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
 
                     
            Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Base   Amount   Balance
 
1
  $4,000   $96,489   $100,000   $4,000   $96,000
2
  $4,000   $94,384   $100,000   $4,000   $92,000
3
  $4,000   $92,215   $100,000   $4,000   $88,000
4
  $4,000   $89,982   $100,000   $4,000   $84,000
5
  $4,000   $87,681   $100,000   $4,000   $80,000
6
  $4,000   $85,311   $100,000   $4,000   $76,000
7
  $4,000   $82,871   $100,000   $4,000   $72,000
8
  $4,000   $80,357   $100,000   $4,000   $68,000
9
  $4,000   $77,768   $100,000   $4,000   $64,000
10
  $4,000   $75,101   $100,000   $4,000   $60,000
11
  $4,000   $72,354   $100,000   $4,000   $56,000
12
  $4,000   $69,524   $100,000   $4,000   $52,000
13
  $4,000   $66,610   $100,000   $4,000   $48,000
14
  $4,000   $63,608   $100,000   $4,000   $44,000
15
  $4,000   $60,517   $100,000   $4,000   $40,000
16
  $4,000   $57,332   $100,000   $4,000   $36,000
17
  $4,000   $54,052   $100,000   $4,000   $32,000
18
  $4,000   $50,674   $100,000   $4,000   $28,000
19
  $4,000   $47,194   $100,000   $4,000   $24,000
20
  $4,000   $43,610   $100,000   $4,000   $20,000
21
  $4,000   $39,918   $100,000   $4,000   $16,000
22
  $4,000   $36,115   $100,000   $4,000   $12,000
23
  $4,000   $32,199   $100,000   $4,000   $8,000
24
  $4,000   $28,165   $100,000   $4,000   $4,000
25
  $4,000   $24,010   $100,000   $4,000   $0
26
  $4,000   $19,730   $100,000   $4,000   $0
27
  $4,000   $15,322   $100,000   $4,000   $0
28
  $4,000   $10,782   $100,000   $4,000   $0
29
  $4,000   $6,105   $100,000   $4,000   $0
30
  $4,000   $1,288   $100,000   $4,000   $0
31
  $4,000   $0   $100,000   $4,000   $0
32
  $4,000   $0   $100,000   $4,000   $0
33
  $4,000   $0   $100,000   $4,000   $0
34
  $4,000   $0   $100,000   $4,000   $0
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 4% of Protected Payment Base = $4,000


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Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($4,000): (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.
 
Since it was assumed that the Owner was age 65 or older when the first withdrawal was taken, withdrawals of 4% of the Protected Payment Base will continue to be paid each year (even after the Contract Value and Remaining Protected Balance have been reduced to zero) until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
Flexible Lifetime Income Plus (Single)
 
(This Rider is called the Guaranteed Withdrawal Benefit Rider in the Contract’s Rider.)
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is age 591/2 or older when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to the withdrawal percentage multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during the Contract Year.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is younger than age 591/2 when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to the lesser of:
 
  •  the withdrawal percentage multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year, or
 
  •  the Remaining Protected Balance as of that day.
 
The Protected Payment Amount will never be less than zero. The initial Protected Payment Amount on the Rider Effective Date is equal to the applicable withdrawal percentage (based on the Owner’s age at the time of purchase) multiplied by the Protected Payment Base.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will never be less than zero and will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider. The Remaining Protected Balance will never be less than zero. The initial Remaining Protected Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Annual Credit – An amount added to the Protected Payment Base and Remaining Protected Balance.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount each contract year, regardless of market performance, until the Rider terminates. Lifetime withdrawals up to the Protected Payment Amount may continue after the Remaining Protected Balance is reduced to zero (0) if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) was age 591/2 or older when the first withdrawal was taken after the Rider Effective Date or the most recent Reset Date, whichever is later. If a withdrawal was taken before age 591/2 and there was no subsequent Reset, the Rider will terminate once the Remaining Protected Balance is reduced to zero (0). This Rider also provides for an amount (an “Annual Credit”) to be added to the Protected Payment Base and Remaining Protected Balance. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).


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In addition, beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value.
 
If applicable, an Annual Credit is added to the Protected Payment Base and Remaining Protected Balance prior to any Automatic Reset. If the Contract Value as of that Contract Anniversary is greater than the Protected Payment Base (which includes the Annual Credit amount), then the Protected Payment Base and Remaining Protected Balance will be automatically reset to equal the Contract Value.
 
The Protected Payment Base and Remaining Protected Balance may change over time. The addition of an Annual Credit will increase the Protected Payment Base and the Remaining Protected Balance by the amount of the Annual Credit. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal Percentage
 
The withdrawal percentage is determined according to the table below based on the oldest Owner’s age (or youngest Annuitant in the case of a Non-Natural Owner) at Rider Effective Date or the most recent Reset Date, whichever is later. The withdrawal percentages are as follows:
 
         
Age
  Withdrawal Percentage
 
Before 591/2
    5.0 %
591/2 - 74
    5.0 %
75 and older
    6.0 %
 
If you purchase the Rider before you reach 75 years of age, a Reset is required to receive the higher withdrawal percentage once you are 75 years of age.
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year.
 
If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. The Remaining Protected Balance will decrease by the withdrawal amount immediately following the withdrawal.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations below for a numerical example of the adjustments to the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.


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Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – General Rules – Required Minimum Distributions.
 
Depletion of Contract Value
 
If a withdrawal (including an RMD Withdrawal) does not exceed the Protected Payment Amount immediately prior to the withdrawal and reduces the Contract Value to zero, the following will apply:
 
  •  if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 591/2 when the first withdrawal was taken under the Rider, after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the Remaining Protected Balance is reduced to zero, or
 
  •  was age 591/2 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant.
 
  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract,
 
  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
If the Owner or sole surviving Annuitant dies and the Contract Value is zero as of the date of death, there is no death benefit, however, any Remaining Protected Balance will be paid to the Beneficiary under a series of pre-authorized withdrawals and payment frequency (at least annually) then in effect at the time of the Owner’s or sole surviving Annuitant’s death. If, however, the Remaining Protected Balance would be paid over a period that exceeds the life expectancy of the Beneficiary, the pre-authorized withdrawal amount will be adjusted so that the withdrawal payments will be paid over a period that does not exceed the Beneficiary’s life expectancy.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduced the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 591/2 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, this Rider will terminate, or
 
  •  was age 591/2 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to withdraw up to the Protected Payment Amount each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant. If an Automatic or Owner-Elected Reset occurs, the Remaining Protected Balance will be reinstated to an amount equal to the Contract Value as of that Contract Anniversary.
 
Before your Remaining Protected Balance is zero, if you took your first withdrawal before age 591/2 and you would like to be eligible for lifetime payments under the Rider, an Automatic or Owner-Elected Reset must occur and your first withdrawal after that Reset must be taken on or after age 591/2. See the Reset of Protected Payment Base and Remaining Protected Balance subsection of this Rider. If you are


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younger than age 591/2 when the Remaining Protected Balance is zero and Contract Value remains, the Rider will terminate and there is no opportunity for a Reset.
 
If a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the withdrawal will be treated as an excess withdrawal and the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection.
 
Any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.
 
Annual Credit
 
On each Contract Anniversary after the Rider Effective Date, an Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance, as of that Contract Anniversary, if:
 
  •  no withdrawals have occurred after the Rider Effective Date or the most recent Reset Date, whichever is later, and
 
  •  that Contract Anniversary is within the first 10 Contract Anniversaries, measured from the Rider Effective Date or the most recent Reset Date, whichever is later.
 
The Annual Credit is equal to 5% (7% if your Rider Effective Date is before January 1, 2009) of the total of:
 
  •  the Remaining Protected Balance on the Rider Effective Date or the most recent Reset Date, whichever is later, and
 
  •  the cumulative Purchase Payments received after the Rider Effective Date or most recent Reset Date, whichever is later,
 
as of the Contract Anniversary on which the Annual Credit is added.
 
Once a withdrawal has occurred, including an RMD Withdrawal, no Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal, unless an Automatic Reset or Owner Elected Reset occurs. If such a Reset occurs, your eligibility for the Annual Credit will be reinstated as of the Reset Date.
 
The Annual Credit is not added to your Contract Value.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. Eligibility for any Annual Credit, the limitations and restrictions on Purchase Payments and withdrawals, the deduction of annual charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date and after any annual credit is applied, we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base, after any Annual Credit is applied, is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.


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If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and any Annual Credit that may be applied. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached, permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
The annuity payments described in this subsection are available to you even if your first withdrawal was taken prior to age 591/2 and no Resets have occurred.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Remaining Protected Balance is zero when the Owner dies, this Rider will terminate. If the Owner dies while this Rider is in effect and if the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, the surviving spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero.
 
The surviving spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries. If an election to reset is made, whether by an Automatic Reset or an Owner-Elected Reset, then the provisions of this Rider will continue in full force and in effect for the surviving spouse. The withdrawal percentage will be determined based on the age of the surviving spouse and the new withdrawal percentage may be higher or lower than what the withdrawal percentage was prior to death. In addition, if the surviving spouse is age 591/2 or older when the first withdrawal is taken after the most recent Reset Date and this Reset Date occurred after the surviving spouse continued the Contract, then the surviving spouse may take withdrawals of the Protected Payment Amount (based on the new Protected Payment Base and withdrawal percentage) for life.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day the Remaining Protected Balance is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner), was younger than 591/2 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later,
 
  •  the date of the first death of an Owner or the date of death of the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),


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  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero and see the Depletion of Remaining Protected Balance subsection for situations where the Rider will not terminate when the Remaining Protected Balance is reduced to zero.
 
Flexible Lifetime Income Plus (Joint)
 
(This Rider is called the Joint Life Guaranteed Withdrawal Benefit Rider in the Contract’s Rider.)
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Designated Lives (each a “Designated Life”) – Designated Lives must be natural persons who are each other’s spouses on the Rider Effective Date. Designated Lives will remain unchanged while this Rider is in effect.
 
To be eligible for lifetime benefits, a Designated Life must:
 
  •  be the Owner (or the Annuitant, in the case of a custodial owned IRA or TSA),
 
  •  remain the Spouse of the other Designated Life and be the first in line of succession, as determined under the Contract, for payment of any death benefit.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. The Protected Payment Amount on any day after the Rider Effective Date is equal to the withdrawal percentage multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year. The Protected Payment Amount will never be less than zero. The initial Protected Payment Amount on the Rider Effective Date is equal to the applicable withdrawal percentage (based on the youngest Designated Life’s age at the time of purchase) multiplied by the Protected Payment Base.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will never be less than zero and will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider. The Remaining Protected Balance will never be less than zero. The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Annual Credit – An amount added to the Protected Payment Base and Remaining Protected Balance.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
Spouse – The Owner’s spouse who is treated as the Owner’s spouse pursuant to federal law.
 
Surviving Spouse – The surviving spouse of a deceased Owner.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Rider terminates. This Rider also provides for an amount (an “Annual Credit”) to be added to the Protected Payment Base and


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Remaining Protected Balance. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
In addition, on each Contract Anniversary while this Rider is in effect and before the Annuity Date, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value.
 
If applicable, an Annual Credit is added to the Protected Payment Base and Remaining Protected Balance prior to any Automatic Reset. If the Contract Value as of that Contract Anniversary is greater than the Protected Payment Base (which includes the Annual Credit amount), then the Protected Payment Base and Remaining Protected Balance will be automatically reset to equal the Contract Value.
 
The Protected Payment Base and Remaining Protected Balance may change over time. The addition of an Annual Credit will increase the Protected Payment Base and the Remaining Protected Balance by the amount of the Annual Credit. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal Percentage
 
The withdrawal percentage is determined according to the table below based on youngest Designated Life’s age at Rider Effective Date or the most recent Reset Date, whichever is later. The withdrawal percentages are as follows:
 
         
Age
  Withdrawal Percentage
 
591/2 - 74
    5.0 %
75 and older
    6.0 %
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year.
 
If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. Immediately following the withdrawal, the Remaining Protected Balance will decrease by the withdrawal amount.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations below for a numerical example of the adjustments to the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.


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Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – General Rules – Required Minimum Distributions.
 
Depletion of Contract Value
 
If a withdrawal (including an RMD Withdrawal) does not exceed the Protected Payment Amount immediately prior to the withdrawal and reduces the Contract Value to zero, the following will apply:
 
  •  the Protected Payment Amount will be paid each year until the death of all Designated Lives eligible for lifetime benefits,
 
  •  the payments of the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract,
 
  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
If the surviving Designated Life eligible for lifetime benefits dies and the Contract Value is zero as of the date of death, there is no death benefit, however, any Remaining Protected Balance will be paid to the Beneficiary under a series of pre-authorized withdrawals and payment frequency (at least annually) then in effect at the time of the death of the surviving Designated Life eligible for lifetime benefits. If, however, the Remaining Protected Balance would be paid over a period that exceeds the life expectancy of the Beneficiary, the pre-authorized withdrawal amount will be adjusted so that the withdrawal payments will be paid over a period that does not exceed the Beneficiary’s life expectancy.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduced the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
  •  if a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the withdrawal will be treated as an excess withdrawal and the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection, and
 
  •  any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.
 
Annual Credit
 
On each Contract Anniversary after the Rider Effective Date, an Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance, as of that Contract Anniversary, if:
 
  •  no withdrawals have occurred after the Rider Effective Date or the most recent Reset Date, whichever is later, and
 
  •  that Contract Anniversary is within the first 10 Contract Anniversaries, measured from the Rider Effective Date or the most recent Reset Date, whichever is later.
 
The Annual Credit is equal to 5% (7% if your Rider Effective Date is before January 1, 2009) of the total of:
 
  •  the Remaining Protected Balance on the Rider Effective Date or the most recent Reset Date, whichever is later, and


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  •  the cumulative Purchase Payments received after the Rider Effective Date or most recent Reset Date, whichever is later,
 
as of the Contract Anniversary on which the Annual Credit is added.
 
Once a withdrawal has occurred, including an RMD Withdrawal, no Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal, unless an Automatic Reset or Owner-Elected Reset occurs. If such a Reset occurs, your eligibility for the Annual Credit will be reinstated as of the Reset Date.
 
The Annual Credit is not added to your Contract Value.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. Eligibility for any Annual Credit, the limitations and restrictions on Purchase Payments and withdrawals, the deduction of annual Charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date and after any Annual Credit is applied, we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base, after any Annual Credit is applied, is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and any Annual Credit that may be applied. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached, permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.


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Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only or Joint Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only or Joint Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies while this Rider is in effect and if the Surviving Spouse (who is also a Designated Life eligible for lifetime benefits) elects to continue the Contract in accordance with its terms, the Surviving Spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Rider terminates.
 
The Surviving Spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries. If a reset takes place, whether by an Automatic Reset or an Owner-Elected Reset, the withdrawal percentage may change and will be determined based on the age of the Surviving Spouse. However, the withdrawal percentage will never be lower than the withdrawal percentage in effect at the time of death.
 
The Surviving Spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Ownership and Beneficiary Changes
 
Changes to the Contract Owner, Annuitant and/or Beneficiary designations and changes in marital status, including a dissolution of marriage, may adversely affect the benefits of this Rider. A particular change may make a Designated Life ineligible to receive lifetime income benefits under this Rider. As a result, the Rider may remain in effect and you may pay for benefits that you will not receive. You are strongly advised to work with your financial advisor and consider your options prior to making any Owner, Annuitant and/or Beneficiary changes to your Contract.
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day of death of all Designated Lives eligible for lifetime benefits,
 
  •  upon the death of the first Designated Life, if a death benefit is payable and a Surviving Spouse who chooses to continue the Contract is not a Designated Life eligible for lifetime benefits,
 
  •  upon the death of the first Designated Life, if a death benefit is payable and the Contract is not continued by a Surviving Spouse who is a Designated Life eligible for lifetime benefits,
 
  •  if both Designated Lives are Joint Owners and there is a change in marital status, the Rider will terminate upon the death of the first Designated Life who is a Contract Owner,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day that neither Designated Life is an Owner (or Annuitant, in the case of a custodial owned IRA or TSA),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or
 
  •  the day that the Contract is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
The Rider and the Contract will not terminate the day of death of:
 
  •  all Designated Lives eligible for lifetime benefits, or


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  •  the first Designated Life who is a Contract Owner if both Designated Lives are Joint Owners and there is a change in marital status,
 
if, at the time of these events, the Contract Value is zero and we are making pre-authorized withdrawals of the Protected Payment Amount. In this case, the Rider will terminate when the Remaining Protected Balance is zero, see Depletion of Remaining Protected Balance subsection.
 
Sample Calculations
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
The examples apply to Flexible Lifetime Income Plus (Single) and (Joint) unless otherwise noted below.
 
Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s Age = 74 on the Contract Date
 
                             
Beginning
 		                  Protected
 		  Protected
 		  Remaining
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Example #2 – Subsequent Purchase Payments.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s Age = 74 on the Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  No withdrawals taken.
  •  No Automatic Resets or Owner-Elected Resets.
 
                             
Beginning
 		                  Protected
 		  Protected
 		  Remaining
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000
2
          $207,000   $10,000   $210,000   $10,500   $210,000
 
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $10,000 (5% of the Protected Payment Base after the Purchase Payment since there were no withdrawals during that Contract Year).


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Since no withdrawal occurred prior to the Contract Anniversary at the Beginning of Contract Year 2, an annual credit of $10,000 (5% of the initial Remaining Protected Balance plus cumulative Purchase Payments received after the Rider Effective Date) is applied to the Protected Payment Base and Remaining Protected Balance on that Contract Anniversary, increasing both to $210,000. As a result, the Protected Payment Amount on that Contract Anniversary is equal to $10,500 (5% of the Protected Payment Base on that Contract Anniversary).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of additional amounts credited, charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.
 
Example #3 – Withdrawals Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s Age = 74 on the Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Years 2, 3 and 4.
  •  Automatic Resets at Beginning of Contract Years 4 and 5.
 
                             
Beginning
 		                  Protected
 		  Protected
 		  Remaining
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000
2
          $207,000   $10,000   $210,000   $10,500   $210,000
Activity
      $10,500   $209,000       $210,000   $0   $199,500
3
          $209,000   $0   $210,000   $10,500   $199,500
Activity
      $10,500   $214,845       $210,000   $0   $189,000
4
  (Prior to Automatic Reset)       $214,845   $0   $210,000   $10,500   $189,000
4
  (After Automatic Reset)       $214,845   $0   $214,845   $12,890   $214,845
Activity
      $12,890   $216,994       $214,845   $0   $201,955
5
  (Prior to Automatic Reset)       $216,994   $0   $214,845   $12,890   $201,955
5
  (After Automatic Reset)       $216,994   $0   $216,994   $13,019   $216,994
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
As the withdrawal during Contract Year 2 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($10,500):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $199,500 ($210,000 − $10,500).
 
As the withdrawal during Contract Year 3 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($10,500):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $189,000 ($199,500 − $10,500).
 
Because at the Beginning of Contract Year 4, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Beginning of Contract Year 4 – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Beginning of Contract Year 4 – After Automatic Reset). Additionally, the reset took place after the Owner reached age 75. As a result, the Protected Payment Amount is equal to $12,890 (6% of the reset Protected Payment Base).
 
As the withdrawal during Contract Year 4 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($12,890):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $201,955 ($214,845 − $12,890).
 
Because at the Beginning of Contract Year 5, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Beginning of Contract Year 5 – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Beginning of Contract Year 5 – After Automatic Reset). As a result, the Protected Payment Amount is equal to $13,019 (6% of the reset Protected Payment Base).


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Since withdrawals occurred during Contract Years 2, 3 and 4, annual credits are not applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal. Since a reset occurred at the beginning of Contract Year 5, eligibility for the annual credit will again apply.
 
Example #4 – Withdrawals Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s Age = 74 on the Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Automatic Reset at Beginning of Contract Year 3.
 
                             
Beginning
 		                  Protected
 		  Protected
 		  Remaining
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000
2
          $207,000   $10,000   $210,000   $10,500   $210,000
Activity
      $15,000   $206,490       $205,527   $0   $195,000
3
  (Prior to Automatic Reset)       $206,490   $0   $205,527   $10,276   $195,000
3
  (After Automatic Reset)       $206,490   $0   $206,490   $12,389   $206,490
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $15,000 withdrawal during Contract Year 2 exceeds the Protected Payment Amount immediately prior to the withdrawal ($15,000 > $10,500), the Protected Payment Base and Remaining Protected Balance immediately after the withdrawal are reduced.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $221,490
  •  Protected Payment Base = $210,000
  •  Remaining Protected Balance = $210,000
  •  Protected Payment Amount = $10,500 (5% × Protected Payment Base; 5% × $210,000 = $10,500)
  •  No withdrawals were taken prior to the excess withdrawal
 
A withdrawal of $15,000 was taken, which exceeds the Protected Payment Amount of $10,500 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $4,500 (total withdrawal amount − Protected Payment Amount; $15,000 − $10,500 = $4,500).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). The Contract Value prior to the withdrawal was $221,490, which equals the $206,490 after the withdrawal plus the $15,000 withdrawal amount. Numerically, the ratio is 2.13% ($4,500 ¸ ($221,490 − $10,500); $4,500 ¸ $210,990 = 0.0213 or 2.13%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $205,527 (Protected Payment Base × (1 − ratio); $210,000 × (1 − 2.13%); $210,000 × 97.87% = $205,527).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the new Remaining Protected Balance is $195,250 ((Remaining Protected Balance immediately before the withdrawal − Protected Payment Amount) × (1 − ratio); ($210,000 − $10,500) × (1 − 2.13%); $199,500 × 97.87% = $195,250).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the


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new Remaining Protected Balance is $195,000 (Remaining Protected Balance immediately before the withdrawal − total withdrawal amount; $210,000 − $15,000 = $195,000).
 
Therefore, since $195,000 (total withdrawal amount method) is less than $195,250 (proportionate method) the new Remaining Protected Balance is $195,000.
 
The Protected Payment Amount immediately after the withdrawal is equal to $0 (5% of the Protected Payment Base after the withdrawal (5% of $205,527 = $10,276), less cumulative withdrawals during that Contract Year ($15,000), but not less than zero).
 
Because at the Beginning of Contract Year 3, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Beginning of Contract Year 3 – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Beginning of Contract Year 3 – After Automatic Reset). Additionally, the reset took place after the Owner reached age 75. As a result, the Protected Payment Amount is equal to $12,389 (6% of the reset Protected Payment Base).
 
Since withdrawals occurred during Contract Year 2, annual credits are not applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal. Since a reset occurred at the beginning of Contract Year 3, eligibility for the annual credit will again apply.
 
Example #5 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base and Remaining Protected Balance. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.
 
This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
              $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
05/01/2007
              $100,000   $5,000   $98,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $96,250
09/15/2007
  $1,875           $100,000   $1,250   $94,375
12/15/2007
  $1,875           $100,000   $0   $92,500
01/01/2008
          $8,000            
03/15/2008
  $2,000           $100,000   $0   $90,500
05/01/2008
              $100,000   $5,000   $90,500
Contract
Anniversary 		                       
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. The only effect is a reduction in the Remaining Protected Balance equal to the amount of each withdrawal. In addition, each contract year the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.


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This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
          $0   $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
04/01/2007
      $2,000       $100,000   $1,125   $96,125
05/01/2007
              $100,000   $5,000   $96,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $94,250
09/15/2007
  $1,875           $100,000   $1,250   $92,375
11/15/2007
      $4,000       $96,900   $0   $88,300
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $5,000 there was no adjustment to the Protected Payment Base. The only effect is a reduction in the Remaining Protected Balance and the Protected Payment Amount equal to the amount of each withdrawal. On 5/1/07, the Protected Payment Amount was re-calculated (5% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($5,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($1,250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $96,900 and the Remaining Protected Balance is reduced to $88,300. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $2,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $1,250=$2,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). Numerically, the ratio is 3.10% ($2,750 ¸ ($90,000 − $1,250); $2,750 ¸ $88,750 = 0.0310 or 3.10%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $96,900 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 3.10%); $100,000 × 96.90% = $96,900).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the Remaining Protected Balance is $88,300 ((Remaining Protected Balance − Protected Payment Amount) × (1 − ratio); ($92,375 − $1,250) × (1 − 3.10%); $91,125 × 96.90% = $88,300).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the Remaining Protected Balance is $88,375 (Remaining Protected Balance − total withdrawal amount; $92,375 − $4,000 = $88,375).
 
Therefore, since $88,300 (proportionate method) is less than $88,375 (total withdrawal amount method) the new Remaining Protected Balance is $88,300.


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Example #6 – Lifetime Income.
 
This example applies to Flexible Lifetime Income Plus (Single) only.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments are received.
  •  Owner is age 591/2 or older when the first withdrawal was taken.
  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
 
                         
                Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Annual
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $5,000   $96,489   $0   $100,000   $5,000   $95,000
2
  $5,000   $94,384   $0   $100,000   $5,000   $90,000
3
  $5,000   $92,215   $0   $100,000   $5,000   $85,000
4
  $5,000   $89,982   $0   $100,000   $5,000   $80,000
5
  $5,000   $87,681   $0   $100,000   $5,000   $75,000
6
  $5,000   $85,311   $0   $100,000   $5,000   $70,000
7
  $5,000   $82,871   $0   $100,000   $5,000   $65,000
8
  $5,000   $80,357   $0   $100,000   $5,000   $60,000
9
  $5,000   $77,768   $0   $100,000   $5,000   $55,000
10
  $5,000   $75,101   $0   $100,000   $5,000   $50,000
11
  $5,000   $72,354   $0   $100,000   $5,000   $45,000
12
  $5,000   $69,524   $0   $100,000   $5,000   $40,000
13
  $5,000   $66,610   $0   $100,000   $5,000   $35,000
14
  $5,000   $63,608   $0   $100,000   $5,000   $30,000
15
  $5,000   $60,517   $0   $100,000   $5,000   $25,000
16
  $5,000   $57,332   $0   $100,000   $5,000   $20,000
17
  $5,000   $54,052   $0   $100,000   $5,000   $15,000
18
  $5,000   $50,674   $0   $100,000   $5,000   $10,000
19
  $5,000   $47,194   $0   $100,000   $5,000   $5,000
20
  $5,000   $43,610   $0   $100,000   $5,000   $0
21
  $5,000   $39,918   $0   $100,000   $5,000   $0
22
  $5,000   $36,115   $0   $100,000   $5,000   $0
23
  $5,000   $32,199   $0   $100,000   $5,000   $0
24
  $5,000   $28,165   $0   $100,000   $5,000   $0
25
  $5,000   $24,010   $0   $100,000   $5,000   $0
26
  $5,000   $19,730   $0   $100,000   $5,000   $0
27
  $5,000   $15,322   $0   $100,000   $5,000   $0
28
  $5,000   $10,782   $0   $100,000   $5,000   $0
29
  $5,000   $6,105   $0   $100,000   $5,000   $0
30
  $5,000   $1,288   $0   $100,000   $5,000   $0
31
  $5,000   $0   $0   $100,000   $5,000   $0
32
  $5,000   $0   $0   $100,000   $5,000   $0
33
  $5,000   $0   $0   $100,000   $5,000   $0
34
  $5,000   $0   $0   $100,000   $5,000   $0
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000): (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.


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Since a withdrawal occurred during Contract Year 1, no annual credit will be applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal. Since it was assumed that the Owner was age 591/2 or older when the first withdrawal was taken, withdrawals of 5% of the Protected Payment Base will continue to be paid each year (even after the Contract Value and Remaining Protected Balance have been reduced to zero) until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
Example #7 – Lifetime Income.
 
This example applies to Flexible Lifetime Income Plus (Joint) Only.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments are received.
  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
  •  All Designated Lives remain eligible for lifetime income benefits while the Rider is in effect.
  •  Surviving Spouse continues Contract upon the death of the first Designated Life.
 
                         
                Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Annual
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $5,000   $96,489   $0   $100,000   $5,000   $95,000
2
  $5,000   $94,384   $0   $100,000   $5,000   $90,000
3
  $5,000   $92,215   $0   $100,000   $5,000   $85,000
4
  $5,000   $89,982   $0   $100,000   $5,000   $80,000
5
  $5,000   $87,681   $0   $100,000   $5,000   $75,000
6
  $5,000   $85,311   $0   $100,000   $5,000   $70,000
7
  $5,000   $82,871   $0   $100,000   $5,000   $65,000
8
  $5,000   $80,357   $0   $100,000   $5,000   $60,000
9
  $5,000   $77,768   $0   $100,000   $5,000   $55,000
10
  $5,000   $75,101   $0   $100,000   $5,000   $50,000
11
  $5,000   $72,354   $0   $100,000   $5,000   $45,000
12
  $5,000   $69,524   $0   $100,000   $5,000   $40,000
13
  $5,000   $66,610   $0   $100,000   $5,000   $35,000
Activity (Death of first
Designated Life)
14 		  $5,000   $63,608   $0   $100,000   $5,000   $30,000
15
  $5,000   $60,517   $0   $100,000   $5,000   $25,000
16
  $5,000   $57,332   $0   $100,000   $5,000   $20,000
17
  $5,000   $54,052   $0   $100,000   $5,000   $15,000
18
  $5,000   $50,674   $0   $100,000   $5,000   $10,000
19
  $5,000   $47,194   $0   $100,000   $5,000   $5,000
20
  $5,000   $43,610   $0   $100,000   $5,000   $0
21
  $5,000   $39,918   $0   $100,000   $5,000   $0
22
  $5,000   $36,115   $0   $100,000   $5,000   $0
23
  $5,000   $32,199   $0   $100,000   $5,000   $0
24
  $5,000   $28,165   $0   $100,000   $5,000   $0
25
  $5,000   $24,010   $0   $100,000   $5,000   $0
26
  $5,000   $19,730   $0   $100,000   $5,000   $0
27
  $5,000   $15,322   $0   $100,000   $5,000   $0
28
  $5,000   $10,782   $0   $100,000   $5,000   $0
29
  $5,000   $6,105   $0   $100,000   $5,000   $0
30
  $5,000   $1,288   $0   $100,000   $5,000   $0
31
  $5,000   $0   $0   $100,000   $5,000   $0
32
  $5,000   $0   $0   $100,000   $5,000   $0
33
  $5,000   $0   $0   $100,000   $5,000   $0
34
  $5,000   $0   $0   $100,000   $5,000   $0
 


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On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000): (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.
 
During Contract Year 13, the death of the first Designated Life occurred. Withdrawals of the Protected Payment Amount (5% of the Protected Payment Base) will continue to be paid each year (even after the Contract Value and Remaining Protected Balance were reduced to zero) until the Rider terminates.
 
If there was a change in Owner, Beneficiary or marital status prior to the death of the first Designated Life that resulted in the surviving Designated Life (spouse) to become ineligible for lifetime income benefits, then the lifetime income benefits under the Rider would not continue for the surviving Designated Life and the Rider would terminate upon the death of the first Designated Life.
 
Automatic Income Builder
 
(This Rider is called the Guaranteed Withdrawal Benefit III Rider in the Contract’s Rider.)
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. The initial Protected Payment Amount on the Rider Effective Date is equal to the applicable withdrawal percentage (based on the Owner’s age at the time of purchase) multiplied by the Protected Payment Base.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is age 591/2 or older when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to the withdrawal percentage multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during the Contract Year.
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) is younger than age 591/2 when the first withdrawal was taken or the most recent reset, whichever is later, the Protected Payment Amount on any day after the Rider Effective Date is equal to the lesser of:
 
  •  the withdrawal percentage multiplied by the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year, or
 
  •  the Remaining Protected Balance as of that day.
 
The Protected Payment Amount will never be less than zero.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will never be less than zero and will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider. The Remaining Protected Balance will never be less than zero. The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Reset Date – Any Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
You will find information about an RMD Withdrawal in the Required Minimum Distributions subsection and information about Automatic Resets and Owner-Elected Resets in the Reset of Protected Payment Base subsection below.


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How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Rider terminates. Lifetime withdrawals up to the Protected Payment Amount may continue after the Remaining Protected Balance is reduced to zero (0) if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) was age 591/2 or older when the first withdrawal was taken after the Rider Effective Date or the most recent Reset Date, whichever is later. If a withdrawal was taken before age 591/2 and there was no subsequent Reset, the Rider will terminate once the Remaining Protected Balance is reduced to zero (0). If you are older than 591/2 and if you delay taking withdrawals, this Rider also provides the potential to receive a 0.10% increase in the withdrawal percentage per year, which can increase the percentage that you may withdraw each Contract Year without reducing your Protected Payment Base. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
In addition, beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value.
 
The Protected Payment Base and Remaining Protected Balance may change over time. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal Percentage
 
On or prior to the date of the first withdrawal (measured from the later of the Rider Effective Date or most recent Reset Date) the withdrawal percentage is determined as follows based on the oldest Owner’s age (or youngest Annuitant in the case of a Non-Natural Owner):
 
If your Rider Effective Date is on or after January 1, 2009, the following Withdrawal Percentages will apply:
 
     
Age
  Withdrawal Percentage
 
Before 591/2
  4.0%
591/2 - 69
  4.0%
70 - 84
  5.0%
85 and older
  6.0%
 
If your Rider Effective Date is before January 1, 2009, the following Withdrawal Percentages will apply:
 
     
Age
  Withdrawal Percentage
 
Before 591/2
  5.0%
591/2 - 69
  5.0%
70 - 84
  6.0%
85 and older
  7.0%
 
If the first withdrawal (measured from the later of the Rider Effective Date or most recent Reset Date) is taken on or after age 591/2, the withdrawal percentage will automatically increase according to the table above based on age as of the most recent Contract Anniversary.
 
If the first withdrawal (measured from the later of the Rider Effective Date or most recent Reset Date) is taken prior to age 591/2, the withdrawal percentage will be 4.0% (5.0% if your Rider Effective Date is before January 1, 2009) until the Remaining Protected Balance is depleted and will remain unchanged unless a Reset occurs. If an Automatic Reset or an Owner-Elected Reset occurs and your first withdrawal after that Reset is taken on or after age 591/2, the withdrawal percentage will be the withdrawal percentage that corresponds to the age at the time of the first withdrawal.


170

 

 
There is an opportunity for an increase in the withdrawal percentage. The withdrawal percentage in the table above will increase by 0.10% for each Rider year a withdrawal is not taken beginning on the later of the Contract Anniversary following the Owner’s age 591/2 or the Rider Effective Date. In addition, the increase in the withdrawal percentage will still be included as you reach a new age band (for example, if your first withdrawal is taken after age 591/2 and at age 69 your withdrawal percentage is 4.4%, then your withdrawal percentage would be 5.4% the Contract Anniversary immediately after you turn 70). However, once a withdrawal is taken (including an RMD Withdrawal), regardless of the Owner’s age when the withdrawal is taken, no further 0.10% increase in the withdrawal percentage will be available and eligibility for the 0.10% increase cannot be reinstated with a Reset.
 
The withdrawal percentage, including any 0.10% increase, will not be reduced as a result of a Reset.
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year.
 
If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. Immediately following the withdrawal the Remaining Protected Balance will decrease by the withdrawal amount.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations below for a numerical example of the adjustments to the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Depletion of Contract Value
 
If a withdrawal (including an RMD Withdrawal) does not exceed the Protected Payment Amount immediately prior to the withdrawal and reduces the Contract Value to zero, the following will apply:
 
  •  if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 591/2 when the first withdrawal was taken under the Rider, after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the Remaining Protected Balance is reduced to zero, or
 
  •  was age 591/2 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, the Protected Payment Amount will be paid each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant.


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  •  the Protected Payment Amount will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract,
 
  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
If the Owner or sole surviving Annuitant dies and the Contract Value is zero as of the date of death, there is no death benefit, however, any Remaining Protected Balance will be paid to the Beneficiary under a series of pre-authorized withdrawals and payment frequency (at least annually) then in effect at the time of the Owner’s or sole surviving Annuitant’s death. If, however, the Remaining Protected Balance would be paid over a period that exceeds the life expectancy of the Beneficiary, the pre-authorized withdrawal amount will be adjusted so that the withdrawal payments will be paid over a period that does not exceed the Beneficiary’s life expectancy.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduces the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 591/2 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, this Rider will terminate, or
 
  •  was age 591/2 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to withdraw up to the Protected Payment Amount each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant. If an Automatic or Owner-Elected Reset occurs, the Remaining Protected Balance will be reinstated to an amount equal to the Contract Value as of that Contract Anniversary.
 
Before your Remaining Protected Balance is zero, if you took your first withdrawal before age 591/2 and you would like to be eligible for lifetime payments under the Rider, an Automatic or Owner-Elected Reset must occur and your first withdrawal after that Reset must be taken on or after age 591/2. See the Reset of Protected Payment Base and Remaining Protected Balance subsection of this Rider. If you are younger than age 591/2 when the Remaining Protected Balance is zero and Contract Value remains, the Rider will terminate and there is no opportunity for a Reset.
 
If a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection.
 
Any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued, except that eligibility for the increase in the withdrawal percentage cannot be reinstated with a Reset once a withdrawal is taken. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of annual Charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above. If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries. If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets


172

 

at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance and Protected Payment Amount. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  the Protected Payment Amount in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
The annuity payments described in this subsection are available to you even if your first withdrawal was taken prior to age 591/2 and no Resets have occurred.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Remaining Protected Balance is zero when the Owner dies, this Rider will terminate. If the Remaining Protected Balance is greater than zero and the Owner dies while this Rider is in effect, the surviving spouse of the deceased Owner may elect to continue the Contract in accordance with its terms, and the surviving spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero.
 
The surviving spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries. If a reset takes place then the provisions of this Rider will continue in full force and in effect for the surviving spouse. The withdrawal percentage will be determined based on the age of the surviving spouse and the new withdrawal percentage may be higher or lower than what the withdrawal percentage was prior to death. In addition, if the surviving spouse is age 591/2 or older when the first withdrawal is taken after the most recent Reset Date and this Reset Date occurred after the surviving spouse continued the Contract, then the surviving spouse may take withdrawals of the Protected Payment Amount (based on the new Protected Payment Base and withdrawal percentage) for life.
 
Any 0.10% increase to the withdrawal percentage previously added will apply but no further increases to the withdrawal percentage will be added.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).


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Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day the Remaining Protected Balance is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner), was younger than 591/2 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later,
 
  •  the date of the first death of an Owner or the date of death of the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero and see the Depletion of Remaining Protected Balance subsection for situations where the Rider will not terminate when the Remaining Protected Balance is reduced to zero.
 
Sample Calculations
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s age on Rider Effective Date = 68
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000   $100,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = Withdrawal percentage multiplied by the Protected Payment Base = 4% × $100,000 = $4,000


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Example #2 – Subsequent Purchase Payments.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s age on Rider Effective Date = 68
  •  A subsequent Purchase Payment of $100,000 is received during Contract Years 1 and 2.
  •  No withdrawals taken.
  •  Automatic Reset at Beginning of Contract Years 2 and 3.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000   $100,000
Activity
  $100,000       $216,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  Prior to Automatic Reset       $220,000   $200,000   $8,200   $200,000
Year 2 Contract Anniversary
  After Automatic Reset       $220,000   $220,000   $9,020   $220,000
Activity
  $100,000       $328,000   $320,000   $13,120   $320,000
Year 3 Contract Anniversary
  Prior to Automatic Reset       $331,490   $320,000   $16,640   $320,000
Year 3 Contract Anniversary
  After Automatic Reset       $331,490   $331,490   $17,237   $331,490
 
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $8,000 (4.0% of the Protected Payment Base after the Purchase Payment).
 
Since no withdrawal occurred prior to Year 2 Contract Anniversary, the withdrawal percentage is increased to 4.1%. Additionally, because at Year 2 Contract Anniversary, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 2 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 2 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $9,020 (4.1% of the reset Protected Payment Base).
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 2, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $320,000 ($220,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $13,120 (4.1% of the Protected Payment Base after the Purchase Payment.
 
At Year 3 Contract Anniversary, the withdrawal percentage is increased to 5.2%. The withdrawal percentage increased from 4.1% to 5.2% because during Contract Year 2 there were no withdrawals (0.10% added to the withdrawal percentage) and the Owner reached age 70 (1.0% added to the withdrawal percentage). Additionally, because at Year 3 Contract Anniversary, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $17,237 (5.2% of the reset Protected Payment Base).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of additional amounts credited, charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.
 
Example #3 – Withdrawals Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s age on Rider Effective Date = 68
  •  A subsequent Purchase Payment of $100,000 is received during Contract Years 1 and 2.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Year 3.
  •  Automatic Reset at Beginning of Contract Years 2, 3 and 4.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 


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                Protected
 		  Protected
 		  Remaining
    Purchase
 		          Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Contract Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000   $100,000
Activity
  $100,000       $216,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  Prior to Automatic Reset       $220,000   $200,000   $8,200   $200,000
Year 2 Contract Anniversary
  After Automatic Reset       $220,000   $220,000   $9,020   $220,000
Activity
  $100,000       $328,000   $320,000   $13,120   $320,000
Year 3 Contract Anniversary
  Prior to Automatic Reset       $331,490   $320,000   $16,640   $320,000
Year 3 Contract Anniversary
  After Automatic Reset       $331,490   $331,490   $17,237   $331,490
Activity
      $17,237   $337,457   $331,490   $0   $314,253
Year 4 Contract Anniversary
  Prior to Automatic Reset       $337,457   $331,490   $17,237   $314,253
Year 4 Contract Anniversary
  After Automatic Reset       $337,457   $337,457   $17,547   $337,457
 
 
For an explanation of the values and activities at the start of and during Contract Years 1 and 2, refer to Examples #1 and #2.
 
At Year 3 Contract Anniversary, the withdrawal percentage is increased to 5.2%. The withdrawal percentage increased from 4.1% to 5.2% because during Contract Year 2 there were no withdrawals (0.10% added to the withdrawal percentage) and the Owner reached age 70 (1.0% added to the withdrawal percentage). Additionally, because at Year 3 Contract Anniversary, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $17,237 (5.2% of the reset Protected Payment Base).
 
As the withdrawal during Contract Year 3 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($17,237):
 
  •  the Protected Payment Base remains unchanged; and
 
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $314,253 ($331,490 − $17,237).
 
Since a withdrawal occurred during Contract Year 3, the withdrawal percentage will no longer increase as a result of delaying withdrawals.
 
Because at Year 4 Contract Anniversary, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 4 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 4 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $17,547 (5.2% of the reset Protected Payment Base).
 
Example #4 – Withdrawals Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s age on Rider Effective Date = 68
  •  A subsequent Purchase Payment of $100,000 is received during Contract Years 1 and 2.

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  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 3.
  •  Automatic Resets at Beginning of Contract Years 2, 3 and 4.
  •  Each Contract Anniversary referenced in the table represents the first day of the applicable Contract Year.
 
                         
                Protected
 		  Protected
 		  Remaining
    Purchase
 		      Contract
 		  Payment
 		  Payment
 		  Protected
    Payment   Withdrawal   Value   Base   Amount   Balance
 
Rider Effective Date
  $100,000       $108,000   $100,000   $4,000   $100,000
Activity
  $100,000       $216,000   $200,000   $8,000   $200,000
Year 2 Contract Anniversary
  Prior to Automatic Reset       $220,000   $200,000   $8,200   $200,000
Year 2 Contract Anniversary
  After Automatic Reset       $220,000   $220,000   $9,020   $220,000
Activity
  $100,000       $328,000   $320,000   $13,120   $320,000
Year 3 Contract Anniversary
  Prior to Automatic Reset       $331,490   $320,000   $16,640   $320,000
Year 3 Contract Anniversary
  After Automatic Reset       $331,490   $331,490   $17,237   $331,490
Activity
      $30,000   $323,994   $318,926   $0   $301,490
Year 4 Contract Anniversary
  Prior to Automatic Reset       $323,994   $318,926   $16,584   $301,490
Year 4 Contract Anniversary
  After Automatic Reset       $323,994   $323,994   $16,847   $323,994
 
 
For an explanation of the values and activities at the start of and during Contract Years 1 and 2, refer to Examples #1 and #2.
 
At Year 3 Contract Anniversary, the withdrawal percentage is increased to 5.2%. The withdrawal percentage increased from 4.1% to 5.2% because during Contract Year 2 there were no withdrawals (0.10% added to the withdrawal percentage) and the Owner reached age 70 (1.0% added to the withdrawal percentage). Additionally, because at Year 3 Contract Anniversary, since the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 3 Contract Anniversary – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 3 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $17,237 (5.2% of the reset Protected Payment Base).
 
As the withdrawal during Contract Year 3 exceeded the Protected Payment Amount immediately prior to the withdrawal ($17,237), the Protected Payment Base is reduced to $318,926 and the Remaining Protected Balance is reduced to $301,490. The reduction in the Protected Payment Base and the Remaining Protected Balance is calculated as follows:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $12,763 (total withdrawal amount – Protected Payment Amount; $30,000 − $17,237 = $12,763).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value prior to the withdrawal – Protected Payment Amount). The Contract Value prior to the withdrawal was $353,994, which equals the $323,994 after the withdrawal plus the $30,000 withdrawal amount. Numerically, the ratio is 3.79% ($12,763 ¸ ($353,994 − $17,237); $12,763 ¸ $336,757 = 0.0379 or 3.79%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $318,926 (Protected Payment Base × (1 − ratio); $331,490 × (1 − 3.79%); $331,490 × 96.21% = $318,926.
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the new Remaining Protected Balance is $302,342 (Remaining Protected Balance immediately before the withdrawal – Protected Payment Amount) × (1 − ratio); ($331,490 − $17,237) × (1 − 3.79%); $314,253 × 96.21% = $302,342).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the new Remaining Protected Balance is $301,490 (Remaining Protected Balance immediately before the withdrawal – total withdrawal amount; $331,490 − $30,000 = $301,490).
 
Therefore, since $301,490 (total withdrawal amount method) is less than $302,342 (proportionate method) the new Remaining Protected Balance is $301,490.
 
Since a withdrawal occurred during Contract Year 3, the withdrawal percentage will no longer increase as a result of delaying withdrawals.


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At Year 4 Contract Anniversary, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Year 4 Contract Anniversary – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Year 4 Contract Anniversary – After Automatic Reset). As a result, the Protected Payment Amount is equal to $16,847 (5.2% of the reset Protected Payment Base).
 
Example #5 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base and Remaining Protected Balance. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.
 
This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
Contract
Anniversary 		          $0   $100,000   $5,000   $100,000
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
05/01/2007
Contract
Anniversary 		              $100,000   $5,000   $98,125
06/15/2007
  $1,875           $100,000   $3,125   $96,250
09/15/2007
  $1,875           $100,000   $1,250   $94,375
12/15/2007
  $1,875           $100,000   $0   $92,500
01/01/2008
          $8,000            
03/15/2008
  $2,000           $100,000   $0   $90,500
05/01/2008                        
Contract
Anniversary 		              $100,000   $5,000   $90,500
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. The only effect is a reduction in the Remaining Protected Balance equal to the amount of each withdrawal. In addition, each contract year the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.
 
This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
Contract
Anniversary 		          $0   $100,000   $5,000   $100,000
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
04/01/2007
      $2,000       $100,000   $1,125   $96,125
05/01/2007
Contract
Anniversary 		              $100,000   $5,000   $96,125
06/15/2007
  $1,875           $100,000   $3,125   $94,250
09/15/2007
  $1,875           $100,000   $1,250   $92,375
11/15/2007
      $4,000       $96,900   $0   $88,300
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $5,000 there was no adjustment to the Protected Payment Base. The only effect is a reduction in the Remaining Protected Balance and the Protected Payment Amount equal


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to the amount of each withdrawal. On 5/1/07, the Protected Payment Amount was re-calculated (5% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($5,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($1,250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $96,900 and the Remaining Protected Balance is reduced to $88,300. The Protected Payment Base and Remaining Protected Balance will be reduced by the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $2,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $1,250 = $2,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). Numerically, the ratio is 3.10% ($2,750 ¸ ($90,000 − $1,250); $2,750 ¸ $88,750 = 0.0310 or 3.10%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $96,900 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 3.10%); $100,000 × 96.90% = $96,900).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance is reduced by the Protected Payment Amount and then multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the Remaining Protected Balance is $88,300 ((Remaining Protected Balance − Protected Payment Amount) × (1 − ratio); ($92,375 − $1,250) × (1 − 3.10%); $91,125 × 96.90% = $88,300).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the Remaining Protected Balance is $88,375 (Remaining Protected Balance − total withdrawal amount; $92,375 − $4,000 = $88,375).
 
Therefore, since $88,300 (proportionate method) is less than $88,375 (total withdrawal amount method) the new Remaining Protected Balance is $88,300.
 
Example #6 – Lifetime Income.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  Owner’s age on Rider Effective Date = 65
  •  No subsequent Purchase Payments are received.
  •  Withdrawals, are taken each Contract Year:
  •  Equal to 4% of the Protected Payment Base in Contract Years 1-5 (age 65-69)
  •  Equal to 5% of the Protected Payment Base in Contract Years 6-20 (age 70-84)
  •  Equal to 6% of the Protected Payment Base in Contract Years 21-35 (age 85-99)
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.


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            Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Base   Amount   Balance
 
1
  $4,000   $99,000   $100,000   $4,000   $96,000
2
  $4,000   $97,970   $100,000   $4,000   $92,000
3
  $4,000   $96,909   $100,000   $4,000   $88,000
4
  $4,000   $95,816   $100,000   $4,000   $84,000
5
  $4,000   $94,691   $100,000   $4,000   $80,000
6
  $5,000   $92,532   $100,000   $5,000   $75,000
7
  $5,000   $90,308   $100,000   $5,000   $70,000
8
  $5,000   $88,017   $100,000   $5,000   $65,000
9
  $5,000   $85,657   $100,000   $5,000   $60,000
10
  $5,000   $83,227   $100,000   $5,000   $55,000
11
  $5,000   $80,724   $100,000   $5,000   $50,000
12
  $5,000   $78,146   $100,000   $5,000   $45,000
13
  $5,000   $75,490   $100,000   $5,000   $40,000
14
  $5,000   $72,755   $100,000   $5,000   $35,000
15
  $5,000   $69,937   $100,000   $5,000   $30,000
16
  $5,000   $67,035   $100,000   $5,000   $25,000
17
  $5,000   $64,046   $100,000   $5,000   $20,000
18
  $5,000   $60,968   $100,000   $5,000   $15,000
19
  $5,000   $57,797   $100,000   $5,000   $10,000
20
  $5,000   $54,531   $100,000   $5,000   $5,000
21
  $6,000   $50,167   $100,000   $6,000   $0
22
  $6,000   $45,672   $100,000   $6,000   $0
23
  $6,000   $41,042   $100,000   $6,000   $0
24
  $6,000   $36,273   $100,000   $6,000   $0
25
  $6,000   $31,361   $100,000   $6,000   $0
26
  $6,000   $26,302   $100,000   $6,000   $0
27
  $6,000   $21,091   $100,000   $6,000   $0
28
  $6,000   $15,724   $100,000   $6,000   $0
29
  $6,000   $10,196   $100,000   $6,000   $0
30
  $6,000   $4,501   $100,000   $6,000   $0
31
  $6,000   $0   $100,000   $6,000   $0
32
  $6,000   $0   $100,000   $6,000   $0
33
  $6,000   $0   $100,000   $6,000   $0
34
  $6,000   $0   $100,000   $6,000   $0
35
  $6,000   $0   $100,000   $6,000   $0
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 4% of Protected Payment Base = $4,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal: (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.
 
Since a withdrawal occurred during Contract Year 1, no increases are added to the withdrawal percentage due to delaying withdrawals.
 
Since it was assumed that the Owner was age 591/2 or older when the first withdrawal was taken, withdrawals of 4%, 5% and 6% of the Protected Payment Base, respectively, will continue to be paid each year (even after the Contract Value and Remaining Protected Balance have been reduced to zero) until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
Flexible Lifetime Income (Single)
 
(This Rider is called the 5% Guaranteed Withdrawal Benefit Rider in the Contract’s Rider.)


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Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. The Protected Payment Amount on any day after the Rider Effective Date is equal to the lesser of:
 
  •  5% of the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year, or
 
  •  the Remaining Protected Balance as of that day.
 
The initial Protected Payment Amount on the Rider Effective Date is equal to 5% of the initial Protected Payment Base.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider. The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Annual Credit – An amount added to the Protected Payment Base and Remaining Protected Balance.
 
Reset Date – Any Contract Anniversary beginning with the 1st Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Remaining Protected Balance is reduced to zero (0). Lifetime withdrawals up to the Protected Payment Amount may continue after the Remaining Protected Balance is reduced to zero (0) if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) was age 591/2 or older when the first withdrawal was taken after the Rider Effective Date or the most recent Reset Date, whichever is later. If a withdrawal was taken before age 591/2 and there was no subsequent Reset, the Rider will terminate once the Remaining Protected Balance is reduced to zero (0). This Rider also provides for an amount (an “Annual Credit”) to be added to the Protected Payment Base and Remaining Protected Balance. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
In addition, beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value.
 
If applicable, an Annual Credit is added to the Protected Payment Base and Remaining Protected Balance prior to any Automatic Reset. If the Contract Value as of that Contract Anniversary is greater than the Protected Payment Base (which includes the Annual Credit amount) then the Protected Payment Base and Remaining Protected Balance will be automatically reset to equal the Contract Value.
 
The Protected Payment Base and Remaining Protected Balance may change over time. The addition of an Annual Credit will increase the Protected Payment Base and the Remaining Protected Balance by the amount of the Annual Credit. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.


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If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contact Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year. If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. The Remaining Protected Balance will decrease by the withdrawal amount immediately following the withdrawal.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations below for a numerical example of the adjustments to the Protected Payment Base and Remaining Protected Balance as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Depletion of Contract Value
 
If a withdrawal (including an RMD Withdrawal) does not exceed the Protected Payment Amount and reduces the Contract Value to zero, the following will apply:
 
  •  if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 591/2 when the first withdrawal was taken under the Rider, after the Rider Effective Date or the most recent Reset Date, whichever is later, 5% of the Protected Payment Base will be paid each year until the Remaining Protected Balance is reduced to zero, or
 
  •  was age 591/2 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, 5% of the Protected Payment Base will be paid each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant.
 
  •  the payments of 5% of the Protected Payment Base will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract,


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  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
If the Owner or sole surviving Annuitant dies and the Contract Value is zero as of the date of death, there is no death benefit, however, any Remaining Protected Balance will be paid to the Beneficiary under a series of pre-authorized withdrawals and payment frequency (at least annually) then in effect at the time of the Owner’s or sole surviving Annuitant’s death. If, however, the Remaining Protected Balance would be paid over a period that exceeds the life expectancy of the Beneficiary, the pre-authorized withdrawal amount will be adjusted so that the withdrawal payments will be paid over a period that does not exceed the Beneficiary’s life expectancy.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduced the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 591/2 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, this Rider will terminate, or
 
  •  was age 591/2 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to withdraw up to 5% of the Protected Payment Base each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant. If an Automatic or Owner-Elected Reset occurs, the Remaining Protected Balance will be reinstated to an amount equal to the Contract Value as of that Contract Anniversary.
 
Before your Remaining Protected Balance is zero, if you took your first withdrawal before age 591/2 and you would like to be eligible for lifetime payments under the Rider, an Automatic or Owner-Elected Reset must occur and your first withdrawal after that Reset must be taken on or after age 591/2. See the Reset of Protected Payment Base and Remaining Protected Balance subsection of this Rider. If you are younger than age 591/2 when the Remaining Protected Balance is zero and Contract Value remains, the Rider will terminate and there is no opportunity for a Reset.
 
If a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the withdrawal will be treated as an excess withdrawal and the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection.
 
Any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.
 
Annual Credit
 
On each Contract Anniversary after the Rider Effective Date, an Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance, as of that Contract Anniversary, if:
 
  •  no withdrawals have occurred after the Rider Effective Date or the most recent Reset Date, whichever is later, and
 
  •  that Contract Anniversary is within the first 10 Contract Anniversaries, measured from the Rider Effective Date or the most recent Reset Date, whichever is later.
 
The Annual Credit is equal to 6% of the total of:
 
  •  the Remaining Protected Balance on the Rider Effective Date or the most recent Reset Date, whichever is later, and
 
  •  the cumulative Purchase Payments received after the Rider Effective Date or most recent Reset Date, whichever is later,
 
as of the Contract Anniversary on which the Annual Credit is added.
 
Once a withdrawal has occurred, including an RMD Withdrawal, no Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal, unless an Automatic Reset or Owner-Elected Reset occurs. If such a Reset occurs, your eligibility for the Annual Credit will be reinstated as of the Reset Date.
 
The Annual Credit is not added to your Contract Value.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. Eligibility for any Annual Credit, the limitations and restrictions on Purchase Payments and withdrawals, the deduction of annual Charges and any future reset options available on and after the Reset Date, will again apply and will


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be measured from that Reset Date. A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base, after any Annual Credit is applied, is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in effect in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and any Annual Credit that may be applied. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached, permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only annual payment amount based on the terms of your Contract, or
 
  •  5% of the Protected Payment Base in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
The annuity payments described in this subsection are available to you even if your first withdrawal was taken prior to age 591/2 and no Resets have occurred.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Remaining Protected Balance is zero when the Owner dies, this Rider will terminate. If the Owner dies while this Rider is in effect and if the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, the surviving spouse may


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continue to take withdrawals of the Protected Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero.
 
The surviving spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries. If a reset takes place then the provisions of this Rider will continue in full force and in effect for the surviving spouse. In addition, if the surviving spouse is age 591/2 or older when the first withdrawal is taken after the most recent Reset Date and this Reset Date occurred after the surviving spouse continued the Contract, then the surviving spouse may take withdrawals of the Protected Payment Amount (based on the new Protected Payment Base) for life.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day the Remaining Protected Balance is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner), was younger than 591/2 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later,
 
  •  the date of the first death of an Owner or the date of death of the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero and see the Depletion of Remaining Protected Balance subsection for situations where the Rider will not terminate when the Remaining Protected Balance is reduced to zero.
 
Flexible Lifetime Income (Joint)
 
(This Rider is called the Joint Life 5% Guaranteed Withdrawal Benefit Rider in the Contract’s Rider.)
 
Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Designated Lives (each a “Designated Life”) – Designated Lives must be natural persons who are each other’s spouses on the Rider Effective Date. Designated Lives will remain unchanged while this Rider is in effect.
 
To be eligible for lifetime benefits, a Designated Life must:
 
  •  be the Owner (or the Annuitant, in the case of a custodial owned IRA or TSA), or
 
  •  remain the Spouse of the other Designated Life and be the first in line of succession, as determined under the Contract, for payment of any death benefit.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. The Protected Payment Amount on any day after the Rider Effective Date is equal to 5% of the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year. The initial Protected Payment Amount on the Rider Effective Date is equal to 5% of the initial Protected Payment Base.


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Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider. The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Annual Credit – An amount added to the Protected Payment Base and Remaining Protected Balance.
 
Reset Date – Any Contract Anniversary beginning with the 1st Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
Spouse – The Owner’s spouse who is treated as the Owner’s spouse pursuant to federal law.
 
Surviving Spouse – The surviving spouse of a deceased Owner.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the death of all Designated Lives eligible for lifetime benefits. This Rider also provides for an amount (an “Annual Credit”) to be added to the Protected Payment Base and Remaining Protected Balance. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
In addition, on each Contract Anniversary while this Rider is in effect and before the Annuity Date, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value.
 
If applicable, an Annual Credit is added to the Protected Payment Base and Remaining Protected Balance prior to any Automatic Reset. If the Contract Value as of that Contract Anniversary is greater than the Protected Payment Base (which includes the Annual Credit amount) then the Protected Payment Base and Remaining Protected Balance will be automatically reset to equal the Contract Value.
 
The Protected Payment Base and Remaining Protected Balance may change over time. The addition of an Annual Credit will increase the Protected Payment Base and the Remaining Protected Balance by the amount of the Annual Credit. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year.
 
If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. Immediately following the withdrawal, the Remaining Protected Balance will decrease by the withdrawal amount.


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Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations below for a numerical example of the adjustments to the Protected Payment Base and Remaining Protected Balance as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Depletion of Contract Value
 
If a withdrawal does not exceed the Protected Payment Amount (or is an RMD Withdrawal) and reduces the Contract Value to zero, the following will apply:
 
  •  5% of the Protected Payment Base will be paid each year until the death of all Designated Lives eligible for lifetime benefits,
 
  •  the payments of 5% of the Protected Payment Base will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,
 
  •  no additional Purchase Payments will be accepted under the Contract,
 
  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
If the surviving Designated Life eligible for lifetime benefits dies and the Contract Value is zero as of the date of death, there is no death benefit, however, any Remaining Protected Balance will be paid to the Beneficiary under a series of pre-authorized withdrawals and payment frequency (at least annually) then in effect at the time of the death of the surviving Designated Life eligible for lifetime benefits. If, however, the Remaining Protected Balance would be paid over a period that exceeds the life expectancy of the Beneficiary, the pre-authorized withdrawal amount will be adjusted so that the withdrawal payments will be paid over a period that does not exceed the Beneficiary’s life expectancy.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduced the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
  •  if a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the withdrawal will be treated as an excess withdrawal and the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection, and
 
  •  any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.


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Annual Credit
 
On each Contract Anniversary after the Rider Effective Date, an Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance, as of that Contract Anniversary, if:
 
  •  no withdrawals have occurred after the Rider Effective Date or the most recent Reset Date, whichever is later, and
 
  •  that Contract Anniversary is within the first 10 Contract Anniversaries, measured from the Rider Effective Date or the most recent Reset Date, whichever is later.
 
The Annual Credit is equal to 6% of the total of:
 
  •  the Remaining Protected Balance on the Rider Effective Date or the most recent Reset Date, whichever is later, and
 
  •  the cumulative Purchase Payments received after the Rider Effective Date or most recent Reset Date, whichever is later,
 
as of the Contract Anniversary on which the Annual Credit is added.
 
Once a withdrawal has occurred, including an RMD Withdrawal, no Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal, unless an Automatic Reset or Owner-Elected Reset occurs. If such a Reset occurs, your eligibility for the Annual Credit will be reinstated as of the Reset Date.
 
The Annual Credit is not added to your Contract Value.
 
Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued. Eligibility for any Annual Credit, the limitations and restrictions on Purchase Payments and withdrawals, the deduction of annual Charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base, after any Annual Credit is applied, is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges).
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in effect in accordance with the Automatic Reset paragraph above.
 
If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this Reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and any Annual Credit that may be applied. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.


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Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached, permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only or Joint Life Only fixed annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only or Joint Life Only fixed annual payment amount based on the terms of your Contract, or
 
  •  5% of the Protected Payment Base in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies while this Rider is in effect and if the Surviving Spouse (who is also a Designated Life eligible for lifetime benefits) elects to continue the Contract in accordance with its terms, the Surviving Spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the day of the death of such Surviving Spouse. The Surviving Spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries.
 
The Surviving Spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Ownership and Beneficiary Changes
 
Changes to the Contract Owner, Annuitant and/or Beneficiary designations and changes in marital status, including a dissolution of marriage, may adversely affect the benefits of this Rider. A particular change may make a Designated Life ineligible to receive lifetime income benefits under this Rider. As a result, the Rider may remain in effect and you may pay for benefits that you will not receive. You are strongly advised to work with your financial advisor and consider your options prior to making any Owner, Annuitant and/or Beneficiary changes to your Contract.
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day of death of all Designated Lives eligible for lifetime benefits,
 
  •  upon the death of the first Designated Life, if a death benefit is payable and a Surviving Spouse who chooses to continue the Contract is not a Designated Life eligible for lifetime benefits,
 
  •  upon the death of the first Designated Life, if a death benefit is payable and the Contract is not continued by a Surviving Spouse who is a Designated Life eligible for lifetime benefits,
 
  •  if both Designated Lives are Joint Owners and there is a change in marital status, the Rider will terminate upon the death of the first Designated Life who is a Contract Owner,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day that neither Designated Life is an Owner (or Annuitant, in the case of a custodial owned IRA or TSA),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or


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  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
The Rider and the Contract will not terminate the day of death of:
 
  •  all Designated Lives eligible for lifetime benefits, or
 
  •  the first Designated Life who is a Contract Owner if both Designated Lives are Joint Owners and there is a change in marital status,
 
if, at the time of these events, the Contract Value is zero and we are making pre-authorized withdrawals of 5% of the Protected Payment Base. In this case, the Rider will terminate when the Remaining Protected Balance is reduced to zero, see Depletion of Remaining Protected Balance subsection.
 
Sample Calculations
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
The examples apply to Flexible Lifetime Income (Single) and (Joint) unless otherwise noted below.
 
Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
 
                             
Beginning
 		                  Protected
 		  Protected
 		  Remaining
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Example #2 – Subsequent Purchase Payments.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  No withdrawals taken.
  •  No Automatic Resets or Owner-Elected Resets.
 
                             
Beginning
 		                  Protected
 		  Protected
 		  Remaining
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000
2
          $207,000   $12,000   $212,000   $10,600   $212,000
 


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Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). The Protected Payment Amount after the Purchase Payment is equal to $10,000 (5% of the Protected Payment Base after the Purchase Payment).
 
Since no withdrawal occurred prior to the Contract Anniversary at the Beginning of Contract Year 2, an annual credit of $12,000 (6% of the initial Remaining Protected Balance plus cumulative Purchase Payments received after the Rider Effective Date) is applied to the Protected Payment Base and Remaining Protected Balance on that Contract Anniversary, increasing both to $212,000. As a result, the Protected Payment Amount on that Contract Anniversary is equal to $10,600 (5% of the Protected Payment Base on that Contract Anniversary).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of additional amounts credited, charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.
 
Example #3 – Withdrawals Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Years 2, 3 and 4.
  •  Automatic Resets at Beginning of Contract Years 4 and 5.
 
                             
Beginning
 		                  Protected
 		  Protected
 		  Remaining
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000
2
          $207,000   $12,000   $212,000   $10,600   $212,000
Activity
      $10,600   $210,890       $212,000   $0   $201,400
3
          $210,890   $0   $212,000   $10,600   $201,400
Activity
      $10,600   $215,052       $212,000   $0   $190,800
4
  (Prior to Automatic Reset)       $215,052   $0   $212,000   $10,600   $190,800
4
  (After Automatic Reset)       $215,052   $0   $215,052   $10,752   $215,052
Activity
      $10,600   $219,506       $215,052   $152   $204,452
5
  (Prior to Automatic Reset)       $219,506   $0   $215,052   $10,752   $204,452
5
  (After Automatic Reset)       $219,506   $0   $219,506   $10,975   $219,506
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
As the withdrawal during Contract Year 2 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($10,600):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $201,400 ($212,000 − $10,600).
 
As the withdrawal during Contract Year 3 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($10,600):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $190,800 ($201,400 − $10,600).
 
Because at the Beginning of Contract Year 4, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Beginning of Contract Year 4 – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Beginning of Contract Year 4 – After Automatic Reset). As a result, the Protected Payment Amount is equal to $10,752 (5% of the reset Protected Payment Base).
 
As the withdrawal during Contract Year 4 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($10,600):
 
  •  the Protected Payment Base remains unchanged;
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $204,452 ($215,052 − $10,600); and
  •  the Protected Payment Amount is reduced to $152 (5% of the Protected Payment Base less cumulative withdrawals (5% × $215,052 − $10,600 = $152).


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Because at the Beginning of Contract Year 5, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Beginning of Contract Year 5 – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Beginning of Contract Year 5 – After Automatic Reset). As a result, the Protected Payment Amount is equal to $10,975 (5% of the reset Protected Payment Base).
 
Since withdrawals occurred during Contract Years 2, 3 and 4, no annual credit will be applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal. Since a Reset occurred at the beginning of Contract Year 5, eligibility for the annual credit will again apply.
 
Example #4 – Withdrawals Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Year 1.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 2.
  •  Automatic Resets at Beginning of Contract Year 4.
 
                             
Beginning
 		                  Protected
 		  Protected
 		  Remaining
of Contract
 		  Purchase
 		      Contract
 		  Annual
 		  Payment
 		  Payment
 		  Protected
Year   Payment   Withdrawal   Value   Credit   Base   Amount   Balance
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000
2
          $207,000   $12,000   $212,000   $10,600   $212,000
Activity
      $15,000   $206,490       $207,590   $0   $197,000
3
          $206,490   $0   $207,590   $10,379   $197,000
4
  (Prior to Automatic Reset)       $220,944   $0   $207,590   $10,379   $197,000
4
  (After Automatic Reset)       $220,944   $0   $220,944   $11,047   $220,944
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $15,000 withdrawal during Contract Year 2 exceeds the Protected Payment Amount immediately prior to the withdrawal ($15,000 > $10,600), the Protected Payment Base and Remaining Protected Balance immediately after the withdrawal are reduced.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $221,490
  •  Protected Payment Base = $212,000
  •  Remaining Protected Balance = $212,000
  •  Protected Payment Amount = $10,600 (5% × Protected Payment Base; 5% × $212,000 = $10,600)
  •  No withdrawals were taken prior to the excess withdrawal
 
A withdrawal of $15,000 was taken, which exceeds the Protected Payment Amount of $10,600 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $4,400 (total withdrawal amount − Protected Payment Amount; $15,000 − $10,600 = $4,400).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). The Contract Value prior to the withdrawal was $221,490, which equals the $206,490 after the withdrawal plus the $15,000 withdrawal amount. Numerically, the ratio is 2.08% ($4,400 ¸ ($221,490 − $10,600); $4,400 ¸ $210,890 = 0.0208 or 2.08%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $207,590 (Protected Payment Base × (1 − ratio); $212,000 × (1 − 2.08%); $212,000 × 97.92% = $207,590).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.


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To determine the proportionate reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the new Remaining Protected Balance is $197,210 (Remaining Protected Balance immediately before the withdrawal − Protected Payment Amount) × (1 − ratio); ($212,000 − $10,600) × (1 − 2.08%); $201,400 × 97.92% = $197,210).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the new Remaining Protected Balance is $197,000 (Remaining Protected Balance immediately before the withdrawal − total withdrawal amount; $212,000 − $15,000 = $197,000).
 
Therefore, since $197,000 (total withdrawal amount method) is less than $197,210 (proportionate method) the new Remaining Protected Balance is $197,000.
 
The Protected Payment Amount immediately after the withdrawal is equal to $0 (5% of the Protected Payment Base after the withdrawal (5% of $207,590 = $10,379), less cumulative withdrawals during that Contract Year ($15,000), but not less than zero).
 
Because at the Beginning of Contract Year 4, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Beginning of Contract Year 4 – Prior to Automatic Reset), an Automatic Reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Beginning of Contract Year 4 – After Automatic Reset).
 
Since a withdrawal occurred during Contract Year 2, annual credits are not applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal. Since a reset occurred at the beginning of Contract Year 4, eligibility for the annual credit will again apply.
 
Example #5 – RMD Withdrawals.
 
This is an example of the effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base and Remaining Protected Balance. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.
 
This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006               $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
05/01/2007
              $100,000   $5,000   $98,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $96,250
09/15/2007
  $1,875           $100,000   $1,250   $94,375
12/15/2007
  $1,875           $100,000   $0   $92,500
01/01/2008
          $8,000            
03/15/2008
  $2,000           $100,000   $0   $90,500
05/01/2008
              $100,000   $5,000   $90,500
Contract
Anniversary 		                       
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. The only effect is a reduction in the Remaining Protected Balance equal to the amount of each withdrawal. In addition, each contract year the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.


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This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006           $0   $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
04/01/2007
      $2,000       $100,000   $1,125   $96,125
05/01/2007
              $100,000   $5,000   $96,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $94,250
09/15/2007
  $1,875           $100,000   $1,250   $92,375
11/15/2007
      $4,000       $96,900   $0   $88,300
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $5,000 there was no adjustment to the Protected Payment Base. The only effect is a reduction in the Remaining Protected Balance and the Protected Payment Amount equal to the amount of each withdrawal. On 5/1/07, the Protected Payment Amount was re-calculated (5% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($5,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($1,250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $96,900 and the Remaining Protected Balance is reduced to $88,300.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $90,000
  •  Protected Payment Base = $100,000
  •  Remaining Protected Balance = $92,375
  •  Protected Payment Amount = $1,250
 
A withdrawal of $4,000 was taken, which exceeds the Protected Payment Amount of $1,250 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $2,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $1,250 = $2,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). Numerically, the ratio is 3.10% ($2,750 ¸ ($90,000 − $1,250); $2,750 ¸ $88,750 = 0.0310 or 3.10%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $96,900 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 3.10%); $100,000 × 96.90% = $96,900).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the Remaining Protected Balance is $88,300 (Remaining Protected Balance − Protected Payment Amount) × (1 − ratio); ($92,375 − $1,250) × (1 − 3.10%); $91,125 × 96.90% = $88,300).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the Remaining Protected Balance is $88,375 (Remaining Protected Balance − total withdrawal amount; $92,375 − $4,000 = $88,375).


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Therefore, since $88,300 (proportionate method) is less than $88,375 (total withdrawal amount method) the new Remaining Protected Balance is $88,300.
 
Example #6 – Lifetime Income.
 
This example applies to Flexible Lifetime Income (Single) only.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments are received.
  •  Owner is age 591/2 or older when the first withdrawal was taken.
  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
 
                         
                Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Annual
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $5,000   $96,489   $0   $100,000   $5,000   $95,000
2
  $5,000   $94,384   $0   $100,000   $5,000   $90,000
3
  $5,000   $92,215   $0   $100,000   $5,000   $85,000
4
  $5,000   $89,982   $0   $100,000   $5,000   $80,000
5
  $5,000   $87,681   $0   $100,000   $5,000   $75,000
6
  $5,000   $85,311   $0   $100,000   $5,000   $70,000
7
  $5,000   $82,871   $0   $100,000   $5,000   $65,000
8
  $5,000   $80,357   $0   $100,000   $5,000   $60,000
9
  $5,000   $77,768   $0   $100,000   $5,000   $55,000
10
  $5,000   $75,101   $0   $100,000   $5,000   $50,000
11
  $5,000   $72,354   $0   $100,000   $5,000   $45,000
12
  $5,000   $69,524   $0   $100,000   $5,000   $40,000
13
  $5,000   $66,610   $0   $100,000   $5,000   $35,000
14
  $5,000   $63,608   $0   $100,000   $5,000   $30,000
15
  $5,000   $60,517   $0   $100,000   $5,000   $25,000
16
  $5,000   $57,332   $0   $100,000   $5,000   $20,000
17
  $5,000   $54,052   $0   $100,000   $5,000   $15,000
18
  $5,000   $50,674   $0   $100,000   $5,000   $10,000
19
  $5,000   $47,194   $0   $100,000   $5,000   $5,000
20
  $5,000   $43,610   $0   $100,000   $5,000   $0
21
  $5,000   $39,918   $0   $100,000   $5,000   $0
22
  $5,000   $36,115   $0   $100,000   $5,000   $0
23
  $5,000   $32,199   $0   $100,000   $5,000   $0
24
  $5,000   $28,165   $0   $100,000   $5,000   $0
25
  $5,000   $24,010   $0   $100,000   $5,000   $0
26
  $5,000   $19,730   $0   $100,000   $5,000   $0
27
  $5,000   $15,322   $0   $100,000   $5,000   $0
28
  $5,000   $10,782   $0   $100,000   $5,000   $0
29
  $5,000   $6,105   $0   $100,000   $5,000   $0
30
  $5,000   $1,288   $0   $100,000   $5,000   $0
31
  $5,000   $0   $0   $100,000   $5,000   $0
32
  $5,000   $0   $0   $100,000   $5,000   $0
33
  $5,000   $0   $0   $100,000   $5,000   $0
34
  $5,000   $0   $0   $100,000   $5,000   $0
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000


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Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000): (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.
 
Since a withdrawal occurred during Contract Year 1 and no Resets occurred, no annual credit will be applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal.
 
Since it was assumed that the Owner was age 591/2 or older when the first withdrawal was taken, withdrawals of 5% of the Protected Payment Base will continue to be paid each year (even after the Contract Value and Remaining Protected Balance have been reduced to zero) until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
Example #7 – Lifetime Income.
 
This example applies to Flexible Lifetime Income (Joint) only.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments are received.
  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
  •  All Designated Lives remain eligible for lifetime income benefits while the Rider is in effect.
  •  Surviving Spouse continues Contract upon the death of the first Designated Life.
 


196

 

                         
                Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Annual
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $5,000   $96,489   $0   $100,000   $5,000   $95,000
2
  $5,000   $94,384   $0   $100,000   $5,000   $90,000
3
  $5,000   $92,215   $0   $100,000   $5,000   $85,000
4
  $5,000   $89,982   $0   $100,000   $5,000   $80,000
5
  $5,000   $87,681   $0   $100,000   $5,000   $75,000
6
  $5,000   $85,311   $0   $100,000   $5,000   $70,000
7
  $5,000   $82,871   $0   $100,000   $5,000   $65,000
8
  $5,000   $80,357   $0   $100,000   $5,000   $60,000
9
  $5,000   $77,768   $0   $100,000   $5,000   $55,000
10
  $5,000   $75,101   $0   $100,000   $5,000   $50,000
11
  $5,000   $72,354   $0   $100,000   $5,000   $45,000
12
  $5,000   $69,524   $0   $100,000   $5,000   $40,000
13
  $5,000   $66,610   $0   $100,000   $5,000   $35,000
 Activity (Death of first Designated Life)
14
  $5,000   $63,608   $0   $100,000   $5,000   $30,000
15
  $5,000   $60,517   $0   $100,000   $5,000   $25,000
16
  $5,000   $57,332   $0   $100,000   $5,000   $20,000
17
  $5,000   $54,052   $0   $100,000   $5,000   $15,000
18
  $5,000   $50,674   $0   $100,000   $5,000   $10,000
19
  $5,000   $47,194   $0   $100,000   $5,000   $5,000
20
  $5,000   $43,610   $0   $100,000   $5,000   $0
21
  $5,000   $39,918   $0   $100,000   $5,000   $0
22
  $5,000   $36,115   $0   $100,000   $5,000   $0
23
  $5,000   $32,199   $0   $100,000   $5,000   $0
24
  $5,000   $28,165   $0   $100,000   $5,000   $0
25
  $5,000   $24,010   $0   $100,000   $5,000   $0
26
  $5,000   $19,730   $0   $100,000   $5,000   $0
27
  $5,000   $15,322   $0   $100,000   $5,000   $0
28
  $5,000   $10,782   $0   $100,000   $5,000   $0
29
  $5,000   $6,105   $0   $100,000   $5,000   $0
30
  $5,000   $1,288   $0   $100,000   $5,000   $0
31
  $5,000   $0   $0   $100,000   $5,000   $0
32
  $5,000   $0   $0   $100,000   $5,000   $0
33
  $5,000   $0   $0   $100,000   $5,000   $0
34
  $5,000   $0   $0   $100,000   $5,000   $0
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000): (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.
 
During Contract Year 13, the death of the first Designated Life occurred. Withdrawals of the Protected Payment Amount (5% of the Protected Payment Base) will continue to be paid each year (even after the Contract Value and Remaining Protected Balance were reduced to zero) until the death of all Designated Lives eligible for lifetime benefits.
 
If there was a change in Owner, Beneficiary or marital status prior to the death of the first Designated Life that resulted in the surviving Designated Life (spouse) to become ineligible for lifetime income benefits, then the lifetime income benefits under the Rider would not continue for the surviving Designated Life and the Rider would terminate upon the death of the first Designated Life.
 
Foundation 10
 
(This Rider is called the Guaranteed Withdrawal Benefit Rider in the Contract’s Rider.)

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Rider Terms
 
Annual RMD Amount – The amount required to be distributed each Calendar Year for purposes of satisfying the minimum distribution requirements of Code Section 401(a)(9) (“Section 401(a)(9)”) and related Code provisions in effect as of the Rider Effective Date.
 
Protected Payment Amount – The maximum amount that can be withdrawn under this Rider without reducing the Protected Payment Base. The Protected Payment Amount on any day after the Rider Effective Date is equal to the lesser of:
 
  •  5% of the Protected Payment Base as of that day, less cumulative withdrawals during that Contract Year, or
 
  •  the Remaining Protected Balance as of that day.
 
The initial Protected Payment Amount on the Rider Effective Date is equal to 5% of the initial Protected Payment Base.
 
Protected Payment Base – An amount used to determine the Protected Payment Amount. The Protected Payment Base will remain unchanged except as otherwise described under the provisions of this Rider. The initial Protected Payment Base is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Remaining Protected Balance – The amount available for future withdrawals made under this Rider. The initial Remaining Protected Balance is equal to the initial Purchase Payment, if the Rider Effective Date is on the Contract Date, or the Contract Value, if the Rider Effective Date is on a Contract Anniversary.
 
Annual Credit – An amount added to the Protected Payment Base and Remaining Protected Balance.
 
Maximum Credit Base – An amount equal to 200% of the Remaining Protected Balance as of the Rider Effective Date and any subsequent Purchase Payments made during the first year that the Rider is in effect plus 100% of all subsequent Purchase Payments made after the first year.
 
Reset Date – Any Contract Anniversary beginning with the 1st Contract Anniversary after the Rider Effective Date on which an Automatic Reset or an Owner-Elected Reset occurs.
 
Rider Effective Date – The date the guarantees and charges for the Rider become effective. If the Rider is purchased within 60 days of the Contract Date, the Rider Effective Date is the Contract Date. If the Rider is purchased within 60 days of a Contract Anniversary, the Rider Effective Date is the date of that Contract Anniversary.
 
How the Rider Works
 
On any day, this Rider guarantees you can withdraw up to the Protected Payment Amount, regardless of market performance, until the Remaining Protected Balance is reduced to zero (0). Lifetime withdrawals up to the Protected Payment Amount may continue after the Remaining Protected Balance is reduced to zero (0) if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner) was age 591/2 or older when the first withdrawal was taken after the Rider Effective Date or the most recent Reset Date, whichever is later. If a withdrawal was taken before age 591/2 and there was no subsequent Reset, the Rider will terminate once the Remaining Protected Balance is reduced to zero (0). This Rider also provides for an amount (an “Annual Credit”) to be added to the Protected Payment Base and Remaining Protected Balance if no withdrawals are taken. Once the Rider is purchased, you cannot request a termination of the Rider (see the Termination subsection of this Rider for more information).
 
In addition, beginning with the 1st anniversary of the Rider Effective Date or most recent Reset Date, whichever is later, the Rider provides for Automatic Annual Resets or Owner-Elected Resets of the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value.
 
If applicable, an Annual Credit is added to the Protected Payment Base and Remaining Protected Balance prior to any Automatic Reset. If the Contract Value as of that Contract Anniversary is greater than the Protected Payment Base (which includes the Annual Credit amount) then the Protected Payment Base and Remaining Protected Balance will be automatically reset to equal the Contract Value.
 
The Protected Payment Base and Remaining Protected Balance may change over time. The addition of an Annual Credit will increase the Protected Payment Base and the Remaining Protected Balance by the amount of the Annual Credit. An Automatic Reset or Owner-Elected Reset will increase or decrease the Protected Payment Base and Remaining Protected Balance depending on the Contract Value on the Reset Date. A withdrawal that is less than or equal to the Protected Payment Amount will reduce the Remaining Protected Balance by the amount of the withdrawal and will not change the Protected Payment Base. If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn. For withdrawals that are greater than the Protected Payment Amount, see the Withdrawal of Protected Payment Amount subsection.
 
For purposes of this Rider, the term “withdrawal” includes any applicable withdrawal charges. Amounts withdrawn under this Rider will reduce the Contract Value by the amount withdrawn and will be subject to the same conditions, limitations, restrictions and all other


198

 

fees, charges and deductions, if applicable, as withdrawals otherwise made under the provisions of the Contract. Withdrawals under this Rider are not annuity payouts. Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
 
If your Contract is a Qualified Contract, including a TSA/403(b) Contract, you are subject to restrictions on withdrawals you may take prior to a triggering event (e.g. reaching age 591/2, separation from service, disability) and you should consult your tax or legal advisor prior to purchasing this optional guarantee, the primary benefit of which is guaranteeing withdrawals. For additional information regarding withdrawals and triggering events, see FEDERAL TAX ISSUES – IRAs and Qualified Plans.
 
Withdrawal of Protected Payment Amount
 
While this Rider is in effect, you may withdraw up to the Protected Payment Amount each Contract Year, regardless of market performance, until the Rider terminates. Any portion of the Protected Payment Amount not withdrawn during a Contract Year may not be carried over to the next Contract Year. If a withdrawal does not exceed the Protected Payment Amount immediately prior to that withdrawal, the Protected Payment Base will remain unchanged. The Remaining Protected Balance will decrease by the withdrawal amount immediately following the withdrawal.
 
Withdrawals Exceeding the Protected Payment Amount. If a withdrawal (except an RMD Withdrawal) exceeds the Protected Payment Amount immediately prior to that withdrawal, we will (immediately following the excess withdrawal) reduce the Protected Payment Base on a proportionate basis for the amount in excess of the Protected Payment Amount. We will reduce the Remaining Protected Balance either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount. (See example 4 in Sample Calculations below for a numerical example of the adjustments to the Protected Payment Base and Remaining Protected Balance as a result of an excess withdrawal.) If a withdrawal is greater than the Protected Payment Amount and the Contract Value is less than the Protected Payment Base, both the Protected Payment Base and Remaining Protected Balance will be reduced by an amount that is greater than the excess amount withdrawn.
 
The amount available for withdrawal under the Contract must be sufficient to support any withdrawal that would otherwise exceed the Protected Payment Amount.
 
For information regarding taxation of withdrawals, see FEDERAL TAX ISSUES.
 
Required Minimum Distributions
 
No adjustment will be made to the Protected Payment Base as a result of a withdrawal that exceeds the Protected Payment Amount immediately prior to the withdrawal, provided:
 
  •  such withdrawal (an “RMD Withdrawal”) is for purposes of satisfying the minimum distribution requirements of Section 401(a)(9) and related Code provisions in effect at that time,
 
  •  you have authorized us to calculate and make periodic distribution of the Annual RMD Amount for the Calendar Year required based on the payment frequency you have chosen,
 
  •  the Annual RMD Amount is based on this Contract only, and
 
  •  only RMD Withdrawals are made from the Contract during the Contract Year.
 
Immediately following an RMD Withdrawal, the Remaining Protected Balance will decrease by the RMD Withdrawal amount.
 
See FEDERAL TAX ISSUES – Qualified Contracts – Required Minimum Distributions.
 
Depletion of Contract Value
 
If a withdrawal (including an RMD Withdrawal) does not exceed the Protected Payment Amount and reduces the Contract Value to zero, the following will apply:
 
  •  if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 591/2 when the first withdrawal was taken under the Rider, after the Rider Effective Date or the most recent Reset Date, whichever is later, 5% of the Protected Payment Base will be paid each year until the Remaining Protected Balance is reduced to zero, or
 
  •  was age 591/2 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, 5% of the Protected Payment Base will be paid each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant.
 
  •  the payments of 5% of the Protected Payment Base will be paid under a series of pre-authorized withdrawals under a payment frequency as elected by the Owner, but no less frequently than annually,


199

 

  •  no additional Purchase Payments will be accepted under the Contract,
 
  •  any Remaining Protected Balance will not be available for payment in a lump sum and will not be applied to provide payments under an Annuity Option, and
 
  •  the Contract will cease to provide any death benefit.
 
If the Owner or sole surviving Annuitant dies and the Contract Value is zero as of the date of death, there is no death benefit, however, any Remaining Protected Balance will be paid to the Beneficiary under a series of pre-authorized withdrawals and payment frequency (at least annually) then in effect at the time of the Owner’s or sole surviving Annuitant’s death. If, however, the Remaining Protected Balance would be paid over a period that exceeds the life expectancy of the Beneficiary, the pre-authorized withdrawal amount will be adjusted so that the withdrawal payments will be paid over a period that does not exceed the Beneficiary’s life expectancy.
 
Depletion of Remaining Protected Balance
 
If a withdrawal (including an RMD Withdrawal) reduces the Remaining Protected Balance to zero and Contract Value remains, the following will apply:
 
If the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner):
 
  •  was younger than age 591/2 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, this Rider will terminate, or
 
  •  was age 591/2 or older when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later, you may elect to withdraw up to 5% of the Protected Payment Base each year until the day of the first death of an Owner or the date of death of the sole surviving Annuitant. If an Automatic or Owner-Elected Reset occurs, the Remaining Protected Balance will be reinstated to an amount equal to the Contract Value as of that Contract Anniversary.
 
Before your Remaining Protected Balance is zero, if you took your first withdrawal before age 591/2 and you would like to be eligible for lifetime payments under the Rider, an Automatic or Owner-Elected Reset must occur and your first withdrawal after that Reset must be taken on or after age 591/2. See the Reset of Protected Payment Base and Remaining Protected Balance subsection of this Rider. If you are younger than age 591/2 when the Remaining Protected Balance is zero and Contract Value remains, the Rider will terminate and there is no opportunity for a Reset.
 
If a withdrawal (except an RMD Withdrawal) made from the Contract exceeds the Protected Payment Amount, the withdrawal will be treated as an excess withdrawal and the Protected Payment Base will be reduced according to the Withdrawals Exceeding the Protected Payment Amount subsection.
 
Any death benefit proceeds to be paid to the Beneficiary from remaining Contract Value will be paid according to the Death Benefit provisions of the Contract.
 
Annual Credit
 
On each Contract Anniversary after the Rider Effective Date, an Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance, as of that Contract Anniversary, if:
 
  •  no withdrawals have occurred after the Rider Effective Date,
 
  •  that Contract Anniversary is within the first 10 Contract Anniversaries, measured from the Rider Effective Date, and
 
  •  the Remaining Protected Balance is less than the Maximum Credit Base.
 
The Annual Credit is equal to 10% of the total of:
 
  •  the Remaining Protected Balance on the Rider Effective Date, or the most recent Reset Date, whichever is later, and
 
  •  the cumulative Purchase Payments received after the Rider Effective Date or the most recent Reset Date, whichever is later,
 
as of the Contract Anniversary on which the Annual Credit is added.
 
Once a withdrawal has occurred, including an RMD Withdrawal, no Annual Credit will be added to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal. In addition, Annual Credit eligibility cannot be reinstated by any Automatic or Owner-Elected Reset.
 
The Annual Credit is not added to your Contract Value.


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Reset of Protected Payment Base and Remaining Protected Balance
 
Regardless of which reset option is used, on and after each Reset Date, the provisions of this Rider shall apply in the same manner as they applied when the Rider was originally issued, except that eligibility for the Annual Credit cannot be reinstated with a Reset. The limitations and restrictions on Purchase Payments and withdrawals, the deduction of annual Charges and any future reset options available on and after the Reset Date, will again apply and will be measured from that Reset Date. A reset occurs when the Protected Payment Base and Remaining Protected Balance are changed to an amount equal to the Contract Value as of the Reset Date.
 
If a withdrawal is taken, the Annual Credit will no longer be applied and cannot be restarted with an Automatic or Owner-Elected Reset. In addition, an Automatic or Owner-Elected Reset will not start a new 10 year period for Annual Credit eligibility.
 
Automatic Reset. On each Contract Anniversary while this Rider is in effect and before the Annuity Date, we will automatically reset the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value, if the Protected Payment Base, after any Annual Credit is applied, is less than the Contract Value on that Contract Anniversary. The annual charge percentage may change as a result of any Automatic Reset (see CHARGES, FEES AND DEDUCTIONS – Optional Rider Charges). A Reset does not begin a new 10 year period for the Annual Credit to be applied.
 
Automatic Reset – Opt-Out Election. Within 60 days after a Contract Anniversary on which an Automatic Reset is effective, you have the option to reinstate the Protected Payment Base, Remaining Protected Balance and annual charge percentage to their respective amounts immediately before the Automatic Reset. Any future Automatic Resets will continue in accordance with the Automatic Reset paragraph above. If you elect this option, your opt-out election must be received, In Proper Form, within the same 60 day period after the Contract Anniversary on which the reset is effective.
 
Automatic Reset – Future Participation. You may elect not to participate in future Automatic Resets at any time. Your election must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries.
 
If you previously elected not to participate in Automatic Resets, you may re-elect to participate in future Automatic Resets at any time. Your election to resume participation must be received, In Proper Form, while this Rider is in effect and before the Annuity Date. Such election will be effective for future Contract Anniversaries as described in the Automatic Reset paragraph above.
 
Owner-Elected Resets (Non-Automatic). You may, on any Contract Anniversary, elect to reset the Remaining Protected Balance and Protected Payment Base to an amount equal to 100% of the Contract Value. An Owner-Elected Reset may be elected while Automatic Resets are in effect. The annual charge percentage may change as a result of this reset.
 
If you elect this option, your election must be received, In Proper Form, within 60 days after the Contract Anniversary on which the reset is effective. The reset will be based on the Contract Value as of that Contract Anniversary. Your election of this option may result in a reduction in the Protected Payment Base, Remaining Protected Balance, Protected Payment Amount and any Annual Credit that may be applied. Generally, the reduction will occur when your Contract Value is less than the Protected Payment Base as of the Contract Anniversary you elected the reset. You are strongly advised to work with your financial advisor prior to electing an Owner-Elected Reset. We will provide you with written confirmation of your election.
 
Subsequent Purchase Payments
 
If we receive additional Purchase Payments after the Rider Effective Date, we will increase the Protected Payment Base and Remaining Protected Balance by the amount of the Purchase Payments. However, for purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the later of the 1st Contract Anniversary or most recent Reset Date to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
Annuitization
 
If you annuitize the Contract at the maximum Annuity Date specified in your Contract and this Rider is still in effect at the time of your election and a Life Only annuity option is chosen, the annuity payments will be equal to the greater of:
 
  •  the Life Only annual payment amount based on the terms of your Contract, or
 
  •  5% of the Protected Payment Base in effect at the maximum Annuity Date.
 
If you annuitize the Contract at any time prior to the maximum Annuity Date specified in your Contract, your annuity payments will be determined in accordance with the terms of your Contract. The Protected Payment Base, Remaining Protected Balance and Protected Payment Amount under this Rider will not be used in determining any annuity payments. Work with your financial advisor to determine if you should annuitize your Contract before the maximum Annuity Date or stay in the accumulation phase and continue to take withdrawals under the Rider.


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The annuity payments described in this subsection are available to you even if your first withdrawal was taken prior to age 591/2 and no Resets have occurred.
 
Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies while this Rider is in effect and if the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, the surviving spouse may continue to take withdrawals of the Protected Payment Amount under this Rider, until the Remaining Protected Balance is reduced to zero. If the Remaining Protected Balance is zero when the Owner dies, this Rider will terminate.
 
The surviving spouse may elect any of the reset options available under this Rider for subsequent Contract Anniversaries. If a reset takes place then the provisions of this Rider will continue in full force and in effect for the surviving spouse. In addition, if the surviving spouse is age 591/2 or older when the first withdrawal is taken after the most recent Reset Date and this Reset Date occurred after the surviving spouse continued the Contract, then the surviving spouse may take withdrawals of the Protected Payment Amount (based on the new Protected Payment Base) for life.
 
The surviving spouse may elect to receive any death benefit proceeds instead of continuing the Contract and Rider (see DEATH BENEFITS AND OPTIONAL DEATH BENEFIT RIDERS – Death Benefits).
 
Termination
 
You cannot request a termination of the Rider. Except as otherwise provided below, the Rider will automatically terminate on the earliest of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day the Remaining Protected Balance is reduced to zero if the oldest Owner (or youngest Annuitant, in the case of a Non-Natural Owner), was younger than 591/2 when the first withdrawal was taken under the Rider after the Rider Effective Date or the most recent Reset Date, whichever is later,
 
  •  the date of the first death of an Owner or the date of death of the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the day the Contract is terminated in accordance with the provisions of the Contract,
 
  •  the day we are notified of a change in ownership of the Contract to a non-spouse Owner if the Contract is Non-Qualified (excluding changes in ownership to or from certain trusts),
 
  •  the day you exchange this Rider for another withdrawal benefit Rider,
 
  •  the Annuity Date (see the Annuitization subsection for additional information), or
 
  •  the day the Contract Value is reduced to zero as a result of a withdrawal (except an RMD Withdrawal) that exceeds the Protected Payment Amount.
 
See the Depletion of Contract Value subsection for situations where the Rider will not terminate when the Contract Value is reduced to zero and see the Depletion of Remaining Protected Balance subsection for situations where the Rider will not terminate when the Remaining Protected Balance is reduced to zero.
 
Sample Calculations
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. The examples have been provided to assist in understanding the benefits provided by this Rider and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. Any calculations for determining a Reset/Step-Up are based on Contract Value, which includes any Credit Enhancement. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.


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Example #1 – Setting of Initial Values.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
 
                                 
Beginning
 		                  Protected
 		  Protected
 		  Remaining
 		   
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
 		  Maximum
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance   Credit Base
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000   $200,000
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
  •  Maximum Credit Base = 200% of the Initial Purchase Payment = $200,000
 
Example #2 – Subsequent Purchase Payments.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Years 1 and 2.
  •  No withdrawals taken.
  •  Automatic Reset at Beginning of Contract Year 10.
 
                                 
Beginning
 		                  Protected
 		  Protected
 		  Remaining
 		   
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
 		  Maximum
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance   Credit Base
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000   $200,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000   $400,000
2
          $207,000   $20,000   $220,000   $11,000   $220,000   $400,000
Activity
  $100,000       $315,000       $320,000   $16,000   $320,000   $500,000
3
          $321,490   $30,000   $350,000   $17,500   $350,000   $500,000
4
          $343,994   $30,000   $380,000   $19,000   $380,000   $500,000
5
          $368,073   $30,000   $410,000   $20,500   $410,000   $500,000
6
          $393,839   $30,000   $440,000   $22,000   $440,000   $500,000
7
          $421,407   $30,000   $470,000   $23,500   $470,000   $500,000
8
          $450,906   $30,000   $500,000   $25,000   $500,000   $500,000
9
          $482,469   $0   $500,000   $25,000   $500,000   $500,000
10
  Prior to Automatic Reset       $516,242   $0   $500,000   $25,000   $500,000   $500,000
10
  After Automatic Reset       $516,242   $0   $516,242   $25,812   $516,242   $500,000
 
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 1, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $200,000 ($100,000 + $100,000). Since the subsequent Purchase Payment is received in Contract Year 1, the Maximum Credit Base is increased by 200% of the Purchase Payment, to $400,000. The Protected Payment Amount after the Purchase Payment is equal to $10,000 (5% of the Protected Payment Base after the Purchase Payment since there were no withdrawals during that Contract Year).
 
Since no withdrawal occurred prior to the Contract Anniversary at the Beginning of Contract Year 2, an annual credit of $20,000 (10% of the initial Remaining Protected Balance plus cumulative Purchase Payments received after the Rider Effective Date) is applied to the Protected Payment Base and Remaining Protected Balance on that Contract Anniversary, increasing both to $220,000. As a result, the Protected Payment Amount on that Contract Anniversary is equal to $11,000 (5% of the Protected Payment Base on that Contract Anniversary).
 
Immediately after the $100,000 subsequent Purchase Payment during Contract Year 2, the Protected Payment Base and Remaining Protected Balance are increased by the Purchase Payment amount to $320,000 ($220,000 + $100,000). Since the subsequent Purchase Payment is received in Contract Year 2, the Maximum Credit Base is increased by 100% of the Purchase Payment, to $500,000. The


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Protected Payment Amount after the Purchase Payment is equal to $16,000 (5% of the Protected Payment Base after the Purchase Payment since there were no withdrawals during that Contract Year).
 
Since no withdrawal occurred prior to the Contract Anniversary at the Beginning of Contract Year 3, an annual credit of $30,000 (10% of the initial Remaining Protected Balance plus cumulative Purchase Payments received after the Rider Effective Date) is applied to the Protected Payment Base and Remaining Protected Balance on that Contract Anniversary, increasing both to $350,000. As a result, the Protected Payment Amount on that Contract Anniversary is equal to $17,500 (5% of the Protected Payment Base on that Contract Anniversary).
 
An Annual Credit is no longer applied after the Protected Payment Base and Remaining Protected Balance reach the Maximum Credit Base of $500,000 in Contract Year 8.
 
Because at the Beginning of Contract Year 10, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Beginning of Contract Year 10 – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Beginning of Contract Year 10 – After Automatic Reset). As a result, the Protected Payment Amount is equal to $25,812 (5% of the reset Protected Payment Base).
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during each Contract Year as a result of additional amounts credited, charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.
 
Example #3 – Withdrawals Not Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Years 1 and 2.
  •  A withdrawal equal to or less than the Protected Payment Amount is taken during Contract Years 3 and 4.
  •  Automatic Reset at Beginning of Contract Year 6.
 
                                 
Beginning
 		                  Protected
 		  Protected
 		  Remaining
 		   
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
 		  Maximum
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance   Credit Base
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000   $200,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000   $400,000
2
          $207,000   $20,000   $220,000   $11,000   $220,000   $400,000
Activity
  $100,000       $315,000       $320,000   $16,000   $320,000   $500,000
3
          $321,490   $30,000   $350,000   $17,500   $350,000   $500,000
Activity
      $17,500   $326,494       $350,000   $0   $332,500   $500,000
4
          $326,494   $0   $350,000   $17,500   $332,500   $500,000
Activity
      $17,500   $331,848       $350,000   $0   $315,000   $500,000
5
          $331,848   $0   $350,000   $17,500   $315,000   $500,000
6
  Prior to Automatic Reset       $355,077   $0   $350,000   $17,500   $315,000   $500,000
6
  After Automatic Reset       $355,077   $0   $355,077   $17,753   $355,077   $500,000
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
As the withdrawal during Contract Year 3 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($17,500):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $332,500 ($350,000 − $17,500).
 
As the withdrawal during Contract Year 4 did not exceed the Protected Payment Amount immediately prior to the withdrawal ($17,500):
 
  •  the Protected Payment Base remains unchanged; and
  •  the Remaining Protected Balance is reduced by the amount of the withdrawal to $315,000 ($332,500 − $17,500).
 
Because at the Beginning of Contract Year 6, the Protected Payment Base was less than the Contract Value on that Contract Anniversary (see balances at Beginning of Contract Year 6 – Prior to Automatic Reset), an automatic reset occurred which resets the Protected Payment Base and Remaining Protected Balance to an amount equal to 100% of the Contract Value (see balances at Beginning of Contract Year 6 – After Automatic Reset). As a result, the Protected Payment Amount is equal to $17,753 (5% of the reset Protected Payment Base).


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Since a withdrawal occurred during Contract Year 3, no annual credit will be applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal.
 
Example #4 – Withdrawals Exceeding Protected Payment Amount.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  A subsequent Purchase Payment of $100,000 is received during Contract Years 1 and 2.
  •  A withdrawal greater than the Protected Payment Amount is taken during Contract Year 3.
 
                                 
Beginning
 		                  Protected
 		  Protected
 		  Remaining
 		  Maximum
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
 		  Credit
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance   Base
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000   $200,000
Activity
  $100,000       $216,000       $200,000   $10,000   $200,000   $400,000
2
          $207,000   $20,000   $220,000   $11,000   $220,000   $400,000
Activity
  $100,000       $321,490       $320,000   $16,000   $320,000   $500,000
3
          $321,490   $30,000   $350,000   $17,500   $350,000   $500,000
Activity
      $25,000   $318,994       $341,985   $0   $324,885   $500,000
4
          $318,994   $0   $341,985   $17,099   $324,885   $500,000
 
 
For an explanation of the values and activities at the start of and during Contract Year 1, refer to Examples #1 and #2.
 
Because the $25,000 withdrawal during Contract Year 3 exceeds the Protected Payment Amount immediately prior to the withdrawal ($25,000 > $17,500), the Protected Payment Base and Remaining Protected Balance immediately after the withdrawal are reduced.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $343,994
  •  Protected Payment Base = $350,000
  •  Remaining Protected Balance = $350,000
  •  Protected Payment Amount = $17,500 (5% × Protected Payment Base; 5% × $350,000 = $17,500)
  •  No withdrawals were taken prior to the excess withdrawal
 
A withdrawal of $25,000 was taken, which exceeds the Protected Payment Amount of $17,500 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $7,500 (total withdrawal amount − Protected Payment Amount; $25,000 − $17,500 = $7,500).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). The Contract Value prior to the withdrawal was $343,994, which equals the $318,994 after the withdrawal plus the $25,000 withdrawal amount. Numerically, the ratio is 2.29% ($7,500 ¸ ($343,994 − $17,500); $7,500 ¸ $326,494 = 0.0229 or 2.29%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $341,985 (Protected Payment Base × (1 − ratio); $350,000 × (1 − 2.29%); $350,000 × 97.71% = $341,985).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the new Remaining Protected Balance is $324,885 (Remaining Protected Balance immediately before the withdrawal − Protected Payment Amount) × (1 − ratio); ($350,000 − $17,500) × (1 − 2.29%); $332,500 × 97.71% = $324,885).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance immediately before the withdrawal is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the new Remaining Protected Balance is $325,000 (Remaining Protected Balance immediately before the withdrawal − total withdrawal amount; $350,000 − $25,000 = $325,000).


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Therefore, since $324,885 (proportionate method) is less than $325,000 (total withdrawal amount method) the new Remaining Protected Balance is $324,885.
 
The Protected Payment Amount immediately after the withdrawal is equal to $0 (5% of the Protected Payment Base after the withdrawal (5% of $341,985 = $17,099), less cumulative withdrawals during that Contract Year ($25,000), but not less than zero).
 
Since a withdrawal occurred during Contract Year 3, annual credits are not applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal.
 
Example #5 – Annual Credit & Resets.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments received.
  •  No withdrawals taken.
  •  Automatic Reset at Beginning of Contract Years 3, 5, 7 and 9.
 
                                 
Beginning
 		                  Protected
 		  Protected
 		  Remaining
 		  Maximum
of Contract
 		  Purchase
 		          Annual
 		  Payment
 		  Payment
 		  Protected
 		  Credit
Year   Payment   Withdrawal   Contract Value   Credit   Base   Amount   Balance   Base
 
1
  $100,000       $108,000   $0   $100,000   $5,000   $100,000   $200,000
2
          $107,000   $10,000   $110,000   $5,500   $110,000   $200,000
3
          $125,000   $10,000   $125,000   $6,250   $125,000   $200,000
4
          $120,000   $12,500   $137,500   $6,875   $137,500   $200,000
5
          $190,000   $12,500   $190,000   $9,500   $190,000   $200,000
6
          $180,000   $19,000   $209,000   $10,450   $209,000   $200,000
7
          $240,000   $0   $240,000   $12,000   $240,000   $200,000
8
          $220,000   $0   $240,000   $12,000   $240,000   $200,000
9
          $250,000   $0   $250,000   $12,500   $250,000   $200,000
 
 
On the Contract Anniversary at the beginning of Contract Year 2, an Annual Credit of $10,000 (10% of the Remaining Protected Balance) is added to the Protected Payment Base and Remaining Protected Balance.
 
An Annual Credit of $10,000 would have been applied on the Contract Anniversary at the beginning of Contract Year 3, but an Automatic Reset takes place instead, resetting the Protected Payment Base and Remaining Protected Balance to $125,000.
 
On the Contract Anniversary at the beginning of Contract Year 4, an Annual Credit of $12,500 (10% of the Remaining Protected Balance) is added to the Protected Payment Base and Remaining Protected Balance.
 
An Annual Credit of $12,500 would have been applied on the Contract Anniversary at the beginning of Contract Year 5, but an Automatic Reset took place instead, resetting the Protected Payment Base and Remaining Protected Balance to $190,000.
 
On the Contract Anniversary at the beginning of Contract Year 6, an Annual Credit of $19,000 (10% of the Remaining Protected Balance) is added, increasing the Protected Payment Base and Remaining Protected Balance to $209,000. Annual Credits will no longer be added since the Maximum Credit Base of $200,000 has been reached.
 
Example #6 – RMD Withdrawals.
 
The effect of cumulative RMD Withdrawals during the Contract Year that exceed the Protected Payment Amount established for that Contract Year and its effect on the Protected Payment Base and Remaining Protected Balance. The Annual RMD Amount is based on the entire interest of your Contract as of the previous year-end.


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This table assumes quarterly withdrawals of only the Annual RMD Amount during the Contract Year. The calculated Annual RMD amount for the Calendar Year is $7,500 and the Contract Anniversary is May 1 of each year.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
              $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
05/01/2007
              $100,000   $5,000   $98,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $96,250
09/15/2007
  $1,875           $100,000   $1,250   $94,375
12/15/2007
  $1,875           $100,000   $0   $92,500
01/01/2008
          $8,000            
03/15/2008
  $2,000           $100,000   $0   $90,500
05/01/2008
              $100,000   $5,000   $90,500
Contract
Anniversary 		                       
 
 
Since the RMD Amount for 2008 increases to $8,000, the quarterly withdrawals of the RMD Amount increase to $2,000, as shown by the RMD Withdrawal on March 15, 2008. Because all withdrawals during the Contract Year were RMD Withdrawals, there is no adjustment to the Protected Payment Base for exceeding the Protected Payment Amount. The only effect is a reduction in the Remaining Protected Balance equal to the amount of each withdrawal. In addition, the Protected Payment Amount is reduced by the amount of each withdrawal until the Protected Payment Amount is zero.
 
This chart assumes quarterly withdrawals of the Annual RMD Amount and other non-RMD Withdrawals during the Contract Year. The calculated Annual RMD amount and Contract Anniversary are the same as above.
 
                         
            Annual
 		  Protected
 		  Protected
 		  Remaining
Activity
 		  RMD
 		  Non-RMD
 		  RMD
 		  Payment
 		  Payment
 		  Protected
Date   Withdrawal   Withdrawal   Amount   Base   Amount   Balance
 
05/01/2006
          $0   $100,000   $5,000   $100,000
Contract
Anniversary 		                       
01/01/2007
          $7,500            
03/15/2007
  $1,875           $100,000   $3,125   $98,125
04/01/2007
      $2,000       $100,000   $1,125   $96,125
05/01/2007
              $100,000   $5,000   $96,125
Contract
Anniversary 		                       
06/15/2007
  $1,875           $100,000   $3,125   $94,250
09/15/2007
  $1,875           $100,000   $1,250   $92,375
11/15/2007
      $4,000       $96,900   $0   $88,300
 
 
On 3/15/07 there was an RMD Withdrawal of $1,875 and on 4/1/07 a non-RMD Withdrawal of $2,000. Because the total withdrawals during the Contract Year (5/1/06 through 4/30/07) did not exceed the Protected Payment Amount of $5,000 there was no adjustment to the Protected Payment Base. The only effect is a reduction in the Remaining Protected Balance and the Protected Payment Amount equal to the amount of each withdrawal. On 5/1/07, the Protected Payment Amount was re-calculated (5% of the Protected Payment Base) as of that Contract Anniversary.
 
On 11/15/07, there was a non-RMD Withdrawal ($4,000) that caused the cumulative withdrawals during the Contract Year ($7,750) to exceed the Protected Payment Amount ($5,000). As the withdrawal exceeded the Protected Payment Amount immediately prior to the withdrawal ($1,250), and assuming the Contract Value was $90,000 immediately prior to the withdrawal, the Protected Payment Base is reduced to $96,900 and the Remaining Protected Balance is reduced to $88,300.
 
The Values shown below are based on the following assumptions immediately before the excess withdrawal:
 
  •  Contract Value = $90,000


207

 

  •  Protected Payment Base = $100,000
  •  Remaining Protected Balance = $92,375
  •  Protected Payment Amount = $1,250
 
A withdrawal of $4,000 was taken, which exceeds the Protected Payment Amount of $1,250 for the Contract Year. The Protected Payment Base and Remaining Protected Balance will be reduced based on the following calculation:
 
First, determine the excess withdrawal amount. The excess withdrawal amount is the total withdrawal amount less the Protected Payment Amount. Numerically, the excess withdrawal amount is $2,750 (total withdrawal amount − Protected Payment Amount; $4,000 − $1,250 = $2,750).
 
Second, determine the ratio for the proportionate reduction. The ratio is the excess withdrawal amount determined above divided by (Contract Value − Protected Payment Amount). Numerically, the ratio is 3.10% ($2,750 ¸ ($90,000 − $1,250); $2,750 ¸ $88,750 = 0.0310 or 3.10%).
 
Third, determine the new Protected Payment Base. The Protected Payment Base will be reduced on a proportionate basis. The Protected Payment Base is multiplied by 1 less the ratio determined above. Numerically, the new Protected Payment Base is $96,900 (Protected Payment Base × (1 − ratio); $100,000 × (1 − 3.10%); $100,000 × 96.90% = $96,900).
 
Fourth, determine the new Remaining Protected Balance. The Remaining Protected Balance is reduced either on a proportionate basis or by the total withdrawal amount, whichever results in the lower Remaining Protected Balance amount.
 
To determine the proportionate reduction, the Remaining Protected Balance is reduced by the Protected Payment Amount multiplied by 1 less the ratio determined above. Numerically, after the proportionate reduction, the Remaining Protected Balance is $88,300 (Remaining Protected Balance − Protected Payment Amount) × (1 − ratio); ($92,375 − $1,250) × (1 − 3.10%); $91,125 × 96.90% = $88,300).
 
To determine the total withdrawal amount reduction, the Remaining Protected Balance is reduced by the total withdrawal amount. Numerically, after the Remaining Protected Balance is reduced by the total withdrawal amount, the Remaining Protected Balance is $88,375 (Remaining Protected Balance − total withdrawal amount; $92,375 − $4,000 = $88,375).
 
Therefore, since $88,300 (proportionate method) is less than $88,375 (total withdrawal amount method) the new Remaining Protected Balance is $88,300.
 
Example #7 – Lifetime Income.
 
The values shown below are based on the following assumptions:
 
  •  Initial Purchase Payment = $100,000
  •  Rider Effective Date = Contract Date
  •  No subsequent Purchase Payments are received.
  •  Owner is age 591/2 or older when the first withdrawal was taken.
  •  Withdrawals, each equal to 5% of the Protected Payment Base are taken each Contract Year.
  •  No Automatic Reset or Owner-Elected Reset is assumed during the life of the Rider.
 


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                Protected
 		  Protected
 		  Remaining
Contract
 		      End of Year
 		  Annual
 		  Payment
 		  Payment
 		  Protected
Year   Withdrawal   Contract Value   Credit   Base   Amount   Balance
 
1
  $5,000   $96,489   $0   $100,000   $5,000   $95,000
2
  $5,000   $94,384   $0   $100,000   $5,000   $90,000
3
  $5,000   $92,215   $0   $100,000   $5,000   $85,000
4
  $5,000   $89,982   $0   $100,000   $5,000   $80,000
5
  $5,000   $87,681   $0   $100,000   $5,000   $75,000
6
  $5,000   $85,311   $0   $100,000   $5,000   $70,000
7
  $5,000   $82,871   $0   $100,000   $5,000   $65,000
8
  $5,000   $80,357   $0   $100,000   $5,000   $60,000
9
  $5,000   $77,768   $0   $100,000   $5,000   $55,000
10
  $5,000   $75,101   $0   $100,000   $5,000   $50,000
11
  $5,000   $72,354   $0   $100,000   $5,000   $45,000
12
  $5,000   $69,524   $0   $100,000   $5,000   $40,000
13
  $5,000   $66,610   $0   $100,000   $5,000   $35,000
14
  $5,000   $63,608   $0   $100,000   $5,000   $30,000
15
  $5,000   $60,517   $0   $100,000   $5,000   $25,000
16
  $5,000   $57,332   $0   $100,000   $5,000   $20,000
17
  $5,000   $54,052   $0   $100,000   $5,000   $15,000
18
  $5,000   $50,674   $0   $100,000   $5,000   $10,000
19
  $5,000   $47,194   $0   $100,000   $5,000   $5,000
20
  $5,000   $43,610   $0   $100,000   $5,000   $0
21
  $5,000   $39,918   $0   $100,000   $5,000   $0
22
  $5,000   $36,115   $0   $100,000   $5,000   $0
23
  $5,000   $32,199   $0   $100,000   $5,000   $0
24
  $5,000   $28,165   $0   $100,000   $5,000   $0
25
  $5,000   $24,010   $0   $100,000   $5,000   $0
26
  $5,000   $19,730   $0   $100,000   $5,000   $0
27
  $5,000   $15,322   $0   $100,000   $5,000   $0
28
  $5,000   $10,782   $0   $100,000   $5,000   $0
29
  $5,000   $6,105   $0   $100,000   $5,000   $0
30
  $5,000   $1,288   $0   $100,000   $5,000   $0
31
  $5,000   $0   $0   $100,000   $5,000   $0
32
  $5,000   $0   $0   $100,000   $5,000   $0
33
  $5,000   $0   $0   $100,000   $5,000   $0
34
  $5,000   $0   $0   $100,000   $5,000   $0
 
 
On the Rider Effective Date, the initial values are set as follows:
 
  •  Protected Payment Base = Initial Purchase Payment = $100,000
  •  Remaining Protected Balance = Initial Purchase Payment = $100,000
  •  Protected Payment Amount = 5% of Protected Payment Base = $5,000
 
Because the amount of each withdrawal does not exceed the Protected Payment Amount immediately prior to the withdrawal ($5,000): (a) the Protected Payment Base remains unchanged; and (b) the Remaining Protected Balance is reduced by the amount of each withdrawal.
 
Since a withdrawal occurred during Contract Year 1, no annual credit will be applied to the Protected Payment Base and Remaining Protected Balance on any Contract Anniversary following the withdrawal.
 
Since it was assumed that the Owner was age 591/2 or older when the first withdrawal was taken, withdrawals of 5% of the Protected Payment Base will continue to be paid each year (even after the Contract Value and Remaining Protected Balance have been reduced to zero) until the day of the first death of an Owner or the date of death of the sole surviving Annuitant (death of any Annuitant for Non-Natural Owners), whichever occurs first.
 
Guaranteed Income Advantage Plus (GIA Plus)
 
(This Rider is called the Guaranteed Income Annuity (GIA) Rider in the Contract’s Rider.)

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How the Rider Works
 
You may, prior to the Annuity Date, choose any of the Annuity Options described in your Contract, or you may choose the GIA Plus Annuity Option provided this Rider has been in effect for at least 10 years from its Effective Date. If you choose the GIA Plus Annuity Option, you must choose fixed annuity payments and the entire amount available for annuitization at the time you convert to the GIA Plus Annuity Option must be annuitized. The guaranteed income purchased per $1,000 of the net amount applied to the annuity payments will be based on an effective annual interest rate of 2.0% and the 1996 US Annuity 2000 Mortality Table with the age set back 8 years.
 
Annuity Payments – The annuity payments that may be elected under the GIA Plus Annuity Option are:
 
  •  Life Only,
 
  •  Life with 10 years or more Period Certain,
 
  •  Joint and Survivor Life, or
 
  •  20 years or more Period Certain.
 
The Rider contains annuity tables for each GIA Plus Annuity Option available.
 
On the Annuity Date, the Net Amount applied to the annuity payments under the GIA Plus Annuity Option will be equal to the greater of the Guaranteed Income Base on that day or the GIA Plus Step-Up Value on that day, less the following:
 
  •  applicable withdrawal charges resulting from the conversion to the GIA Plus Annuity Option,
 
  •  applicable annual charges for expenses related to other optional benefit riders attached to the Contract that are in effect as of the Annuity Date, and
 
  •  charges for premium taxes and/or other taxes. See CHARGES, FEES AND DEDUCTIONS – Premium Taxes.
 
If you elect the GIA Plus Annuity Option, the waiver of withdrawal charges as described in the Contract will not apply. See CHARGES, FEES AND DEDUCTIONS – Withdrawal Charge.
 
For information regarding taxation of annuity payments, see FEDERAL TAX ISSUES.
 
Initial Values – The Guaranteed Income Base, GIA Plus Withdrawal Base, GIA Plus Withdrawal Amount and GIA Plus Step-Up Value are values used in determining the Net Amount applied on the Annuity Date to provide payments under the GIA Plus Annuity Option.
 
The initial values are determined on the Rider Effective Date as follows:
 
  •  if this Rider is effective on the Contract Date, the Guaranteed Income Base is equal to the initial Purchase Payment.
 
  •  if this Rider is effective on a Contract Anniversary, the Guaranteed Income Base is equal to the Contract Value on that day.
 
  •  if this Rider is effective on the Contract Date, the GIA Plus Withdrawal Base is equal to the total Purchase Payments received in the first 60 days since the Rider Effective Date.
 
  •  if this Rider is effective on a Contract Anniversary, the GIA Plus Withdrawal Base is equal to the Contract Value on that day plus any Purchase Payments received in the first 60 days since the Rider Effective Date.
 
  •  the GIA Plus Withdrawal Amount for the Contract Year beginning on the Rider Effective Date is equal to 5% of the GIA Plus Withdrawal Base.
 
  •  the GIA Plus Step-Up Value is equal to the Contract Value on the Rider Effective Date.
 
The GIA Plus Withdrawal Base and GIA Plus Withdrawal Amount after the Rider Effective Date are recalculated only on each subsequent Contract Anniversary.
 
Limitation on Subsequent Purchase Payments – For purposes of this Rider, we reserve the right to restrict additional Purchase Payments that result in a total of all Purchase Payments received on or after the 1st Contract Anniversary from the Effective Date of the Rider to exceed $100,000 without our prior approval. This provision only applies if the Contract to which this Rider is attached, permits Purchase Payments after the 1st Contract Anniversary, measured from the Contract Date.
 
Subsequent Values – The Guaranteed Income Base, GIA Plus Withdrawal Base, GIA Plus Withdrawal Amount and GIA Plus Step-Up Value after the Rider Effective Date are determined as follows:
 
Guaranteed Income Base – On any day after the Rider Effective Date, the Guaranteed Income Base is equal to:
 
  •  the Guaranteed Income Base on the prior day, multiplied by a daily factor of 1.000133680 which is equivalent to increasing the Guaranteed Income Base at an annual growth rate of 5%, plus


210

 

  •  Purchase Payments received by us on that day, less
 
  •  adjustments for withdrawals made on that day.
 
The adjustment for each withdrawal is calculated by multiplying the Guaranteed Income Base immediately prior to the withdrawal by the percentage decrease in Contract Value as a result of the withdrawal.
 
However, on each Contract Anniversary after the Rider Effective Date, if there is at least one withdrawal during the prior Contract Year and the cumulative withdrawals for that Contract Year do not exceed the sum of:
 
  •  the GIA Plus Withdrawal Amount for that Contract Year, and
 
  •  any remaining dollar amount of the prior Contract Year’s GIA Plus Withdrawal Amount,
 
the Guaranteed Income Base as of that Contract Anniversary will be reset to equal:
 
  •  the Guaranteed Income Base on the Rider Effective Date or prior Contract Anniversary, whichever is later, increased at an annual growth rate of 5%, plus
 
  •  the amount of any subsequent Purchase Payments received by us during the prior Contract Year, each increased at an annual growth rate of 5% from the effective date of that Purchase Payment, less
 
  •  the amount of cumulative withdrawals during the prior Contract Year.
 
The 5% annual growth rate will stop accruing as of the earlier of:
 
  •  the Contract Anniversary prior to the youngest Annuitant’s 81st birthday, or
 
  •  the day this Rider terminates.
 
GIA Plus Withdrawal Base – On each Contract Anniversary after the Rider Effective Date, the GIA Plus Withdrawal Base is equal to:
 
  •  the GIA Plus Withdrawal Base determined on the Rider Effective Date, plus
 
  •  the amount of any subsequent Purchase Payments received by us after the Rider Effective Date, up through the day immediately prior to that Contract Anniversary.
 
GIA Plus Withdrawal Amount – On each Contract Anniversary after the Rider Effective Date, the GIA Plus Withdrawal Amount for the Contract Year beginning on that Contract Anniversary is equal to 5% of the GIA Plus Withdrawal Base as of that Contract Anniversary.
 
GIA Plus Step-Up Value – On any day after the Rider Effective Date, the GIA Plus Step-Up Value is equal to:
 
  •  the GIA Plus Step-Up Value as of the prior day, plus
 
  •  Purchase Payments received by us on that day, less
 
  •  adjustment for withdrawals made on that day.
 
The adjustment for each withdrawal is calculated by multiplying the GIA Plus Step-Up Value immediately prior to the withdrawal by the percentage decrease in Contract Value as a result of that withdrawal.
 
On any Contract Anniversary after the Rider Effective Date and prior to the youngest Annuitant’s 81st birthday, the GIA Plus Step-Up Value is set equal to the greater of:
 
  •  the Contract Value as of that Contract Anniversary, or
 
  •  the GIA Plus Step-Up Value immediately prior to that Contract Anniversary.
 
The GIA Plus Step-Up Value will then be adjusted for any Purchase Payments or withdrawals on that Contract Anniversary in accordance with the first paragraph of this subsection.
 
The GIA Plus Step-Up Value on each Contract Anniversary on and after the youngest Annuitant’s 81st birthday is equal to the GIA Plus Step-Up Value immediately prior to the Contract Anniversary preceding that 81st birthday, adjusted for any Purchase Payments and withdrawals since that anniversary.
 
Partial Conversion of Net Contract Value for Annuity Payments – If a portion of the Net Contract Value (Contract Value less Contract Debt) is converted to provide payments under an Annuity Option described in the Contract at any time before you annuitize under the GIA Plus Annuity Option, the amount converted will be considered a “withdrawal” for purposes of determining withdrawal adjustments to the Guaranteed Income Base and GIA Plus Step-Up Value. A withdrawal charge may also apply.


211

 

Continuation of Rider if Surviving Spouse Continues Contract
 
If the Owner dies while this Rider is in effect and if the surviving spouse of the deceased Owner elects to continue the Contract in accordance with its terms, then the provisions of this Rider will continue, unless otherwise terminated. If a death benefit becomes payable after the Contract Anniversary prior to the youngest Annuitant’s 81st birthday and the surviving spouse elects to continue the Contract and the Rider, the 5% annual growth rate to the Guaranteed Income Base would be applied retroactively for any period of time that the 5% annual growth rate was not applied and until the earlier of the Contract Anniversary prior to the surviving spouse’s 81st birthday or the day this Rider terminates.
 
Termination
 
Except as otherwise provided below, the Rider will remain in effect until the earlier of:
 
  •  the day any portion of the Contract Value is no longer allocated according to the Investment Allocation Requirements,
 
  •  the day we receive notification from you to terminate the Rider,
 
  •  the date of the first death of an Owner or the date of death of the sole surviving Annuitant (except as provided under the Continuation of Rider if Surviving Spouse Continues Contract subsection),
 
  •  for Contracts with a Non-Natural Owner, the date of the first death of an Annuitant, including Primary, Joint and Contingent Annuitants,
 
  •  the date the Contract is terminated in accordance with the terms of the Contract, or
 
  •  the Annuity Date.
 
Upon your request, the Rider may be terminated at any time. If your request to terminate the Rider is received at our Service Center within 60 days after a Contract Anniversary, the Rider will terminate on that Contract Anniversary. If your request to terminate the Rider is received at our Service Center more than 60 days after a Contract Anniversary, the Rider will terminate the day we receive the request.
 
If the Rider is terminated, you must wait until a Contract Anniversary that is at least 1 year from the Effective Date of the termination before the Rider may be purchased again (if available).
 
Sample Calculations
 
The examples provided are based on certain hypothetical assumptions and are for example purposes only. Where Contract Value is reflected, the examples do not assume any specific return percentage. They have been provided to assist in understanding the benefits provided by the Guaranteed Income Advantage Plus (“GIA Plus”) Rider, and to demonstrate how Purchase Payments received and withdrawals made from the Contract prior to the Annuity Date affect the values and benefits under this Rider over an extended period of time. Any Credit Enhancement added to your Contract is not counted as a Purchase Payment and is not included when determining the guarantees under any of the optional living benefit riders. There may be minor differences in the calculations due to rounding. These examples are not intended to serve as projections of future investment returns nor are they a reflection of how your Contract will actually perform.
 
Example #1 – The initial values on the Rider Effective Date based on an Initial Purchase Payment of $100,000. The Initial Purchase Payment is assumed to be the Contract Value if the Rider Effective Date is on a Contract Anniversary.
 
                                 
                                Remaining
                            GIA Plus
 		  Dollar
Beginning
 		  Purchase
 		          Guaranteed
 		  GIA Plus
 		  GIA Plus
 		  Withdrawal
 		  Amount of
of Contract
 		  Payments
 		  Withdrawal
 		  Contract
 		  Income
 		  Step-Up
 		  Withdrawal
 		  Amt. (GWA)
 		  Prior Year’s
Year   Received   Amount   Value   Base (GIB)   Value   Base (GWB)   (5% of GWB)   GWA
 
1   $100,000       $108,000   $100,000   $100,000   $100,000   $5,000   N/A
 


212

 

Example #2 – Subsequent Purchase Payment received during the first Contract Year and its effect on the values and balances under this Rider. This example assumes that no withdrawals have been made.
 
                                 
                                Remaining
                            GIA Plus
 		  Dollar
Beginning
 		  Purchase
 		          Guaranteed
 		  GIA Plus
 		  GIA Plus
 		  Withdrawal
 		  Amount of
of Contract
 		  Payments
 		  Withdrawal
 		  Contract
 		  Income
 		  Step-Up
 		  Withdrawal
 		  Amt. (GWA)
 		  Prior Year’s
Year   Received   Amount   Value   Base (GIB)   Value   Base (GWB)   (5% of GWB)   GWA
 
1   $100,000       $108,000   $100,000   $100,000   $100,000   $5,000   N/A
Activity
  $100,000       $216,742   $201,237   $200,000            
2
          $205,242   $208,717   $205,242   $200,000   $10,000   $5,000
 
 
In addition to Purchase Payments, the Contract Value is further subject to increases and/or decreases during a Contract Year as a result of additional amounts credited, charges, fees and other deductions, and increases and/or decreases in the investment performance of the Variable Account.
 
The Guaranteed Income Base prior to receipt of the Purchase Payment is assumed to have accumulated to $101,237. This amount is derived by multiplying each day’s Guaranteed Income Base by the daily factor of 1.000133680. As a result of the subsequent Purchase Payment, the Guaranteed Income Base is increased to $201,237 ($101,237 + $100,000). The Guaranteed Income Base will assume to accumulate to $208,717 at the next Contract Anniversary, by multiplying each day’s Guaranteed Income Base immediately after receipt of the subsequent Purchase Payment by the daily factor of 1.000133680.
 
The GIA Plus Step-Up Value prior to receipt of the Purchase Payment is $100,000. As a result of the subsequent Purchase Payment, the GIA Plus Step-Up Value is increased to $200,000 ($100,000 + $100,000). On the Contract Anniversary at the beginning of Contract Year 2, the Contract Value ($205,242) is greater than the GIA Plus Step-Up Value immediately prior to that Contract Anniversary ($200,000). As a result, the GIA Plus Step-Up Value as of that Contract Anniversary is equal to the Contract Value on that Contract Anniversary ($205,242).
 
The GIA Plus Withdrawal Base on the Contract Anniversary at the beginning of Contract Year 2 is equal to the GIA Plus Withdrawal Base on the Rider Effective Date ($100,000) plus cumulative Purchase Payments received after the Rider Effective Date ($100,000). As a result of the subsequent Purchase Payment, the GIA Plus Withdrawal Base on the Contract Anniversary at the beginning of Contract Year 2 is equal to $200,000 ($100,000 + $100,000).
 
The GIA Plus Withdrawal Amount for Contract Year 2 is determined on the Contract Anniversary at the beginning of Contract Year 2, and is equal to 5% of the GIA Plus Withdrawal Base on that Contract Anniversary (5% of $200,000). As a result of the subsequent Purchase Payment, the GIA Plus Withdrawal Amount for Contract Year 2 is equal to $10,000.
 
Since no withdrawals were made during Contract Year 1, the GIA Plus Withdrawal Amount for Contract Year 1 ($5,000) becomes the remaining dollar amount of the prior Contract Year’s GIA Plus Withdrawal Amount for Contract Year 2.
 
Example #3 – Cumulative withdrawals during Contract Year 2 exceeding the sum of: (a) the GIA Plus Withdrawal Amount for Contract Year 2; and (b) the remaining dollar amount of the prior Contract Year’s GIA Plus Withdrawal Amount for Contract Year 2. The withdrawal is assumed to result in a 10% reduction in the Contract Value.
 
                                         
 
                                  Remaining
 		 
                            GIA Plus
 		    Dollar
 		 
Beginning
 		  Purchase
 		          Guaranteed
 		  GIA Plus
 		  GIA Plus
 		  Withdrawal
 		    Amount of
 		 
of Contract
 		  Payments
 		  Withdrawal
 		  Contract
 		  Income
 		  Step-Up
 		  Withdrawal
 		  Amt. (GWA)
 		    Prior Year’s
 		 
Year   Received   Amount   Value   Base (GIB)   Value   Base (GWB)   (5% of GWB)     GWA  
 
 
1   $100,000       $108,000   $100,000   $100,000   $100,000     $5,000       N/A   
Activity
  $100,000       $216,742   $201,237   $200,000                    
2
          $205,242   $208,717   $205,242   $200,000     $10,000       $5,000  
Activity
      $20,830   $187,468   $192,471   $184,717         -$15,830
= $0 		      -$5,000
= $0 		 
3
          $190,259   $197,237   $190,259   $200,000     $10,000       $0  
 
 
Since the $20,830 withdrawal exceeded the sum of: (a) the GIA Plus Withdrawal Amount for Contract Year 2; and (b) the remaining dollar amount of the prior Contract’s Year’s GIA Plus Withdrawal Amount for Contract Year 2, the remaining dollar amount of the prior Contract Year’s GIA Plus Withdrawal Amount for Contract Year 3 is zero. Withdrawals are first applied to the remaining dollar amount of the prior Contract Year’s GIA Plus Withdrawal Amount, if any, until exhausted, then to the GIA Plus Withdrawal Amount for the current Contract Year, until exhausted.


213

 

The GIA Plus Withdrawal Amount for Contract Year 3 is determined on the Contract Anniversary at the beginning of Contract Year 3, and is equal to 5% of the GIA Plus Withdrawal Base on that Contract Anniversary (5% of $200,000). As a result, the GIA Plus Withdrawal Amount for Contract Year 3 is equal to $10,000. The GIA Plus Withdrawal Amount for any Contract Year will not be less than zero.
 
Immediately after the withdrawal, the Guaranteed Income Base and the GIA Plus Step-Up Value are reduced by the percentage decrease (10%) in Contract Value as a result of the withdrawal.
 
Since no subsequent Purchase Payments were received during Contract Year 2, the GIA Plus Withdrawal Base at the beginning of Contract Year 3 remains unchanged.
 
Example #4 – Cumulative withdrawals during Contract Year 3 not exceeding the sum of: (a) the GIA Plus Withdrawal Amount for Contract Year 3; and (b) the remaining dollar value of the prior Contract Year’s GIA Plus Withdrawal Amount for Contract Year 3.
 
                                         
 
                                  Remaining
 		 
                            GIA Plus
 		    Dollar
 		 
Beginning
 		  Purchase
 		          Guaranteed
 		  GIA Plus
 		  GIA Plus
 		  Withdrawal
 		    Amount of
 		 
of Contract
 		  Payments
 		  Withdrawal
 		  Contract
 		  Income
 		  Step-Up
 		  Withdrawal
 		  Amt. (GWA)
 		    Prior Year’s
 		 
Year   Received   Amount   Value   Base (GIB)   Value   Base (GWB)   (5% of GWB)     GWA  
 
 
1   $100,000       $108,000   $100,000   $100,000   $100,000     $5,000       N/A   
Activity
  $100,000       $216,742   $201,237   $200,000                    
2
          $205,242   $208,717   $205,242   $200,000     $10,000       $5,000  
Activity
      $20,830   $187,468   $192,471   $184,717         -$15,830
= $0 		      -$5,000
= $0 		 
3
          $190,259   $197,237   $190,259   $200,000     $10,000       $0  
Activity
      $8,000   $185,092   $193,743   $182,376          -$8,000
= $2,000 		       -$0
= $0 		 
4
          $187,848   $199,099   $187,848   $200,000     $10,000       $2,000  
 
 
Because cumulative withdrawals for Contract Year 3 did not exceed the sum of: (a) the GIA Plus Withdrawal Amount for Contract Year 3; and (b) the remaining dollar amount of the prior Contract Year’s GIA Plus Withdrawal Amount for Contract Year 3, the Guaranteed Income Base on the Contract Anniversary at the beginning of Contract Year 4 is calculated as follows:
 
Guaranteed Income Base on the Contract Anniversary at the beginning of Contract Year 3:
$197,237
 
Increased at an annual rate of 5% to the Contract Anniversary at the beginning of Contract Year 4:
+ $9,862
 
Reduced by the amount equal to the amount withdrawn in Contract Year 3:
− $8,000
 
Guaranteed Income Base on the Contract Anniversary at the beginning of Contract Year 4:
$199,099
 
Since no subsequent Purchase Payments were received during Contract Year 3, the GIA Plus Withdrawal Base at the beginning of Contract Year 4 remains unchanged.
 
The GIA Plus Withdrawal Amount for Contract Year 4 is determined on the Contract Anniversary at the beginning of Contract Year 4, and is equal to 5% of the GIA Plus Withdrawal Base on that Contract Anniversary (5% of $200,000). As a result, the GIA Plus Withdrawal Amount for Contract Year 4 is equal to $10,000.
 
Because cumulative withdrawals for Contract Year 3 did not exceed the sum of: (a) the GIA Plus Withdrawal Amount for Contract Year 3; and (b) the remaining dollar value of the prior Contract Year’s GIA Plus Withdrawal Amount for Contract Year 3; the dollar amount of the GIA Plus Withdrawal Amount for Contact Year 3 remaining ($2,000) becomes the remaining dollar amount of the prior Contract Year’s GIA Plus Withdrawal Amount for Contract Year 4.
 
Example #5 – Rider values on each Contract Anniversary based on an Initial Purchase Payment of $100,000 paid on the Contract Date. The values further assume that no subsequent Purchase Payments are received and no withdrawals are taken during the first 10 Contract


214

 

Years after the Rider Effective Date. The Initial Purchase Payment is assumed to be the Contract Value if the Rider is effective on a Contract Anniversary.
 
                         
                    GIA Plus
 		   
Beginning
 		          GIA Plus
 		  GIA Plus
 		  Withdrawal
 		  Remaining Dollar
of Contract
 		      Guaranteed
 		  Step-Up
 		  Withdrawal
 		  Amt. (GWA)
 		  Amount of
Year   Contract Value   Income Base (GIB)   Value   Base (GWB)   (5% of GWB)   Prior Year’s GWA
 
1
  $108,000   $100,000   $100,000   $100,000   $5,000   N/A
2
  $103,000   $105,000   $103,000   $100,000   $5,000   $5,000
3
  $106,090   $110,250   $106,090   $100,000   $5,000   $5,000
4
  $109,273   $115,763   $109,273   $100,000   $5,000   $5,000
5
  $112,551   $121,551   $112,551   $100,000   $5,000   $5,000
6
  $115,927   $127,628   $115,927   $100,000   $5,000   $5,000
7
  $112,450   $134,010   $115,927   $100,000   $5,000   $5,000
8
  $109,076   $140,710   $115,927   $100,000   $5,000   $5,000
9
  $105,804   $147,746   $115,927   $100,000   $5,000   $5,000
10
  $102,630   $155,133   $115,927   $100,000   $5,000   $5,000
11
  $99,551   $162,889   $115,927   $100,000   $5,000   $5,000
 
 
Example #6 – Rider values on each Contract Anniversary based on an Initial Purchase Payment of $100,000 paid on the Contract Date. The values further assume that no subsequent Purchase Payments are received and withdrawals of $5,000 are taken each Contract Year for the first 10 Contract Years after the Rider Effective Date. The Initial Purchase Payment is assumed to be the Contract Value if the Rider is effective on a Contract Anniversary.
 
                         
                    GIA Plus
 		   
Beginning
 		          GIA Plus
 		  GIA Plus
 		  Withdrawal
 		  Remaining Dollar
of Contract
 		      Guaranteed
 		  Step-Up
 		  Withdrawal
 		  Amt. (GWA)
 		  Amount of
Year   Contract Value   Income Base (GIB)   Value   Base (GWB)   (5% of GWB)   Prior Year’s GWA
 
1
  $108,000   $100,000   $100,000   $100,000   $5,000   N/A
2
  $97,926   $100,000   $97,926   $100,000   $5,000   $0
3
  $95,789   $100,000   $95,789   $100,000   $5,000   $0
4
  $93,588   $100,000   $93,588   $100,000   $5,000   $0
5
  $91,321   $100,000   $91,321   $100,000   $5,000   $0
6
  $88,986   $100,000   $88,986   $100,000   $5,000   $0
7
  $81,392   $100,000   $83,910   $100,000   $5,000   $0
8
  $74,026   $100,000   $78,676   $100,000   $5,000   $0
9
  $66,881   $100,000   $73,280   $100,000   $5,000   $0
10
  $59,950   $100,000   $67,718   $100,000   $5,000   $0
11
  $53,227   $100,000   $61,983   $100,000   $5,000   $0
 
 
Should the Contract annuitize immediately after the Rider has been in effect for at least 10 years and the GIA Plus Annuity Option has been elected to provide such payments, the net amount applied on the Annuity Date as a single premium to provide the payments is equal to the greater of:
 
  (a)  the Guaranteed Income Base; or
  (b)  the GIA Plus Step-Up Value; less any:
  (c)  applicable withdrawal charges resulting from the conversion to the GIA Plus Annuity Option;
  (d)  applicable annual charges for expenses related to other optional benefit riders attached to the Contract that are in effect as of the Annuity Date; and
  (e)  charges for premium taxes and/or other taxes.
 
Under Example #5, the net amount applied on the Annuity Date (the Contract Anniversary at the beginning of Contract Year 11) is equal to the Guaranteed Income Base ($162,889), as it is greater than the GIA Plus Step-Up Value ($115,927) as of the Annuity Date, less the amounts in (c), (d) and (e) above, if any.
 
Under Example #6, the net amount applied on the Annuity Date (the Contract Anniversary at the beginning of Contract Year 11) is equal to the Guaranteed Income Base ($100,000), as it is greater than the GIA Plus Step-Up Value ($61,983) as of the Annuity Date, less the amounts in (c), (d) and (e) above, if any.


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PACIFIC VALUE EDGE
 		  WHERE TO GO FOR MORE INFORMATION
 
     
The Pacific Value Edge variable annuity Contract is offered by Pacific Life Insurance Company, 700 Newport Center Drive. P.O. Box 9000, Newport Beach, California 92660.

If you have any questions about the Contract, please ask your financial advisor or contact us.
 
You will find more information about the Pacific Value Edge variable annuity contract and Separate Account A in the Statement of Additional Information (SAI) dated May 1, 2012.

The SAI has been filed with the SEC and is considered to be part of this Prospectus because it is incorporated by reference. In this Prospectus, you will find the table of contents for the SAI on page 93.

You can get a copy of the SAI at no charge by visiting our website, calling or writing to us, or by contacting the SEC. The SEC may charge you a fee for this information.
     
     
How to Contact Us
 
Call or write to us at:
Pacific Life Insurance Company
P.O. Box 2378
Omaha, Nebraska 68103-2378

Contract Owners: (800) 722-4448
Financial Advisors: (800) 722-2333
6 a.m. through 5 p.m. Pacific time

Send Purchase Payments, other payments and application forms to the following address:

By mail
Pacific Life Insurance Company
P.O. Box 2290
Omaha, Nebraska 68103-2290

By overnight delivery service
Pacific Life Insurance Company
1299 Farnam Street, 6th Floor, RSD
Omaha, Nebraska 68102
     
     
How to Contact the SEC
  Commission’s Public Reference Section
100 F Street, NE
Washington, D.C. 20549
(202) 551-8090
Website: www.sec.gov
e-mail: publicinfo@sec.gov
     
     
FINRA Public Disclosure Program
  The Financial Industry Regulatory Authority (FINRA) provides investor protection education through its website and printed materials. The FINRA regulation website address is www.finra.org. An investor brochure that includes information describing the BrokerCheck program may be obtained from FINRA. The FINRA BrokerCheck hotline number is (800) 289-9999. FINRA does not charge a fee for the BrokerCheck program services.

 

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Pacific Life Insurance Company
Mailing address:
P.O. Box 2378
Omaha, Nebraska 68103-2378
 
Visit us at our website: www.PacificLife.com
 
692612A
 

 

STATEMENT OF ADDITIONAL INFORMATION
 
May 1, 2012
 
PACIFIC VALUE EDGE
 
SEPARATE ACCOUNT A
 
 
 
Pacific Value Edge (the “Contract”) is a variable annuity contract offered by Pacific Life Insurance Company (“Pacific Life”).
 
This Statement of Additional Information (“SAI”) is not a Prospectus and should be read in conjunction with the Contract’s Prospectus, dated May 1, 2012, and any supplement thereto, which is available without charge upon written or telephone request to Pacific Life. Terms used in this SAI have the same meanings as in the Prospectus, and some additional terms are defined particularly for this SAI. This SAI is incorporated by reference into the Contract’s Prospectus.
 
 
Pacific Life Insurance Company
Mailing address: P.O. Box 2378
Omaha, Nebraska 68103-2378
 
(800) 722-4448 - Contract Owners
(800) 722-2333 - Financial Advisors

 

 
TABLE OF CONTENTS
 
         
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PERFORMANCE
 
From time to time, our reports or other communications to current or prospective Contract Owners or our advertising or other promotional material may quote the performance (yield and total return) of a Subaccount. Quoted results are based on past performance and reflect the performance of all assets held in that Subaccount for the stated time period. Quoted results are neither an estimate nor a guarantee of future investment performance, and do not represent the actual experience of amounts invested by any particular Contract Owner.
 
Total Returns
 
A Subaccount may advertise its “average annual total return” over various periods of time. “Total return” represents the average percentage change in value of an investment in the Subaccount from the beginning of a measuring period to the end of that measuring period. “Annualized” total return assumes that the total return achieved for the measuring period is achieved for each full year period. “Average annual” total return is computed in accordance with a standard method prescribed by the SEC, and is also referred to as “standardized return.”
 
Average Annual Total Return
 
To calculate a Subaccount’s average annual total return for a specific measuring period, we first take a hypothetical $1,000 investment in that Subaccount, at its applicable Subaccount Unit Value (the “initial payment”) and we compute the ending redeemable value of that initial payment at the end of the measuring period based on the investment experience of that Subaccount (“full withdrawal value”). The full withdrawal value reflects the effect of all recurring fees and charges applicable to a Contract Owner under the Contract, including the Risk Charge, the asset-based Administrative Fee and the deduction of the applicable withdrawal charge, but does not reflect charges for applicable premium taxes and/or any other taxes, non-recurring fees or charges, any increase in the Risk Charge for an optional Death Benefit Rider, or any optional Rider charge. The redeemable value is then divided by the initial payment and this quotient is raised to the 365/N power (N represents the number of days in the measuring period), and 1 is subtracted from this result. Average annual total return is expressed as a percentage.
 
T = (ERV/P)(365/N) − 1
 
             
where
  T   =   average annual total return
    ERV   =   ending redeemable value
    P   =   hypothetical initial payment of $1,000
    N   =   number of days
 
Average annual total return figures will be given for recent 1-, 3-, 5- and 10-year periods (if applicable), and may be given for other periods as well (such as from commencement of the Subaccount’s operations, or on a year-by-year basis).
 
When considering “average” total return figures for periods longer than one year, it is important to note that the relevant Subaccount’s annual total return for any one year in the period might have been greater or less than the average for the entire period.
 
Aggregate Total Return
 
A Subaccount may use “aggregate” total return figures along with its “average annual” total return figures for various periods; these figures represent the cumulative change in value of an investment in the Subaccount for a specific period. Aggregate total returns may be shown by means of schedules, charts or graphs and may indicate subtotals of the various components of total return. The SEC has not prescribed standard formulas for calculating aggregate total return.


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Total returns may also be shown for the same periods that do not take into account the withdrawal charge.
 
Non-Standardized Total Returns
 
We may also calculate non-standardized total returns which may or may not reflect any Credit Enhancement, withdrawal charges, increases in Risk Charge for an optional Death Benefit Rider, charges for premium taxes and/or any other taxes, any optional Rider charge, or any non-recurring fees or charges.
 
Standardized return figures will always accompany any non-standardized returns shown.
 
Yields
 
Cash Management Subaccount
 
The “yield” (also called “current yield”) of the Cash Management Subaccount is computed in accordance with a standard method prescribed by the SEC. The net change in the Subaccount’s Unit Value during a seven-day period is divided by the Unit Value at the beginning of the period to obtain a base rate of return. The current yield is generated when the base rate is “annualized” by multiplying it by the fraction 365/7; that is, the base rate of return is assumed to be generated each week over a 365-day period and is shown as a percentage of the investment. The “effective yield” of the Cash Management Subaccount is calculated similarly but, when annualized, the base rate of return is assumed to be reinvested. The effective yield will be slightly higher than the current yield because of the compounding effect of this assumed reinvestment.
 
The formula for effective yield is: [(Base Period Return + 1) (To the power of 365/7)] − 1.
 
Realized capital gains or losses and unrealized appreciation or depreciation of the assets of the underlying Cash Management Portfolio are not included in the yield calculation. Current yield and effective yield do not reflect any Credit Enhancement, the deduction of charges for any applicable premium taxes and/or any other taxes, any increase in the Risk Charge for an optional Death Benefit Rider, any optional Rider charge or any non-recurring fees or changes but do reflect a deduction for the Risk Charge and the asset-based Administrative Fee.
 
Other Subaccounts
 
“Yield” of the other Subaccounts is computed in accordance with a different standard method prescribed by the SEC. The net investment income (investment income less expenses) per Subaccount Unit earned during a specified one-month or 30-day period is divided by the Subaccount Unit Value on the last day of the specified period. This result is then annualized (that is, the yield is assumed to be generated each month or each 30-day period for a year), according to the following formula, which assumes semi-annual compounding:
 
         
YIELD = 2*[(
  a – b
c*d 		  + 1)6 − 1]
 
             
where:
  a   =   net investment income earned during the period by the Portfolio attributable to the Subaccount.
    b   =   expenses accrued for the period (net of reimbursements).
    c   =   the average daily number of Subaccount Units outstanding during the period that were entitled to receive dividends.
    d   =   the Unit Value of the Subaccount Units on the last day of the period.
 
The yield of each Subaccount reflects the deduction of all recurring fees and charges applicable to the Subaccount, such as the Risk Charge and asset-based Administrative Fee, but does not reflect any Credit Enhancement, withdrawal charge, charge for applicable premium taxes and/or any other taxes, increase in the Risk Charge for an optional Death Benefit Rider, any optional Rider charge, or any non-recurring fees or charges.
 
The Subaccounts’ yields will vary from time to time depending upon market conditions, the composition of each Portfolio and operating expenses of the Fund allocated to each Portfolio. Consequently, any given performance quotation should not be considered representative of the Subaccount’s performance in the future. Yield should also be considered relative to changes in Subaccount Unit Values and to the relative risks associated with the investment policies and objectives of the various Portfolios. In addition, because performance will fluctuate, it may not provide a


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basis for comparing the yield of a Subaccount with certain bank deposits or other investments that pay a fixed yield or return for a stated period of time.
 
Performance Comparisons and Benchmarks
 
In advertisements and sales literature, we may compare the performance of some or all of the Subaccounts to the performance of other variable annuity issuers in general and to the performance of particular types of variable annuities investing in mutual funds, or series of mutual funds, with investment objectives similar to each of the Subaccounts. This performance may be presented as averages or rankings compiled by Lipper Analytical Services, Inc. (“Lipper”), or Morningstar, Inc. (“Morningstar”), which are independent services that monitor and rank the performance of variable annuity issuers and mutual funds in each of the major categories of investment objectives on an industry-wide basis. Lipper’s rankings include variable life issuers as well as variable annuity issuers. The performance analyses prepared by Lipper and Morningstar rank such issuers on the basis of total return, assuming reinvestment of dividends and distributions, but do not take sales charges, redemption fees or certain expense deductions at the separate account level into consideration. In addition, Morningstar prepares risk adjusted rankings, which consider the effects of market risk on total return performance. We may also compare the performance of the Subaccounts with performance information included in other publications and services that monitor the performance of insurance company separate accounts or other investment vehicles. These other services or publications may be general interest business publications such as The Wall Street Journal, Barron’s, Business Week, Forbes, Fortune, and Money.
 
In addition, our reports and communications to Contract Owners, advertisements, or sales literature may compare a Subaccount’s performance to various benchmarks that measure the performance of a pertinent group of securities widely regarded by investors as being representative of the securities markets in general or as being representative of a particular type of security. We may also compare the performance of the Subaccounts with that of other appropriate indices of investment securities and averages for peer universes of funds or data developed by us derived from such indices or averages. Unmanaged indices generally assume the reinvestment of dividends or interest but do not generally reflect deductions for investment management or administrative costs and expenses.
 
Tax Deferred Accumulation
 
In reports or other communications to you or in advertising or sales materials, we may also describe the effects of tax-deferred compounding on the Separate Account’s investment returns or upon returns in general. These effects may be illustrated in charts or graphs and may include comparisons at various points in time of returns under the Contract or in general on a tax-deferred basis with the returns on a taxable basis. Different tax rates may be assumed.
 
In general, individuals who own annuity contracts are not taxed on increases in the value under the annuity contract until some form of distribution is made from the contract (Non-Natural Persons as Owners may not receive tax deferred accumulation). Thus, the annuity contract will benefit from tax deferral during the accumulation period, which generally will have the effect of permitting an investment in an annuity contract to grow more rapidly than a comparable investment under which increases in value are taxed on a current basis. The following chart illustrates this benefit by comparing accumulation under a variable annuity contract with accumulations from an investment on which gains are taxed on a current ordinary income basis.
 
The chart shows a single Purchase Payment of $10,000, assuming hypothetical annual returns of 0%, 4% and 8%, compounded annually, and a tax rate of 33%. The values shown for the taxable investment do not include any deduction for management fees or other expenses but assume that taxes are deducted annually from investment returns. The values shown for the variable annuity do not reflect the Credit Enhancement, the deduction of contractual expenses such as the Risk Charge (equal to an annual rate of 1.50% of average daily account value); the Administrative Fee (equal to an annual rate of 0.25% of average daily account value); any increase in the Risk Charge for an optional death benefit rider (equal to up to a maximum annual rate of 0.20% of average daily account value); other optional Rider charges (equal to a maximum annual rate of 1.75% of the Protected Payment Base); a charge for premium taxes and/or other taxes, any applicable withdrawal charge; or any underlying Fund expenses.
 
If these expenses and fees were taken into account, they would reduce the investment return shown for both the taxable investment and the hypothetical variable annuity contract. In addition, these values assume that you do not surrender the Contract or make any withdrawals until the end of the period shown. The chart assumes a full withdrawal, at the


3

 

end of the period shown, of all Contract Value and the payment of taxes at the 33% rate on the amount in excess of the Purchase Payments.
 
The rates of return illustrated are hypothetical and are not an estimate or guarantee of performance. Actual tax rates may vary for different assets (e.g. capital gains and qualifying dividend income) and taxpayers from that illustrated. Withdrawals by and distributions to Contract Owners who have not reached age 591/2 may be subject to a tax penalty of 10%.
 
Power of Tax Deferral
 
$10,000 investment at annual rates of return of 0%, 4% and 8%, taxed @ 33%
 
(Power of Tax Deferral)
 
DISTRIBUTION OF THE CONTRACTS
 
Pacific Select Distributors, Inc. (PSD)
 
Pacific Select Distributors, Inc., our subsidiary, acts as the distributor of the Contracts and offers the Contracts on a continuous basis. PSD is located at 700 Newport Center Drive, Newport Beach, California 92660. PSD is registered as a broker-dealer with the SEC and is a member of FINRA. We pay PSD for acting as distributor under a Distribution Agreement. We and PSD enter into selling agreements with broker-dealers whose financial advisors are authorized by state insurance departments to solicit applications for the Contracts. The aggregate amount of underwriting commissions paid to PSD for 2011, 2010 and 2009 with regard to this Contract was $1,324,638, $1,442,052 and $10,955,112 respectively, of which $0 was retained.
 
PSD or an affiliate pays various sales compensation to broker-dealers that solicit applications for the Contracts. PSD or an affiliate also may provide reimbursement for other expenses associated with the promotion and solicitation of applications for the Contracts. Your financial advisor typically receives a portion of the compensation that is payable to


4

 

his or her broker-dealer in connection with the Contract, depending on the agreement between your financial advisor and his or her firm. Pacific Life is not involved in determining that compensation arrangement, which may present its own incentives or conflicts. You may ask your financial advisor how he/she will personally be compensated for the transaction.
 
Under certain circumstances where PSD pays lower initial commissions, certain broker-dealers that solicit applications for Contracts may be paid an ongoing persistency trail commission (sometimes called a residual). The mix of Purchase Payment-based versus trail commissions varies depending upon our agreement with the selling broker-dealer and the commission option selected by your financial advisor or broker-dealer. Certain broker-dealers may also be paid an amount under a persistency program which will be based on assets under management and duration of contracts. The amount under the persistency program for a financial advisor is not expected to exceed 0.25% of their total assets under management.
 
In addition to the Purchase Payment-based, trail commissions and persistency program described above, we and/or an affiliate may pay additional cash compensation from our own resources in connection with the promotion and solicitation of applications for the Contracts by some, but not all, broker-dealers. The range of additional cash compensation based on Purchase Payments generally does not exceed 0.40% and trailing compensation based on Account Value generally does not exceed 0.10% on an annual basis. Such additional compensation may give Pacific Life greater access to financial advisors of the broker-dealers that receive such compensation. While this greater access provides the opportunity for training and other educational programs so that your financial advisor may serve you better, this additional compensation also may afford Pacific Life a “preferred” status at the recipient broker-dealer and provide some other marketing benefit such as website placement, access to financial advisor lists, extra marketing assistance or other heightened visibility and access to the broker-dealer’s sales force that may otherwise influence the way that the broker-dealer and the financial advisor market the Contracts.
 
As of December 31, 2011, the following firms have arrangements in effect with the Distributor pursuant to which the firm is entitled to receive a revenue sharing payment:
 
American Portfolios Financial Services Inc., Askar Corporation, Bancwest Investment Services Inc., C C O Investment Services Corp, C U N A Brokerage Services Inc., C U S O Financial Services LP, Centaurus Financial, Inc., Citigroup Global Markets Inc., Commonwealth Financial Network, B B V A Compass Investment Solutions Inc., Edward D. Jones & Co., LP, Essex National Securities Inc., F S C Securities Corporation, Fifth Third Securities Inc., Financial Network Investment Corp., First Allied Securities Inc., First Heartland Capital Inc., First Tennessee Brokerage Inc., Geneos Wealth Management Inc., I N G Financial Partners Inc., Infinex Investments Inc., Invest Financial Corporation, Investacorp Inc., Investment Centers of America Inc., Investment Professionals Inc., J J B Hilliard, W L Lyons Inc., Jacques Financial L L C, Janney Montgomery Scott Inc., Key Investment Services L L C, L P L Financial Corp., Lincoln Financial Advisors Corp., Lincoln Financial Securities Corp., M & T Securities Inc., M Holdings Securities Inc., M M L Investors Services Inc., Merrill Lynch, Pierce, Fenner & Smith, Morgan Keegan & Company Inc., Morgan Stanley & Co. Incorporated, Multi-Financial Securities Corp., Mutual Of Omaha Investor Services Inc., NF P Securities Inc., National Planning Corporation, NEXT Financial Group Inc., P N C Investments L L C, Park Avenue Securities LLC., Primevest Financial Services Inc., ProEquities Inc., R B C Capital Markets Corporation, Raymond James & Associates Inc., Raymond James Financial Services Inc., Robert W Baird & Company Inc., Royal Alliance Associates Inc., S I I Investments Inc., Sagepoint Financial Inc., Securian Financial Services Inc., Securities America Inc., Sigma Financial Corp., Signator Investors Inc., Sorrento Pacific Financial L L C, Stifel Nicolaus & Company Inc., Suntrust Investment Services Inc., Tower Square Securities Inc., Transamerica Financial Advisors Inc., Triad Advisors Inc., U B S Financial Services Inc., U S Bancorp Investments Inc., Unionbanc Investment Services L L C, United Planners’ Financial Services of America, V S R Financial Services Inc., Vision Investment Services Inc., Walnut Street Securities, Wells Fargo Advisors LLC, Wells Fargo Investments LLC, Wescom Financial Services L L C, Woodbury Financial Services Inc., Zions Direct Inc.
 
We or our affiliates may also pay override payments, expense allowances and reimbursements, bonuses, wholesaler fees, and training and marketing allowances. Such payments may offset the broker-dealer’s expenses in connection with activities that it is required to perform, such as educating personnel and maintaining records. Financial advisors may also receive non-cash compensation, such as expense-paid educational or training seminars involving travel within and outside the U.S. or promotional merchandise.


5

 

 
All of the compensation described in this section, and other compensation or benefits provided by us or our affiliates, may be more or less than the overall compensation on similar or other products and may influence your financial advisor or broker-dealer to present this Contract over other investment options. You may ask your financial advisor about these potential conflicts of interest and how he/she and his/her broker-dealer are compensated for selling the Contract.
 
Portfolio Managers of the underlying Portfolios available under this Contract may from time to time bear all or a portion of the expenses of conferences or meetings sponsored by Pacific Life or PSD that are attended by, among others, representatives of PSD, who would receive information and/or training regarding the Fund’s Portfolios and their management by the Portfolio Managers in addition to information regarding the variable annuity and/or life insurance products issued by Pacific Life and its affiliates. Other persons may also attend all or a portion of any such conferences or meetings, including directors, officers and employees of Pacific Life, officers and trustees of Pacific Select Fund, and spouses/guests of the foregoing. The Pacific Select Fund Board of Trustees may hold meetings concurrently with such a conference or meeting. The Pacific Select Fund pays for the expenses of the meetings of its Board of Trustees, including the pro rata share of expenses for attendance by the Trustees at the concurrent conferences or meetings sponsored by Pacific Life or PSD. Additional expenses and promotional items may be paid for by Pacific Life and/or Portfolio Managers. PSD serves as the Pacific Select Fund Distributor.


6

 

 
THE CONTRACTS AND THE SEPARATE ACCOUNT
 
Calculating Subaccount Unit Values
 
The Unit Value of the Subaccount Units in each Variable Investment Option is computed at the close of the New York Stock Exchange, which is usually 4:00 p.m. Eastern time on each Business Day. The initial Unit Value of each Subaccount was $10 on the Business Day the Subaccount began operations. At the end of each Business Day, the Unit Value for a Subaccount is equal to:
 
Y × Z
 
             
where
  (Y)   =   the Unit Value for that Subaccount as of the end of the preceding Business Day; and
    (Z)   =   the Net Investment Factor for that Subaccount for the period (a “valuation period”) between that Business Day and the immediately preceding Business Day.
 
The “Net Investment Factor” for a Subaccount for any valuation period is equal to:
 
(A ¸ B) − C
 
             
where
  (A)   =   the “per share value of the assets” of that Subaccount as of the end of that valuation period, which is equal to: a+b+c
 
             
where
  (a)   =   the net asset value per share of the corresponding Portfolio shares held by that Subaccount as of the end of that valuation period;
    (b)   =   the per share amount of any dividend or capital gain distributions made by the Fund for that Portfolio during that valuation period; and
    (c)   =   any per share charge (a negative number) or credit (a positive number) for any income taxes or other amounts set aside during that valuation period as a reserve for any income and/or any other taxes which we determine to have resulted from the operations of the Subaccount or Contract, and/or any taxes attributable, directly or indirectly, to Investments;
 
             
    (B)   =   the net asset value per share of the corresponding Portfolio shares held by the Subaccount as of the end of the preceding valuation period; and
    (C)   =   a factor that assesses against the Subaccount net assets for each calendar day in the valuation period, the basic Risk Charge plus the Administrative Fee and any applicable increase in the Risk Charge (see the CHARGES, FEES AND DEDUCTIONS section in the Prospectus).
 
Variable Annuity Payment Amounts
 
The following steps show how we determine the amount of each variable annuity payment under your Contract.
 
First: Pay Applicable Premium Taxes
 
When you convert any portion of your Net Contract Value into annuity payments, you must pay any applicable charge for premium taxes and/or any other taxes on your Contract Value (unless applicable law requires those taxes to be paid at a later time). We assess this charge by reducing your Account Value proportionately, relative to your Account Value in each Subaccount and in any fixed option, in an amount equal to the aggregate amount of the charges. The remaining amount of your available Net Contract Value may be used to provide variable annuity payments. Alternatively, your remaining available Net Contract Value may be used to provide fixed annuity payments, or it may be divided to provide both fixed and variable annuity payments. You may also choose to withdraw some or all of your remaining Net Contract Value, less any applicable optional Rider Charge, withdrawal charge, and any charges for premium taxes and/or any other taxes without converting this amount into annuity payments.
 
Second: The First Variable Payment
 
We begin by referring to your Contract’s Option Table for your Annuity Option (the “Annuity Option Table”). The Annuity Option Table allows us to calculate the dollar amount of the first variable annuity payment under your Contract, based on the amount applied toward the variable annuity. The number that the Annuity Option Table yields


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will be based on the Annuitant’s age (and, in certain cases, sex) and assumes a 5% rate of return, as described in more detail below.
 
Example: Assume a man is 65 years of age at his Annuity Date and has selected a lifetime annuity with monthly payments guaranteed for 10 years. According to the Annuity Option Table, this man should receive an initial monthly payment of $5.79 for every $1,000 of his Contract Value (reduced by applicable charges) that he will be using to provide variable payments. Therefore, if his Contract Value after deducting applicable fees and charges is $100,000 on his Annuity Date and he applies this entire amount toward his variable annuity, his first monthly payment will be $579.00.
 
You may choose any other Annuity Option Table that assumes a different rate of return which we offer at the time your Annuity Option is effective.
 
Third: Subaccount Annuity Units
 
For each Subaccount, we use the amount of the first variable annuity payment under your Contract attributed to each Subaccount to determine the number of Subaccount Annuity Units that will form the basis of subsequent payment amounts. First, we use the Annuity Option Table to determine the amount of that first variable payment for each Subaccount. Then, for each Subaccount, we divide that amount of the first variable annuity payment by the value of one Subaccount Annuity Unit (the “Subaccount Annuity Unit Value”) as of the end of the Annuity Date to obtain the number of Subaccount Annuity Units for that particular Subaccount. The number of Subaccount Annuity Units used to calculate subsequent payments under your Contract will not change unless exchanges of Annuity Units are made, (or if the Joint and Survivor Annuity Option is elected and the Primary Annuitant dies first) but the value of those Annuity Units will change daily, as described below.
 
Fourth: The Subsequent Variable Payments
 
The amount of each subsequent variable annuity payment will be the sum of the amounts payable based on each Subaccount. The amount payable based on each Subaccount is equal to the number of Subaccount Annuity Units for that Subaccount multiplied by their Subaccount Annuity Unit Value at the end of the Business Day in each payment period you elected that corresponds to the Annuity Date.
 
Each Subaccount’s Subaccount Annuity Unit Value, like its Subaccount Unit Value, changes each day to reflect the net investment results of the underlying investment vehicle, as well as the assessment of the Risk Charge at an annual rate of 1.50% and the Administrative Fee at an annual rate of 0.25%. In addition, the calculation of Subaccount Annuity Unit Value incorporates an additional factor; as discussed in more detail below, this additional factor adjusts Subaccount Annuity Unit Values to correct for the Option Table’s implicit assumed annual investment return on amounts applied but not yet used to furnish annuity benefits. Any increase in your Risk Charge for an optional death benefit rider is not charged on and after the Annuity Date.
 
Different Subaccounts may be selected for your Contract before and after your Annuity Date, subject to any restrictions we may establish. Currently, you may exchange Subaccount Annuity Units in any Subaccount for Subaccount Annuity Units in any other Subaccount(s) up to four times in any twelve month period after your Annuity Date. The number of Subaccount Annuity Units in any Subaccount may change due to such exchanges. Exchanges following your Annuity Date will be made by exchanging Subaccount Annuity Units of equivalent aggregate value, based on their relative Subaccount Annuity Unit Values.
 
Understanding the “Assumed Investment Return” Factors
 
The Annuity Option Table incorporates a number of implicit assumptions in determining the amount of your first variable annuity payment. As noted above, the numbers in the Annuity Option Table reflect certain actuarial assumptions based on the Annuitant’s age, and, in some cases, the Annuitant’s sex. In addition, these numbers assume that the amount of your Contract Value that you convert to a variable annuity will have a positive net investment return of 5% each year during the payout of your annuity; thus 5% is referred to as an “assumed investment return.”
 
The Subaccount Annuity Unit Value for a Subaccount will increase only to the extent that the investment performance of that Subaccount exceeds the Risk Charge, the Administrative Fee, and the assumed investment return. The


8

 

Subaccount Annuity Unit Value for any Subaccount will generally be less than the Subaccount Unit Value for that same Subaccount, and the difference will be the amount of the assumed investment return factor.
 
Example: Assume the net investment performance of a Subaccount is at a rate of 5.00% per year (after deduction of the 1.50% Risk Charge and the 0.25% Administrative Fee). The Subaccount Unit Value for that Subaccount would increase at a rate of 5.00% per year, but the Subaccount Annuity Unit Value would not increase (or decrease) at all. The net investment factor for that 5% return [1.05] is then divided by the factor for the 5% assumed investment return [1.05] and 1 is subtracted from the result to determine the adjusted rate of change in Subaccount Annuity Unit Value:
 
     
1.05
1.05 		  = 1; 1 − 1 = 0; 0 × 100% = 0%.
 
If the net investment performance of a Subaccount’s assets is at a rate less than 5.00% per year, the Subaccount Annuity Unit Value will decrease, even if the Subaccount Unit Value is increasing.
 
Example: Assume the net investment performance of a Subaccount is at a rate of 2.60% per year (after deduction of the 1.50% Risk Charge and the 0.25% Administrative Fee). The Subaccount Unit Value for that Subaccount would increase at a rate of 2.60% per year, but the Subaccount Annuity Unit Value would decrease at a rate of 2.29% per year. The net investment factor for that 2.6% return [1.026] is then divided by the factor for the 5% assumed investment return [1.05] and 1 is subtracted from the result to determine the adjusted rate of change in Subaccount Annuity Unit Value:
 
     
1.026
1.05 		  = 0.9771; 0.9771 − 1 = −0.0229; −0.0229 × 100% = −2.29%.
 
The assumed investment return will always cause increases in Subaccount Annuity Unit Values to be somewhat less than if the assumption had not been made, will cause decreases in Subaccount Annuity Unit Values to be somewhat greater than if the assumption had not been made, and will (as shown in the example above) sometimes cause a decrease in Subaccount Annuity Unit Values to take place when an increase would have occurred if the assumption had not been made. If we had assumed a higher investment return in our Annuity Option tables, it would produce annuities with larger first payments, but the increases in subaccount annuity payments would be smaller and the decreases in subsequent annuity payments would be greater; a lower assumed investment return would produce annuities with smaller first payments, and the increases in subsequent annuity payments would be greater and the decreases in subsequent annuity payments would be smaller.
 
Redemptions of Remaining Guaranteed Variable Payments Under Options 2 and 4
 
If variable payments are elected under Annuity Options 2 and 4, you may redeem all remaining guaranteed variable payments after the Annuity Date. Also, under Option 4, partial redemptions of remaining guaranteed variable payments after the Annuity Date are available. If you elect to redeem all remaining guaranteed variable payments in a single sum, we will not make any additional variable annuity payments during the Annuitant’s lifetime or the remaining guaranteed period after the redemption. The amount available upon full redemption would be the present value of any remaining guaranteed variable payments at the assumed investment return. Any applicable withdrawal charge will be deducted from the present value as if you made a full withdrawal, or if applicable, a partial withdrawal. For purposes of calculating the withdrawal charge and Free Withdrawal amount, it will be assumed that the Contract was never converted to provide annuity payments and any prior variable annuity payments in that Contract Year will be treated as if they were partial withdrawals from the Contract (see the CHARGES, FEES AND DEDUCTIONS – Withdrawal Charge section in the Prospectus). For example, assume that a Contract was issued with a single investment of $10,000 and in Contract Year 2 the Owner elects to receive variable annuity payments under Annuity Option 4. In Contract Year 3, the Owner elects to make a partial redemption of $5,000. The withdrawal charge as a percentage of the Purchase Payments with an age of 3 years is 8%. Assuming the Free Withdrawal amount immediately prior to the partial redemption is $200, the withdrawal charge for the partial redemption will be $384 (($5,000 − $200)* 8%). No withdrawal charge will be imposed on a redemption if:
 
  •  the Annuity Option is elected as the form of payments of death benefit proceeds, or
 
  •  the Annuitant dies before the period certain has ended and the Beneficiary requests a redemption of the variable annuity payments.


9

 

The variable payment amount we use in calculating the present value is determined by summing an amount for each Subaccount, which we calculate by multiplying your Subaccount Annuity Units by the Annuity Unit Value next computed after we receive your redemption request. This variable payment amount is then discounted at the assumed investment return from each future Annuity Payment date that falls within the payment guaranteed period. The sum of these discounted remaining variable payment amounts is the present value of remaining guaranteed variable payments.
 
If you elect to redeem all remaining guaranteed variable payments in a single sum, we will not make any additional variable annuity payments during the remaining guaranteed period after the redemption.
 
If you elect to redeem a portion of the remaining guaranteed variable payments in a single sum, we will reduce the number of Annuity Units for each Subaccount by the same percentage as the partial redemption value bears to the amount available upon a full redemption.
 
Redemption of remaining guaranteed variable payments will not affect the amount of any fixed annuity payments.
 
Corresponding Dates
 
If any systematic pre-authorized transaction under your Contract is scheduled to occur on a “corresponding date” that does not exist in a given calendar period or is scheduled to occur on the last day of the month that is not a Business Day, the transaction will be deemed to occur on the last Business Day of the month.
 
Example: If your Contract is issued on February 29 in year 1 (a leap year), your Contract Anniversary in years 2, 3 and 4 will be on February 28.
 
Example: If your Annuity Date is January 31, and you select monthly annuity payments, the payments received will be based on valuations made on February 28 (or 29 in a leap year), March 31, April 30, May 31, June 30, July 31, August 31, September 30, October 31, November 30, and December 31 if those days are Business Days. Otherwise, the valuations made will be based on the last Business Day of the applicable month.
 
Age and Sex of Annuitant
 
The Contracts generally provide for sex-distinct annuity income factors in the case of life annuities. Statistically, females tend to have longer life expectancies than males; consequently, if the amount of annuity payments is based on life expectancy, they will ordinarily be higher if an annuitant is male than if an annuitant is female. Certain states’ regulations prohibit sex-distinct annuity income factors, and Contracts issued in those states will use unisex factors. In addition, Contracts issued in connection with Qualified Plans are required to use unisex factors.
 
We may require proof of your Annuitant’s age and sex before or after commencing annuity payments. If the age or sex (or both) of your Annuitant are incorrectly stated in your Contract, we will correct the amount payable to equal the amount that the annuitized portion of the Contract Value under that Contract would have purchased for your Annuitant’s correct age and sex. If we make the correction after annuity payments have started, and we have made overpayments based on the incorrect information, we will deduct the amount of the overpayment, with interest as stated in your Contract, from any payments due then or later; if we have made underpayments, we will add the amount, with interest as stated in your Contract, of the underpayments to the next payment we make after we receive proof of the correct age and/or sex.
 
Additionally, we may require proof of the Annuitant’s or Owner’s age before any payments associated with the Death Benefit provisions of your Contract are made. If the age or sex of the Annuitant is incorrectly stated in your Contract, we will base any payment associated with the Death Benefit provisions on your Contract on the Annuitant’s or Owner’s correct age or sex.
 
Systematic Transfer Programs
 
The fixed option(s) are not available in connection with portfolio rebalancing. If you are using the earnings sweep, you may also use portfolio rebalancing only if you selected the Cash Management Subaccount. You may not use dollar cost averaging, DCA Plus, and the earnings sweep at the same time. Only portfolio rebalancing is available after you annuitize. The systematic transfer options are subject to the same requirements and restrictions as non-systematic


10

 

transfers. In addition, no fixed option(s) may be used as the target Investment Option under any systematic transfer program.
 
Dollar Cost Averaging
 
When you request dollar cost averaging, you are authorizing us to make periodic reallocations of your Contract Value without waiting for any further instruction from you. You may request to begin or stop dollar cost averaging at any time prior to your Annuity Date; the effective date of your request will be the day we receive notice from you In Proper Form. Your request may specify the date on which you want your first transfer to be made. Your first transfer may not be made until 30 days after your Contract Date, and if you specify an earlier date, your first transfer will be delayed until one calendar month after the date you specify. If you request dollar cost averaging on your application for your Contract and you fail to specify a date for your first transfer, your first transfer will be made one period after your Contract Date (that is, if you specify monthly transfers, the first transfer will occur 30 days after your Contract Date; quarterly transfers, 90 days after your Contract Date; semi-annual transfers, 180 days after your Contract Date; and if you specify annual transfers, the first transfer will occur on your Contract Anniversary). If you stop dollar cost averaging, you must wait 30 days before you may begin this option again. Currently, we are not enforcing the 30 day waiting period but we reserve the right to enforce such waiting period in the future.
 
Your request to begin dollar cost averaging must specify the Investment Option you wish to transfer money from (your “source account”). You may choose any one Investment Option as your source account. The Account Value of your source account must be at least $5,000 for you to begin dollar cost averaging. Currently, we are not enforcing the minimum Account Value but we reserve the right to enforce such minimum amounts in the future.
 
Your request to begin dollar cost averaging must also specify the amount and frequency of your transfers. You may choose monthly, quarterly, semiannual or annual transfers. The amount of your transfers may be specified as a dollar amount or a percentage of your source Account Value; however, each transfer must be at least $250. Currently, we are not enforcing the minimum transfer amount but we reserve the right to enforce such minimum amounts in the future. Dollar cost averaging transfers are not subject to the same requirements and limitations as other transfers.
 
Finally, your request must specify the Variable Investment Option(s) you wish to transfer amounts to (your “target account(s)”). If you select more than one target account, your dollar cost averaging request must specify how transferred amounts should be allocated among the target accounts. Your source account may not also be a target account.
 
Your dollar cost averaging transfers will continue until the earlier of:
 
  •  your request to stop dollar cost averaging is effective, or
 
  •  your source Account Value is zero, or
 
  •  your Annuity Date.
 
If, as a result of a dollar cost averaging transfer, your source Account Value falls below any minimum Account Value we may establish, we have the right, at our option, to transfer that remaining Account Value to your target account(s) on a proportionate basis relative to your most recent allocation instructions. We may change, terminate or suspend the dollar cost averaging option at any time.
 
Portfolio Rebalancing
 
Portfolio rebalancing allows you to maintain the percentage of your Contract Value allocated to each Variable Investment Option at a pre-set level prior to annuitization.
 
For example, you could specify that 30% of your Contract Value should be in Subaccount A, 40% in Subaccount B, and 30% in Subaccount C.
 
Over time, the variations in each Subaccount’s investment results will shift this balance of these Subaccount Value allocations. If you elect the portfolio rebalancing feature, we will automatically transfer your Subaccount Value back to the percentages you specify.


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You may choose to have rebalances made quarterly, semi-annually or annually. Only portfolio rebalancing is available after you annuitize.
 
Procedures for selecting portfolio rebalancing are generally the same as those discussed in detail above for selecting dollar cost averaging: You may make your request at any time prior to your Annuity Date and it will be effective when we receive it In Proper Form. If you stop portfolio rebalancing, you must wait 30 days to begin again. Currently, we are not enforcing the 30-day waiting period but we reserve the right to enforce such waiting period in the future. If you specify a date fewer than 30 days after your Contract Date, your first rebalance will be delayed one month, and if you request rebalancing on your application but do not specify a date for the first rebalance, it will occur one period after your Contract Date, as described above under Dollar Cost Averaging. We may change, terminate or suspend the portfolio rebalancing feature at any time.
 
Earnings Sweep
 
An earnings sweep automatically transfers the earnings attributable to the Cash Management Subaccount (the “sweep option”) to one or more other Variable Investment Options (your “target option(s)”). The Account Value of your sweep option will be required to be at least $5,000 when you elect the earnings sweep. Currently, we are not enforcing the minimum Account Value but we reserve the right to enforce such minimum amounts in the future.
 
You may choose to have earnings sweeps occur monthly, quarterly, semi-annually or annually until you annuitize. At each earnings sweep, we will automatically transfer your accumulated earnings attributable to your sweep option for the previous period proportionately to your target option(s). That is, if you select a monthly earnings sweep, we will transfer the sweep option earnings from the preceding month; if you select a semi-annual earnings sweep, we will transfer the sweep option earnings accumulated over the preceding 6 months. Earnings sweep transfers are not subject to the same requirements and limitations as other transfers.
 
To determine the earnings, we take the change in the sweep option’s Account Value during the sweep period, add any withdrawals or transfers out of the sweep option Account that occurred during the sweep period, and subtract any allocations, including Credit Enhancements, to the sweep option Account during the sweep period. The result of this calculation represents the “total earnings” for the sweep period.
 
If, during the sweep period, you withdraw or transfer amounts from the sweep option Account, we assume that earnings are withdrawn or transferred before any other Account Value. Therefore, your “total earnings” for the sweep period will be reduced by any amounts withdrawn or transferred during the sweep option period. The remaining earnings are eligible for the sweep transfer.
 
Procedures for selecting the earnings sweep are generally the same as those discussed in detail above for selecting dollar cost averaging and portfolio rebalancing: You may make your request at any time and it will be effective when we receive In Proper Form. If you stop the earnings sweep, you must wait 30 days to begin again. Currently, we are not enforcing the 30-day waiting period but we reserve the right to enforce such waiting period in the future. If you specify a date fewer than 30 days after your Contract Date, your first earnings sweep will be delayed one month, and if you request the earnings sweep on your application but do not specify a date for the first sweep, it will occur one period after your Contract Date, as described above under Dollar Cost Averaging.
 
If, as a result of an earnings sweep transfer, your source Account Value falls below $500, we have the right, at our option, to transfer that remaining Account Value to your target account(s) on a proportionate basis relative to your most recent allocation instructions. We may change, terminate or suspend the earnings sweep option at any time.
 
Pre-Authorized Withdrawals
 
You may specify a dollar amount for your pre-authorized withdrawals, or you may specify a percentage of your Contract Value or an Account Value. You may direct us to make your pre-authorized withdrawals from one or more specific Investment Options. If you do not give us these specific instructions, amounts will be deducted proportionately from your Account Value in each Investment Option.
 
Procedures for selecting pre-authorized withdrawals are generally the same as those discussed in detail above for selecting dollar cost averaging, portfolio rebalancing, and earnings sweeps: You may make your request at any time and


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it will be effective when we receive it In Proper Form. If you stop the pre-authorized withdrawals, you must wait 30 days to begin again. Currently, we are not enforcing the 30-day waiting period but we reserve the right to enforce such waiting period in the future.
 
Pre-authorized withdrawals are subject to the same withdrawal charges as are other withdrawals, and each withdrawal is subject to any applicable charge for premium taxes and/or other taxes, to federal income tax on its taxable portion, and, if you have not reached age 591/2, may be subject to a 10% federal tax penalty.
 
More on Federal Tax Issues
 
Section 817(h) of the Code provides that the investments underlying a variable annuity must satisfy certain diversification requirements. Details on these diversification requirements generally appear in the Fund SAIs. We believe the underlying Variable Investment Options for the Contract meet these requirements. On March 7, 2008, the Treasury Department issued Final Regulations under Section 817(h). These Final Regulations do not provide guidance concerning the extent to which you may direct your investments to particular divisions of a separate account. Such guidance may be included in regulations or revenue rulings under Section 817(d) relating to the definition of a variable contract. We reserve the right to make such changes as we deem necessary or appropriate to ensure that your Contract continues to qualify as an annuity for tax purposes. Any such changes will apply uniformly to affected Contract Owners and will be made with such notice to affected Contract Owners as is feasible under the circumstances.
 
For a variable life insurance contract or a variable annuity contract to qualify for tax deferral, assets in the separate accounts supporting the contract must be considered to be owned by the insurance company and not by the contract owner. Under current U.S. tax law, if a contract owner has excessive control over the investments made by a separate account, or the underlying fund, the contract owner will be taxed currently on income and gains from the account or fund. In other words, in such a case of “investor control” the contract owner would not derive the tax benefits normally associated with variable life insurance or variable annuities.
 
Generally, according to the IRS, there are two ways that impermissible investor control may exist. The first relates to the design of the contract or the relationship between the contract and a separate account or underlying fund. For example, at various times, the IRS has focused on, among other factors, the number and type of investment choices available pursuant to a given variable contract, whether the contract offers access to funds that are available to the general public, the number of transfers that a contract owner may make from one investment option to another, and the degree to which a contract owner may select or control particular investments.
 
With respect to this first aspect of investor control, we believe that the design of our contracts and the relationship between our contracts and the Portfolios satisfy the current view of the IRS on this subject, such that the investor control doctrine should not apply. However, because of some uncertainty with respect to this subject and because the IRS may issue further guidance on this subject, we reserve the right to make such changes as we deem necessary or appropriate to reduce the risk that your contract might not qualify as a life insurance contract or as an annuity for tax purposes.
 
The second way that impermissible investor control might exist concerns your actions. Under the IRS pronouncements, you may not select or control particular investments, other than choosing among broad investment choices such as selecting a particular Portfolio. You may not select or direct the purchase or sale of a particular investment of a Separate Account, a Subaccount (or Variable Investment Option), or a Portfolio. All investment decisions concerning the Separate Accounts and the Subaccounts must be made by us, and all investment decisions concerning the underlying Portfolios must be made by the portfolio manager for such Portfolio in his or her sole and absolute discretion, and not by the contract owner. Furthermore, under the IRS pronouncements, you may not enter into an agreement or arrangement with a portfolio manager of a Portfolio or communicate directly or indirectly with such a portfolio manager or any related investment officers concerning the selection, quality, or rate of return of any specific investment or group of investments held by a Portfolio, and you may not enter into any such agreement or arrangement or have any such communication with us or PLFA.
 
Finally, the IRS may issue additional guidance on the investor control doctrine, which might further restrict your actions or features of the variable contract. Such guidance could be applied retroactively. If any of the rules outlined


13

 

above are not complied with, the IRS may seek to tax you currently on income and gains from a Portfolio such that you would not derive the tax benefits normally associated with variable life insurance or variable annuities. Although highly unlikely, such an event may have an adverse impact on the fund and other variable contracts. We urge you to consult your own tax adviser with respect to the application of the investor control doctrine.
 
Loans
 
Certain Owners of Qualified Contracts may borrow against their Contracts. Otherwise loans from us are not permitted. You may request a loan from us, using your Contract Value as your only security if your Qualified Contract is:
 
  •  not subject to Title 1 of ERISA,
 
  •  issued under Section 403(b) of the Code, and
 
  •  permits loans under its terms (a “Loan Eligible Plan”).
 
You will be charged interest on your Contract Debt at a fixed annual rate equal to 5%. The amount held in the Loan Account to secure your loan will earn a return equal to an annual rate of 3%. The net amount of interest you pay on your loan will be 2.00% annually. This loan rate may vary by state.
 
Interest charges accrue on your Contract Debt daily, beginning on the effective date of your loan. Interest earned on the Loan Account Value accrue 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.
 
We may change these loan provisions to reflect changes in the Code or interpretations thereof. We urge you to consult with a qualified tax adviser prior to effecting any loan transaction under your Contract.
 
If you purchase any optional living benefit rider (including any and all previous, current, and future versions), taking a loan while an optional living benefit rider is in effect will terminate your Rider. If you have an existing loan on your Contract, you should carefully consider whether an optional living benefit rider is appropriate for you.
 
Tax and Legal Matters
 
The tax and ERISA rules relating to Contract loans are complex and in many cases unclear. For these reasons, and because the rules vary depending on the individual circumstances, these loans are processed by your Plan Administrator. We urge you to consult with a qualified tax adviser prior to effecting any loan transaction under your Contract.
 
Generally, interest paid on your loan under a 403(b) tax-sheltered annuity will be considered non-deductible “personal interest” under Section 163(h) of the Code, to the extent the loan comes from and is secured by your pre-tax contributions, even if the proceeds of your loan are used to acquire your principal residence.
 
Loan Procedures
 
Your loan request must be submitted on our Non-ERISA TSA Application and Loan Agreement Form. You may submit a loan request 30 days after your Contract Date and before your Annuity Date. However, before requesting a new loan, you must wait 30 days after the last payment of a previous loan. If approved, your loan will usually be effective as of the end of the Business Day on which we receive all necessary documentation In Proper Form. We will normally forward proceeds of your loan to you within 7 calendar days after the effective date of your loan.
 
In order to secure your loan, on the effective date of your loan, we will transfer an amount equal to the principal amount of your loan into an account called the “Loan Account.” The Loan Account is held under the General Account. To make this transfer, we will transfer amounts proportionately from your Investment Options based on your Account Value in each Investment Option.
 
As your loan is repaid, a portion, corresponding to the amount of the repayment of any amount then held as security for your loan, will be transferred from the Loan Account back into your Investment Options relative to your most recent allocation instructions.


14

 

A transfer from the Loan Account back into your Investment Options following a loan repayment is not considered a transfer under the transfer limitations as stated in the HOW YOUR PURCHASE PAYMENTS ARE ALLOCATED – Transfers and Market-timing Restrictions section in the Prospectus.
 
Loan Terms
 
You may have only one loan outstanding at any time. The minimum loan amount is $1,000, subject to certain state limitations. Your Contract Debt at the effective date of your loan may not exceed the lesser of:
 
  •  50% of the amount available for withdrawal under this Contract (see the WITHDRAWALS – Optional Withdrawals – Amount Available for Withdrawal section in the Prospectus), or
 
  •  $50,000 less your highest outstanding Contract Debt during the 12-month period immediately preceding the effective date of your loan.
 
You should refer to the terms of your particular Loan Eligible Plan for any additional loan restrictions. If you have other loans outstanding pursuant to other Loan Eligible Plans, the amount you may borrow may be further restricted. We are not responsible for making any determination (including loan amounts permitted) or any interpretation with respect to your Loan Eligible Plan.
 
Repayment Terms
 
Your loan, including principal and accrued interest, generally must be repaid in quarterly installments. An installment will be due in each quarter on the date corresponding to the effective date of your loan, beginning with the first such date following the effective date of your loan. See the FEDERAL TAX ISSUES – Qualified Contracts – Loans section in the Prospectus.
 
Example: On May 1, we receive your loan request, and your loan is effective. Your first quarterly payment will be due on August 1.
 
Adverse tax consequences may result if you fail to meet the repayment requirements for your loan. You must repay principal and interest of any loan in substantially equal payments over the term of the loan. Generally, the term of the loan will be 5 years from the effective date of the loan. However, if you have certified to us that your loan proceeds are to be used to acquire a principal residence for yourself, you may request a loan term of 30 years. In either case, however, you must repay your loan prior to your Annuity Date. If you elect to annuitize (or withdraw) your Net Contract Value while you have an outstanding loan, we will deduct any Contract Debt from your Contract Value at the time of the annuitization (or withdrawal) to repay the Contract Debt.
 
You may prepay your entire loan at any time. If you do so, we will bill you for any unpaid interest that has accrued through the date of payoff. Your loan will be considered repaid only when the interest due has been paid. Subject to any necessary approval of state insurance authorities, while you have Contract Debt outstanding, we will treat all payments you send us as Investments unless you specifically indicate that your payment is a loan repayment or include your loan payment notice with your payment. To the extent allowed by law, any loan repayments in excess of the amount then due will be applied to the principal balance of your loan. Such repayments will not change the due dates or the periodic repayment amount due for future periods. If a loan repayment is in excess of the principal balance of your loan, any excess repayment will be refunded to you. Repayments we receive that are less than the amount then due will be returned to you, unless otherwise required by law.
 
If we have not received your full payment by its due date, we will declare the entire remaining loan balance in default. At that time, we will send written notification of the amount needed to bring the loan back to a current status. You will have 60 days from the date on which the loan was declared in default (the “grace period”) to make the required payment.
 
If the required payment is not received by the end of the grace period, the defaulted loan balance plus accrued interest and any withdrawal charge will be withdrawn from your Contract Value, if amounts under your Contract are eligible for distribution. In order for an amount to be eligible for distribution from a TSA funded by salary reductions you must meet one of five triggering events. The triggering events are:


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  •  attainment of age 591/2,
 
  •  severance from employment,
 
  •  death,
 
  •  disability, and
 
  •  financial hardship (with respect to contributions only, not income or earnings on these contributions).
 
If those amounts are not eligible for distribution, the defaulted loan balance plus accrued interest and any withdrawal charge will be considered a Deemed Distribution and will be withdrawn when such Contract Values become eligible. In either case, the Distribution or the Deemed Distribution will be considered a currently taxable event, and may be subject to federal tax withholding, the withdrawal charge and may be subject to a 10% federal tax penalty.
 
If there is a Deemed Distribution under your Contract and to the extent allowed by law, any future withdrawals will first be applied as repayment of the defaulted Contract Debt, including accrued interest and charges for applicable taxes. Any amounts withdrawn and applied as repayment of Contract Debt will first be withdrawn from your Loan Account, and then from your Investment Options on a proportionate basis relative to the Account Value in each Investment Option. If you have an outstanding loan that is in default, the defaulted Contract Debt will be considered a withdrawal for the purpose of calculating any Death Benefit Amount and/or Guaranteed Minimum Death Benefit.
 
The terms of any such loan are intended to qualify for the exception in Code Section 72(p)(2) so that the distribution of the loan proceeds will not constitute a distribution that is taxable to you. To that end, these loan provisions will be interpreted to ensure and maintain such tax qualification, despite any other provisions to the contrary. Subject to any regulatory approval, we reserve the right to amend your Contract to reflect any clarifications that may be needed or are appropriate to maintain such tax qualification or to conform any terms of our loan arrangement with you to any applicable changes in the tax qualification requirements. We will send you a copy of any such amendment. If you refuse such an amendment, it may result in adverse tax consequences to you.
 
Safekeeping of Assets
 
We are responsible for the safekeeping of the assets of the Separate Account. These assets are held separate and apart from the assets of our General Account and our other separate accounts.
 
FINANCIAL STATEMENTS
 
The statements of assets and liabilities of Separate Account A as of December 31, 2011, the related statements of operations for the periods presented, the statements of changes in net assets for each of the periods presented and the financial highlights for each of the periods presented are incorporated by reference in this Statement of Additional Information from the Annual Report of Separate Account A dated December 31, 2011. Pacific Life’s consolidated financial statements as of December 31, 2011 and 2010 and for each of the three years in the period ended December 31, 2011 are attached. These financial statements should be considered only as bearing on the ability of Pacific Life to meet its obligations under the Contracts and not as bearing on the investment performance of the assets held in the Separate Account.


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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AND INDEPENDENT AUDITORS
 
The financial statements of Separate Account A of Pacific Life Insurance Company as of December 31, 2011 and for each of the periods presented have been audited by Deloitte & Touche LLP, 695 Town Center Drive, Costa Mesa, CA 92626, independent registered public accounting firm, as stated in their report included in the Annual Report of Separate Account A dated December 31, 2011, which is incorporated by reference in this Registration Statement.
 
The consolidated financial statements of Pacific Life Insurance Company and Subsidiaries as of December 31, 2011 and 2010 and for each of the three years in the period ended December 31, 2011 have been audited by Deloitte & Touche LLP, 695 Town Center Drive, Costa Mesa, CA 92626, independent auditors, as stated in their report appearing herein.


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Form No. 692712A

 

PACIFIC LIFE INSURANCE COMPANY
AND SUBSIDIARIES
Consolidated Financial Statements
as of December 31, 2011 and 2010 and
for the years ended December 31, 2011, 2010 and 2009
and Independent Auditors’ Report

PL-1

 

()
Deloitte & Touche LLP
Suite 1200
695 Town Center Drive
Costa Mesa, CA 92626-7188
USA
Tel: +1 714 436 7100
Fax: +1 714 436 7200
www.deloitte.com
INDEPENDENT AUDITORS’ REPORT
Pacific Life Insurance Company and Subsidiaries:
We have audited the accompanying consolidated statements of financial condition of Pacific Life Insurance Company and Subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations, equity and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pacific Life Insurance Company and Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting and reporting for deferred policy acquisition costs in 2011. In addition, the Company changed its method of accounting and reporting for other than temporary impairments as required by accounting guidance adopted in 2009.
DELOITTE & TOUCHE LLP 
April 12, 2012

PL-2

 

Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 
    December 31,  
    2011     2010  
    (In Millions)  
ASSETS
                
Investments:
                
Fixed maturity securities available for sale, at estimated fair value
   $ 28,853     $ 28,313  
Equity securities available for sale, at estimated fair value
     301       279  
Mortgage loans
     7,599       6,693  
Policy loans
     6,812       6,690  
Other investments (includes VIE assets of $351 and $263)
     2,319       2,247  
 
TOTAL INVESTMENTS
     45,884       44,222  
Cash and cash equivalents (includes VIE assets of $26 and $4)
     2,829       2,270  
Restricted cash (includes VIE assets of $200 and $170)
     280       214  
Deferred policy acquisition costs
     5,263       4,435  
Aircraft leasing portfolio, net (includes VIE assets of $1,838 and $2,154)
     5,845       5,259  
Other assets (includes VIE assets of $32 and $40)
     3,069       2,579  
Separate account assets
     51,450       55,683  
 
TOTAL ASSETS
   $ 114,620     $ 114,662  
 
 
                
LIABILITIES AND EQUITY
                
Liabilities:
                
Policyholder account balances
   $ 34,392     $ 35,076  
Future policy benefits
     9,467       7,080  
Long-term debt (includes VIE debt of $1,150 and $1,592)
     7,152       6,516  
Other liabilities (includes VIE liabilities of $338 and $388)
     2,983       2,377  
Separate account liabilities
     51,450       55,683  
 
TOTAL LIABILITIES
     105,444       106,732  
 
 
                
Commitments and contingencies (Note 21)
                
 
                
Stockholder’s Equity:
                
Common stock — $50 par value; 600,000 shares authorized, issued and outstanding
     30       30  
Paid-in capital
     982       982  
Retained earnings
     6,896       6,359  
Accumulated other comprehensive income
     934       308  
 
Total Stockholder’s Equity
     8,842       7,679  
Noncontrolling interest
     334       251  
 
TOTAL EQUITY
     9,176       7,930  
 
TOTAL LIABILITIES AND EQUITY
   $ 114,620     $ 114,662  
 
The abbreviation VIE above means variable interest entity.
See Notes to Consolidated Financial Statements

PL-3

 

Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
                         
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
REVENUES
                        
Policy fees and insurance premiums
   $ 3,081     $ 2,367     $ 2,275  
Net investment income
     2,186       2,122       1,862  
Net realized investment gain (loss)
     (661 )     (94 )     153  
OTTIs, consisting of $409, $328 and $641 in total, net of $256, $215 and $330 recognized in OCI
     (153 )     (113 )     (311 )
Investment advisory fees
     268       245       208  
Aircraft leasing revenue
     607       591       578  
Other income
     226       230       137  
 
TOTAL REVENUES
     5,554       5,348       4,902  
 
 
                        
BENEFITS AND EXPENSES
                        
Policy benefits paid or provided
     1,951       1,351       1,226  
Interest credited to policyholder account balances
     1,318       1,317       1,253  
Commission expenses
     83       831       691  
Operating and other expenses
     1,293       1,264       1,246  
 
TOTAL BENEFITS AND EXPENSES
     4,645       4,763       4,416  
 
 
                        
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES
     909       585       486  
Provision for income taxes
     146       63       44  
 
 
                        
INCOME FROM CONTINUING OPERATIONS
     763       522       442  
Discontinued operations, net of taxes
     (9 )             (20 )
 
 
                        
Net income
     754       522       422  
Less: net (income) loss attributable to the noncontrolling interest from continuing operations
     (71 )     (50 )     14  
 
 
                        
NET INCOME ATTRIBUTABLE TO THE COMPANY
   $ 683     $ 472     $ 436  
 
The abbreviation OTTIs above means other than temporary impairment losses.
The abbreviation OCI above means other comprehensive income (loss).
See Notes to Consolidated Financial Statements

PL-4

 

Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF EQUITY
                                                                 
                            Accumulated Other                    
                            Comprehensive Income (Loss)                    
                            Unrealized                            
                            Gain (Loss) On                            
                            Derivatives                            
                            and Securities             Total              
    Common     Paid-in     Retained     Available for     Other,     Stockholder’s     Noncontrolling     Total  
    Stock     Capital     Earnings     Sale, Net     Net     Equity     Interest     Equity  
    (In Millions)  
BALANCES, DECEMBER 31, 2008
   $ 30     $ 782     $ 5,426     $ (1,751 )   $ (51 )   $ 4,436     $ 244     $ 4,680  
Cumulative effect of adoption of new accounting principle, net of tax
                     175       (170 )             5               5  
Comprehensive income (loss):
                                                                
Net income (loss)
                     436                       436       (14 )     422  
Other comprehensive income (loss)
                             1,562       47       1,609       (7 )     1,602  
 
                                                            
Total comprehensive income
                                             2,045               2,024  
Contribution to parent
             200                               200               200  
Change in equity of noncontrolling interest
                                                     8       8  
 
BALANCES, DECEMBER 31, 2009
     30       982       6,037       (359 )     (4 )     6,686       231       6,917  
Comprehensive income:
                                                                
Net income
                     472                       472       50       522  
Other comprehensive income
                             669       2       671               671  
 
                                                            
Total comprehensive income
                                             1,143               1,193  
Dividend to parent
                     (150 )                     (150 )             (150 )
Change in equity of noncontrolling interest
                                                     (30 )     (30 )
 
BALANCES, DECEMBER 31, 2010
     30       982       6,359       310       (2 )     7,679       251       7,930  
Comprehensive income (loss):
                                                                
Net income
                     683                       683       71       754  
Other comprehensive income (loss)
                             638       (12 )     626               626  
 
                                                            
Total comprehensive income
                                             1,309               1,380  
Dividend to parent
                     (125 )                     (125 )             (125 )
Non-cash dividend to parent
                     (21 )                     (21 )             (21 )
Change in equity of noncontrolling interest
                                                     12       12  
 
BALANCES, DECEMBER 31, 2011
   $ 30     $ 982     $ 6,896     $ 948     $ (14 )   $ 8,842     $ 334     $ 9,176  
 
See Notes to Consolidated Financial Statements

PL-5

 

Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
                         
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
CASH FLOWS FROM OPERATING ACTIVITIES
                        
Net income from continuing operations
   $ 763     $ 522     $ 442  
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
                        
Net accretion on fixed maturity securities
     (116 )     (136 )     (142 )
Depreciation and amortization
     329       299       281  
Deferred income taxes
     141       56       451  
Net realized investment (gain) loss
     661       94       (153 )
Other than temporary impairments
     153       113       311  
Net change in deferred policy acquisition costs
     (850 )     116       (202 )
Interest credited to policyholder account balances
     1,318       1,317       1,253  
Net change in future policy benefits and other insurance liabilities
     1,215       648       111  
Other operating activities, net
     (18 )     (5 )     85  
 
NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE DISCONTINUED OPERATIONS
     3,596       3,024       2,437  
Net cash used in operating activities of discontinued operations
     (7 )             (27 )
 
NET CASH PROVIDED BY OPERATING ACTIVITIES
     3,589       3,024       2,410  
 
CASH FLOWS FROM INVESTING ACTIVITIES
                        
Fixed maturity and equity securities available for sale:
                        
Purchases
     (4,808 )     (6,503 )     (5,507 )
Sales
     3,159       3,572       1,463  
Maturities and repayments
     2,256       2,138       2,542  
Repayments of mortgage loans
     1,172       746       406  
Fundings of mortgage loans and real estate
     (2,177 )     (870 )     (1,434 )
Net change in policy loans
     (122 )     (181 )     411  
Change in restricted cash
     (66 )     7       6  
Purchases of derivative instruments
     (79 )     (116 )     (20 )
Terminations of derivative instruments, net
     172       (51 )     20  
Proceeds from nonhedging derivative settlements
     151       9       64  
Payments for nonhedging derivative settlements
     (505 )     (569 )     (1,540 )
Net change in collateral received or pledged
     516       6       (1,226 )
Purchases of and advance payments on aircraft leasing portfolio
     (1,397 )     (754 )     (561 )
Acquisition of retrocession business (Note 5)
     192                  
Acquisition of pension advisory business (Note 5)
     (45 )                
Other investing activities, net
     386       265       42  
 
NET CASH USED IN INVESTING ACTIVITIES
     (1,195 )     (2,301 )     (5,334 )
 
(Continued)
See Notes to Consolidated Financial Statements

PL-6

 

Pacific Life Insurance Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
                         
    Years Ended December 31,  
(Continued)   2011     2010     2009  
            (In Millions)          
CASH FLOWS FROM FINANCING ACTIVITIES
                        
Policyholder account balances:
                        
Deposits
   $ 4,521     $ 4,272     $ 8,003  
Withdrawals
     (6,599 )     (5,162 )     (7,972 )
Net change in short-term debt
             (105 )     (45 )
Issuance of long-term debt
     1,124       1,815       1,692  
Payments of long-term debt
     (768 )     (1,012 )     (433 )
Contribution from (dividend to) parent
     (125 )     (150 )     200  
Other financing activities, net
     12       (30 )     1  
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
     (1,835 )     (372 )     1,446  
 
 
Net change in cash and cash equivalents
     559       351       (1,478 )
Cash and cash equivalents, beginning of year
     2,270       1,919       3,397  
 
 
CASH AND CASH EQUIVALENTS, END OF YEAR
   $ 2,829     $ 2,270     $ 1,919  
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                        
Income taxes paid (received), net
   $ (7 )   $ 113     $ (143 )
Interest paid
   $ 222     $ 175     $ 146  
 
See Notes to Consolidated Financial Statements

PL-7

 

Pacific Life Insurance Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    ORGANIZATION AND DESCRIPTION OF BUSINESS
    Pacific Life Insurance Company (Pacific Life) was established in 1868 and is domiciled in the State of Nebraska as a stock life insurance company. Pacific Life is an indirect subsidiary of Pacific Mutual Holding Company (PMHC), a Nebraska mutual holding company, and a wholly owned subsidiary of Pacific LifeCorp, an intermediate Delaware stock holding company. PMHC and Pacific LifeCorp were organized pursuant to consent received from the California Department of Insurance and the implementation of a plan of conversion to form a mutual holding company structure in 1997 (the Conversion).
    Effective December 31, 2009, Pacific LifeCorp contributed its 100% stock ownership of Aviation Capital Group Corp. (ACG) to Pacific Life (Note 9). ACG is engaged in the acquisition and leasing of commercial jet aircraft. These financial statements and the accompanying footnotes have been prepared by combining the previously separate financial statements of Pacific Life and ACG as if the two entities had been combined as of the beginning of 2009, the first period presented in these consolidated financial statements. This retrospective treatment is prescribed by accounting principles generally accepted in the United States of America (U.S. GAAP) whenever a transfer between entities under common control is effected.
    Pacific Life and its subsidiaries and affiliates have primary business operations consisting of life insurance, annuities, mutual funds, and aircraft leasing.
    BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
    The accompanying consolidated financial statements of Pacific Life and its subsidiaries (the Company) have been prepared in accordance with U.S. GAAP and include the accounts of Pacific Life and its majority owned and controlled subsidiaries and variable interest entities (VIEs) in which the Company is the primary beneficiary. Noncontrolling interest is primarily comprised of private equity funds (Note 4). All significant intercompany transactions and balances have been eliminated in consolidation.
    Pacific Life prepares its regulatory financial statements in accordance with statutory accounting practices prescribed or permitted by the Nebraska Department of Insurance (NE DOI), which is a comprehensive basis of accounting other than U.S. GAAP (Note 2). These consolidated financial statements materially differ from those filed with regulatory authorities.
    The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
    In developing these estimates, management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Management has identified the following estimates as critical, as they involve a higher degree of judgment and are subject to a significant degree of variability:
  •   The fair value of investments in the absence of quoted market values
  •   Other than temporary impairment losses (OTTI) of investments
  •   Application of the consolidation rules to certain investments
  •   The fair value of and accounting for derivatives
  •   Aircraft valuation and impairment
  •   The capitalization and amortization of deferred policy acquisition costs (DAC)
  •   The liability for future policyholder benefits
  •   Accounting for income taxes
  •   Accounting for business combinations
  •   Accounting for reinsurance transactions
  •   Litigation and other contingencies
    Certain reclassifications have been made to the 2010 and 2009 consolidated financial statements to conform to the 2011 financial statement presentation.

PL-8

 

    The Company has evaluated events subsequent to December 31, 2011 through April 12, 2012, the date the consolidated financial statements were available to be issued. See Note 2 for discussion of subsequent event.
    CHANGE IN ACCOUNTING METHOD
    Effective October 1, 2011, the Company changed its DAC amortization method for universal life-type contracts. Management determined it was preferable to provide a more constant rate of positive or negative amortization in relation to the emergence of gross profits over the lives of the contracts. During reporting periods in which actual gross profits (AGPs) are negative, DAC amortization may be negative, which would result in an increase of the DAC asset balance. The facts and circumstances surrounding potential negative amortization are considered to determine whether it is appropriate for recognition in the consolidated financial statements. Additionally, negative amortization is only recorded when the increased DAC asset balance is determined to be recoverable and is also limited to amounts originally deferred plus interest. The Company’s previous accounting method eliminated to zero DAC amortization in reporting periods in which the AGPs were negative.
    The Company accounted for this change in accounting estimate effected by a change in accounting method prospectively, resulting in an increase to the DAC asset balance of $618 million and a decrease to commission expenses of $502 million and operating and other expenses of $116 million, pre-tax, and an increase to net income and total equity of $402 million, after tax, in the accompanying consolidated financial statements as of and for the year ended December 31, 2011.
    RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
    In April 2009, the Financial Accounting Standards Board (FASB) issued additional guidance under the Accounting Standards Codification’s (Codification) Investments — Debt and Equity Securities Topic. For debt securities, this guidance replaced the management assertion that it has the intent and ability to hold an impaired debt security until recovery with the requirement that management assert if it either has the intent to sell the debt security or if it is more likely than not the entity will be required to sell the debt security before recovery of its amortized cost basis. If management intends to sell the debt security or it is more likely than not the entity will be required to sell the debt security before recovery of its amortized cost basis, an OTTI shall be recognized in earnings equal to the entire difference between the debt security’s amortized cost basis and its estimated fair value at the reporting date. After the recognition of an OTTI, the debt security is accounted for as if it had been purchased on the measurement date of the OTTI, with an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. The update also changed the presentation in the financial statements of non credit related impairment amounts for instruments within its scope. When the entity asserts it does not have the intent to sell the security and it is more likely than not it will not have to sell the security before recovery of its amortized cost basis, only the credit related impairment losses are recognized in earnings and non credit losses are recognized in other comprehensive income (loss) (OCI). Additionally, this update provides for enhanced presentation and disclosure of OTTIs of debt and equity securities in the consolidated financial statements. The Company early adopted this guidance effective January 1, 2009, resulting in an after tax decrease to OCI of $170 million, including an after tax DAC impact of $5 million, and an after tax increase to retained earnings of $175 million.
    FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
    In October 2010, the FASB issued Accounting Standards Update (ASU) 2010-26 to the Codification’s Financial Services — Insurance Topic. ASU 2010-26 significantly amends the guidance applicable to accounting for costs associated with acquiring or renewing insurance contracts. The amendment specifies the following costs incurred in the acquisition of new and renewal contracts should be capitalized: 1) incremental direct costs of contract acquisition and 2) certain costs related directly to underwriting, policy issuance and processing, medical and inspecting, and sales force contract selling activities. This amendment also specifies that costs may only be capitalized based on successful contract acquisition efforts. The Company will adopt this standard retrospectively on January 1, 2012, resulting in a write-down of the Company’s DAC asset relating to those costs, which no longer meet the revised standard. The Company estimates that the DAC asset will be reduced by approximately $1.0 billion to $1.2 billion and total equity will be reduced by approximately $650 million to $780 million, after tax, as of the date of adoption.
    In May 2011, the FASB issued ASU 2011-04 which modifies the Codification’s Fair Value Measurements and Disclosures Topic. The Company will adopt this new guidance in the fourth quarter of 2012 and will apply it prospectively. The Company expects this guidance to have an impact on its financial statement disclosures and no impact on the Company’s consolidated financial statements.
    In June 2011, the FASB issued ASU 2011-05 to the Codification’s Comprehensive Income Topic. ASU 2011-05 revises the manner in which a company presents comprehensive income on the financial statements. The amendment requires a company to present each component of net income along with total net income, each component of OCI along with a total for OCI, and a total

PL-9

 

    amount for comprehensive income. The Company will adopt this amendment in the fourth quarter of 2012. Adoption will not have an impact on the Company’s financial position, results of operations or cash flows, however, adoption will result in the presentation of a new consolidated statement of comprehensive income immediately following the consolidated statement of operations.
    INVESTMENTS
    Fixed maturity and equity securities available for sale are reported at estimated fair value, with unrealized gains and losses, net of adjustments related to DAC, future policy benefits and deferred income taxes, recognized as a component of OCI. For mortgage-backed securities and asset-backed securities included in fixed maturity securities available for sale, the Company recognizes income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. For fixed rate securities, the net investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied since the acquisition of the securities. These adjustments are reflected in net investment income. Trading securities, which are included in other investments, are reported at estimated fair value with changes in estimated fair value included in net realized investment gain (loss).
    Investment income consists primarily of interest and dividends, net investment income from partnership interests, prepayment fees on fixed maturity securities and mortgage loans, and income from certain derivatives. Interest is recognized on an accrual basis and dividends are recorded on the ex-dividend date. Amortization of premium and accretion of discount on fixed maturity securities is recorded using the effective interest method.
    The Company’s available for sale securities are regularly assessed for OTTIs. If a decline in the estimated fair value of an available for sale security is deemed to be other than temporary, the OTTI is recognized equal to the difference between the estimated fair value and net carrying amount of the security. If the OTTI for a fixed maturity security is attributable to both credit and other factors, then the OTTI is bifurcated and the non credit related portion is recognized in OCI while the credit portion is recognized in earnings. If the OTTI is related to credit factors only, it is recognized in earnings.
    The evaluation of OTTIs is a quantitative and qualitative process subject to significant estimates and management judgment. The Company has rigorous controls and procedures in place to monitor securities and identify those that are subject to greater analysis for OTTIs. The Company has an investment impairment committee that reviews and evaluates securities for potential OTTIs at least on a quarterly basis.
    In evaluating whether a decline in value is other than temporary, the Company considers many factors including, but not limited to, the following: the extent and duration of the decline in value; the reasons for the decline (credit event, currency, interest rate related, or spread widening); the ability and intent to hold the investment for a period of time to allow for a recovery of value; and the financial condition of and near-term prospects of the issuer.
    Analysis of the probability that all cash flows will be collected under the contractual terms of a fixed maturity security and determination as to whether the Company does not intend to sell the security and that it is more likely than not that the Company will not be required to sell the security before recovery of the investment are key factors in determining whether a fixed maturity security is other than temporarily impaired.
    For mortgage-backed and asset-backed securities, scrutiny was placed on the performance of the underlying collateral and projected future cash flows. In projecting future cash flows, the Company incorporates inputs from third-party sources and applies reasonable judgment in developing assumptions used to estimate the probability and timing of collecting all contractual cash flows.
    In evaluating investment grade perpetual preferred securities, which do not have final contractual cash flows, the Company applied OTTI considerations used for debt securities, placing emphasis on the probability that all cash flows will be collected under the contractual terms of the security and the Company’s intent and ability to hold the security to allow for a recovery of value. Perpetual preferred securities are reported as equity securities as they are structured in equity form, but have significant debt-like characteristics, including periodic dividends, call features, and credit ratings and pricing similar to debt securities.
    Realized gains and losses on investment transactions are determined on a specific identification basis and are included in net realized investment gain (loss).
    Mortgage loans on real estate are carried at their unpaid principal balance, net of deferred origination fees and write-downs. Mortgage loans are considered to be impaired when management estimates that based upon current information and events, it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the mortgage loan

PL-10

 

    agreement. For mortgage loans deemed to be impaired, an impairment loss is recorded when the carrying amount is greater than the Company’s estimated fair value of the underlying collateral of the loan. When the underlying collateral of the mortgage loan is greater than the carrying amount, the mortgage loan is not considered to have an impaired loss and no write-down is recorded.
    Policy loans are stated at unpaid principal balances.
    Other investments primarily consist of partnership and joint ventures, real estate investments, derivative instruments, non-marketable equity securities, and low income housing investments qualifying for tax credits (LIHTC). Non-marketable equity securities are carried at estimated fair value with unrealized gains or losses recognized in OCI. Partnership and joint venture interests where the Company does not have a controlling interest or majority ownership are recorded under the cost or equity method of accounting depending on the equity ownership position. Real estate investments are carried at depreciated cost, net of write-downs, or, for real estate acquired in satisfaction of debt, estimated fair value less estimated selling costs at the date of acquisition, if lower than the related unpaid balance.
    Real estate investments are evaluated for impairment based on the undiscounted cash flows expected to be received during the estimated holding period. When the undiscounted cash flows are less than the current carrying value of the property (gross cost less accumulated depreciation), the property is considered impaired and will be written-down to its estimated fair value.
    Investments in LIHTC are recorded under the effective interest method, if they meet certain requirements, including a projected positive yield based solely on guaranteed credits. The amortization of the original investment and the tax credits are recorded in the provision for income taxes.
    All derivatives, whether designated in hedging relationships or not, are required to be recorded at estimated fair value. If the derivative is designated as a cash flow hedge, the effective portion of changes in the estimated fair value of the derivative is recorded in OCI and recognized in earnings when the hedged item affects earnings. See discussion of the discontinuance of cash flow hedge accounting for insurance operations in Note 10. If the derivative is designated as a fair value hedge, changes in the estimated fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the estimated fair value of the hedged item related to the designated risk being hedged, are reported in net realized investment gain (loss). The change in estimated value of the hedged item associated with the risk being hedged is reflected as an adjustment to the carrying amount of the hedged item. For derivative instruments not designated as hedges, the change in estimated fair value of the derivative is recorded in net realized investment gain (loss).
    The periodic cash flows for all hedging derivatives are recorded consistent with the hedged item on an accrual basis. For derivatives that are hedging securities, these amounts are included in net investment income. For derivatives that are hedging liabilities, these amounts are included in interest credited to policyholder account balances or interest expense, which is included in operating and other expenses. For derivatives not designated as hedging instruments, the periodic cash flows are reflected in net realized investment gain (loss) on an accrual basis. Upon termination of a cash flow hedging relationship, the accumulated amount in OCI is amortized into net investment income or interest credited to policyholder account balances over the remaining life of the hedged item. Upon termination of a fair value hedging relationship, the accumulated adjustment to the carrying value of the hedged item is amortized into net investment income or interest expense, which is included in operating and other expenses, or interest credited to policyholder account balances over its remaining life.
    CASH AND CASH EQUIVALENTS
    Cash and cash equivalents include all investments with a maturity of three months or less from purchase date. Cash equivalents consist primarily of U.S. Treasury bills and money market securities.
    RESTRICTED CASH
    Restricted cash primarily consists of liquidity reserves related to VIEs, security deposits, commitment fees, maintenance reserve payments and rental payments received from certain lessees related to the aircraft leasing business.
    DEFERRED POLICY ACQUISITION COSTS
    The costs of acquiring new insurance business, principally commissions, medical examinations, underwriting, policy issue and other expenses, all of which vary with and are primarily associated with the production of new business, are deferred and recorded as an asset referred to as DAC. DAC related to internally replaced contracts (as defined in the Codification’s Financial Services — Insurance Topic), is immediately written off to expense and any new deferrable expenses associated with the replacement are deferred if the contract modification substantially changes the contract. However, if the contract modification does not substantially

PL-11

 

    change the contract, the existing DAC asset remains in place and any acquisition costs associated with the modification are immediately expensed. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC.
    For universal life (UL), variable annuities and other investment-type contracts, acquisition costs are amortized through earnings in proportion to the present value of estimated gross profits (EGPs) from projected investment, mortality and expense margins, and surrender charges over the estimated lives of the contracts. Actual gross margins or profits may vary from management’s estimates, which can increase or decrease the rate of DAC amortization. DAC related to traditional policies is amortized through earnings over the premium-paying period of the related policies in proportion to premium revenues recognized, using assumptions and estimates consistent with those used in computing policy reserves. DAC related to certain unrealized components in OCI, primarily unrealized gains and losses on securities available for sale, is adjusted with corresponding charges or benefits, respectively, directly to equity through OCI.
    Effective October 1, 2011, the Company changed its DAC amortization method for periods when AGPs are negative. During reporting periods of negative AGPs, DAC amortization may be negative, which would result in an increase to the DAC balance. The specific facts and circumstances surrounding the potential negative amortization are evaluated to determine whether it is appropriate for recognition in the consolidated financial statements. Negative amortization is only recorded when the increased DAC balance is determined to be recoverable and is also limited to amounts originally deferred plus interest.
    Significant assumptions in the development of EGPs include investment returns, surrender and lapse rates, rider utilization, interest spreads, and mortality margins. The Company’s long-term assumption for the underlying separate account investment return ranges up to 8.0%. A change in the assumptions utilized to develop EGPs results in a change to amounts expensed in the reporting period in which the change was made by adjusting the DAC balance to the level DAC would have been had the EGPs been calculated using the new assumptions over the entire amortization period. In general, favorable experience variances result in increased expected future profitability and may lower the rate of DAC amortization, whereas unfavorable experience variances result in decreased expected future profitability and may increase the rate of DAC amortization. All critical assumptions utilized to develop EGPs are evaluated at least annually and necessary revisions are made to certain assumptions to the extent that actual or anticipated experience necessitates such a prospective change. The Company may also identify and implement actuarial modeling refinements to projection models that may result in increases or decreases to the DAC asset.
    The DAC asset is reviewed periodically to ensure that the unamortized balance does not exceed expected recoverable EGPs.
    AIRCRAFT LEASING PORTFOLIO
    Aircraft are recorded at depreciated cost, which includes certain acquisition costs. Depreciation to estimated residual values is computed using the straight-line method over the estimated useful lives of the aircraft. Estimated residuals values are based on a percentage of the acquisition cost. Major improvements to aircraft are capitalized when incurred and depreciated over the shorter of the useful life of the aircraft or the useful life of the improvement. The Company evaluates carrying values of aircraft based upon changes in market and other physical and economic conditions and will record impairments to recognize a loss in the value of the aircraft when management believes that, based on future estimated cash flows, the recoverability of the Company’s investment in an aircraft has been impaired.
    GOODWILL
    Goodwill represents the excess of acquisition costs over the fair value of net assets acquired. Goodwill is not amortized but is reviewed for impairment at least annually or more frequently if events occur or circumstances indicate that the goodwill might be impaired. Goodwill is included in other assets and totaled $87 million and $43 million as of December 31, 2011 and 2010, respectively. See Note 5. There were no goodwill impairment write-downs during the years ended December 31, 2011, 2010 and 2009.
    POLICYHOLDER ACCOUNT BALANCES
    Policyholder account balances on UL and investment-type contracts, such as funding agreements, annuities without life contingencies, deposit liabilities and guaranteed interest contracts (GICs), are valued using the retrospective deposit method and are equal to accumulated account values, which consist of deposits received, plus interest credited, less withdrawals and assessments. Interest credited to these contracts primarily ranged from 0.2% to 7.7%.

PL-12

 

    FUTURE POLICY BENEFITS
    Annuity reserves, which primarily consist of group retirement and structured settlement annuities with life contingencies, are equal to the present value of estimated future payments using pricing assumptions, as applicable, for interest rates, mortality, morbidity, retirement age and expenses. Interest rates used in establishing such liabilities ranged from 0.4% to 11.0%.
    The Company offers variable annuity contracts with guaranteed minimum benefits, including guaranteed minimum death benefits (GMDBs) and riders with guaranteed living benefits (GLBs) that guarantee net principal over a ten-year holding period or a minimum withdrawal benefit over specified periods, subject to certain restrictions. If the guarantee includes a benefit that is only attainable upon annuitization or is wholly life contingent (e.g. GMDBs or guaranteed minimum withdrawal benefits for life), it is accounted for as an insurance liability (Note 12). All other GLB guarantees are accounted for as embedded derivatives (Note 10).
    Policy charges assessed against policyholders that represent compensation to the Company for services to be provided in future periods, or unearned revenue reserves (URR), are recognized in revenue over the expected life of the contract using the same methods and assumptions used to amortize DAC. Unearned revenue related to certain unrealized components in OCI, primarily unrealized gains and losses on securities available for sale, is recorded to equity through OCI.
    Life insurance reserves are valued using the net level premium method on the basis of actuarial assumptions appropriate at policy issue. Mortality and persistency assumptions are generally based on the Company’s experience, which, together with interest and expense assumptions, include a margin for possible unfavorable deviations. Interest rate assumptions ranged from 3.0% to 9.3%. Future dividends for participating business are provided for in the liability for future policy benefits.
    As of December 31, 2011 and 2010, participating experience rated policies paying dividends represent less than 1% of direct life insurance in force.
    Estimates of future policy benefit reserves and liabilities are continually reviewed and, as experience develops, are adjusted as necessary. Such changes in estimates are included in earnings for the period in which such changes occur.
    REINSURANCE
    The Company has ceded reinsurance agreements with other insurance companies to limit potential losses, reduce exposure arising from larger risks, provide additional capacity for future growth and has assumed reinsurance agreements intended to offset reinsurance costs. As part of a strategic alliance, the Company also reinsures risks associated with policies written by an independent producer group through modified coinsurance and yearly renewable term (YRT) arrangements with this producer group’s reinsurance company. The ceding of risk does not discharge the Company from its primary obligations to contract owners. To the extent that the assuming companies become unable to meet their obligations under reinsurance contracts, the Company remains contingently liable. Each reinsurer is reviewed to evaluate its financial stability before entering into each reinsurance contract and throughout the period that the reinsurance contract is in place. The Company also assumes reinsurance from affiliated and unaffiliated insurers. In August 2011, the Company acquired a retrocession business (Note 5).
    All assets associated with business reinsured on a modified coinsurance basis remain with, and under the control of, the Company. As part of its risk management process, the Company routinely evaluates its reinsurance programs and may change retention limits, reinsurers or other features at any time.
    Reinsurance accounting is utilized for ceded and assumed transactions when risk transfer provisions have been met. To meet risk transfer requirements, a reinsurance contract must include insurance risk, consisting of both underwriting and timing risk, and a reasonable possibility of a significant loss to the reinsurer.
    Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from their respective revenue and benefit and expense accounts. Prepaid reinsurance premiums, included in other assets, are premiums that are paid in advance for future coverage. Reinsurance recoverables, included in other assets, include balances due from reinsurance companies for paid and unpaid losses. Amounts receivable and payable are offset for account settlement purposes for contracts where the right of offset exists.

PL-13

 

    REVENUES, BENEFITS AND EXPENSES
    Premiums from annuity contracts with life contingencies and traditional life and term insurance contracts, are recognized as revenue when due. Benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the contracts by providing for liabilities for future policy benefits, expenses of contract administration and DAC amortization.
    Receipts for UL and investment-type contracts are reported as deposits to either policyholder account balances or separate account liabilities and are not included in revenue. Policy fees consist of mortality charges, surrender charges and expense charges that have been earned and assessed against related account values during the period and also includes the amortization of URR. The timing of policy fee revenue recognition is determined based on the nature of the fees. Benefits and expenses include policy benefits and claims incurred in the period that are in excess of related policyholder account balances, interest credited to policyholder account balances, expenses of contract administration and the amortization of DAC.
    Investment advisory fees are primarily fees earned by Pacific Life Fund Advisors LLC (PLFA), a wholly owned subsidiary of Pacific Life, which serves as the investment advisor for the Pacific Select Fund, an investment vehicle provided to the Company’s variable universal life (VUL) and variable annuity contract holders, and the Pacific Life Funds, the investment vehicle for the Company’s mutual fund products. These fees are based upon the net asset value of the underlying portfolios and are recorded as earned. Related subadvisory expense is included in operating and other expenses and recorded when incurred.
    Aircraft leases, which are structured as triple net leases, are accounted for as operating leases. Aircraft leasing revenue is recognized ratably over the terms of the lease agreements.
    DEPRECIATION AND AMORTIZATION
    Aircraft and certain other assets are depreciated or amortized using the straight-line method over estimated useful lives, which range from three to 40 years. Depreciation and amortization of aircraft under operating leases and certain other assets are included in operating and other expenses. Depreciation of investment real estate is computed using the straight-line method over estimated useful lives, which range from five to 30 years, and is included in net investment income.
    INCOME TAXES
    Pacific Life and its includable subsidiaries are included in the consolidated Federal income tax return of PMHC. Pacific Life, Pacific Life & Annuity Company (PL&A), an Arizona domiciled life insurance company, and Pacific Alliance Reinsurance Company of Vermont (PAR Vermont), a Vermont-based life reinsurance company, both wholly owned by Pacific Life, are taxed as life insurance companies for Federal income tax purposes. Pacific Life’s non-insurance subsidiaries are either included in PMHC’s combined California franchise tax return or, if necessary, file separate state tax returns. Companies included in the consolidated Federal income tax return of PMHC and/or the combined California franchise tax return of PMHC are allocated tax expense or benefit based principally on the effect of including their operations in PMHC’s returns under a tax sharing agreement. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years the differences are expected to be recovered or settled.
    CONTINGENCIES
    Each reporting cycle, the Company evaluates all identified contingent matters on an individual basis. A loss is recorded if probable and reasonably estimable. The Company establishes reserves for these contingencies at the best estimate, or, if no one number within the range of possible losses is more probable than any other, the Company records an estimated reserve at the low end of the range of losses.
    SEPARATE ACCOUNTS
    Separate accounts primarily include variable annuity and life contracts, as well as other guaranteed and non-guaranteed accounts. Separate account assets are recorded at estimated fair value and represent legally segregated contract holder funds. A separate account liability is recorded equal to the amount of separate account assets. Deposits to separate accounts, investment income and realized and unrealized gains and losses on the separate account assets accrue directly to contract holders and, accordingly, are not reflected in the consolidated statements of operations or cash flows. Amounts charged to the separate account for mortality, surrender and expense charges are included in revenues as policy fees.

PL-14

 

    For separate account funding agreements in which the Company provides a guarantee of principal and interest to the contract holder and bears all the risks and rewards of the investments underlying the separate account, the related investments and liabilities are recognized as investments and liabilities in the consolidated statements of financial condition. Revenue and expenses are recognized within the respective revenue and benefit and expense lines in the consolidated statements of operations.
    ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
    The estimated fair value of financial instruments has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is often required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented may not be indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts.
2.   STATUTORY FINANCIAL INFORMATION AND DIVIDEND RESTRICTIONS
    STATUTORY ACCOUNTING PRACTICES
    Pacific Life prepares its regulatory financial statements in accordance with statutory accounting practices prescribed or permitted by the NE DOI, which is a comprehensive basis of accounting other than U.S. GAAP. Statutory accounting practices primarily differ from U.S. GAAP by charging policy acquisition costs to expense as incurred, recognizing certain policy fees as revenue when billed, establishing future policy benefit liabilities using different actuarial assumptions, reporting surplus notes as surplus instead of debt, as well as the valuation of investments and certain assets and accounting for deferred income taxes on a different basis.
    As of December 31, 2011, the Company had two permitted practices. Under the first permitted practice, the Company utilizes book value accounting for certain guaranteed separate account funding agreements. The underlying separate account assets are recorded at book value instead of at fair value as required by National Association of Insurance Commissioners (NAIC) Accounting Practices and Procedures Manual (NAIC SAP). As of December 31, 2011 and 2010, the underlying separate account assets had unrealized losses of $25 million and $24 million, respectively. Under the second permitted practice, which was approved by the Director of the NE DOI in 2011, investments in Working Capital Finance Notes (WCFN), a new type of investment being considered by the NAIC for admissibility, will be treated as admitted assets provided they are rated by the NAIC Securities Valuation Office as an NAIC 1 or 2 investment. As of December 31, 2011, admitted WCFN investments totaled $29 million.
    The NE DOI has a prescribed accounting practice for certain synthetic GIC reserves that differs from NAIC SAP. The NE DOI reserve method is based on an annual accumulation of 30% of the contract fees on synthetic GICs and is subject to a maximum of 150% of the annualized contract fees. This reserve amounted to $36 million and $27 million as of December 31, 2011 and 2010, respectively, and has been recorded by the Company. The NAIC SAP basis for this reserve equals the excess, if any, of the value of guaranteed contract liabilities over the market value of the assets in the segregated portfolio less deductions based on asset valuation reserve factors. As of December 31, 2011 and 2010, the reserve for synthetic GICs using the NAIC SAP basis was zero.
    STATUTORY NET INCOME (LOSS) AND SURPLUS
    Statutory net income (loss) of Pacific Life was ($735) million, $741 million and $652 million for the years ended December 31, 2011, 2010 and 2009, respectively. Statutory capital and surplus of Pacific Life was $5,577 million and $5,867 million as of December 31, 2011 and 2010, respectively.
    RISK-BASED CAPITAL
    Risk-based capital is a method developed by the NAIC to measure the minimum amount of capital appropriate for an insurance company to support its overall business operations in consideration of its size and risk profile. The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Additionally, certain risks are required to be measured using actuarial cash flow modeling techniques, subject to formulaic minimums. The adequacy of a company’s actual capital is measured by a comparison to the risk-based capital results. Companies below minimum risk-based capital requirements are classified within certain levels, each of which requires specified corrective action. As of December 31, 2011 and 2010, Pacific Life, PL&A and PAR Vermont exceeded the minimum risk-based capital requirements.

PL-15

 

    NO LAPSE GUARANTEE RIDER REINSURANCE
    Certain no lapse guarantee rider (NLGR) benefits of Pacific Life’s UL insurance products are subject to Actuarial Guideline 38 (AG 38) statutory reserving requirements. AG 38 results in additional statutory reserves on UL products with NLGRs issued after June 30, 2005. Substantially all statutory reserves relating to NLGRs issued after June 30, 2005 through approximately March 31, 2010 were ceded from Pacific Life to Pacific Alliance Reinsurance Ltd. (PAR Bermuda), a Bermuda-based life reinsurance company wholly owned by Pacific LifeCorp, and PAR Vermont under reinsurance agreements. Effective October 1, 2010, 100% of the PAR Bermuda reinsurance was novated to PAR Vermont, consolidating all such NLGR reinsurance in PAR Vermont. In August 2011, PAR Vermont was accredited as an authorized reinsurer in Nebraska, making it unnecessary to provide security for statutory reserve credits taken by Pacific Life. Funded economic reserves and a letter of credit approved as an admitted asset for PAR Vermont for statutory accounting will continue to be held in a trust with Pacific Life as beneficiary. See Note 21.
    DIVIDEND RESTRICTIONS
    The payment of dividends by Pacific Life to Pacific LifeCorp is subject to restrictions set forth in the State of Nebraska insurance laws. These laws require (i) notification to the NE DOI for the declaration and payment of any dividend and (ii) approval by the NE DOI for accumulated dividends within the preceding twelve months that exceed the greater of 10% of statutory policyholder surplus as of the preceding December 31 or statutory net gain from operations for the preceding twelve months ended December 31. Generally, these restrictions pose no short-term liquidity concerns for Pacific LifeCorp. Based on these restrictions and 2011 statutory results, Pacific Life could pay $199 million in dividends in 2012 to Pacific LifeCorp without prior approval from the NE DOI, subject to the notification requirement.
    During the years ended December 31, 2011 and 2010, Pacific Life paid cash dividends to Pacific LifeCorp of $125 million and $150 million, respectively. No dividends were paid during 2009. In March 2012, Pacific Life declared and paid a cash dividend to Pacific LifeCorp of $70 million.
    The maximum amount of ordinary dividends that can be paid by PL&A to Pacific Life without restriction cannot exceed the lesser of 10% of statutory surplus as regards to policyholders, or the statutory net gain from operations. Based on this limitation and 2011 statutory results, PL&A could pay $30 million in dividends to Pacific Life in 2012 without prior regulatory approval. No dividends were paid during 2011, 2010 and 2009.
3.   CLOSED BLOCK
    In connection with the Conversion, an arrangement known as a closed block (the Closed Block) was established, for dividend purposes only, for the exclusive benefit of certain individual life insurance policies that had an experience based dividend scale for 1997. The Closed Block was designed to give reasonable assurance to holders of the Closed Block policies that policy dividends will not change solely as a result of the Conversion.
    Assets that support the Closed Block, which are primarily included in fixed maturity securities and policy loans, amounted to $289 million and $284 million as of December 31, 2011 and 2010, respectively. Liabilities allocated to the Closed Block, which are primarily included in future policy benefits, amounted to $301 million and $304 million as of December 31, 2011 and 2010, respectively. The net contribution to income from the Closed Block was $1 million, zero and $4 million for the years ended December 31, 2011, 2010 and 2009, respectively.
4.   VARIABLE INTEREST ENTITIES
    The Company evaluates its interests in VIEs on an ongoing basis and consolidates those VIEs in which it has a controlling financial interest and is thus deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Creditors or beneficial interest holders of VIEs, where the Company is the primary beneficiary, have no recourse against the Company in the event of default by these VIEs.

PL-16

 

    The following table presents, as of December 31, 2011 and 2010, the consolidated assets, consolidated liabilities and maximum exposure to loss relating to VIEs, which the Company (i) has consolidated because it is the primary beneficiary or (ii) total assets of and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest, but has not consolidated because it is not the primary beneficiary (In Millions):
                                         
    Primary Beneficiary     Not Primary Beneficiary  
                    Maximum             Maximum  
    Consolidated     Consolidated     Exposure to     Total     Exposure to  
    Assets     Liabilities     Loss     Assets     Loss  
         
December 31, 2011:
                                        
Aircraft securitizations
   $ 2,070     $ 1,466     $ 604     $ 282          
Private equity funds
     377       22       50                  
Asset-backed securities
                             1,910     $ 105  
         
Total
   $ 2,447     $ 1,488     $ 654     $ 2,192     $ 105  
         
December 31, 2010:
                                        
Aircraft securitizations
   $ 2,364     $ 1,975     $ 389     $ 320          
Private equity funds
     267       5       34                  
Asset-backed securities
                             1,910     $ 108  
         
Total
   $ 2,631     $ 1,980     $ 423     $ 2,230     $ 108  
         
    AIRCRAFT SECURITIZATIONS
 
    ACG has sponsored three financial asset securitizations secured by interests in aircraft. ACG serves as the remarketing agent and provides various aircraft related services in all three securitizations for a fee. This fee is eliminated for the two consolidated securitizations and is included in other income as earned for the unconsolidated securitization.
 
    In 2005, ACG sponsored a securitization transaction whereby Aviation Capital Group Trust III (ACG Trust III) acquired 74 of ACG’s aircraft through a private placement note offering in the amount of $1,860 million. ACG owns 100% of the equity and has a controlling financial interest in this VIE. Therefore, ACG was determined to be the primary beneficiary of this VIE and ACG Trust III is consolidated into the consolidated financial statements of the Company. These private placement notes are the obligation of ACG Trust III and represent debt that is non-recourse to the Company (Note 13). VIE non-recourse debt consolidated from ACG Trust III was $795 million and $1,103 million as of December 31, 2011 and 2010, respectively. As of December 31, 2011 and 2010, the maximum exposure to loss, based on the Company’s interest in ACG Trust III, was $397 million and $201 million, respectively.
 
    In 2003, ACG sponsored a securitization transaction whereby Aviation Capital Group Trust II (ACG Trust II) acquired 37 of ACG’s aircraft through a private placement note offering in the amount of $1,027 million. ACG owns 100% of the equity and has a controlling financial interest in this VIE. Therefore, ACG was determined to be the primary beneficiary of this VIE and ACG Trust II is consolidated into the consolidated financial statements of the Company. These private placement notes are the obligation of ACG Trust II and represent debt that is non-recourse to the Company (Note 13). VIE non-recourse debt consolidated from ACG Trust II was $335 million and $484 million as of December 31, 2011 and 2010, respectively. As of December 31, 2011 and 2010, the maximum exposure to loss was $207 million and $188 million, respectively.
 
    In 2000, ACG sponsored a financial asset securitization of aircraft to Aviation Capital Group Trust (Aviation Trust). ACG and Pacific Life are beneficial interest holders in Aviation Trust. Aviation Trust is not consolidated as the Company is not the primary beneficiary as ACG does not have the obligation to absorb losses of Aviation Trust that could potentially be significant to Aviation Trust or the right to receive benefits from Aviation Trust that could potentially be significant to it. The carrying value is comprised of beneficial interests issued by Aviation Trust. As of December 31, 2011 and 2010, the maximum exposure to loss, based on carrying value, was zero.
 
    PRIVATE EQUITY FUNDS
 
    Private equity funds (the Funds) are limited partnerships that invest in private equity investments for outside investors, where the Company is the general partner. The Company provides investment management services to the Funds for a fee and receives

PL-17

 

    carried interest based upon the performance of the Funds. The Funds are a VIE due to the purpose and design of the Funds and the lack of control by the other equity investors. The Company has determined itself to be the primary beneficiary since it has a controlling financial interest in the Funds and the Funds are consolidated into the consolidated financial statements of the Company. The Company has not guaranteed the performance, liquidity or obligations of the Funds, and the Company’s maximum exposure to loss is equal to the carrying amounts of its retained interest. VIE non-recourse debt consolidated from the Funds was $20 million and $5 million as of December 31, 2011 and 2010, respectively (Note 13).
    ASSET-BACKED SECURITIES
 
    As part of the Company’s investment strategy, the Company purchases primarily investment grade beneficial interests issued from bankruptcy-remote special purpose entities (SPEs), which are collateralized by financial assets including corporate debt. The Company has not guaranteed the performance, liquidity or obligations of the SPEs, and the Company’s maximum exposure to loss is limited to its carrying value of the beneficial interests in the SPEs. The Company has no liabilities related to these VIEs. The Company has determined that it is not the primary beneficiary of these entities since it does not have the power to direct their financial activities. Therefore, the Company does not consolidate these entities. The investments are reported as fixed maturity securities available for sale and had a net carrying amount of $105 million and $108 million as of December 31, 2011 and 2010, respectively. During the years ended December 31, 2011, 2010 and 2009, the Company recorded OTTIs of zero, zero and $60 million, respectively, related to these securities.
 
    OTHER NON-CONSOLIDATED VIEs
 
    As part of normal investment activities, the Company will make passive investments in structured securities for which it is not the sponsor. These structured securities include residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), collateralized debt obligations, and other asset-backed securities which are reported in fixed maturities securities available for sale. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the original amount issued by the VIEs. In addition, the Company does not have the authority to direct the activities of these VIEs that most significantly impact the VIEs economic performance. The Company’s maximum exposure to loss is limited to the amount of its investment. See Note 8 for the carrying amount and estimated fair value of these investments.
 
5.   BUSINESS ACQUISITIONS
 
    On August 31, 2011, Pacific Life and Pacific Life Reinsurance (Barbados) Limited (PLRB), a newly formed insurer and wholly owned subsidiary of Pacific LifeCorp, acquired Manulife Financial Corporation’s life retrocession business. The acquisition was structured utilizing five coinsurance transactions in which Pacific Life entered into three contracts covering the lives of U.S. persons and PLRB entered into two contracts covering non-U.S. persons. By operation of the five reinsurance transactions, Pacific Life and PLRB each obtained control of a business requiring the application of the acquisition accounting provisions of the Codification’s Business Combinations Topic.
 
    The acquisition allows Pacific Life to gain access to a large block of mortality-based business without adding significant concentration risk. The addition of this mortality risk helps Pacific Life diversify its overall risk profile by providing balance against the more volatile risks of equity, credit, and interest rates. The expectation is that the acquired retrocession business will also provide a platform to generate new business. For financial reporting purposes, the retrocession business is a component of the Company’s reinsurance segment.
 
    Ceding commissions in the form of non-cash consideration in connection with the acquisition of the U.S. life business by Pacific Life and the non-U.S. life business by PLRB was $198 million and $39 million, respectively. In anticipation of the acquisition, Pacific LifeCorp invested $120 million of capital in PLRB. Pacific Life and PLRB incurred acquisition-related costs of $6 million, which is included in operating and other expenses and capitalized $5 million of debt issuance cost, which is included in other assets.
 
    Pacific Life and PLRB are in the process of finalizing the fair value of the assets acquired and the liabilities assumed and therefore has not finalized the acquisition accounting required by U.S. GAAP. The valuation of the insurance reserves acquired and the identification and valuation of intangible assets are the most significant items requiring additional data and analysis before the valuation process is complete. Pacific Life and PLRB expect to finalize the acquisition accounting no later than the third quarter of 2012.

PL-18

 

    The following table presents, as of December 31, 2011, the estimated fair value of the assets acquired and liabilities assumed on August 31, 2011:
                         
    Pacific Life     PLRB     Combined  
    (In Millions)  
Assets acquired:
                        
Cash
   $ 192     $ 520     $ 712  
Value of business acquired (1)
     72       12       84  
Software computer applications (2)
     4               4  
Other assets
     4               4  
Goodwill (2)
     6       70       76  
     
Total assets
   $ 278     $ 602     $ 880  
     
 
                        
Liabilities assumed:
                        
GAAP reserves (3)
   $ 129     $ 567     $ 696  
Other liabilities
     149       35       184  
     
Total liabilities
   $ 278     $ 602     $ 880  
     
 
(1)     Included in DAC
 
(2)     Included in other assets
 
(3)     Included in future policy benefits
    On July 28, 2011, Pacific Global Advisors LLC (PGA), a wholly owned subsidiary of Pacific Life, acquired JP Morgan Chase’s Pension Advisory Group. PGA’s target market is businesses and plan trustees managing employee defined benefit retirement plans. PGA’s expertise is in the delivery of advisory services concentrated in the areas of liability-driven investing, hedging, risk management, and actuarial services.
 
    This acquisition allows Pacific Life to strengthen its ability to deliver financial security solutions to retirement plans sponsors and trustees. PGA will also provide additional diversification to Pacific Life’s business mix.
 
    PGA paid approximately $45 million to acquire the pension advisory business. In anticipation of the acquisition, Pacific Life invested $48 million of capital in PGA. The Company incurred acquisition-related expense of $5 million, which is included in operating and other expenses.
 
    The Company is in the process of finalizing the fair value of the assets acquired and the liabilities assumed and therefore has not finalized the acquisition accounting required by U.S. GAAP. The identification and valuation of intangible assets is the most significant item requiring additional data and analysis before the valuation process is complete. The Company expects to finalize the acquisition accounting no later than the second quarter of 2012.
 
    The following table presents, as of December 31, 2011, the estimated fair value of the assets acquired and liabilities assumed on July 28, 2011 (In Millions):
         
Assets acquired:
        
Intangibles (1)
   $ 7  
Goodwill (1)
     38  
 
      
Total assets
   $ 45  
 
      
 
        
Liabilities assumed:
        
Other liabilities
     —  
 
      
Total liabilities
     —  
 
      
 
(1)   Included in other assets

PL-19

 

6.   DISCONTINUED OPERATIONS
 
    The Company’s former broker-dealer operations have been reflected as discontinued operations in the Company’s consolidated financial statements. Discontinued operations do not include the operations of Pacific Select Distributors, Inc. (PSD), a wholly owned broker-dealer subsidiary of Pacific Life, which primarily serves as the underwriter/distributor of registered investment-related products and services, principally variable life and variable annuity contracts issued by the Company, and mutual funds. In March 2007, the Company classified its broker-dealer subsidiaries, other than PSD, as held for sale. During 2008 and 2007, these broker-dealers were sold.
 
    Operating results from the discontinued operations were as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
Benefits and expenses
   $ 13             $ 31  
     
Loss from discontinued operations
     (13 )     —       (31 )
Benefit from income taxes
     (4 )             (11 )
     
Discontinued operations, net of taxes
   $ (9 )     —     $ (20 )
     
7.   DEFERRED POLICY ACQUISITION COSTS
 
    Components of DAC are as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
Balance, January 1
   $ 4,435     $ 4,806     $ 5,012  
     
Cumulative pre-tax effect of adoption of new accounting principle (Note 1)
                     7  
     
Additions:
                        
Capitalized during the year
     639       558       777  
     
Amortization:
                        
Allocated to commission expenses
     274       (529 )     (446 )
Allocated to operating expenses
     9       (145 )     (129 )
     
Total amortization
     283       (674 )     (575 )
Allocated to OCI
     (94 )     (255 )     (415 )
     
Balance, December 31
   $ 5,263     $ 4,435     $ 4,806  
     
    During the year ended December 31, 2011, negative AGPs resulted in an increase to the DAC asset of $618 million and negative DAC amortization through a decrease to commission expenses of $502 million and operating expenses of $116 million (Note 1). During the years ended December 31, 2011, 2010 and 2009, the Company revised certain assumptions to develop EGPs for its products subject to DAC amortization. This resulted in a decrease in DAC amortization expense of $109 million for the year ended December 31, 2011 and increases in DAC amortization expense of $34 million and $23 million for the years ended December 31, 2010 and 2009, respectively. The revised EGPs also resulted in increased URR amortization of $35 million for the year ended December 31, 2011, increased URR amortization of $20 million for the year ended December 31, 2010 and an immaterial decrease in URR amortization for the year ended December 31, 2009. The capitalized sales inducement balance included in the DAC asset was $645 million and $549 million as of December 31, 2011 and 2010, respectively.

PL-20

 

8.   INVESTMENTS
 
    The net carrying amount, gross unrealized gains and losses, and estimated fair value of fixed maturity and equity securities available for sale are shown below. The net carrying amount of fixed maturity securities represents amortized cost adjusted for OTTIs recognized in earnings and changes in the estimated fair value attributable to the hedged risk in a fair value hedge. The net carrying amount of equity securities represents cost adjusted for OTTIs. See Note 14 for information on the Company’s estimated fair value measurements and disclosure.
                                 
    Net              
    Carrying     Gross Unrealized     Estimated  
    Amount     Gains     Losses     Fair Value  
    (In Millions)  
December 31, 2011:
                                
U.S. Treasury securities
   $ 27     $ 8             $ 35  
Obligations of states and political subdivisions
     1,064       117     $ 2       1,179  
Foreign governments
     456       51       4       503  
Corporate securities
     19,468       2,210       186       21,492  
RMBS
     4,475       189       491       4,173  
CMBS
     740       37       6       771  
Collateralized debt obligations
     115       17       17       115  
Other asset-backed securities
     523       69       7       585  
     
Total fixed maturity securities
   $ 26,868     $ 2,698     $ 713     $ 28,853  
     
 
                                
Perpetual preferred securities
   $ 283     $ 5     $ 60     $ 228  
Other equity securities
     74               1       73  
     
 
                                
Total equity securities
   $ 357     $ 5     $ 61     $ 301  
     
                                 
    Net              
    Carrying     Gross Unrealized     Estimated  
    Amount     Gains     Losses     Fair Value  
    (In Millions)  
December 31, 2010:
                                
U.S. Treasury securities
   $ 914     $ 21     $ 15     $ 920  
Obligations of states and political subdivisions
     954       15       44       925  
Foreign governments
     433       50       1       482  
Corporate securities
     18,454       1,421       207       19,668  
RMBS
     5,100       138       597       4,641  
CMBS
     972       50       11       1,011  
Collateralized debt obligations
     118       28       26       120  
Other asset-backed securities
     500       54       8       546  
     
Total fixed maturity securities
   $ 27,445     $ 1,777     $ 909     $ 28,313  
     
 
                                
Perpetual preferred securities
   $ 299     $ 11     $ 35     $ 275  
Other equity securities
     4                       4  
     
 
                                
Total equity securities
   $ 303     $ 11     $ 35     $ 279  
     

PL-21

 

    The Company has investments in perpetual preferred securities that are issued primarily by European banks. The net carrying amount and estimated fair value of the available for sale perpetual preferred securities was $372 million and $282 million, respectively, as of December 31, 2011. Included in these amounts are perpetual preferred securities carried in trusts with a net carrying amount and estimated fair value of $89 million and $54 million, respectively, that are held in fixed maturities and included in the tables above in corporate securities. Perpetual preferred securities reported as equity securities available for sale are presented in the tables above as perpetual preferred securities.
 
    The net carrying amount and estimated fair value of fixed maturity securities available for sale as of December 31, 2011, by contractual repayment date of principal, are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
                                 
    Net              
    Carrying     Gross Unrealized     Estimated  
    Amount     Gains     Losses     Fair Value  
    (In Millions)  
Due in one year or less
   $ 896     $ 31     $ 2     $ 925  
Due after one year through five years
     5,570       428       41       5,957  
Due after five years through ten years
     8,805       895       99       9,601  
Due after ten years
     5,744       1,032       50       6,726  
     
 
     21,015       2,386       192       23,209  
Mortgage-backed and asset-backed securities
     5,853       312       521       5,644  
     
Total fixed maturity securities
   $ 26,868     $ 2,698     $ 713     $ 28,853  
     

PL-22

 

    The following tables present the number of investments, estimated fair value and gross unrealized losses on investments where the estimated fair value has declined and remained continuously below the net carrying amount for less than twelve months and for twelve months or greater. Included in the tables are gross unrealized losses for fixed maturity securities available for sale and other securities, which include equity securities available for sale, cost method investments, and non-marketable equity securities.
                         
    Total  
                    Gross  
            Estimated     Unrealized  
    Number     Fair Value     Losses  
            (In Millions)  
December 31, 2011:
                        
Obligations of states and political subdivisions
     4     $ 71     $ 2  
Foreign governments
     11       73       4  
Corporate securities
     314       2,183       186  
RMBS
     207       2,624       491  
CMBS
     10       77       6  
Collateralized debt obligations
     3       91       17  
Other asset-backed securities
     13       101       7  
           
Total fixed maturity securities
     562       5,220       713  
           
Perpetual preferred securities
     19       177       60  
Other securities
     12       89       5  
           
Total other securities
     31       266       65  
           
Total
     593     $ 5,486     $ 778  
           
                                                 
    Less than 12 Months     12 Months or Greater  
                    Gross                     Gross  
            Estimated     Unrealized             Estimated     Unrealized  
    Number     Fair Value     Losses     Number     Fair Value     Losses  
            (In Millions)             (In Millions)  
December 31, 2011:
                                                
Obligations of states and political subdivisions
                             4     $ 71     $ 2  
Foreign governments
     11     $ 73     $ 4                          
Corporate securities
     217       1,159       49       97       1,024       137  
RMBS
     49       401       14       158       2,223       477  
CMBS
     7       37       2       3       40       4  
Collateralized debt obligations
                             3       91       17  
Other asset-backed securities
     8       89       6       5       12       1  
                       
Total fixed maturity securities
     292       1,759       75       270       3,461       638  
                       
Perpetual preferred securities
     8       57       6       11       120       54  
Other securities
     6       42       2       6       47       3  
                       
Total other securities
     14       99       8       17       167       57  
                       
Total
     306     $ 1,858     $ 83       287     $ 3,628     $ 695  
                       

PL-23

 

                         
    Total  
                    Gross  
            Estimated     Unrealized  
    Number     Fair Value     Losses  
            (In Millions)  
December 31, 2010:
                        
U.S. Treasury securities
     3     $ 429     $ 15  
Obligations of states and political subdivisions
     44       612       44  
Foreign governments
     7       56       1  
Corporate securities
     350       3,161       207  
RMBS
     287       2,976       597  
CMBS
     21       141       11  
Collateralized debt obligations
     5       67       26  
Other asset-backed securities
     19       122       8  
           
Total fixed maturity securities
     736       7,564       909  
           
Perpetual preferred securities
     17       195       35  
Other securities
     29       112       16  
           
Total other securities
     46       307       51  
           
Total
     782     $ 7,871     $ 960  
           
                                                 
    Less than 12 Months     12 Months or Greater  
                    Gross                     Gross  
            Estimated     Unrealized             Estimated     Unrealized  
    Number     Fair Value     Losses     Number     Fair Value     Losses  
            (In Millions)             (In Millions)  
December 31, 2010:
                                                
U.S. Treasury securities
     3     $ 429     $ 15                          
Obligations of states and political subdivisions
     32       374       16       12     $ 238     $ 28  
Foreign governments
     7       56       1                          
Corporate securities
     241       1,926       66       109       1,235       141  
RMBS
     94       156       4       193       2,820       593  
CMBS
     15       52       2       6       89       9  
Collateralized debt obligations
                             5       67       26  
Other asset-backed securities
     7       30       1       12       92       7  
                     
Total fixed maturity securities
     399       3,023       105       337       4,541       804  
                     
Perpetual preferred securities
                             17       195       35  
Other securities
     3       17       1       26       95       15  
                     
Total other securities
     3       17       1       43       290       50  
                     
Total
     402     $ 3,040     $ 106       380     $ 4,831     $ 854  
                     
    The Company has evaluated fixed maturity and other securities with gross unrealized losses and has determined that the unrealized losses are temporary. The Company does not intend to sell the securities and it is more likely than not that the Company will not be required to sell the securities before recovery of their net carrying amounts.

PL-24

 

    The table below presents non-agency RMBS and CMBS by investment rating from independent rating agencies and vintage year of the underlying collateral as of December 31, 2011.
                                                                 
    Net             Rating as % of     Vintage Breakdown  
    Carrying     Estimated     Net Carrying     2004 and                             2008 and  
Rating   Amount     Fair Value     Amount     Prior     2005     2006     2007     Thereafter  
    ($ In Millions)                                                  
Prime RMBS:
                                                                
AAA
   $ 223     $ 230       9 %     7 %                             2 %
AA
     91       93       3 %     3 %                                
A
     119       117       5 %     4 %     1 %                        
BAA
     95       95       4 %     3 %     1 %                        
BA and below
     2,058       1,823       79 %     6 %     27 %     33 %     13 %        
         
Total
   $ 2,586     $ 2,358       100 %     23 %     29 %     33 %     13 %     2 %
         
 
Alt-A RMBS:
                                                                
AAA
   $ 39     $ 34       5 %     5 %                                
AA
     23       23       3 %     1 %     1 %     1 %                
A
     3       3       1 %     1 %                                
BA and below
     653       478       91 %     2 %     11 %     28 %     50 %        
         
Total
   $ 718     $ 538       100 %     9 %     12 %     29 %     50 %     0 %
         
 
Sub-prime RMBS:
                                                                
AAA
   $ 17     $ 16       5 %     5 %                                
A
     28       27       8 %     8 %                                
BAA
     72       67       20 %     20 %                                
BA and below
     246       194       67 %     49 %     17 %             1 %        
         
Total
   $ 363     $ 304       100 %     82 %     17 %     0 %     1 %     0 %
         
 
CMBS:
                                                                
AAA
   $ 573     $ 593       77 %     34 %     1 %     1 %     21 %     20 %
AA
     120       134       16 %     12 %                             4 %
A
     15       12       2 %     2 %                                
BAA
     4       5       1 %                                     1 %
BA
     28       27       4 %                             4 %        
         
Total
   $ 740     $ 771       100 %     48 %     1 %     1 %     25 %     25 %
         
    Prime mortgages are loans made to borrowers with strong credit histories, whereas sub-prime mortgage lending is the origination of residential mortgage loans to borrowers with weak credit profiles. Alt-A mortgage lending is the origination of residential mortgage loans to customers who have good credit ratings, but have limited documentation for their source of income or some other standard input used to underwrite the mortgage loan. The slowing U.S. housing market, greater use of affordability mortgage products and relaxed underwriting standards by some originators for these loans has led to higher delinquency and loss rates, especially within the 2007 and 2006 vintage years.
 
    Pacific Life is a member of the Federal Home Loan Bank (FHLB) of Topeka. As of December 31, 2011, the Company has received advances of $1.0 billion from the FHLB of Topeka and has issued funding agreements to the FHLB of Topeka. The funding agreement liabilities are included in policyholder account balances. As of December 31, 2011, fixed maturity securities with an estimated fair value of $1.1 billion are in a custodial account pledged as collateral for the funding agreements. The Company is required to purchase stock in FHLB of Topeka each time it receives an advance. As of December 31, 2011, the Company holds $50 million of FHLB of Topeka stock, which has been restricted for sale and is recorded in other investments.
 
    PL&A is a member of FHLB of San Francisco. As of December 31, 2011, no assets are pledged as collateral. As of December 31, 2011, PL&A holds FHLB of San Francisco stock with an estimated fair value of $4 million, which has been restricted for sale and is recorded in other investments.

PL-25

 

    In connection with the acquired life retrocession business (Note 5), as of December 31, 2011, fixed maturity securities and cash and cash equivalents of $377 million and $12 million, respectively, have been pledged as collateral in reinsurance trusts.
 
    Major categories of investment income (loss) and related investment expense are summarized as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
Fixed maturity securities
   $ 1,458     $ 1,506     $ 1,448  
Equity securities
     15       19       20  
Mortgage loans
     391       337       297  
Real estate
     107       93       92  
Policy loans
     204       214       229  
Partnerships and joint ventures
     163       119       (78 )
Other
     16               12  
     
Gross investment income
     2,354       2,288       2,020  
Investment expense
     168       166       158  
     
Net investment income
   $ 2,186     $ 2,122     $ 1,862  
     
    The components of net realized investment gain (loss) are as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
Fixed maturity securities:
                        
Gross gains on sales
   $ 113     $ 167     $ 42  
Gross losses on sales
     (16 )     (32 )     (18 )
     
Total fixed maturity securities
     97       135       24  
     
 
                        
Equity securities:
                        
Gross gains on sales
     9       4          
Gross losses on sales
                     (11 )
     
Total equity securities
     9       4       (11 )
     
 
                        
Non-marketable securities
     34                  
Trading securities
     (7 )     12       20  
Real estate
     5       21          
Variable annuity GLB embedded derivatives
     (1,191 )     185       2,211  
Variable annuity GLB policy fees
     197       208       147  
Variable annuity derivatives — interest rate swaps
                     (104 )
Variable annuity derivatives — total return swaps
     (366 )     (534 )     (1,542 )
Equity put options
     135       (159 )     (672 )
Foreign currency and interest rate swaps
     75       16       9  
Forward starting interest rate swaps
     299                  
Synthetic GIC policy fees
     43       30       25  
Other
     9       (12 )     46  
     
Total
   $ (661 )   $ (94 )   $ 153  
     

PL-26

 

    The table below summarizes the OTTIs by investment type:
                         
    Recognized in     Included in        
    Earnings     OCI     Total  
    (In Millions)  
Year ended December 31, 2011:
                        
Corporate securities (1)
   $ 24             $ 24  
RMBS
     102     $ 256       358  
Equity securities
     11               11  
     
OTTIs — fixed maturity and equity securities
     137       256       393  
Mortgage loans
     5               5  
Real estate
     1               1  
Other investments
     10               10  
     
Total OTTIs
   $ 153     $ 256     $ 409  
     
 
                        
Year ended December 31, 2010:
                        
Corporate securities
   $ 10             $ 10  
RMBS
     64     $ 215       279  
Collateralized debt obligations
     1               1  
     
OTTIs — fixed maturity securities
     75       215       290  
Real estate
     27               27  
Other investments
     11               11  
     
Total OTTIs
   $ 113     $ 215     $ 328  
     
 
                        
Year ended December 31, 2009:
                        
Corporate securities (2)
   $ 63     $ 2     $ 65  
RMBS
     116       315       431  
Collateralized debt obligations
     66       13       79  
Perpetual preferred securities
     26               26  
     
OTTIs — fixed maturity and equity securities
     271       330       601  
Other investments
     40               40  
     
Total OTTIs
   $ 311     $ 330     $ 641  
     
 
(1)   Included are $7 million of OTTI recognized in earnings on perpetual preferred securities carried in trusts.
 
(2)   Included are $29 million of OTTI recognized in earnings on perpetual preferred securities carried in trusts.

PL-27

 

    The table below details the amount of OTTIs attributable to credit losses recognized in earnings for which a portion was recognized in OCI:
                 
    Years Ended  
    December 31,  
    2011     2010  
    (In Millions)  
Cumulative credit loss, January 1
   $ 245     $ 200  
Additions for credit impairments recognized on:
                
Securities not previously other than temporarily impaired
     15       14  
Securities previously other than temporarily impaired
     87       46  
     
Total additions
     102       60  
 
                
Reductions for credit impairments previously recognized on:
                
Securities that matured or were sold
     (71 )     (5 )
Securities due to an increase in expected cash flows and time value of cash flows
     (8 )     (10 )
     
Total subtractions
     (79 )     (15 )
     
Cumulative credit loss, December 31
   $ 268     $ 245  
     

PL-28

 

    The table below presents gross unrealized losses on investments for which OTTI has been recognized in earnings in current or prior periods and gross unrealized losses on temporarily impaired investments for which no OTTI has been recognized.
                         
    Gross Unrealized Losses  
    OTTI     Non-OTTI        
    Investments     Investments     Total  
    (In Millions)  
December 31, 2011:
                        
Obligations of states and political subdivisions
           $ 2     $ 2  
Foreign governments
             4       4  
Corporate securities
             186       186  
RMBS
   $ 301       190       491  
CMBS
             6       6  
Collateralized debt obligations
     17               17  
Other asset-backed securities
             7       7  
     
Total fixed maturity securities
   $ 318     $ 395     $ 713  
     
 
                        
Perpetual preferred securities
           $ 60     $ 60  
Other equity securities
             1       1  
     
Total equity securities
     —     $ 61     $ 61  
     
 
                        
December 31, 2010:
                        
U.S. Treasury securities
           $ 15     $ 15  
Obligations of states and political subdivisions
             44       44  
Foreign governments
             1       1  
Corporate securities
             207       207  
RMBS
   $ 308       289       597  
CMBS
             11       11  
Collateralized debt obligations
     26               26  
Other asset-backed securities
             8       8  
     
Total fixed maturity securities
   $ 334     $ 575     $ 909  
     
 
                        
Perpetual preferred securities
           $ 35     $ 35  
     
Total equity securities
     —     $ 35     $ 35  
     
    The change in unrealized gain (loss) on investments in available for sale and trading securities is as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
Available for sale securities:
                        
Fixed maturity
   $ 1,117     $ 1,185     $ 2,455  
Equity
     (32 )     23       124  
     
Total available for sale securities
   $ 1,085     $ 1,208     $ 2,579  
     
 
                        
Trading securities
   $ (12 )   $ 14     $ 26  
     

PL-29

 

    Trading securities, included in other investments, totaled $215 million and $349 million as of December 31, 2011 and 2010, respectively. The cumulative net unrealized gains on trading securities held as of December 31, 2011 and 2010 were $9 million and $21 million, respectively.
 
    As of December 31, 2011 and 2010, fixed maturity securities of $12 million were on deposit with state insurance departments to satisfy regulatory requirements.
 
    Mortgage loans totaled $7,599 million and $6,693 million as of December 31, 2011 and 2010, respectively. Mortgage loans are collateralized by commercial properties primarily located throughout the U.S. As of December 31, 2011, $1,423 million, $1,250 million, $844 million, $657 million and $642 million were located in Washington, California, District of Columbia, Florida, and Texas, respectively. As of December 31, 2011, $382 million was located in Canada. The Company did not have any mortgage loans with accrued interest more than 180 days past due as of December 31, 2011 or 2010. As of December 31, 2011, there was no single mortgage loan investment that exceeded 10% of stockholder’s equity.
 
    As of December 31, 2011, there were three mortgage loans totaling $287 million that were considered impaired, and an impairment loss of $5 million was recorded as the underlying collateral of two of these mortgage loans was lower than the carrying amount and they were in the process of foreclosure. No impairment loss was recorded for the other mortgage loan since the estimated fair value of the collateral was greater than the carrying amount. As of December 31, 2010, one mortgage loan totaling $6 million was foreclosed upon. Since the estimated fair value of the collateral was greater than the carrying amount, no impairment loss was recorded.
 
    Real estate investments totaled $534 million and $547 million as of December 31, 2011 and 2010, respectively. During the years ended December 31, 2011 and 2010, real estate investment write-downs totaled $1 million and $27 million, respectively. The Company had no real estate investment write-downs during the year ended December 31, 2009.
 
9.   AIRCRAFT LEASING PORTFOLIO, NET
 
    Aircraft leasing portfolio, net, consisted of the following:
                 
    December 31,  
    2011     2010  
    (In Millions)  
Aircraft
   $ 4,569     $ 3,502  
Aircraft consolidated from VIEs
     2,613       2,938  
     
 
     7,182       6,440  
Accumulated depreciation
     1,337       1,181  
     
Aircraft leasing portfolio, net
   $ 5,845     $ 5,259  
     
    As of December 31, 2011, domestic and foreign future minimum rentals scheduled to be received under the noncancelable portion of operating leases are as follows (In Millions):
                                                 
    2012     2013     2014     2015     2016     Thereafter  
     
Domestic
   $ 64     $ 63     $ 61     $ 52     $ 48     $ 186  
Foreign
     537       435       379       306       248       489  
     
Total operating leases
   $ 601     $ 498     $ 440     $ 358     $ 296     $ 675  
     
    Included in the table above are three aircraft ACG has subleased to airlines with lease maturity dates of July 2021, March 2023 and April 2024 with total future rentals of $148 million. The revenue related to these aircraft, included in aircraft leasing revenue, was $11 million and $1 million for the years ended December 31, 2011 and 2010, respectively. There were no sublease revenues for the year ended December 31, 2009. These aircraft were sold to third-parties and subsequently leased back with lease maturity dates of March 2023 and December 2025. See Note 21 for the future lease commitments and minimum rentals to be received related to these sale leaseback transactions.

PL-30

 

    As of December 31, 2011 and 2010, aircraft with a carrying amount of $4,317 million and $4,802 million, respectively, were assigned as collateral to secure debt (Notes 4 and 13).
 
    During the years ended December 31, 2011, 2010 and 2009, ACG recognized aircraft impairments of $15 million, $4 million and zero, respectively, which are included in operating and other expenses.
 
    The Company had four and five non-earning aircraft in the portfolio as of December 31, 2011 and 2010, respectively.
 
    During the years ended December 31, 2011, 2010 and 2009, ACG recognized pre-tax gains on the sale of aircraft of $33 million, $18 million and zero, respectively, which are included in other income. Aircraft held for sale totaled $6 million and $4 million as of December 31, 2011 and 2010, respectively, and are included in aircraft leasing portfolio, net.
 
    See Note 21 for future aircraft purchase commitments.
 
10.   DERIVATIVES AND HEDGING ACTIVITIES
 
    The Company primarily utilizes derivative instruments to manage its exposure to interest rate risk, foreign currency risk, credit risk, and equity risk. Derivative instruments are also used to manage the duration mismatch of assets and liabilities. The Company utilizes a variety of derivative instruments including swaps and options. In addition, certain insurance products offered by the Company contain features that are accounted for as derivatives.
 
    Accounting for derivatives and hedging activities requires the Company to recognize all derivative instruments as either assets or liabilities at estimated fair value in its consolidated statement of financial condition. The Company applies hedge accounting by designating derivative instruments as either fair value or cash flow hedges on the date the Company enters into a derivative contract. The Company formally documents at inception all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions. In this documentation, the Company specifically identifies the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and states how the hedging instrument is expected to hedge the risks related to the hedged item. The Company formally assesses and measures effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis in accordance with its risk management policy.
 
    The Company developed a pattern of forecasted transactions that did not occur as originally forecasted, and as a result, derivative instruments in the Company’s insurance operations previously designated as cash flow hedges should have been reported as derivatives not designated as hedging instruments during 2010. The impact of the discontinuance of cash flow hedge accounting was insignificant to the consolidated financial statements as of and for the year ended December 31, 2010, and therefore, the consolidated financial statements and footnote disclosures as of and for the year ended December 31, 2010 were not revised.
 
    DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
 
    The Company has certain insurance and reinsurance contracts that are considered to have embedded derivatives. When it is determined that the embedded derivative possesses economic and risk characteristics that are not clearly and closely related to those of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, it is separated from the host contract and accounted for as a stand-alone derivative.
 
    The Company offers a rider on certain variable annuity contracts that guarantees net principal over a ten-year holding period, as well as riders on certain variable annuity contracts that guarantee a minimum withdrawal benefit over specified periods, subject to certain restrictions. These variable annuity GLBs are considered embedded derivatives and are recorded in future policy benefits.
 
    GLBs on variable annuity contracts issued between January 1, 2007 and March 31, 2009 are partially covered by reinsurance. These reinsurance arrangements are used to offset a portion of the Company’s exposure to the GLBs for the lives of the host variable annuity contracts issued. The ceded portion of the GLBs is considered an embedded derivative and is recorded as a component of net reinsurance recoverable in other assets.
 
    The Company employs hedging strategies (variable annuity derivatives) to mitigate equity risk associated with the GLBs not covered by reinsurance. The Company utilizes total return swaps based upon the S&P 500 Index (S&P 500) primarily to economically hedge the equity risk of the mortality and expense fees in its variable annuity products. These contracts provide periodic payments to the Company in exchange for the total return and changes in fair value of the S&P 500 in the form of a

PL-31

 

    payment or receipt, depending on whether the return relative to the index on trade date is positive or negative, respectively. Payments and receipts are recognized in net realized investment gain (loss).
 
    The Company also uses equity put options to hedge equity and credit risks. These equity put options involve the exchange of periodic fixed rate payments for the return, at the end of the option agreement, of the equity index below a specified strike price. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party.
 
    The Company issues synthetic GICs to Employee Retirement Income Security Act of 1974 (ERISA) qualified defined contribution employee benefit plans (ERISA Plan). The ERISA Plan uses the contracts in its stable value fixed income option. The Company receives a fee for providing book value accounting for the ERISA Plan stable value fixed income option. The Company does not manage the assets underlying synthetic GICs. In the event that plan participant elections exceed the estimated fair value of the assets or if the contract is terminated and at the end of the termination period the book value under the contract exceeds the estimated fair value of the assets, then the Company is required to pay the ERISA Plan the difference between book value and estimated fair value. The Company mitigates the investment risk through pre-approval and monitoring of the investment guidelines, requiring high quality investments and adjustments to the plan crediting rates to compensate for unrealized losses in the portfolios.
 
    Financial futures contracts obligate the holder to buy or sell the underlying financial instrument at a specified future date for a set price and may be settled in cash or by delivery of the financial instrument. Price changes on futures are settled daily through the required margin cash flows. As part of its asset/liability management, the Company generally utilizes futures contracts to manage its interest rate and market risk related to bonds. Future contracts have limited off-balance sheet credit risk as they are executed on organized exchanges and require security deposits, as well as daily cash settlement of margins.
 
    The Company offers indexed universal life insurance products, which credit the price return of an underlying index to the policy cash value. A policyholder may allocate the policy’s net accumulated value to one or a combination of the following: fixed return account, one year S&P 500 indexed account capped at 13%, two year S&P 500 index account capped at 32%, five year S&P 500 indexed account, or one year global index account capped at 13%. The indexed products contain embedded derivatives and are recorded in policyholder account balances.
 
    The Company utilizes call options to hedge the credit paid to the policy on the underlying index. These options are contracts to buy the index at a predetermined time at a contracted price. The contracts will be net settled in cash based on differentials in the index at the time of exercise and the strike price and the settlements will be recognized in net realized investment gain (loss).
 
    Foreign currency interest rate swap agreements are used to convert a fixed or floating rate, foreign-denominated asset or liability to a U.S. dollar fixed rate asset or liability. The foreign currency interest rate swaps involve the exchange of an initial principal amount in two currencies and the agreement to re-exchange the currencies at a future date at an agreed exchange rate. There are also periodic exchanges of interest payments in the two currencies at specified intervals, calculated using agreed upon rates and the exchanged principal amounts. The main currencies that the Company hedges are the Euro, British Pound, and Canadian Dollar.
 
    Interest rate swap agreements are used to convert a floating rate asset or liability to a fixed rate to hedge the variability of cash flows of the hedged asset or liability due to changes in benchmark interest rates. These derivatives are predominantly used to better match the cash flow characteristics of certain assets and liabilities. These agreements involve the exchange, at specified intervals, of interest payments resulting from the difference between fixed rate and floating rate interest amounts calculated by reference to an underlying notional amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party.
 
    Forward starting interest rate swaps are used to hedge the variability in the future interest receipts or payments stemming from the anticipated purchase of fixed rate securities or issuance of fixed rate liabilities due to changes in benchmark interest rates. These derivatives are predominantly used to lock in interest rate levels to match future cash flow characteristics of assets and liabilities. Forward starting interest rate swaps involve the exchange, at specified intervals, of interest payments resulting from the difference between fixed and floating rate interest amounts calculated by reference to an underlying notional amount to begin at a specified date in the future for a specified period of time. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. The notional amounts of the contracts do not represent future cash requirements, as the Company intends to close out open positions prior to their effective dates.

PL-32

 

    The Company had the following outstanding derivatives not designated as hedging instruments:
                 
    Notional Amount  
    December 31,  
    2011     2010  
    (In Millions)  
Variable annuity GLB embedded derivatives
   $ 38,960     $ 37,147  
Variable annuity GLB reinsurance contracts
     14,744       15,117  
Variable annuity derivatives — total return swaps
     3,666       2,891  
Equity put options
     6,133       5,285  
Synthetic GICs
     21,593       22,402  
Foreign currency and interest rate swaps
     8,020       568  
Forward starting interest rate swaps
     1,140          
Futures
     1,400          
Other
     2,084       1,438  
    Notional amount represents a standard of measurement of the volume of derivatives. Notional amount is not a quantification of market risk or credit risk and is not recorded in the consolidated statements of financial condition. Notional amounts generally represent those amounts used to calculate contractual cash flows to be exchanged and are not paid or received, except for certain contracts such as currency swaps.
 
    The following table summarizes amounts recognized in net realized investment gain (loss) for derivatives not designated as hedging instruments. Gains and losses include the changes in estimated fair value of the derivatives and amounts realized on terminations. The amounts presented do not include the periodic net payments of $418 million, $560 million and $1,476 million for the years ended December 31, 2011, 2010 and 2009, respectively, which are recognized in net realized investment gain (loss).
                         
    Amount of Gain (Loss)  
    Recognized in  
    Income on Derivatives  
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
Derivatives not designated as hedging instruments:
                        
Variable annuity derivatives — interest rate swaps
                   $ (168 )
Variable annuity derivatives — total return swaps
   $ (121 )   $ (84 )     (102 )
Equity put options
     252       (60 )     (580 )
Foreign currency and interest rate swaps
     170 (1)             7  
Forward starting interest rate swaps
     281                  
Other
     34       39       27  
Embedded derivatives:
                        
Variable annuity GLB embedded derivatives (including reinsurance contracts)
     (1,191 )     185       2,211  
Other
     23       (23 )     (14 )
     
Total
   $ (552 )   $ 57     $ 1,381  
     
 
(1)   Includes foreign currency transaction gains and (losses) for foreign currency interest rate swaps.

PL-33

 

    DERIVATIVES DESIGNATED AS CASH FLOW HEDGES
 
    The Company primarily uses foreign currency interest rate swaps, forward starting interest rate swaps and interest rate swaps to manage its exposure to variability in cash flows due to changes in foreign currencies and the benchmark interest rate. These cash flows include those associated with existing assets and liabilities, as well as the forecasted interest cash flows related to anticipated investment purchases and liability issuances. Such anticipated cash flows in the non-insurance company operations are considered probable to occur and are generally completed within 24 years of the inception of the hedge.
 
    When a derivative is designated as a cash flow hedge, the effective portion of changes in the estimated fair value of the derivative is recognized in OCI and reclassified to earnings when the hedged item affects earnings, and the ineffective portion of changes in the estimated fair value of the derivative is recognized in net realized investment gain (loss). For the years ended December 31, 2011, 2010 and 2009, hedge ineffectiveness related to designated cash flow hedges reflected in net realized investment gain (loss) was immaterial.
 
    For the year ended December 31, 2011, the Company reclassified a gain, net of tax, of $12 million from accumulated other comprehensive income (loss) (AOCI) to earnings resulting from the discontinuance of cash flow hedges due to forecasted transactions that were no longer probable of occurring. Amounts reclassified from AOCI to earnings resulting from the discontinuance of cash flow hedges due to forecasted cash flows that were no longer probable of occurring for the years ended December 31, 2010 and 2009 were immaterial. Over the next twelve months, the Company anticipates that $12 million of deferred losses, net of tax, on derivative instruments in AOCI will be reclassified to earnings consistent with when the hedged forecasted transaction affects earnings. For the year ended December 31, 2011, all of the non-insurance company operation’s (primarily ACG) hedged forecasted transactions for outstanding cash flow hedges were determined to be probable of occurring.
 
    The Company had the following outstanding derivatives designated as cash flow hedges:
                 
    Notional Amount  
    December 31,  
    2011     2010  
    (In Millions)  
Foreign currency and interest rate swaps
   $ 1,531     $ 7,644  
Forward starting interest rate swaps
             1,140  
    The following table summarizes amounts recognized in OCI for changes in estimated fair value for derivatives designated as cash flow hedges. The amounts presented do not include the periodic net settlements of the derivatives.
                         
    Gain (Loss)  
    Recognized in  
    OCI on Derivatives  
    (Effective Portion)  
    Years Ended December 31,  
    2011     2010     2009  
    (In Millions)  
Derivatives in cash flow hedges:
                        
Foreign currency and interest rate swaps
   $ 5     $ (14 )   $ 108  
Forward starting interest rate swaps
             29       (254 )
     
Total
   $ 5     $ 15     $ (146 )
     
    DERIVATIVES DESIGNATED AS FAIR VALUE HEDGES
 
    Interest rate swap agreements are used to convert a U.S. dollar denominated fixed rate asset or liability to a floating U.S. dollar denominated rate to hedge the changes in estimated fair value of the hedged asset or liability due to changes in benchmark interest rates. These derivatives are used primarily to closely match the duration of the assets supporting specific liabilities. Pacific Life also used interest rate swaps to convert fixed rate surplus notes to variable notes (Note 13). The Company had outstanding

PL-34

 

    derivatives designated as fair value hedges with notional amounts for foreign currency and interest rate swaps of zero and $1,592 million as of December 31, 2011 and 2010, respectively.
    The following table summarizes amounts recognized in net realized investment gain (loss) for derivatives designated as fair value hedges. Gains and losses include the changes in estimated fair value of the derivatives as well as the offsetting gain or loss on the hedged item attributable to the hedged risk. The Company includes the gain or loss on the derivative in the same line item as the offsetting gain or loss on the hedged item. The amounts presented do not include the periodic net settlements of the derivatives or the income (expense) related to the hedged item.
                                                 
    Gain (Loss)     Gain (Loss)  
    Recognized in     Recognized in  
    Income on Derivatives     Income on Hedged Items  
    Years Ended December 31,     Years Ended December 31,  
    2011     2010     2009     2011     2010     2009  
    (In Millions)     (In Millions)  
Derivatives in fair value hedges:
                                                
Interest rate swaps
   $ 328     $ 85     $ 97     $ (334 )   $ (98 )   $ (93 )
         
Total
   $ 328     $ 85     $ 97     $ (334 )   $ (98 )   $ (93 )
         
    For the years ended December 31, 2011, 2010 and 2009, hedge ineffectiveness related to designated fair value hedges reflected in net realized investment gain (loss) was ($6) million, ($13) million and $4 million, respectively. No component of the hedging instrument’s estimated fair value is excluded from the determination of effectiveness.
 
    CONSOLIDATED FINANCIAL STATEMENT IMPACT
 
    Derivative instruments are recorded on the Company’s consolidated statements of financial condition at estimated fair value and are presented as assets or liabilities determined by calculating the net position for each derivative counterparty by legal entity, taking into account income accruals and net cash collateral.

PL-35

 

    The following table summarizes the gross asset or liability derivative estimated fair value and excludes the impact of offsetting asset and liability positions held with the same counterparty, cash collateral payables and receivables and income accruals. See Note 14.
                                 
    Asset Derivatives     Liability Derivatives  
    Estimated Fair Value     Estimated Fair Value  
    December 31,     December 31,  
    2011     2010     2011     2010  
    (In Millions)     (In Millions)  
Derivatives designated as hedging instruments:
                                
Foreign currency and interest rate swaps
           $ 326 (1)           $ 308 (1)
 
             18 (5)   $ 111       326 (5)
Forward starting interest rate swaps
             51 (1)             1 (1)
 
             20 (5)                
         
Total derivatives designated as hedging instruments
     —       415       111       635  
         
 
                                
Derivatives not designated as hedging instruments:
                                
Variable annuity derivatives — total return swaps
   $ 1         (1)     63       41 (1)
 
                     2       33 (5)
Equity put options
     543       254 (1)     2       15 (1)
 
             33 (5)             13 (5)
Foreign currency and interest rate swaps
     332       30 (1)     242       4 (1)
 
     8       1 (5)     104         (5)
Forward starting interest rate swaps
     293         (1)                
 
     29         (5)                
Other
     35       29 (1)     29       23 (1)
 
     2       15 (5)                
Embedded derivatives:
                                
Variable annuity GLB embedded derivatives (including reinsurance contracts)
     230       25 (2)     1,938       542 (3)
Other
                     67       76 (4)
         
Total derivatives not designated as hedging instruments
     1,473       387       2,447       747  
         
Total derivatives
   $ 1,473     $ 802     $ 2,558     $ 1,382  
         
 
    Location on the consolidated statements of financial condition:
 
(1)   Other investments
 
(2)     Other assets
 
(3)    Future policy benefits
 
(4)    Policyholder account balances
 
(5)   Other liabilities
    Cash collateral received from counterparties was $658 million and $251 million as of December 31, 2011 and 2010, respectively. This unrestricted cash collateral is included in cash and cash equivalents and the obligation to return it is netted against the estimated fair value of derivatives in other investments or other liabilities. Cash collateral pledged to counterparties was $36 million and $145 million as of December 31, 2011 and 2010, respectively. A receivable representing the right to call this collateral back from the counterparty is netted against the estimated fair value of derivatives in other investments or other liabilities. If the net estimated fair value of the exposure to the counterparty is positive, the amount is reflected in other investments, whereas, if the net estimated fair value of the exposure to the counterparty is negative, the estimated fair value is included in other liabilities.
 
    As of December 31, 2011 and 2010, the Company had also accepted collateral consisting of various securities with an estimated fair value of $77 million and $36 million, respectively, which are held in separate custodial accounts. The Company is permitted by contract to sell or repledge this collateral and as of December 31, 2011 and 2010, none of the collateral had been repledged. As of December 31, 2011 and 2010, the Company provided collateral in the form of various securities with an estimated fair value of $1 million and $15 million, respectively, which are included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral.

PL-36

 

    CREDIT EXPOSURE AND CREDIT RISK RELATED CONTINGENT FEATURES
 
    Credit exposure is measured on a counterparty basis as the net positive aggregate estimated fair value, net of collateral received, if any. The credit exposure for over the counter derivatives as of December 31, 2011 was $137 million. The maximum exposure to any single counterparty was $21 million at December 31, 2011.
 
    For all derivative contracts, excluding embedded derivative contracts such as variable annuity GLBs and synthetic GICs, the Company enters into master agreements that may include a termination event clause associated with financial strength ratings assigned by certain independent rating agencies. If these financial strength ratings were to fall below a specified level, as defined within each counterparty master agreement or, in most cases, if one of the rating agencies ceased to provide a financial strength rating, the counterparty could terminate the master agreement with payment due based on the estimated fair value of the underlying derivatives. As of December 31, 2011, the Company’s financial strength ratings were above the specified level.
 
    The Company enters into collateral arrangements with derivative counterparties, which require both the pledge and acceptance of collateral when the net estimated fair value of the underlying derivatives reaches a pre-determined threshold. Certain of these arrangements include credit-contingent provisions that provide for a reduction of these thresholds in the event of downgrades in the credit ratings of the Company and/or the counterparty. If these financial strength ratings were to fall below a specific investment grade credit rating, the counterparties to the derivative instruments could request immediate and ongoing full collateralization on derivative instruments in net liability positions. The aggregate estimated fair value of all derivative instruments with credit risk related contingent features that are in a liability position on December 31, 2011, is $81 million for which the Company has posted collateral of $36 million in the normal course of business. If certain of the Company’s financial strength ratings were to fall one notch as of December 31, 2011, the Company would have been required to post an additional $15 million of collateral to its counterparties.
 
    The Company attempts to limit its credit exposure by dealing with creditworthy counterparties, establishing risk control limits, executing legally enforceable master netting agreements, and obtaining collateral where appropriate. In addition, each counterparty is reviewed to evaluate its financial stability before entering into each agreement and throughout the period that the financial instrument is owned. All of the Company’s credit exposure from derivative contracts is with investment grade counterparties.
 
11.   POLICYHOLDER LIABILITIES
 
    POLICYHOLDER ACCOUNT BALANCES
 
    The detail of the liability for policyholder account balances is as follows:
                 
    December 31,  
    2011     2010  
     
    (In Millions)  
UL
   $ 20,941     $ 20,098  
Annuity and deposit liabilities
     9,162       8,335  
Funding agreements
     3,178       4,618  
GICs
     1,111       2,025  
     
Total
   $ 34,392     $ 35,076  
     

PL-37

 

    FUTURE POLICY BENEFITS
 
    The detail of the liability for future policy benefits is as follows:
                 
    December 31,  
    2011     2010  
     
    (In Millions)  
Annuity reserves
   $ 5,572     $ 4,926  
Variable annuity GLB embedded derivatives
     1,936       542  
Policy benefits payable
     741       363  
Life insurance
     591       411  
Closed Block liabilities
     300       303  
URR
     289       510  
Other
     38       25  
     
Total
   $ 9,467     $ 7,080  
     
12.   SEPARATE ACCOUNTS AND VARIABLE ANNUITY GUARANTEED BENEFIT FEATURES
 
    The Company issues variable annuity contracts through separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder (traditional variable annuities). These contracts also include various types of GMDB and GLB features. For a discussion of certain GLBs accounted for as embedded derivatives, see Note 10.
 
    The GMDBs provide a specified minimum return upon death. Many of these death benefits are spousal, whereby a death benefit will be paid upon death of the first spouse. The survivor has the option to terminate the contract or continue it and have the death benefit paid into the contract and a second death benefit paid upon the survivor’s death. The GMDB features include those where the Company contractually guarantees to the contract holder either (a) return of no less than total deposits made to the contract less any partial withdrawals (return of net deposits), (b) the highest contract value on any contract anniversary date through age 80 minus any payments or withdrawals following the contract anniversary (anniversary contract value), or (c) the highest of contract value on certain specified dates or total deposits made to the contract less any partial withdrawals plus a minimum return (minimum return).
 
    The guaranteed minimum income benefit (GMIB) is a GLB that provides the contract holder with a guaranteed annuitization value after 10 years. Annuitization value is generally based on deposits adjusted for withdrawals plus a minimum return. In general, the GMIB requires contract holders to invest in an approved asset allocation strategy.
 
    In 2011, the Company began offering variable annuity contracts with guaranteed minimum withdrawal benefits for life (GMWBL) features. The GMWBL is a GLB that provides, subject to certain restrictions, a percentage of a contract holder’s guaranteed payment base will be available for withdrawal for life starting at age 59.5, regardless of market performance. The rider terminates upon death of the contract holder or their spouse if a spousal form of the rider is purchased. Outstanding GMWBL features were not significant at December 31, 2011.

PL-38

 

    Information in the event of death on the various GMDB features outstanding was as follows (the Company’s variable annuity contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed are not mutually exclusive):
                 
    December 31,  
    2011     2010  
     
    ($ In Millions)  
Return of net deposits
                
Separate account value
   $ 45,720     $ 49,673  
Net amount at risk (1)
    2,311       1,738  
Average attained age of contract holders
   63 years   61 years
 
                
Anniversary contract value
                
Separate account value
   $ 14,832     $ 16,814  
Net amount at risk (1)
    1,664       1,299  
Average attained age of contract holders
   64 years   62 years
 
                
Minimum return
                
Separate account value
   $ 1,040     $ 1,211  
Net amount at risk (1)
    555       505  
Average attained age of contract holders
   67 years   65 years
 
(1)   Represents the amount of death benefit in excess of the current account balance as of December 31.
    Information regarding GMIB features outstanding is as follows:
                 
    December 31,  
    2011     2010  
     
    ($ In Millions)  
Separate account value
   $ 2,345     $ 2,744  
Average attained age of contract holders
   59 years   57 years
    The determination of GMDB and GMIB liabilities is based on models that involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience. The following table summarizes the GMDB and GMIB liabilities, which are recorded in future policy benefits, and changes in these liabilities, which are reflected in policy benefits paid or provided:
                                 
    December 31,     December 31,  
    2011     2010     2011     2010  
         
    GMDB     GMIB  
         
    (In Millions)     (In Millions)  
Balance, beginning of year
                   $ 43     $ 38  
Changes in reserves
   $ 26     $ 42       39       14  
Benefits paid
     (26 )     (42 )     (4 )     (9 )
         
Balance, end of year
     —       —     $ 78     $ 43  
         

PL-39

 

    Variable annuity contracts with guarantees were invested in separate account investment options as follows:
                 
    December 31,  
    2011     2010  
     
    (In Millions)  
Asset type
                
Domestic equity
   $ 22,908     $ 26,290  
International equity
     6,272       6,447  
Bonds
     16,137       16,484  
Money market
     403       452  
     
Total separate account value
   $ 45,720     $ 49,673  
     
13.   DEBT
 
    Debt consists of the following:
                 
    December 31,  
    2011     2010  
     
    (In Millions)  
Long-term debt:
                
Surplus notes
   $ 1,600     $ 1,600  
Deferred gains from derivative hedging activities
     417          
Fair value adjustment for derivative hedging activities
             84  
Non-recourse long-term debt:
                
Debt recourse only to ACG
     3,332       2,499  
ACG non-recourse debt
     550       621  
Other non-recourse debt
     103       120  
ACG VIE debt (Note 4)
     1,130       1,587  
Other VIE debt (Note 4)
     20       5  
     
Total long-term debt
   $ 7,152     $ 6,516  
     
    SHORT-TERM DEBT
 
    Pacific Life maintains a $700 million commercial paper program. There was no commercial paper debt outstanding as of December 31, 2011 and 2010. Pacific Life replaced a bank revolving credit facility of $400 million in November 2011 that was scheduled to mature in 2012 and served as a back-up line of credit for the commercial paper program, with a new bank revolving credit facility of $400 million maturing in November 2016 that will serve as a back-up line of credit to the commercial paper program. These facilities had no debt outstanding as of December 31, 2011 and 2010. As of and during the year ended December 31, 2011, Pacific Life was in compliance with the debt covenants related to these facilities.
 
    PL&A maintains reverse repurchase lines of credit with various financial institutions. These borrowings are at variable rates of interest based on collateral and market conditions. There was no debt outstanding in connection with these lines of credit as of December 31, 2011 and 2010.
 
    Pacific Life has approval from the FHLB of Topeka to receive advances up to 40% of Pacific Life’s statutory general account assets provided it has available collateral and is in compliance with debt covenant restrictions and insurance laws and regulations. There was no debt outstanding with the FHLB of Topeka as of December 31, 2011 and 2010. The Company had no additional funding capacity from eligible collateral as of December 31, 2011 and 2010.

PL-40

 

    PL&A is eligible to borrow from the FHLB of San Francisco amounts based on a percentage of statutory capital and surplus and could borrow up to amounts of $121 million. Of this amount, half, or $60.5 million, can be borrowed for terms other than overnight, out to a maximum term of nine months. These borrowings are at variable rates of interest, collateralized by certain mortgage loan and government securities. As of December 31, 2011 and 2010, PL&A had no debt outstanding with the FHLB of San Francisco.
 
    ACG has a revolving credit agreement with a bank for a $200 million borrowing facility. Interest is at variable rates and the facility matures in October 2013. There was no debt outstanding in connection with this revolving credit agreement as of December 31, 2011 and 2010. This credit facility is recourse only to ACG.
 
    LONG-TERM DEBT
 
    In June 2009, Pacific Life issued $1.0 billion of surplus notes at a fixed interest rate of 9.25%, maturing on June 15, 2039. Interest is payable semiannually on June 15 and December 15. Pacific Life may redeem the 9.25% surplus notes at its option, subject to the approval of the Nebraska Director of Insurance for such optional redemption. The 9.25% surplus notes are unsecured and subordinated to all present and future senior indebtedness and policy claims of Pacific Life. All future payments of interest and principal on the 9.25% surplus notes can be made only with the prior approval of the Nebraska Director of Insurance. The Company entered into interest rate swaps converting the 9.25% surplus notes to variable rate notes based upon the London InterBank Offered Rate (LIBOR). The interest rate swaps were designated as fair value hedges of these surplus notes and the changes in fair value of the hedged surplus notes associated with changes in interest rates were reflected as an adjustment to their carrying amount. This fair value adjustment to the carrying amount of the 9.25% surplus notes, which increased long-term debt by $53 million as of December 31, 2010 was offset by an estimated fair value adjustment which was also recorded for the interest rate swap derivative instruments. During the year ended December 31, 2011, the interest rate swaps were terminated and the fair value adjustment as of the termination date which increased the carrying value by $364 million will be amortized over the remaining life of the surplus notes using the effective interest method. Total unamortized deferred gains are $362 million as of December 31, 2011.
 
    Pacific Life has $150 million of surplus notes outstanding at a fixed interest rate of 7.9%, maturing on December 30, 2023. Interest is payable semiannually on June 30 and December 30. The 7.9% surplus notes may not be redeemed at the option of Pacific Life or any holder of the surplus notes. The 7.9% surplus notes are unsecured and subordinated to all present and future senior indebtedness and policy claims of Pacific Life. All future payments of interest and principal on the 7.9% surplus notes can be made only with the prior approval of the Nebraska Director of Insurance. The Company entered into interest rate swaps converting these surplus notes to variable rate notes based upon the LIBOR. The interest rate swaps were designated as fair value hedges of these surplus notes and the changes in estimated fair value of the hedged surplus notes associated with changes in interest rates were reflected as an adjustment to their carrying amount. This fair value adjustment to the carrying amount of the 7.9% surplus notes, which increased long-term debt by $31 million as of December 31, 2010 was offset by an estimated fair value adjustment which was also recorded for the interest rate swap derivative instruments. During the year ended December 31, 2011, the interest rate swaps were terminated and the fair value adjustment as of the termination date which increased the carrying value by $56 million will be amortized over the remaining life of the surplus notes using the effective interest method. Total unamortized deferred gains are $55 million as of December 31, 2011.
 
    In March 2010, the Nebraska Director of Insurance approved the issuance of an internal surplus note by Pacific Life to Pacific LifeCorp for $450 million. Pacific Life is required to pay Pacific LifeCorp interest on the internal surplus note semiannually on February 5 and August 5 at a fixed annual rate of 6.0%. All future payments of interest and principal on the internal surplus note can be made only with the prior approval of the Nebraska Director of Insurance. The internal surplus note matures on February 5, 2020.
 
    ACG enters into various secured loans that are guaranteed by the U.S. Export-Import bank or by the European Export Credit Agencies. Interest on these loans is payable quarterly and ranged from 0.7% to 4.4% as of December 31, 2011 and from 0.4% to 4.5% as of December 31, 2010. As of December 31, 2011, $1,455 million was outstanding on these loans with maturities ranging from 2014 to 2023. Principal payments due over the next twelve months are $120 million. As of December 31, 2010, $1,524 million was outstanding on these loans. These loans are recourse only to ACG.
 
    ACG enters into various senior unsecured loans with third-parties. Interest on these loans is payable monthly, quarterly or semi-annually and ranged from 2.0% to 7.2% as of December 31, 2011 and from 5.7% to 7.2% as of December 31, 2010. As of December 31, 2011, $1,813 million was outstanding on these loans with maturities ranging from 2012 to 2021. Principal payments over the next twelve months are $120 million. As of December 31, 2010, $975 million was outstanding on these loans. These loans are recourse only to ACG.

PL-41

 

    ACG enters into various secured bank loans to finance aircraft orders and deposits. Interest on these loans is payable monthly and was 2.0% as of December 31, 2011. As of December 31, 2011, $64 million was outstanding on these loans with maturities ranging from 2012 to 2013. Principal payments due over the next twelve months are $47 million. As of December 31, 2010, there was no amount outstanding on these loans. These loans are recourse only to ACG.
 
    ACG enters into various acquisition facilities and bank loans to acquire aircraft. Interest on these facilities and loans accrues at variable rates, is payable monthly and ranged from 2.8% to 3.3% as of December 31, 2011 and from 1.6% to 3.3% as of December 31, 2010. As of December 31, 2011, $550 million was outstanding on these facilities and loans with maturities ranging from 2013 to 2014. As of December 31, 2010, $621 million was outstanding on these facilities and loans. These facilities and loans are non-recourse to the Company.
 
    Certain subsidiaries of Pacific Asset Holding LLC, a wholly owned subsidiary of Pacific Life, entered into various real estate property related loans with various third-parties. Interest on these loans accrues at fixed and variable rates and is payable monthly. Fixed rates ranged from 3.6% to 5.4% as of December 31, 2011 and ranged from 5.8% to 6.2% as of December 31, 2010. Variable rates ranged from 1.5% to 4.0% as of December 31, 2011 and 1.4% to 2.0% as of December 31, 2010. As of December 31, 2011, there was $103 million outstanding on these loans with maturities ranging from 2012 to 2017. Principal payments due over the next twelve months are $54 million. As of December 31, 2010, there was $120 million outstanding on these loans. During the year ended December 31, 2011, one of these loans totaling $32 million was returned in foreclosure. All of these loans are secured by real estate properties and are non-recourse to the Company.
 
14.   ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The Codification’s Fair Value Measurements and Disclosures Topic establishes a hierarchy that prioritizes the inputs of valuation methods used to measure estimated fair value for financial assets and financial liabilities that are carried at estimated fair value. The hierarchy consists of the following three levels that are prioritized based on observable and unobservable inputs.
  Level 1   Unadjusted quoted prices for identical instruments in active markets. Level 1 financial instruments would include securities that are traded in an active exchange market.
 
  Level 2   Observable inputs other than Level 1 prices, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in inactive markets; and model-derived valuations for which all significant inputs are observable market data. Level 2 instruments include most fixed maturity securities that are valued by models using inputs that are derived principally from or corroborated by observable market data.
 
  Level 3   Valuations derived from valuation techniques in which one or more significant inputs are unobservable. Level 3 instruments include less liquid securities for which significant inputs are not observable in the market, such as certain structured securities and variable annuity GLB embedded derivatives that require significant management assumptions or estimation in the fair value measurement.
    This hierarchy requires the use of observable market data when available.

PL-42

 

    The following tables present, by estimated fair value hierarchy level, the Company’s financial assets and liabilities that are carried at estimated fair value as of December 31, 2011 and 2010.
                                                 
                            Gross              
                            Derivatives              
                            Estimated     Netting        
    Level 1     Level 2     Level 3     Fair Value     Adjustments (1)     Total  
     
    (In Millions)  
December 31, 2011:
                                                
Assets:
                                                
U.S. Treasury securities
           $ 35                             $ 35  
Obligations of states and political subdivisions
             1,170     $ 9                       1,179  
Foreign governments
             422       81                       503  
Corporate securities
             19,875       1,617                       21,492  
RMBS
             3,137       1,036                       4,173  
CMBS
             520       251                       771  
Collateralized debt obligations
             4       111                       115  
Other asset-backed securities
             289       296                       585  
     
Total fixed maturity securities
     —       25,452       3,401                       28,853  
     
 
                                                
Perpetual preferred securities
             202       26                       228  
Other equity securities
   $ 73                                       73  
     
Total equity securities
     73       202       26                       301  
     
 
                                                
Trading securities
     89       91       35                       215  
Other investments
                     54                       54  
Derivatives:
                                                
Foreign currency and interest rate swaps
             340             $ 340     $ (250 )     90  
Forward starting interest rate swaps
             322               322       (29 )     293  
Equity derivatives
                     544       544       (65 )     479  
Embedded derivatives
                     230       230               230  
Other
             4       33       37       (31 )     6  
     
Total derivatives
     —       666       807       1,473       (375 )     1,098  
     
 
                                                
Separate account assets (2)
     51,184       128       113                       51,425  
     
Total
   $ 51,346     $ 26,539     $ 4,436     $ 1,473     $ (375 )   $ 81,946  
     
 
                                                
Liabilities:
                                                
Derivatives:
                                                
Foreign currency and interest rate swaps
           $ 457             $ 457     $ (250 )   $ 207  
Forward starting interest rate swaps
                                     (29 )     (29 )
Equity derivatives
                   $ 67       67       (65 )     2  
Embedded derivatives
                     2,005       2,005               2,005  
Other
             1       28       29       (31 )     (2 )
     
Total
     —     $ 458     $ 2,100     $ 2,558     $ (375 )   $ 2,183  
     

PL-43

 

                                                 
                            Gross              
                            Derivatives              
                            Estimated     Netting        
    Level 1     Level 2     Level 3     Fair Value     Adjustments (1)     Total  
     
    (In Millions)  
December 31, 2010:
                                                
Assets:
                                                
U.S. Treasury securities
           $ 920                             $ 920  
Obligations of states and political subdivisions
             886     $ 39                       925  
Foreign governments
             412       70                       482  
Corporate securities
             18,040       1,628                       19,668  
RMBS
             3,573       1,068                       4,641  
CMBS
             757       254                       1,011  
Collateralized debt obligations
             5       115                       120  
Other asset-backed securities
             266       280                       546  
     
Total fixed maturity securities
     —       24,859       3,454                       28,313  
     
 
                                                
Perpetual preferred securities
             263       12                       275  
Other equity securities
   $ 3               1                       4  
     
Total equity securities
     3       263       13                       279  
     
 
                                                
Trading securities
     91       192       66                       349  
Other investments
                     173                       173  
Derivatives:
                                                
Foreign currency and interest rate swaps
             371       4     $ 375     $ (331 )     44  
Forward starting interest rate swaps
             71               71       (21 )     50  
Equity derivatives
                     287       287       (89 )     198  
Embedded derivatives
                     25       25               25  
Other
             4       40       44       (38 )     6  
     
Total derivatives
     —       446       356       802       (479 )     323  
     
 
                                                
Separate account assets (2)
     55,438       123       100                       55,661  
     
Total
   $ 55,532     $ 25,883     $ 4,162     $ 802     $ (479 )   $ 85,098  
     
 
                                                
Liabilities:
                                                
Derivatives:
                                                
Foreign currency and interest rate swaps
           $ 638             $ 638     $ (331 )   $ 307  
Forward starting interest rate swaps
             1               1       (21 )     (20 )
Equity derivatives
                   $ 102       102       (89 )     13  
Embedded derivatives
                     618       618               618  
Other
                     23       23       (38 )     (15 )
     
Total
     —     $ 639     $ 743     $ 1,382     $ (479 )   $ 903  
     
 
(1)   Netting adjustments represent the impact of offsetting asset and liability positions on the consolidated statement of financial condition held with the same counterparty as permitted by guidance for offsetting in the Codification’s Derivatives and Hedging Topic.
 
(2)   Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is offset by corresponding amounts credited to contract holders whose liability is reflected in the separate account liabilities. Separate account liabilities are measured to equal the estimated fair value of separate account assets as prescribed by guidance

PL-44

 

    in the Codification’s Financial Services — Insurance Topic for accounting and reporting of certain non traditional long-duration contracts and separate accounts. Separate account assets as presented in the tables above differ from the amounts presented in the consolidated statements of financial condition because cash and receivables for securities, and investment income due and accrued are not subject to the guidance under the Codification’s Fair Value Measurements and Disclosures Topic.
    ESTIMATED FAIR VALUE MEASUREMENT
 
    The Codification’s Fair Value Measurements and Disclosures Topic defines estimated fair value as the price that would be received to sell the asset or paid to transfer the liability at the measurement date. This “exit price” notion is a market-based measurement that requires a focus on the value that market participants would assign for an asset or liability.
 
    The following section describes the valuation methodologies used by the Company to measure various types of financial instruments at estimated fair value.
 
    FIXED MATURITY, EQUITY AND TRADING SECURITIES
 
    The estimated fair values of fixed maturity securities available for sale, equity securities available for sale and trading securities are determined by management after considering external pricing sources and internal valuation techniques.
 
    For securities with sufficient trading volume, prices are obtained from third-party pricing services. For structured or complex securities that are traded infrequently, estimated fair values are determined after evaluating prices obtained from third-party pricing services and independent brokers or are valued internally using various valuation techniques. Such techniques include matrix model pricing and internally developed models, which incorporate observable market data, where available. Matrix model pricing measures estimated fair value using cash flows, which are discounted using observable market yield curves provided by a major independent data service. The matrix model determines the discount yield based upon significant factors that include the security’s weighted average life and rating.
 
    Where matrix model pricing is not used, particularly for RMBS and other asset-backed securities, estimated fair values are determined by evaluating prices from third-party pricing services and independent brokers or other internally derived valuation models are utilized. The inputs used to measure estimated fair value in the internal valuations include, but are not limited to, benchmark yields, issuer spreads, bids, offers, reported trades, and estimated projected cash flows that incorporate significant inputs such as defaults and delinquency rates, severity, subordination, vintage and prepayment speeds.
 
    Prices obtained from independent third-parties are generally evaluated based on the inputs indicated above. The Company’s management analyzes and evaluates these prices and determines whether they are reasonable estimates of fair value. Management’s analysis may include, but is not limited to, review of third-party pricing methodologies and inputs, analysis of recent trades, and development of internal models utilizing observable market data of comparable securities. Based on this analysis, prices received from third-parties may be adjusted if the Company determines that there is a more appropriate estimated fair value based on available market information.
 
    Most securities priced by a major independent third-party service have been classified as Level 2, as management has verified that the inputs used in determining their estimated fair values are market observable and appropriate. Other externally priced securities for which estimated fair value measurement inputs are not sufficiently transparent, such as securities valued based on broker quotations, have been classified as Level 3. Internally valued securities, including adjusted prices received from independent third-parties, where significant management assumptions have been utilized in determining estimated fair value, have been classified as Level 3.
 
    OTHER INVESTMENTS
 
    Other investments include non-marketable equity securities that do not have readily determinable estimated fair values. Certain significant inputs used in determining the estimated fair value of these equities are based on management assumptions or contractual terms with another party that cannot be readily observable in the market. These investments are classified as Level 3 assets.
 
    DERIVATIVE INSTRUMENTS
 
    Derivative instruments are reported at estimated fair value using pricing valuation models, which utilize market data inputs or independent broker quotations. Excluding embedded derivatives, as of December 31, 2011, 99% of derivatives based upon

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    notional values were priced by valuation models. The remaining derivatives were priced by broker quotations. The derivatives are valued using mid-market inputs that are predominantly observable in the market. Inputs used to value derivatives include, but are not limited to, interest swap rates, foreign currency forward and spot rates, credit spreads and correlations, interest volatility, equity volatility and equity index levels. In accordance with the Codification’s Fair Value Measurements and Disclosures Topic, a credit valuation analysis was performed for all derivative positions to measure the risk that the counterparties to the transaction will be unable to perform under the contractual terms (nonperformance risk) and was determined to be immaterial as of December 31, 2011.
 
    The Company performs a monthly analysis on derivative valuations, which includes both quantitative and qualitative analysis. Examples of procedures performed include, but are not limited to, review of pricing statistics and trends, analyzing the impacts of changes in the market environment, and review of changes in market value for each derivative including those derivatives priced by brokers.
 
    Derivative instruments classified as Level 2 primarily include interest rate, currency and certain credit default swaps. The derivative valuations are determined using pricing models with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.
 
    Derivative instruments classified as Level 3 include complex derivatives, such as equity options and swaps and certain credit default swaps. Also included in Level 3 classification are embedded derivatives in certain insurance and reinsurance contracts. These derivatives are valued using pricing models, which utilize both observable and unobservable inputs and, to a lesser extent, broker quotations. A derivative instrument containing Level 1 or Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.
 
    The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instrument may not be classified within the same estimated fair value hierarchy level as the associated assets and liabilities. Therefore, the realized and unrealized gains and losses on derivatives reported in Level 3 may not reflect the offsetting impact of the realized and unrealized gains and losses of the associated assets and liabilities.
 
    VARIABLE ANNUITY GLB EMBEDDED DERIVATIVES
 
    Estimated fair values for variable annuity GLB and related reinsurance embedded derivatives are calculated based upon significant unobservable inputs using internally developed models because active, observable markets do not exist for those items. As a result, variable annuity GLB and related reinsurance embedded derivatives are categorized as Level 3. Below is a description of the Company’s estimated fair value methodologies for these embedded derivatives.
 
    Estimated fair value is calculated as an aggregation of estimated fair value and additional risk margins including Behavior Risk Margin, Mortality Risk Margin and Credit Standing Adjustment. The resulting aggregation is reconciled or calibrated, if necessary, to market information that is, or may be, available to the Company, but may not be observable by other market participants, including reinsurance discussions and transactions. Each of the components described below are unobservable in the market place and requires subjectivity by the Company in determining their value.
  •   Behavior Risk Margin: This component adds a margin that market participants would require for the risk that the Company’s assumptions about policyholder behavior used in the estimated fair value model could differ from actual experience.
 
  •   Mortality Risk Margin: This component adds a margin in mortality assumptions, both for decrements for policyholders with GLBs, and for expected payout lifetimes in guaranteed minimum withdrawal benefits.
 
  •   Credit Standing Adjustment: This component makes an adjustment that market participants would make to reflect the chance that GLB obligations or the GLB reinsurance recoverables will not be fulfilled (nonperformance risk).
    SEPARATE ACCOUNT ASSETS
 
    Separate account assets are primarily invested in mutual funds, but also have investments in fixed maturity and short-term securities. Separate account assets are valued in the same manner, and using the same pricing sources and inputs, as the fixed maturity and equity securities available for sale of the Company. Mutual funds are included in Level 1. Most fixed maturity securities are included in Level 2. Level 3 assets include any investments where estimated fair value is based on management

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    assumptions or obtained from independent third-parties and estimated fair value measurement inputs are not sufficiently transparent.
 
    LEVEL 3 RECONCILIATION
 
    The tables below present reconciliations of the beginning and ending balances of the Level 3 financial assets and liabilities, net, that have been measured at estimated fair value on a recurring basis using significant unobservable inputs.
                                                                 
                            Transfers                                
            Total Gains or Losses     In and/or                                
    January 1,     Included in     Included in     Out of                             December 31,  
    2011     Earnings     OCI     Level 3 (1)     Purchases     Sales     Settlements     2011  
    (In Millions)  
Obligations of states and political subdivisions
   $ 39             $ 3     $ (33 )                           $ 9  
Foreign governments
     70                       14                     $ (3 )     81  
Corporate securities
     1,628     $ (6 )     14       (2 )   $ 366     $ (164 )     (219 )     1,617  
RMBS
     1,068       (66 )     55       141       17       (12 )     (167 )     1,036  
CMBS
     254               3               47               (53 )     251  
Collateralized debt obligations
     115       3       (2 )                             (5 )     111  
Other asset-backed securities
     280       2       7       2       31               (26 )     296  
 
                                                
Total fixed maturity securities (2)
     3,454       (67 )     80       122       461       (176 )     (473 )     3,401  
 
                                                
 
                                                                
Perpetual preferred securities
     12                       14                               26  
Other equity securities
     1                       (1 )                             —  
 
                                                
Total equity securities (2)
     13       —       —       13       —       —       —       26  
 
                                                
 
                                                                
Trading securities (2)
     66                       (2 )     20       (4 )     (45 )     35  
Other investments (2)
     173       34       (12 )             2       (143 )             54  
Derivatives, net:
                                                                
Foreign currency and interest rate swaps
     4                       (4 )                             —  
Equity derivatives
     185       91                       81               120       477  
Embedded derivatives
     (593 )     (1,167 )                     (52 )             37       (1,775 )
Other
     17       26               (1 )                     (37 )     5  
 
                                                
Total derivatives
     (387 )     (1,050 )     —       (5 )     29       —       120       (1,293 )
 
                                                
 
                                                                
Separate account assets (3)
     100       2               1       11               (1 )     113  
 
                                                
Total
   $ 3,419     $ (1,081 )   $ 68     $ 129     $ 523     $ (323 )   $ (399 )   $ 2,336  
 
                                                

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                                    Purchases,        
                            Transfers     Sales,        
            Total Gains or Losses     In and/or     Issuances,        
    January 1,     Included in     Included in     Out of     and     December 31,  
    2010     Earnings     OCI     Level 3 (1)     Settlements     2010  
    (In Millions)  
U.S. Treasury securities
   $ 6                             $ (6 )        
Obligations of states and political subdivisions
     34     $ 4     $ (7 )   $ (4 )     12     $ 39  
Foreign governments
     108               7       (43 )     (2 )     70  
Corporate securities
     2,287       38       25       (547 )     (175 )     1,628  
RMBS
     3,650       (44 )     500       (2,407 )     (631 )     1,068  
CMBS
     327               20       (59 )     (34 )     254  
Collateralized debt obligations
     104       5       7       2       (3 )     115  
Other asset-backed securities
     235               7       65       (27 )     280  
                         
Total fixed maturity securities (2)
     6,751       3       559       (2,993 )     (866 )     3,454  
                         
 
                                                
Perpetual preferred securities
     70               3       (42 )     (19 )     12  
Other equity securities
                     1                       1  
                         
Total equity securities (2)
     70       —       4       (42 )     (19 )     13  
                         
 
                                                
Trading securities (2)
     29       2               27       8       66  
Other investments (2)
     163               6               4       173  
Derivatives, net:
                                                
Foreign currency and interest rate swaps
     3               1                       4  
Equity derivatives
     282       (173 )                     76       185  
Embedded derivatives
     (746 )     162                       (9 )     (593 )
Other
     14       22                       (19 )     17  
                         
Total derivatives
     (447 )     11       1       —       48       (387 )
                         
 
                                                
Separate account assets (3)
     101       6                       (7 )     100  
                         
Total
   $ 6,667     $ 22     $ 570     $ (3,008 )   $ (832 )   $ 3,419  
                         
 
(1)   Transfers in and/or out are recognized at the end of each quarterly reporting period.
 
(2)   Amounts included in earnings are recognized either in net investment income or net realized investment gain (loss).
 
(3)   The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company.
    During the year ended December 31, 2011, the Company transferred $884 million of fixed maturity securities out of Level 2 and into Level 3, and transferred $762 million of fixed maturity securities out of Level 3 and into Level 2. The net transfers into Level 3 were primarily attributable to the decreased availability and use of market observable inputs to estimate fair value. During the year ended December 31, 2011, the Company did not have any significant transfers between Level 1 and Level 2.
 
    During the year ended December 31, 2010, the Company transferred $923 million of fixed maturity securities out of Level 2 and into Level 3, and transferred $3,916 million of fixed maturity securities out of Level 3 and into Level 2. The net transfers into Level 2 were primarily attributable to the increased use of market observable inputs to estimate fair value for non-agency RMBS. During the first three quarters of 2010, the Company utilized an internally developed weighting of valuations for non-agency RMBS which were reported as Level 3 securities. In the fourth quarter of 2010, the Company determined that there had been an increase in the volume and level of trading activity for these securities and utilized prices obtained from third-party pricing services. As a result, these securities were transferred out of Level 3 and classified as Level 2 securities. During the year ended December 31, 2010, the Company did not have any significant transfers between Level 1 and 2.

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    The table below represents the net amount of total gains or losses for the period, attributable to the change in unrealized gains (losses) relating to assets and liabilities classified as Level 3 that were still held at the end of the reporting period.
                 
    December 31,  
    2011     2010  
     
    (In Millions)  
Corporate securities (1)
           $ (2 )
Derivatives, net: (1)
                
Equity derivatives
   $ 206       249  
Embedded derivatives
     (1,165 )     164  
Other
     9       13  
     
Total derivatives
     (950 )     426  
     
 
                
Separate account assets (2)
     2       7  
     
Total
   $ (948 )   $ 431  
     
 
(1)   Amounts are recognized in net realized investment gain (loss).
 
(2)   The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company.
    NONRECURRING FAIR VALUE MEASUREMENTS
 
    Certain assets are measured at estimated fair value on a nonrecurring basis and are not included in the tables presented above. The amounts below relate to certain investments measured at estimated fair value during the year and still held at the reporting date.
                                                 
    Year Ended December 31, 2011     Year Ended December 31, 2010  
    Carrying Value     Estimated Fair     Net     Carrying Value     Estimated Fair     Net  
    Prior to     Value After     Investment     Prior to     Value After     Investment  
    Measurement     Measurement     Loss     Measurement     Measurement     Loss  
    (In Millions)  
Mortgage loans
   $ 8     $ 3     $ (5 )                        
Real estate investments
     8       7       (1 )   $ 69     $ 42     $ (27 )
Aircraft
     51       36       (15 )     24       20       (4 )
    MORTGAGE LOANS
 
    During the year ended December 31, 2011, the Company recognized an impairment of $5 million, which is included in OTTIs and is related to two commercial mortgage loans, which are currently in the process of foreclosure. The estimated fair value after measurement is based on the underlying real estate collateral of the two loans. These write-downs to estimated fair value represent nonrecurring fair value measurements that have been classified as Level 3 due to the limited activity and lack of price transparency inherent in the market for such investments.
 
    REAL ESTATE INVESTMENTS
 
    During the years ended December 31, 2011 and 2010, the Company recognized impairments of $1 million and $27 million, respectively, which are included in OTTIs. The impaired investments presented above were accounted for using the cost basis. Real estate investments are evaluated for impairment based on the undiscounted cash flows expected to be received during the estimated holding period. When the undiscounted cash flows are less than the current carrying value of the property (gross cost less accumulated depreciation), the property may be considered impaired and written-down to its estimated fair value. Estimated fair value is determined using a combination of the present value of the expected future cash flows and comparable sales. These

PL-49

 

    write-downs to estimated fair value represent nonrecurring fair value measurements that have been classified as Level 3 due to the limited activity and lack of price transparency inherent in the market for such investments.
 
    AIRCRAFT
 
    During the years ended December 31, 2011 and 2010, the Company recognized impairments of $15 million and $4 million, respectively, which are included in operating and other expenses, as a result of declines in the estimated future cash flows to be received from five and two aircraft, respectively. The Company evaluates carrying values of aircraft based upon changes in market and other physical and economic conditions and records write-offs to recognize losses in the value of aircraft when management believes that, based on future estimated cash flows, the recoverability of the Company’s investment in an aircraft has been impaired. The estimated fair value is based on the present value of the future cash flows, which include contractual lease agreements, projected future lease payments as well as a disposition value. Projected future lease payments are based upon current contracted lease rates for similar aircraft and industry trends. The disposition value reflects an aircraft’s estimated residual value or estimated sales price. The cash flows were based on unobservable inputs and have been classified as Level 3.
 
    The Company did not have any other nonfinancial assets or liabilities measured at fair value on a nonrecurring basis resulting from impairments as of December 31, 2011 and 2010. The Company has not made any changes in the valuation methodologies for nonfinancial assets and liabilities.
 
    The carrying amount and estimated fair value of the Company’s financial instruments that are not carried at fair value under the Codification’s Financial Instruments Topic are as follows:
                                 
    December 31, 2011     December 31, 2010  
    Carrying     Estimated     Carrying     Estimated  
    Amount     Fair Value     Amount     Fair Value  
    (In Millions)  
Assets:
                                
Mortgage loans
   $ 7,596     $ 7,818     $ 6,693     $ 6,906  
Policy loans
     6,812       6,812       6,690       6,690  
Other invested assets
     193       218       183       190  
Cash and cash equivalents
     2,829       2,829       2,270       2,270  
Restricted cash
     280       280       214       214  
Liabilities:
                                
Funding agreements and GICs (1)
     4,284       4,632       6,635       7,127  
Annuity and deposit liabilities
     9,162       9,162       8,335       8,335  
Long-term debt
     7,152       7,072       6,516       6,775  
 
(1)   Balance excludes embedded derivatives that are included in the fair value hierarchy level tables above.
    The following methods and assumptions were used to estimate the fair value of these financial instruments as of December 31, 2011 and 2010:
 
    MORTGAGE LOANS
 
    The estimated fair value of the mortgage loan portfolio is determined by discounting the estimated future cash flows, using current rates that are applicable to similar credit quality, property type and average maturity of the composite portfolio.
 
    POLICY LOANS
 
    Policy loans are not separable from their associated insurance contract and bear no credit risk since they do not exceed the contract’s cash surrender value, making these assets fully secured by the cash surrender value of the contracts. Therefore, the carrying amount of the policy loans is a reasonable approximation of their fair value.

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    OTHER INVESTED ASSETS
 
    Included in other invested assets are private equity investments in which the estimated fair value is based on the ownership percentage of the underlying equity of the investments.
 
    CASH AND CASH EQUIVALENTS
 
    The carrying values approximate fair values due to the short-term maturities of these instruments.
 
    RESTRICTED CASH
 
    The carrying values approximate fair values due to the short-term maturities of these instruments.
 
    FUNDING AGREEMENTS AND GICs
 
    The estimated fair value of funding agreements and GICs is estimated using the rates currently offered for deposits of similar remaining maturities.
 
    ANNUITY AND DEPOSIT LIABILITIES
 
    Annuity and deposit liabilities primarily includes policyholder deposits and accumulated credited interest. The estimated fair value of annuity and deposit liabilities approximates carrying value based on an analysis of discounted future cash flows with maturities similar to the product portfolio liabilities.
 
    LONG-TERM DEBT
 
    The estimated fair value of long-term debt is based on market quotes, except for VIE debt and non-recourse debt, for which the carrying amounts are reasonable estimates of their fair values because the interest rate approximates current market rates.

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15.   OTHER COMPREHENSIVE INCOME
 
    The Company displays comprehensive income and its components on the consolidated statements of equity. The disclosure of the gross components of other comprehensive income and related taxes are as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
     
    (In Millions)  
Unrealized gain (loss) on derivatives and securities available for sale, net:
                        
Gross holding gain (loss):
                        
Securities available for sale
   $ 1,054     $ 1,272     $ 2,594  
Derivatives
     (9 )     15       (146 )
Income tax expense
     (365 )     (438 )     (861 )
Reclassification adjustment:
                        
Sale of securities available for sale — net realized investment gain
     (106 )     (139 )     (13 )
OTTI recognized on securities available for sale
     137       75       271  
Derivatives — net investment income
     22               (1 )
Derivatives — net realized investment gain
     (18 )                
Derivatives — interest credited
     48       24       26  
Income tax benefit
     (29 )     (1 )     (98 )
Allocation of holding gain to DAC
     (94 )     (255 )     (415 )
Allocation of holding gain (loss) to future policy benefits
     (54 )     41       85  
Income tax expense
     52       75       113  
Cumulative effect of adoption of new accounting pronouncement
                     (263 )
Income tax expense
                     93  
     
Unrealized gain on derivatives and securities available for sale, net
     638       669       1,385  
     
 
                        
Other, net:
                        
Holding gain (loss) on other securities
     (12 )     9       22  
Income tax (expense) benefit
     4       (4 )     (8 )
     
Net unrealized gain (loss) on other securities
     (8 )     5       14  
Other, net of tax
     (4 )     (3 )     33  
     
Other, net
     (12 )     2       47  
     
Total other comprehensive income, net
   $ 626     $ 671     $ 1,432  
     
16.   REINSURANCE
 
    Reinsurance receivables and payables generally include amounts related to claims, reserves and reserve related items. Reinsurance receivables, included in other assets, were $507 million and $326 million as of December 31, 2011 and 2010, respectively. Reinsurance payables, included in other liabilities, were $146 million and $47 million as of December 31, 2011 and 2010, respectively.

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    The components of insurance premiums presented in the consolidated statements of operations are as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
     
    (In Millions)  
Direct premiums
   $ 1,051     $ 626     $ 666  
Reinsurance assumed (1)
     256       122       60  
Reinsurance ceded (2)
     (325 )     (339 )     (323 )
     
Insurance premiums
   $ 982     $ 409     $ 403  
     
 
(1)   Included are $18 million, $11 million and $4 million of assumed premiums from Pacific Life Re Limited (PLR), an affiliate of the Company and a wholly owned subsidiary of Pacific LifeCorp, for the years ended December 31, 2011, 2010 and 2009, respectively. PLR is incorporated in the United Kingdom (UK) and provides reinsurance to insurance and annuity providers in the UK, Ireland and to insurers in selected markets in Asia. Also included for the year ended December 31, 2010 is $59 million of assumed premiums from PAR Bermuda.
 
(2)   Included are $21 million of reinsurance ceded to PAR Bermuda for the years ended December 31, 2010 and 2009.
17.   EMPLOYEE BENEFIT PLANS
 
    PENSION PLANS
 
    Prior to December 31, 2007, Pacific Life provided a defined benefit pension plan (ERP) covering all eligible employees of the Company. The Company amended the ERP to terminate effective December 31, 2007. In September 2009, the Company received regulatory approval to commence the final termination of the ERP and payment of plan benefits to the participants. The Company completed the final distribution of plan assets to participants in December 2009. The Company recognized settlement costs of $72 million during the year ended December 31, 2009.
 
    Pacific Life maintains supplemental employee retirement plans (SERPs) for certain eligible employees. As of December 31, 2011 and 2010, the projected benefit obligation was $46 million and $44 million, respectively. The fair value of plan assets as of December 31, 2011 and 2010 was zero. The net periodic benefit expense of the SERPs was $5 million, $5 million and $4 million for the years ended December 31, 2011, 2010 and 2009, respectively.
 
    The Company incurred a net pension expense of $5 million, $5 million and $79 million for the years ended December 31, 2011, 2010 and 2009, respectively, as detailed in the following table:
                                                 
    Years Ended December 31,  
    2011     2010     2009  
    ERP     SERP     ERP     SERP     ERP     SERP  
    (In Millions)     (In Millions)     (In Millions)  
Components of the net periodic pension expense:
                                                
Service cost — benefits earned during the year
           $ 2             $ 2             $ 2  
Interest cost on projected benefit obligation
             2               2     $ 12       2  
Expected return on plan assets
                                     (12 )        
Settlement costs
                                     72          
Amortization of net loss, net obligations and prior service cost
             1               1       3          
             
Net periodic pension expense
     —     $ 5       —     $ 5     $ 75     $ 4  
             

PL-53

 

    Significant plan assumptions:
                 
    December 31,  
    2011     2010  
     
Weighted-average assumptions used to determine benefit obligations for the SERP:
                
Discount rate
     4.00 %     4.75 %
Salary rate
     4.50 %     4.50 %
                         
    Years Ended December 31,  
    2011     2010     2009  
     
Weighed-average assumptions used to determine the ERP’s net periodic pension expense:
                        
Discount rate
     N/A       N/A       6.30 %
Expected long-term return on plan assets
     N/A       N/A       N/A  
    The salary rate used to determine the net periodic pension expense for the SERP was 4.50% for the years ended December 31, 2011, 2010 and 2009.
 
    Pacific Life’s expected SERP contribution payments are as follows for the years ending December 31 (In Millions):
                                         
2012   2013   2014   2015   2016   2017-2021
$5
  $ 4     $ 4     $ 4     $ 3     $ 14  
    RETIREMENT INCENTIVE SAVINGS PLAN
 
    Pacific Life provides a Retirement Incentive Savings Plan (RISP) covering all eligible employees of Pacific LifeCorp and certain of its subsidiaries. The RISP matches 75% of each employee’s contributions, up to a maximum of 6% of eligible employee compensation in cash. Contributions made by the Company to the RISP, including the matching contribution, amounted to $28 million, $27 million and $26 million for the years ended December 31, 2011, 2010 and 2009, respectively, and are included in operating expenses.
 
    POSTRETIREMENT BENEFITS
 
    Pacific Life provides a defined benefit health care plan and a defined benefit life insurance plan (the Plans) that provide postretirement benefits for all eligible retirees and their dependents. Generally, qualified employees may become eligible for these benefits if they have reached normal retirement age, have been covered under Pacific Life’s policy as an active employee for a minimum continuous period prior to the date retired, and have an employment date before January 1, 1990. The Plans contain cost-sharing features such as deductibles and coinsurance, and require retirees to make contributions, which can be adjusted annually. Pacific Life’s commitment to qualified employees who retire after April 1, 1994 is limited to specific dollar amounts. Pacific Life reserves the right to modify or terminate the Plans at any time. As in the past, the general policy is to fund these benefits on a pay-as-you-go basis.
 
    The net periodic postretirement benefit cost for each of the years ended December 31, 2011, 2010 and 2009 was $1 million. As of December 31, 2011 and 2010, the accumulated benefit obligation was $23 million and $19 million, respectively. The fair value of the plan assets as of December 31, 2011 and 2010 was zero.
 
    The discount rate used in determining the accumulated postretirement benefit obligation was 4.25% and 4.85% for 2011 and 2010, respectively.

PL-54

 

    Benefit payments for the year ended December 31, 2011 amounted to $2 million. The expected benefit payments are as follows for the years ending December 31 (In Millions):
                     
2012   2013   2014   2015   2016   2017-2021
$2
   $2   $2   $2   $2   $9
    OTHER PLANS
 
    The Company has deferred compensation plans that permit eligible employees to defer portions of their compensation and earn interest on the deferred amounts. The interest rate is determined quarterly. The compensation that has been deferred has been accrued and the primary expense related to this plan, other than compensation, is interest on the deferred amounts. The Company also has performance-based incentive compensation plans for its employees.
 
18.   INCOME TAXES
 
    The provision for income taxes is as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
     
    (In Millions)  
Current
   $ 5     $ 7     $ (407 )
Deferred
     141       56       451  
     
Provision for income taxes from continuing operations
     146       63       44  
Benefit from income taxes from discontinued operations
     (4 )             (11 )
     
Total
   $ 142     $ 63     $ 33  
     
    A reconciliation of the provision for income taxes from continuing operations based on the Federal corporate statutory tax rate of 35% to the provision for income taxes from continuing operations reflected in the consolidated financial statements is as follows:
                         
    Years Ended December 31,  
    2011     2010     2009  
     
    (In Millions)  
Provision for income taxes at the statutory rate
   $ 318     $ 205     $ 170  
Separate account dividends received deduction
     (95 )     (106 )     (93 )
Singapore Transfer
     (32 )     (17 )        
LIHTC and foreign tax credits
     (17 )     (18 )     (19 )
Internal Revenue Service settlement
     (7 )                
Other
     (21 )     (1 )     (14 )
     
Provision for income taxes from continuing operations
   $ 146     $ 63     $ 44  
     
    During 2010 and 2011, ACG transferred aircraft assets and related liabilities to foreign subsidiaries and affiliates in Singapore (collectively referred to as the Singapore Transfer). The Singapore Transfer reduced the provision for income taxes for the year ended December 31, 2011 and 2010 by $32 million and $17 million, respectively, primarily due to the reversal of deferred taxes related to bases differences in the interest transferred. U.S. income taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary.
 
    It is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations. In addition to those basis differences transferred during 2011 and 2010, as of December 31, 2011, the Company has not made a provision for U.S. or additional foreign withholding taxes on approximately $6.5 million of foreign subsidiary undistributed earnings that are essentially permanent in duration. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and

PL-55

 

    under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.
 
    A reconciliation of the changes in the unrecognized tax benefits is as follows (In Millions):
         
Balance at January 1, 2009
   $ 434  
Additions and deletions
     (420 )
 
      
Balance at December 31, 2009
     14  
 
      
Additions and deletions
        
Balance at December 31, 2010
     14  
Additions and deletions
     (14 )
 
      
Balance at December 31, 2011
   $ 0  
 
      
    During the year ended December 31, 2009, the Company’s contingency related to the accounting for uncertainty in income taxes decreased by $420 million. The Company resolved an uncertain tax accounting position on certain tax deductions resulting in a $402 million decrease. The Company also effectively settled $18 million of the gross uncertain tax position related to separate account Dividends Received Deductions (DRD), which resulted in the realization of $9 million of tax benefits.
 
    During the year ended December 31, 2011, the Company effectively settled $14 million of the gross uncertain tax position related to separate account DRD, which resulted in the realization of $7 million of tax benefits. All realized tax benefits and related interest are recognized as a discrete item that will impact the effective tax rate in the accounting period in which the uncertain tax position is ultimately settled.
 
    No unrecognized tax benefits will be realized over the next twelve months.
 
    During the years ended December 31, 2011, 2010 and 2009, the Company paid an insignificant amount of interest and penalties to state tax authorities.

PL-56

 

    The net deferred tax liability, included in other liabilities, is comprised of the following tax effected temporary differences:
                 
    December 31,  
    2011     2010  
     
    (In Millions)  
     
Deferred tax assets:
                
Investment valuation
   $ 590     $ 247  
Tax net operating loss carryforwards
     510       220  
Policyholder reserves
     349       672  
Tax credit carryforwards
     313       312  
Deferred compensation
     57       54  
Aircraft maintenance reserves
     13       24  
Dividends to policyholders
     8       8  
Other
     16       24  
     
Total deferred tax assets
     1,856       1,561  
     
 
                
Deferred tax liabilities:
                
DAC
     (1,546 )     (1,257 )
Depreciation
     (671 )     (625 )
Hedging
     (116 )     (81 )
Partnership income
     (63 )     (59 )
Reinsurance
     (20 )     (27 )
Other
     (117 )     (48 )
     
Total deferred tax liabilities
     (2,533 )     (2,097 )
     
 
                
Net deferred tax liability from continuing operations
     (677 )     (536 )
Unrealized gain on derivatives and securities available for sale
     (485 )     (143 )
Minimum pension liability and other adjustments
     (8 )     (12 )
     
Net deferred tax liability
     ($1,170 )     ($691 )
     
    The tax net operating loss carryforwards relate to Federal tax losses incurred in 1998 through 2011 with a 20-year carryforward for non-life losses and a 15-year carryforward for life losses, and California tax losses incurred in 2004 through 2011 with a ten-year carryforward.
 
    The tax credit carryforwards relate to LIHTC, foreign tax credits, and alternative minimum tax (AMT) credits generated from 2000 to 2011. The LIHTC begin to expire in 2020. The foreign tax credits begin to expire in 2016. Foreign tax credits and tax net operating loss carryforwards of $153 million expire between 2016 and 2021. AMT credits and tax net operating loss carryforwards of $29 million possess no expiration date. The remainder will expire between 2022 and 2031.
 
    The Codification’s Income Taxes Topic requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that a portion or all of the deferred tax assets will not be realized. Based on management’s assessment, it is more likely than not that the Company’s deferred tax assets will be realized through future taxable income, including the reversal of deferred tax liabilities.
 
    The Company files income tax returns in U.S. Federal and various state jurisdictions. The Company is under continuous audit by the Internal Revenue Service (IRS) and is audited periodically by some state taxing authorities. The IRS has completed audits of the Company’s tax returns through the tax year ended December 31, 2008. The State of California concluded audits for tax years 2003 and 2004 without material assessment. The Company does not expect the current Federal audits to result in any material assessments.

PL-57

 

  19.   SEGMENT INFORMATION
      The Company has four operating segments: Life Insurance, Retirement Solutions, Aircraft Leasing and Reinsurance, a new segment formed as a result of the acquisition of the retrocession business disclosed in Note 5. These segments are managed separately and have been identified based on differences in products and services offered. All other activity is included in the Corporate and Other segment.
      The Life Insurance segment provides a broad range of life insurance products through multiple distribution channels operating in the upper income and corporate markets. Principal products include UL, VUL, survivor life, interest sensitive whole life, corporate-owned life insurance and traditional products such as whole life and term life. Distribution channels include regional life offices, marketing organizations, broker-dealer firms, wirehouses and M Financial, an association of independently owned and operated insurance and financial producers.
      The Retirement Solutions segment’s principal products include variable and fixed annuity products, mutual funds, and structured settlement and group retirement annuities, which are offered through multiple distribution channels. Distribution channels include independent planners, financial institutions and national/regional wirehouses.
      The Aircraft Leasing segment offers aircraft leasing to the airline industry throughout the world and provides brokerage and asset management services to other third-parties.
      The Reinsurance segment primarily includes the domestic life retrocession business, which was acquired in August 2011 (Note 5). Also included in the Reinsurance segment is international reinsurance the Company has assumed from PLR.
      The Corporate and Other segment consists of assets and activities which support the Company’s operating segments. Included in these support activities is the management of investments, certain entity level hedging activities and other expenses and other assets not directly attributable to the operating segments. The Corporate and Other segment also includes several operations that do not qualify as operating segments and the elimination of intersegment transactions. Discontinued operations (Note 6) are also included in the Corporate and Other segment.
      The Company uses the same accounting policies and procedures to measure segment net income (loss) and assets as it uses to measure its consolidated net income (loss) and assets. Net investment income and net realized investment gain (loss) are allocated based on invested assets purchased and held as is required for transacting the business of that segment. Overhead expenses are allocated based on services provided. Interest expense is allocated based on the short-term borrowing needs of the segment and is included in net investment income. The provision (benefit) for income taxes is allocated based on each segment’s actual tax provision (benefit).
      Certain segments are allocated equity based on formulas determined by management and receive a fixed interest rate of return on interdivision debentures supporting the allocated equity. The debenture amount is reflected as investment expense in net investment income in the Corporate and Other segment and as investment income in the operating segments.
      The Company generates the majority of its revenues and net income from customers located in the U.S. As of December 31, 2011 and 2010, the Company had foreign investments with an estimated fair value of $8.2 billion and $8.0 billion, respectively. Aircraft leased to foreign customers were $5.3 billion and $5.1 billion as of December 31, 2011 and 2010, respectively. Revenues derived from any customer did not exceed 10% of consolidated total revenues for the years ended December 31, 2011, 2010 and 2009.

PL-58

 

    The following is segment information as of and for the year ended December 31, 2011:
                                                 
    Life     Retirement     Aircraft             Corporate        
    Insurance     Solutions     Leasing     Reinsurance     and Other     Total  
     
REVENUES   (In Millions)
Policy fees and insurance premiums
   $ 1,182     $ 1,701             $ 198             $ 3,081  
Net investment income
     954       818               4     $ 410       2,186  
Net realized investment gain (loss)
     83       (1,076 )   $ (3 )             335       (661 )
OTTIs
     (38 )     (33 )                     (82 )     (153 )
Investment advisory fees
     22       233                       13       268  
Aircraft leasing revenue
                     607                       607  
Other income
     13       159       48       3       3       226  
     
Total revenues
     2,216       1,802       652       205       679       5,554  
     
 
BENEFITS AND EXPENSES
                                                
Policy benefits
     429       1,343               179               1,951  
Interest credited
     736       302                       280       1,318  
Commission expenses
     428       (352 )             6       1       83  
Operating expenses
     352       168       99       18       113       750  
Depreciation of aircraft
                     255                       255  
Interest expense
                     194               94       288  
     
Total benefits and expenses
     1,945       1,461       548       203       488       4,645  
     
 
Income from continuing operations before provision (benefit) for income taxes
     271       341       104       2       191       909  
Provision (benefit) for income taxes
     84       25       (7 )     1       43       146  
     
Income from continuing operations
     187       316       111       1       148       763  
Discontinued operations, net of taxes
                                     (9 )     (9 )
     
 
Net income
     187       316       111       1       139       754  
Less: net income attributable to the noncontrolling interest from continuing operations
                     (6 )             (65 )     (71 )
     
Net income attributable to the Company
   $ 187     $ 316     $ 105     $ 1     $ 74     $ 683  
     
 
Total assets
   $ 31,334     $ 66,764     $ 7,389     $ 568     $ 8,565     $ 114,620  
DAC
     1,350       3,843               70               5,263  
Separate account assets
     5,698       45,752                               51,450  
Policyholder and contract liabilities
     22,400       16,926               244       4,289       43,859  
Separate account liabilities
     5,698       45,752                               51,450  

PL-59

 

      The following is segment information as of and for the year ended December 31, 2010:
                                                 
    Life     Retirement     Aircraft             Corporate        
    Insurance     Solutions     Leasing     Reinsurance     and Other     Total  
     
REVENUES   (In Millions)
Policy fees and insurance premiums
   $ 1,092     $ 1,265             $ 10             $ 2,367  
Net investment income
     924       748                     $ 450       2,122  
Net realized investment gain (loss)
     55       (73 )   $ (2 )             (74 )     (94 )
OTTIs
     (21 )     (10 )                     (82 )     (113 )
Investment advisory fees
     21       224                               245  
Aircraft leasing revenue
                     591                       591  
Other income
     11       141       57       2       19       230  
     
Total revenues
     2,082       2,295       646       12       313       5,348  
     
 
BENEFITS AND EXPENSES
                                                
Policy benefits
     432       923               (4 )             1,351  
Interest credited
     700       282                       335       1,317  
Commission expenses
     355       475                       1       831  
Operating expenses
     297       339       60               65       761  
Depreciation of aircraft
                     241                       241  
Interest expense
                     178               84       262  
     
Total benefits and expenses
     1,784       2,019       479       (4 )     485       4,763  
     
 
Income (loss) from continuing operations before provision (benefit) for income taxes
     298       276       167       16       (172 )     585  
Provision (benefit) for income taxes
     93       (9 )     41       6       (68 )     63  
     
 
Net income (loss)
     205       285       126       10       (104 )     522  
Less: net income attributable to the noncontrolling interest from continuing operations
                     (9 )             (41 )     (50 )
     
Net income (loss) attributable to the Company
   $ 205     $ 285     $ 117     $ 10     $ (145 )   $ 472  
     
 
Total assets
   $ 30,337     $ 67,415     $ 6,893     $ 2     $ 10,015     $ 114,662  
DAC
     1,598       2,836                       1       4,435  
Separate account assets
     5,982       49,701                               55,683  
Policyholder and contract liabilities
     21,776       13,743               (5 )     6,642       42,156  
Separate account liabilities
     5,982       49,701                               55,683  

PL-60

 

      The following is segment information for the year ended December 31, 2009:
                                                 
    Life     Retirement     Aircraft             Corporate          
    Insurance     Solutions     Leasing     Reinsurance     and Other   Total  
     
REVENUES   (In Millions)
Policy fees and insurance premiums
   $ 1,063     $ 1,209             $ 3             $ 2,275  
Net investment income
     892       610     $ 1             $ 359       1,862  
Net realized investment gain (loss)
             311       7               (165 )     153  
OTTIs
     (63 )     (53 )                     (195 )     (311 )
Investment advisory fees
     18       190                               208  
Aircraft leasing revenue
                     578                       578  
Other income
     10       112       13               2       137  
     
Total revenues
     1,920       2,379       599       3       1       4,902  
     
 
BENEFITS AND EXPENSES
                                                
Policy benefits
     363       863                               1,226  
Interest credited
     681       193                       379       1,253  
Commission expenses
     353       337                       1       691  
Operating expenses
     290       285       59               148       782  
Depreciation of aircraft
                     227                       227  
Interest expense
                     182               55       237  
     
Total benefits and expenses
     1,687       1,678       468               583       4,416  
     
 
Income (loss) from continuing operations before provision (benefit) for income taxes
     233       701       131       3       (582 )     486  
Provision (benefit) for income taxes
     66       147       39       1       (209 )     44  
     
 
Income (loss) from continuing operations
     167       554       92       2       (373 )     442  
Discontinued operations, net of taxes
                                     (20 )     (20 )
     
Net income (loss)
     167       554       92       2       (393 )     422  
Less: net (income) loss attributable to the noncontrolling interest from continuing operations
                     (9 )             23       14  
     
Net income (loss) attributable to the Company
   $ 167     $ 554     $ 83     $ 2     $ (370 )   $ 436  
     
  20.   TRANSACTIONS WITH AFFILIATES
      PLFA serves as the investment adviser for the Pacific Select Fund, an investment vehicle provided to the Company’s variable life insurance policyholders and variable annuity contract owners, and the Pacific Life Funds, the investment vehicle for the Company’s mutual fund products. Investment advisory and other fees are based primarily upon the net asset value of the underlying portfolios. These fees, included in investment advisory fees and other income, amounted to $294 million, $291 million and $244 million for the years ended December 31, 2011, 2010 and 2009, respectively. In addition, Pacific Life provides certain support services to the Pacific Select Fund, the Pacific Life Funds and other affiliates based on an allocation of actual costs. These fees amounted to $10 million, $8 million and $9 million for the years ended December 31, 2011, 2010 and 2009, respectively.
      Additionally, the Pacific Select Fund and Pacific Life Funds have service and other plans whereby the funds pay PSD, as distributor of the fund, a service fee in connection with services rendered to or procured for shareholders of the fund or their variable annuity and life insurance contract owners. These services may include, but are not limited to, payment of compensation to broker-dealers, including PSD itself, and other financial institutions and organizations, which assist in providing any of the services. For the years

PL-61

 

      ended December 31, 2011, 2010 and 2009, PSD received $115 million, $100 million and $86 million, respectively, in service and other fees from the Pacific Select Fund and Pacific Life Funds, which are recorded in other income.
      ACG has derivative swap contracts with Pacific LifeCorp as the counterparty. The notional amounts total $1.3 billion and $1.5 billion as of December 31, 2011 and 2010, respectively. The estimated fair values of the derivatives were net liabilities of $78 million and $62 million as of December 31, 2011 and 2010, respectively.
  21.   COMMITMENTS AND CONTINGENCIES
      COMMITMENTS
      The Company has outstanding commitments to make investments primarily in fixed maturity securities, mortgage loans, limited partnerships and other investments, as follows (In Millions):
         
Years Ending December 31:
2012
   $ 610  
2013 through 2016
     913  
2017 and thereafter
     124  
 
      
Total
   $ 1,647  
 
      
      The Company leases office facilities under various operating leases, which in most, but not all cases, are noncancelable. Rent expense, which is included in operating and other expenses, in connection with these leases was $10 million, $9 million and $8 million for the years ended December 31, 2011, 2010 and 2009, respectively. In connection with the sale of a block of business in 2005, PL&A is contingently liable until March 31, 2013 for certain future rent and expense obligations, not to exceed $6 million, related to an office lease that has been assigned to the buyer. Aggregate minimum future commitments are as follows (In Millions):
         
Years Ending December 31:
2012
   $ 11  
2013 through 2016
     23  
2017 and thereafter
     11  
 
      
Total
   $ 45  
 
      
      In 2011, ACG entered into a sale leaseback transaction of one commercial aircraft on long-term lease to a U.S. airline. As a result of this transaction, the Company has committed to an operating lease, the expense of which is included in operating and other expenses, expiring March 2023. In 2010, ACG entered into a sale leaseback transaction of two commercial aircraft on long-term lease to a U.S. airline. As a result of this transaction, the Company has committed to two operating leases, the expense of which is included in operating and other expenses, expiring December 2025. Aggregate minimum future lease commitments and minimum rentals to be received in the future are as follows (In Millions):
                 
    Minimum Future     Minimum Rentals to  
Years Ending December 31:   Commitments     be Received  
2012
   $ 8     $ 13  
2013 through 2016
     38       54  
2017 and thereafter
     80       81  
     
Total
   $ 126     $ 148  
     

PL-62

 

      As of December 31, 2011, ACG has commitments with major aircraft manufacturers and other third-parties to purchase aircraft at an estimated delivery price of $7,569 million with delivery from 2012 through 2020. These purchase commitments may be funded:
  •   up to $1,239 million in less than one year,
 
  •   an additional $2,333 million in one to three years,
 
  •   an additional $1,522 million in three to five years, and
 
  •   an additional $1,779 million thereafter.
      As of December 31, 2011, deposits related to these agreements totaled $696 million and are included in other assets.
      In connection with the acquisition of the life retrocession business as discussed in Note 5, Pacific Life entered into agreements to reinsure a block of U.S. life reinsurance business on a 100% coinsurance basis. The underlying reinsurance is comprised of coinsurance and YRT treaties. Upon closing the transaction in August 2011, Pacific Life retroceded the majority of the underlying YRT treaties on a 100% modified coinsurance basis to PLRB effective July 1, 2011 (PLRB Agreement). The PLRB Agreement will be accounted for under deposit accounting under U.S. GAAP and as reinsurance under statutory accounting practices. The statutory accounting reserve credit is afforded by virtue of collateral posted by PLRB for the benefit of Pacific Life by a $430 million letter of credit issued to PLRB by third-party banks. In connection with the letter of credit agreement, Pacific LifeCorp entered into a capital maintenance agreement to ensure PLRB will have sufficient capital to meet its obligations. Additionally, certain assets related to the life retrocession business have been pledged and placed in reinsurance trusts (Note 8). If the estimated fair market value of the pledged assets in these trusts fall below a minimum value, as defined in the transaction agreements, the Company is required to promptly deposit additional funds into the trusts to account for any shortfall.
      On March 29, 2010, the Company entered into an agreement with PLR to guarantee the performance of unaffiliated reinsurance obligations of PLR. For the years ended December 31, 2011 and 2010, the Company earned $2 million under the agreement for its guarantee. This guarantee is secondary to a similar guarantee provided by Pacific LifeCorp and would only be triggered in the event of nonperformance by both PLR and Pacific LifeCorp. Management believes that any additional obligations, if any, related to the guarantee agreement are not likely to have a material adverse effect on the Company’s consolidated financial statements.
      In connection with the reinsurance of NLGR benefits ceded from Pacific Life to PAR Vermont (Note 2), PAR Bermuda and PAR Vermont entered into a three year letter of credit agreement with a group of banks in April 2009. This agreement allows for the issuance of letters of credit with an expiration date of March 2012 to PAR Bermuda and PAR Vermont for up to a combined total amount of $650 million. As of December 31, 2010, the letter of credit issued from this facility for PAR Bermuda was cancelled. In November 2011, PAR Vermont replaced its $650 million letter of credit agreement with a new letter of credit agreement with a maximum commitment amount of $843 million and a 20 year term. As of December 31, 2011, the letter of credit amounted to $416 million. The new agreement is non-recourse to Pacific LifeCorp or any of its affiliates, other than PAR Vermont.
      In connection with an acquisition in 2005, ACG assumed residual value support agreements with remaining expiration dates ranging from 2013 to 2015. The gross remaining residual value exposure under these agreements was $89 million and $99 million as of December 31, 2011 and 2010, respectively. As of December 31, 2011, the Company has estimated that it has no measurable liability under the remaining residual value guarantee agreements.
      CONTINGENCIES — LITIGATION
      The Company is a respondent in a number of legal proceedings, some of which involve allegations for extra-contractual damages. Although the Company is confident of its position in these matters, success is not a certainty and it is possible that in any case a judge or jury could rule against the Company. In the opinion of management, the outcome of such proceedings is not likely to have a material adverse effect on the Company’s consolidated financial position. The Company believes adequate provision has been made in its consolidated financial statements for all probable and estimable losses for litigation claims against the Company.
      CONTINGENCIES — IRS REVENUE RULING
      In 2007, the IRS issued Revenue Ruling 2007-54, which provided the IRS’ interpretation of tax law regarding the computation of the DRD and Revenue Ruling 2007-61, which suspended Revenue Ruling 2007-54 and indicated the IRS would address the proper interpretation of tax law in a regulation project that is on the IRS’ priority guidance plan. Although no guidance has been issued, if the IRS ultimately adopts the interpretation contained in Revenue Ruling 2007-54, the Company could lose a substantial amount of DRD tax benefits, which could have a material adverse effect on the Company’s consolidated financial statements.

PL-63

 

      CONTINGENCIES — OTHER
      In connection with the sale of certain broker-dealer subsidiaries (Note 6), certain indemnifications triggered by breaches of representations, warranties or covenants were provided by the Company. Also, included in the indemnifications is indemnification for certain third-party claims arising from the normal operation of these broker-dealers prior to the closing and within the nine month period following the sale. Management believes that claims, if any, against the Company related to such indemnification matters are not likely to have a material adverse effect on the Company’s consolidated financial statements.
      In the course of its business, the Company provides certain indemnifications related to other dispositions, acquisitions, investments, lease agreements or other transactions that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. These obligations are typically subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. Because the amounts of these types of indemnifications often are not explicitly stated, the overall maximum amount of the obligation under such indemnifications cannot be reasonably estimated. The Company has not historically made material payments for these types of indemnifications. The estimated maximum potential amount of future payments under these obligations is not determinable due to the lack of a stated maximum liability for certain matters, and therefore, no related liability has been recorded. Management believes that judgments, if any, against the Company related to such matters are not likely to have a material adverse effect on the Company’s consolidated financial statements.
      Most of the jurisdictions in which the Company is admitted to transact business require life insurance companies to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by insolvent life insurance companies. These associations levy assessments, up to prescribed limits, on all member companies in a particular state based on the proportionate share of premiums written by member companies in the lines of business in which the insolvent insurer operated. The Company has not received notification of any insolvency that is expected to result in a material guaranty fund assessment.
      The Asset Purchase Agreements of Aviation Trust, ACG Trust II and ACG Trust III (Note 4) provide that Pacific LifeCorp will guarantee the performance of certain obligations of ACG, as well as provide certain indemnifications, and that Pacific Life will assume certain obligations of ACG arising from the breach of certain representations and warranties under the Asset Purchase Agreements. Management believes that obligations, if any, related to these guarantees are not likely to have a material adverse effect on the Company’s consolidated financial statements. The financial debt obligations of Aviation Trust, ACG Trust II and ACG Trust III are non-recourse to the Company and are not guaranteed by the Company.
      In connection with the operations of certain subsidiaries, the Company has made commitments to provide for additional capital funding as may be required.
      See Note 10 for discussion of contingencies related to derivative instruments.
      See Note 18 for discussion of other contingencies related to income taxes.

PL-64

 

PART II

Part C: OTHER INFORMATION

     Item 24. Financial Statements and Exhibits

  (a)   Financial Statements

    Part A: None

    Part B:

  (1)   Registrant’s Financial Statements

    Audited Financial Statements dated as of December 31, 2011 and for each of the periods presented which are incorporated by reference from the 2011 Annual Report include the following for Separate Account A:

         Statements of Assets and Liabilities
     Statements of Operations
     Statements of Changes in Net Assets
     Notes to Financial Statements
     Report of Independent Registered Public Accounting Firm

  (2)   Depositor’s Financial Statements

    Audited Consolidated Financial Statements dated as of December 31, 2011 and 2010, and for each of the three years in the period ended December 31, 2011, included in Part B include the following for Pacific Life:

         Independent Auditors’ Report
     Consolidated Statements of Financial Condition
     Consolidated Statements of Operations
     Consolidated Statements of Stockholder’s Equity
     Consolidated Statements of Cash Flows
     Notes to Consolidated Financial Statements

  (b)   Exhibits

         
1.   (a)   Resolution of the Board of Directors of the Depositor authorizing establishment of Separate Account A and Memorandum establishing Separate Account A.1
         
    (b)   Resolution of the Board of Directors of Pacific Life Insurance Company authorizing conformity to the terms of the current Bylaws.2

II-1

 

             
2.   Not applicable
 
  
 
  
 
  
 
3.
  
(a)
   Distribution Agreement between Pacific Life Insurance Company, Pacific Life & Annuity Company
and Pacific Select Distributors, Inc. (PSD)26
 
  
 
  
 
  
 
    (b)   Form of Selling Agreement between Pacific Life, PSD and Various Broker Dealers11
 
  
 
  
 
  
 
4.
  
(a)
  
Individual Flexible Premium Deferred Variable Annuity Contract (Form No. 10-1143)15
 
  
 
  
 
  
 
    (b)   (1)   403(b) Tax-Sheltered Annuity Rider (Form No. 20-15200)12
 
  
 
  
 
  
 
        (2)   403(b) Tax-Sheltered Annuity Rider (Form No. 20-1156)19
 
  
 
  
 
  
 
    (c)   Section 457 Plan Rider (Form No. 24-123799)12
 
  
 
  
 
  
 
    (d)   Individual Retirement Annuity Rider (Form No. 20-18900)5
 
  
 
  
 
  
 
    (e)   Roth Individual Retirement Annuity Rider (Form No. 20-19000)5
 
  
 
  
 
  
 
    (f)   SIMPLE Individual Retirement Annuity Rider (Form No. 20-19100)5
 
  
 
  
 
  
 
    (g)   Qualified Retirement Plan Rider (Form No. 20-14200)12
 
  
 
  
 
  
 
    (h)   Guaranteed Earnings Enhancement (EEG) Rider (Form No. 20-14900)3
 
  
 
  
 
  
 
    (i)   Guaranteed Protection Advantage 5 Rider (Form No. 20-19600)7
 
  
 
  
 
  
 
 
  
(j)
  
(1)
  
Income Access Rider (Form No. 20-1104)7
 
  
 
  
 
  
 
 
  
 
  
(2)
  
Income Access Endorsement (Form No. 15-1122)10
 
  
 
  
 
  
 
 
  
 
  
(3)
  
Excess Withdrawal Endorsement (Form No. 15-1152C)18
 
  
 
  
 
  
 
    (k)   DCA Plus Fixed Option Rider (Form No. 20-1103)6
 
  
 
  
 
  
 
    (l)   Guaranteed Income Annuity Rider (Form No. 20-1118)8
 
  
 
  
 
  
 
    (m)   Stepped-Up Death Benefit Rider (Form No. 20-1117)8
 
  
 
  
 
    (n)  
(1)
  
5% Guaranteed Withdrawal Benefit Rider (Form No. 20-1131)13
 
  
 
  
 
  
 
 
  
 
  
(2)
  
Excess Withdrawal Endorsement (Form No. 15-1152)18
 
  
 
  
 
  
 
    (o)  
(1)
  
Joint Life 5% Guaranteed Withdrawal Benefit Rider (Form No. 20-1135)13
 
  
 
  
 
  
 
 
  
 
  
(2)
  
Excess Withdrawal Endorsement (Form No. 15-1152B)18
    (p)   Guaranteed Protection Advantage 3 Rider (Form No. 20-1144)14
 
  
 
  
 
  
 
    (q)  
(1)
   Guaranteed Withdrawal Benefit II Rider (Form No. 20-1146)14
 
  
 
  
 
  
 
 
  
 
  
(2)
  
Excess Withdrawal Endorsement (Form No. 15-1152)18
 
  
 
  
 
  
 
 
  
 
  
 
  
 
    (r)   Guaranteed Withdrawal Benefit III Rider (Form No. 20-1153)18
 
  
 
  
 
  
 
    (s)   Guaranteed Withdrawal Benefit Rider (Form No. 20-1154)18
 
  
 
  
 
  
 
    (t)   Joint Life Guaranteed Withdrawal Benefit Rider (Form No. 20-1155)18
    (u)   Core Withdrawal Benefit Rider (Form No. 20-1162)20
    (v)   Guaranteed Withdrawal Benefit IV Rider (Form No. 20-1176)21
    (w)   Core Withdrawal Benefit II Rider (Form No. 20-1178)22
    (x)   Guaranteed Withdrawal Benefit V Rider — Single Life (Form No. ICC 10:20-1194)23
    (y)   Guaranteed Withdrawal Benefit V Rider — Joint Life (Form No. ICC 10:20-1195)23
    (z)   Guaranteed Withdrawal Benefit VII Rider — Single Life (Form No. ICC 11:20-1204)25
    (aa)   Guaranteed Withdrawal Benefit VII Rider — Joint Life (Form No. ICC 11:20-1205)25
 
  
 
  
 
  
 
5.
  
(a)
  
Variable Annuity Application17
 
  
 
  
 
  
 
 
  
 
  
 
6.
  
(a)
  
Pacific Life’s Articles of Incorporation2
 
  
 
  
 
 
  
(b)
  
By-laws of Pacific Life2
 
  
 
  
 
 
  
(c)
  
Pacific Life’s Restated Articles of Incorporation11
 
  
 
  
 
 
  
(d)
  
By-laws of Pacific Life As Amended September 1, 200511
 
  
 
  
 
7.   Form of Reinsurance Agreement16
 
  
 
  
 
8.  
(a)
  
Pacific Select Fund Participation Agreement4
 
  
 
  
 
 
  
(b)
  
Fund Participation Agreement Between Pacific Life Insurance Company, Pacific Select
 
  
 
  
Distributions, Inc., American Funds Insurance Series, American Funds Distributors,
 
  
 
  
and Capital Research and Management Company9
 
  
 
  
 
    (c)   Form of AllianceBernstein Variable Products Series Fund, Inc. Participation Agreement18
 
  
 
  
 
  
 
    (d)   Form of BlackRock Variable Series Fund, Inc. Participation Agreement18
 
 
  
 
  
(1)    Amendment to Participation Agreement22
 
  
 
  
 
  
 
    (e)   Form of Franklin Templeton Variable Insurance Products Trust Participation Agreement18
 
 
  
 
  
(1)    First Amendment to Participation Agreement22
 
 
  
 
  
(2)    Second Amendment to Participation Agreement25
 
    (f)   Form of AllianceBernstein Investments, Inc. Administrative Services Agreement18
 
  
 
  
 
  
 
    (g)   Form of BlackRock Distributors, Inc. Administrative Services Agreement18
 
 
  
 
  
(1)    Amendment to Administrative Services Agreement22
 
 
  
 
  
 
  
 
    (h)   Form of Franklin Templeton Services, LLC Administrative Services Agreement18
 
 
  
 
  
(1)    First Amendment to Administrative Services Agreement22
 
    (i)   Form of AIM Variable Insurance Funds Participation Agreement19
 
  
 
  
 
  
 
 
  
 
  
(1)    First Amendment to Participation Agreement
 
    
    (j)   Form of Invesco Aim Distributors, Inc. Distribution Services Agreement19
 
  
 
  
 
  
 
    (k)   Form of Invesco Aim Advisors, Inc. Administrative Services Agreement19
 
  
 
  
 
  
 
    (l)   Form of GE Investments Funds, Inc. Participation Agreement19
 
 
  
 
  
(1)    Amendment to Participation Agreement22
 
  
 
  
 
  
 
    (m)   Form of GE Investment Distributors, Inc. Distribution and Services Agreement (Amended and Restated)22
 
  
 
  
 
  
 
    (n)   Form of Van Kampen Life Investment Trust Participation Agreement19
 
  
 
  
 
  
 
    (o)   Form of Van Kampen Funds, Inc. Shareholder Service Agreement19
 
  
 
  
 
  
 
    (p)   Form of Van Kampen Asset Management Administrative Services Letter Agreement19
    (q)   Form of GE Investments Funds, Inc. Investor Services Agreement22
 
 
  
 
  
(1)    First Amendment to Investor Services Agreement22
 
  
 
  
 
  
 
    (r)   Form of PIMCO Variable Insurance Trust Participation Agreement22
 
    
 
  
 
  
(1)       First Amendment to Participation Agreement25
 
    
 
  
 
  
(2)    Second Amendment to Participation Agreement25
 
  
 
  
 
  
 
    (s)   Form of Allianz Global Investors Distributors LLC Selling Agreement22
 
  
 
  
 
  
 
    (t)   Form of PIMCO LLC Services Agreement22
 
    (u)   Form of MFS Variable Insurance Trust Participation Agreement24
 
 
  
 
  
(1)    First Amendment to Participation Agreement24
 
 
  
 
  
(2)    Second Amendment to Participation Agreement25
 
    (v)   Form of MFS Variable Insurance Trust Administrative Services Agreement24
 
    (w)   Participation Agreement with Fidelity Variable Insurance Products (Variable Insurance Products Funds, Variable Insurance Products Fund II, Variable Insurance Products Fund III and Variable Insurance Products Funds V).
 
        (1)    First Amendment to Participation Agreement
 
        (2)    Second Amendment to Participation Agreement
 
    (x)   Service Contract with Fidelity Distributors Corporation
 
        (1)    Amendment to Service Contract
 
    (y)   Participation Agreement with First Trust Variable Insurance Trust
 
    (z)   Administrative Services Agreement with First Trust Variable Insurance Trust
 
  
 
  
 
  
 
    (aa)   Support Agreement with First Trust Advisors L.P.
 
  
 
  
 
  
 
9.   Opinion and Consent of legal officer of Pacific Life Insurance Company as to the legality of Contracts being registered.15

II-2

 

     
10.
  
Consent of Independent Registered Public Accounting Firm and Consent of Independent Auditors
 
  
 
11.
  
Not applicable
 
  
 
12.
  
Not applicable
 
  
 
13.
  
Powers of Attorney

1   Included in Registrant’s Form N-4, File No. 33-88460, Accession No. 0000898430-96-001377 filed on April 19, 1996 and incorporated by reference herein.
 
2   Included in Registrant’s Form N-4, File No. 33-88460, Accession No. 0001017062-98-000945 filed on April 29, 1998 and incorporated by reference herein.
 
3   Included in Registrant’s Form N-4, File No. 33-88460, Accession No. 0001017062-01-000459 filed on March 2, 2001, and incorporated by reference herein.
 
4   Included in Registrant’s Form N-4, File No. 33-88460, Accession No. 0001017062-01-500083 filed on April 25, 2001 and incorporated by reference herein.
 
5   Included in Registrant’s Form N-4, File No. 033-88460, Accession No. 0001017062-02-002150 filed on December 19, 2002 and incorporated by reference herein.
 
6   Included in Registrant’s Form N-4, File No. 033-88460, Accession No. 0001193125-03-099259 filed on December 24, 2003 and incorporated by reference herein.
 
7   Included in Registrant’s Form N-4, File No. 033-88460, Accession No. 0001193125-04-031337 filed on February 27, 2004 and incorporated by reference herein.
 
8   Included in Registrant’s Form N-4, File No. 033-88460, Accession No. 0000892569-04-000888 filed on October 15, 2004 and incorporated by reference herein.
 
9   Included in Registrant’s Form N-4, File No. 333-93059, Accession No. 0000892569-05-000253 filed on April 19, 2005 and incorporated by reference herein.
 
10   Included in Registrant’s Form N-4, File No. 033-88460, Accession No. 0000892569-05-000440 filed on June 15, 2005 and incorporated by reference herein.
 
11   Included in Registrant’s Form N-4, File No. 033-88460, Accession No. 0000892569-06-000528 filed on April 18, 2006 and incorporated by reference herein.
 
12   Included in Registrant’s Form N-4, File No. 333-136597, Accession No. 0000892569-06-000999 filed on August 14, 2006 and incorporated by reference herein.
 
13   Included in Registrant’s Form N-4, File No. 333-141135, Accession No. 0000892569-07-000204, filed on March 8, 2007, and incorporated by reference herein.
 
14   Included in Registrant’s Form N-4, File No. 333-141135, Accession No. 0000892569-07-001521, filed on December 12, 2007, and incorporated by reference herein.
 
15   Included in Registrant’s Form N-4, File No. 333-148865, Accession No. 0000892569-08-000079, filed on January 25, 2008, and incorporated by reference herein.
 
16   Included in Registrant’s Form N-4, File No. 333-148865, Accession No. 0000892569-08-00440, filed on March 27, 2008, and incorporated by reference herein.
 
17   Included in Registrant’s Form N-4, File No. 333-148865, Accession No. 0000892569-08-000636, filed on April 23, 2008, and incorporated by reference herein.
 
18   Included in Registrant’s Form N-4, File No. 333-136597, Accession No. 0000892569-08-000961, filed on July 2, 2008, and incorporated by reference herein.
 
19   Included in Registrant’s Form N-4, File No. 333-148865, Accession No. 0000892569-08-001562, filed on December 4, 2008, and incorporated by reference herein.
 
20   Included in Registrant’s Form N-4, File No. 333-136597, Accession No. 0000892569-09-000061, filed on February 9, 2009, and incorporated by reference herein.
 
21   Included in Registrant’s Form N-4, File No. 333-136597, Accession No. 0000950123-09-050719, filed on October 16, 2009, and incorporated by reference herein.
 
22   Included in Registrant’s Form N-4, File No. 333-148865, Accession No. 0000950123-10-036169, filed on April 20, 2010, and incorporated by reference herein.
 
23   Included in Registrant’s Form N-4, File No. 333-148865, Accession No. 0000950123-10-115919 filed on December 23, 2010, and incorporated by reference herein.
 
24   Included in Registrant’s Form N-4, File No. 333-160772, Accession No. 0000950123-10-036181 filed on April 20, 2010, and incorporated by reference herein.
 
25   Included in Registrant’s Form N-4, File No. 333-148865, Accession No. 0000950123-11-036756 filed on April 19, 2011, and incorporated by reference herein.
 
26   Included in Registrant’s Form N-4, File No. 333-60833, Accession No. 0000950123-11-061492 filed on June 24, 2011, and incorporated by reference herein.

Item 25. Directors and Officers of Pacific Life

     
    Positions and Offices
Name and Address   with Pacific Life
James T. Morris   Director, Chairman and Chief Executive Officer
Khanh T. Tran   Director and President
Adrian S. Griggs   Executive Vice President and Chief Financial Officer
Sharon A. Cheever   Director, Senior Vice President and General Counsel
Jane M. Guon   Director, Vice President and Secretary
Edward R. Byrd   Senior Vice President and
Chief Accounting Officer
Brian D. Klemens   Vice President and Controller
Dewey P. Bushaw   Executive Vice President
Denis P. Kalscheur   Senior Vice President and Treasurer

The address for each of the persons listed above is as follows:

700 Newport Center Drive
Newport Beach, California 92660

II-3

 

Item 26. Persons Controlled by or Under Common Control with Pacific Life or Separate Account A.
     The following is an explanation of the organization chart of Pacific eLife’s subsidiaries:
Pacific Life is a Nebraska Stock Life Insurance Company wholly-owned by Pacific LifeCorp (a Delaware Stock Holding Company), which is, in turn, 100% owned by Pacific Mutual Holding Company (a Nebraska Mutual Insurance Holding Company).
PACIFIC LIFE, SUBSIDIARIES & AFFILIATED ENTERPRISES
LEGAL STRUCTURE
                 
    Jurisdiction of   Percentage of
    Incorporation or   Ownership by its
    Organization   Immediate Parent
Pacific Mutual Holding Company
   Nebraska        
Pacific LifeCorp
   Delaware     100  
Pacific Life Insurance Company
   Nebraska     100  
Pacific Life & Annuity Company
   Arizona     100  
Pacific Select Distributors, Inc.
   California     100  
Pacific Select, LLC
   Delaware     100  
Pacific Asset Holding LLC
   Delaware     100  
Pacific TriGuard Partners LLC#
   Delaware     100  
Grayhawk Golf Holdings, LLC
   Delaware     95  
Grayhawk Golf L.L.C.
   Arizona     100  
Las Vegas Golf I, LLC
   Delaware     100  
Angel Park Golf, LLC
   Nevada     100  
CW Atlanta, LLC
   Delaware     100  
City Walk Towers, LLC
   Delaware     100  
Kierland One, LLC
   Delaware     100  
Kinzie Member, LLC
   Delaware     100  
Parcel B Owner LLC
   Delaware     88  
Kinzie Parcel A Member, LLC
   Delaware     100  
Parcel A Owner LLC
   Delaware     90  
PL/KBS Fund Member, LLC
   Delaware     100  
KBS/PL Properties, L.P.#
   Delaware     99.9  
Wildflower Member, LLC
   Delaware     100  
Epoch-Wildflower, LLC
   Florida     99  
Sedona Golf Club, LLC
   Delaware     100  
Glenoaks Golf Club, LLC
   Delaware     100  
Polo Fields Golf Club, LLC
   Delaware     100  
PL Regatta Member, LLC
   Delaware     100  
Pacific Asset Loan LLC
   Delaware     100  
PL Vintage Park Member, LLC
   Delaware     100  
PL Broadstone Avena Member, LLC
   Delaware     100  
PAR Industrial LLC
   Delaware     100  
Confederation Life Insurance and Annuity Company
   Georgia     100  
Pacific Life Fund Advisors LLC
   Delaware     100  
Pacific Alliance Reinsurance Company of Vermont
   Vermont     100  
Pacific Mezzanine Associates L.L.C.
   Delaware     67  
Pacific Mezzanine Investors L.L.C.#
   Delaware     100  
Pacific Global Advisors LLC
   Delaware     100  
Pacific Services Canada Limited
   Canada     100  
Aviation Capital Group Corp.
   Delaware     100  
ACG Acquisition 4063 LLC
   Delaware     100  
ACG Acquisition 4084 LLC
   Delaware     100  
ACG Acquisition Ireland III Limited
   Ireland     100  
ACG Acquisition Ireland V Ltd.
   Ireland     100  
ACG Acquisition 4658 LLC
   Delaware     100  
ACG Acquisition 2688 LLC
   Delaware     100  
Aviation Capital Group Singapore Pte. Ltd.
   Singapore     100  
ACG International Ltd.
   Bermuda     100  
ACG Capital Partners Singapore Pte. Ltd.
   Singapore     50  
ACG Capital Partners LLC
   Delaware     100  
ACG Acquisition VI LLC
   Nevada     50  
ACG Acquisition XIX LLC
   Delaware     20  
ACG XIX Holding LLC
   Delaware     100  
Aviation Capital Group Trust
   Delaware     100  
ACG Acquisition XV LLC
   Delaware     100  
ACG Acquisition XX LLC
   Delaware     100  
ACG Acquisition (Bermuda) Ltd.
   Bermuda     100  
ACG Acquisition Ireland Limited
   Ireland     100  
ACG Acquisition Labuan Ltd.
   Labuan     100  
ACG Acquisitions Sweden AB
   Sweden     100  
ACG Acquisition XXI LLC
   Delaware     100  
ACG Trust 2004 -1 Holding LLC
   Delaware     100  
ACG Funding Trust 2004-1
   Delaware     100  
ACG 2004-1 Bermuda Limited
   Bermuda     100  
ACG Acquisition 2004-1 Ireland Limited
   Ireland     100  
ACG Trust II Holding LLC
   Delaware     100  
Aviation Capital Group Trust II
   Delaware     100  
ACG Acquisition XXV LLC
   Delaware     100  
ACG Acquisition 37 LLC
   Delaware     100  
ACG Acquisition 38 LLC
   Delaware     100  
ACG Acquisition Ireland II Limited
   Ireland     100  
ACG Acquisition (Bermuda) II Ltd.
   Bermuda     100  
ACG Acquisition XXIX LLC
   Delaware     100  
ACG Acquisition XXX LLC
   Delaware     100  
ACG Acquisition 31 LLC
   Delaware     100  
ACG Acquisition 32 LLC
   Delaware     100  
ACG Acquisition 33 LLC
   Delaware     100  
ACG Acquisition 36 LLC
   Delaware     100  
ACG Acquisition 39 LLC
   Delaware     100  
ACGFS LLC
   Delaware     100  
ACG Acquisition 35 LLC
   Delaware     100  
Boullioun Aviation Services Inc.
   Washington     100  
Boullioun Aircraft Holding Company, Inc.
   Washington     100  
Boullioun Portfolio Finance III LLC
   Nevada     100  
ACG ECA Bermuda Limited
   Ireland     100  
ACG III Holding LLC
   Delaware     100  
ACG Trust III
   Delaware     100  
RAIN I LLC
   Delaware     100  
RAIN II LLC
   Delaware     100  
RAIN III LLC
   Delaware     100  
RAIN IV LLC
   Delaware     100  
RAIN V LLC
   Delaware     100  
RAIN VI LLC
   Delaware     100  
RAIN VII LLC
   Delaware     100  
RAIN VIII LLC
   Delaware     100  
ACG Acquisition 169 LLC
   Delaware     100  
ACG Acquisition 30271 LLC
   Delaware     100  
ACG Acquisition 30744 LLC
   Delaware     100  
ACG Acquisition 30745 LLC
   Delaware     100  
ACG Acquisition 30289 LLC
   Delaware     100  
ACG Acquisition 30293 LLC
   Delaware     100  
ACG Acquisition 1176 LLC
   Delaware     100  
0179 Statutory Trust
   Connecticut     100  
ACG Acquisition 30277 LLC
   Delaware     100  
Bellevue Aircraft Leasing Limited
   Ireland     100  
Rainier Aircraft Leasing (Ireland) Limited
   Ireland     100  
ACG Acquisition (Cyprus) Ltd.
   Cyprus     100  
ACG Acquisition (Bermuda) III Ltd.
   Bermuda     100  
ACG 2006-ECA LLC
   Delaware     100  
ACG Acquisition 2692 LLC
   Delaware     100  
ACG ECA-2006 Ireland Limited
   Ireland     100  
ACG Acquisition 2987 LLC
   Delaware     100  
ACG Acquisition Aruba NV
   Aruba     100  
Bellevue Coastal Leasing LLC
   Washington     100  
ACG Capital Partners Ireland Limited
   Ireland     100  
ACG Acquisition 30288 LLC
   Delaware     100  
ACGCP Acquisition 979 LLC
   Delaware     100  
ACG Trust 2009-1 Holding LLC
   Delaware     100  
ACG Funding Trust 2009-1
   Delaware     100  
ACG Acquisition 29677 LLC
   Delaware     100  
ACG Acquisition 4913 LLC
   Delaware     100  
ACG Acquisition 4941 LLC
   Delaware     100  
ACG Acquisition 4942 LLC
   Delaware     100  
ACG Acquisition 4891 LLC
   Delaware     100  
ACG Acquisition 5047 LLC
   Delaware     100  
ACG Acquisition 5048 LLC
   Delaware     100  
ACG Acquisition 5063 LLC
   Delaware     100  
ACG Acquisition 5136 LLC
   Delaware     100  
ACG Acquisition 38105 LLC
   Delaware     100  
ACG Acquisition 38106 LLC
   Delaware     100  
ACG Acquisition 4864 LLC
   Delaware     100  
ACG Acquisition 4883 LLC
   Delaware     100  
ACG Acquisition 5096 LLC
   Delaware     100  
ACG Acquisition 5193 LLC
   Delaware     100  
ACG Acquisition 5278 LLC
   Delaware     100  
ACG Acquisition 5299 LLC
   Delaware     100  
ACG Acquisition 38884 LLC
   Delaware     100  
ACG Acquisition 38885 LLC
   Delaware     100  
ACG Acquisition 39891 LLC
   Delaware     100  
ACG Acquisition 40547 LLC
   Delaware     100  
0168 Statutory Trust
   Connecticut     100  
ACG ECA Ireland Limited
   Ireland     100  
ACG Bermuda Leasing Limited
   Bermuda     100  
ACG Acquisition BR 2012-10A LLC
   Delaware     100  
ACG Acquisition BR 2012-10B LLC
   Delaware     100  
ACG Acquisition BR 2012-11 LLC
   Delaware     100  
ACG Acquisition BR 2013-02 LLC
   Delaware     100  
Pacific Asset Funding, LLC
   Delaware     100  
Pacific Life & Annuity Services, Inc.
   Colorado     100  
Bella Sera Holdings, LLC
   Delaware     100  
Pacific Life Re Holdings LLC
   Delaware     100  
Pacific Life Re Holdings Limited
     U.K.       100  
Pacific Life Re Services Limited
     U.K.       100  
Pacific Life Re Limited
     U.K.       100  
Pacific Alliance Reinsurance Ltd.
   Bermuda     100  
Pacific Life Reinsurance (Barbados) Limited
   Barbados     100  
Pacific Alliance Excess Reinsurance Company
   Vermont     100  
 
# = Abbreviated structure

 

Item 27. Number of Contractholders

             
Pacific Value Edge – Approximately  
 
3,812   Qualified
   
 
1,308   Non Qualified

Item 28. Indemnification

  (a)   The Distribution Agreement between Pacific Life Insurance Company, Pacific Life & Annuity Company (collectively referred to as “Pacific Life”) and Pacific Select Distributors, Inc. (PSD) provides substantially as follows:

    Pacific Life shall indemnify and hold harmless PSD and PSD’s officers, directors, agents, controlling persons, employees, subsidiaries and affiliates for all attorneys’ fees, litigation expenses, costs, losses, claims, judgments, settlements, fines, penalties, damages, and liabilities incurred as the direct or indirect result of: (i) negligent, dishonest, fraudulent, unlawful, or criminal acts, statements, or omissions by Pacific Life or its employees, agents, officers, or directors; (ii) Pacific Life’s breach of this Agreement; (iii) Pacific Life’s failure to comply with any statute, rule, or regulation; (iv) a claim or dispute between Pacific Life and a Broker/Dealer (including its Representatives) and/or a Contract owner. Pacific Life shall not be required to indemnify or hold harmless PSD for expenses, losses, claims, damages, or liabilities that result from PSD’s misfeasance, bad faith, negligence, willful misconduct or wrongful act.

    PSD shall indemnify and hold harmless Pacific Life and Pacific Life’s officers, directors, agents, controlling persons, employees, subsidiaries and affiliates for all attorneys’ fees, litigation expenses, costs, losses, claims, judgments, settlements, fines, penalties, damages and liabilities incurred as the direct or indirect result of: (i) PSD’s breach of this Agreement; and/or (ii) PSD’s failure to comply with any statute, rule, or regulation. PSD shall not be required to indemnify or hold harmless Pacific Life for expenses, losses, claims, damages, or liabilities that have resulted from Pacific Life’s willful misfeasance, bad faith, negligence, willful misconduct or wrongful act.

  (b)   The Form of Selling Agreement between Pacific Life, Pacific Select Distributors, Inc. (PSD) and Various Broker-Dealers and Agency (Selling Entities) provides substantially as follows:

    Pacific Life and PSD agree to indemnify and hold harmless Selling Entities, their officers, directors, agents and employees, against any and all losses, claims, damages, or liabilities to which they may become subject under the Securities Act, the Exchange Act, the Investment Company Act of 1940, or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact required to be stated or necessary to make the statements made not misleading in the registration statement for the Contracts or for the shares of Pacific Select Fund (the “Fund”) filed pursuant to the Securities Act, or any prospectus included as a part thereof, as from time to time amended and supplemented, or in any advertisement or sales literature provided by Pacific Life and PSD.

II-5

 

Selling Entities agree to, jointly and severally, hold harmless and indemnify Pacific Life and PSD and any of their respective affiliates, employees, officers, agents and directors (collectively, “Indemnified Persons”) against any and all claims, liabilities and expenses (including, without limitation, losses occasioned by any rescission of any Contract pursuant to a “free look” provision or by any return of initial purchase payment in connection with an incomplete application), including, without limitation, reasonable attorneys’ fees and expenses and any loss attributable to the investment experience under a Contract, that any Indemnified Person may incur from liabilities resulting or arising out of or based upon (a) any untrue or alleged untrue statement other than statements contained in the registration statement or prospectus relating to any Contract, (b) (i) any inaccurate or misleading, or allegedly inaccurate or misleading sales material used in connection with any marketing or solicitation relating to any Contract, other than sales material provided preprinted by Pacific Life or PSD, and (ii) any use of any sales material that either has not been specifically approved in writing by Pacific Life or PSD or that, although previously approved in writing by Pacific Life or PSD, has been disapproved, in writing by either of them, for further use, or (c) any act or omission of a Subagent, director, officer or employee of Selling Entities, including, without limitation, any failure of Selling Entities or any Subagent to be registered as required as a broker/dealer under the 1934 Act, or licensed in accordance with the rules of any applicable SRO or insurance regulator.

II-6

 

Item 29. Principal Underwriters

  (a)   PSD also acts as principal underwriter for Pacific Select Variable Annuity Separate Account, Separate Account B, Pacific Corinthian Variable Separate Account, Pacific Select Separate Account, Pacific Select Exec Separate Account, COLI Separate Account, COLI II Separate Account, COLI III Separate Account, COLI IV Separate Account, COLI V Separate Account, Separate Account A of Pacific Life & Annuity Company, Pacific Select Exec Separate Account of Pacific Life & Annuity Company, Separate Account I of Pacific Life Insurance Company, Separate Account I of Pacific Life & Annuity Company.

  (b)   For information regarding PSD, reference is made to Form B-D, SEC File No. 8-15264, which is herein incorporated by reference.

  (c)   PSD retains no compensation or net discounts or commissions from the Registrant.

Item 30. Location of Accounts and Records

The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and the rules under that section will be maintained by Pacific Life at 700 Newport Center Drive, Newport Beach, California 92660.

Item 31. Management Services

Not applicable

Item 32. Undertakings

The registrant hereby undertakes:

  (a)   to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in this registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted, unless otherwise permitted.

  (b)   to include either (1) as a part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information, or (3) to deliver a Statement of Additional Information with the Prospectus.

  (c)   to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request.

II-7

 

Additional Representations

     (a) The Registrant and its Depositor are relying upon American Council of Life Insurance, SEC No-Action Letter, SEC Ref. No. 1P-6-88 (November 28, 1988) with respect to annuity contracts offered as funding vehicles for retirement plans meeting the requirements of Section 403(b) of the Internal Revenue Code, and the provisions of paragraphs (1)-(4) of this letter have been complied with.

     (b) The Registrant and its Depositor are relying upon Rule 6c-7 of the Investment Company Act of 1940 with respect to annuity contracts offered as funding vehicles to participants in the Texas Optional Retirement Program, and the provisions of Paragraphs (a)-(d) of the Rule have been complied with.

     (c) REPRESENTATION PURSUANT TO SECTION 26(f) OF THE INVESTMENT COMPANY ACT OF 1940: Pacific Life Insurance Company and Registrant represent that the fees and charges to be deducted under the Variable Annuity Contract (“Contract”) described in the prospectus contained in this registration statement are, in the aggregate, reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed in connection with the Contract.

II-8

 

SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has caused this Post-Effective Amendment No. 11 to the Registration Statement on Form N-4 to be signed on its behalf by the undersigned thereunto duly authorized in the City of Newport Beach, and the State of California on this 24th day of April, 2012.

         
    SEPARATE ACCOUNT A
        (Registrant)
         
    By:   PACIFIC LIFE INSURANCE COMPANY
         
    By:    
       
        James T. Morris*
        Director, Chairman and Chief Executive Officer
         
    By:   PACIFIC LIFE INSURANCE COMPANY
(Depositor)
         
    By:    
       
        James T. Morris*
        Director, Chairman and Chief Executive Officer

     Pursuant to the requirements of the Securities Act of 1933, Post-Effective Amendment No. 11 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

         
Signature   Title   Date
 
 
 
James T. Morris*		   Director, Chairman and
Chief Executive Officer 		  April 24, 2012
 
Khanh T. Tran*		   Director and President   April 24, 2012
 
    
 
Adrian S. Griggs*		   Executive Vice President and Chief Financial Officer   April 24, 2012
 
Sharon A. Cheever*		   Director, Senior Vice President and General
Counsel 		  April 24, 2012
 
Jane M. Guon*		   Director, Vice President and Secretary   April 24, 2012
 
Edward R. Byrd*		   Senior Vice President and
Chief Accounting Officer 		  April 24, 2012
 
Brian D. Klemens*		   Vice President and Controller   April 24, 2012
 
Dewey P. Bushaw*		   Executive Vice President   April 24, 2012
 
Denis P. Kalscheur*		   Senior Vice President and Treasurer   April 24, 2012
             
*By:   /s/   SHARON A. CHEEVER       April 24, 2012
   
       
    Sharon A. Cheever
as attorney-in-fact		        

(Powers of Attorney are contained in this Registration Statement as Exhibit 13).

  EX-99.8(I)(1) 2 a59719bexv99w8xiyx1y.htm EXHIBIT 8(I)(1) exv99w8xiyx1y

AMENDMENT NO. 1
PARTICIPATION AGREEMENT
     The Participation Agreement (the “Agreement”), dated as of December 1, 2008, by and among AIM Variable Insurance Funds (“AVIF”), Invesco Aim Distributors, Inc., a Delaware corporation (“INVESCO AIM”), Pacific Life Insurance Company, a Nebraska life insurance company (“LIFE COMPANY”), on its behalf and on behalf of certain segregated asset accounts (“Accounts”) of the Company, and Pacific Select Distributors, Inc., an affiliate of LIFE COMPANY and the principal underwriter of the contract (“UNDERWRITER”). The parties now desire to further amend the Agreement by this amendment (the “Amendment”) which shall take effect May 1, 2012.
     WHEREAS, effective April 30, 2010, AIM Variable Insurance Funds was renamed AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Invesco Aim Distributors, Inc. was renamed Invesco Distributors, Inc.
     Except as modified hereby, all other terms and conditions of the Agreement shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement shall have the same meaning in this Amendment.
A M E N D M E N T
     For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows:
1.   All references to AIM Variable Insurance Funds are hereby deleted and replaced with AIM Variable Insurance Funds (Invesco Variable Insurance Funds);
2.   All references to Invesco Aim Distributors, Inc. are hereby deleted and replaced with Invesco Distributors, Inc. and
3.   Schedule A of the Agreement is deleted and replaced in its entirety with the Schedule A attached hereto.
4.   All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original.
[Signature Pages Follow]

 

 

IN WITNESS WHEREOF, the undersigned has caused this Amendment to be executed as of January 20, 2012.
             
        AIM VARIABLE INSURANCE FUNDS
 
            
        (INVESCO VARIABLE INSURANCE FUNDS)
 
            
Attest:
  /s/ Melanie Ringold   By:   /s/ John M. Zerr
Name:
  Melanie Ringold   Name:   John M. Zerr
Title:
  Assistant Secretary   Title:   Senior Vice President
 
            
        INVESCO DISTRIBUTORS, INC.
 
            
Attest:
  /s/ Melanie Ringold   By:   /s/ John S. Cooper
Name:
  Melanie Ringold   Name:   John S. Cooper
Title:
  Assistant Secretary   Title:   President
 
            
        PACIFIC LIFE INSURANCE COMPANY
 
            
Attest:
  /s/ Jane M. Guon   By:   /s/ Jose T. Miscolta
Name:
  Jane M. Guon   Name:   Jose T. Miscolta
Title:
  Corporate Secretary   Title:   Assistant Vice President
 
            
        PACIFIC SELECT DISTRIBUTORS INC.
 
            
Attest:
  /s/ Jane M. Guon   By:   /s/ Adrian S. Griggs
Name:
  Jane M. Goun   Name:   Adrian S. Griggs
Title:
  Corporate Secretary   Title:   Chief Executive Officer

-2-

 

SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
ALL SERIES I SHARES AND SERIES II SHARES OF AIM VARIABLE INSURANCE
FUNDS (INVESCO VARIABLE INSURANCE FUNDS)
SEPARATE ACCOUNTS UTILIZING THE FUNDS
ALL SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACT FUNDED BY THE SEPARATE ACCOUNTS
ALL CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS

EX-99.8(W) 3 a59719bexv99w8xwy.htm EXHIBIT 8(W) exv99w8xwy
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUNDS
FIDELITY DISTRIBUTORS CORPORATION.
and
PACIFIC LIFE INSURANCE COMPANY
     THIS AGREEMENT, made and entered into as of the 4th day of February, 2005 by and among PACIFIC LIFE INSURANCE COMPANY, (hereinafter the “Company”), a California insurance company, on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A hereto as may be amended from time to time (each such account hereinafter referred to as the “Account”); and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the “Underwriter”), a Massachusetts corporation; and each of VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II and VARIABLE INSURANCE PRODUCTS FUND III, each an unincorporated business trust organized under the laws of the Commonwealth of Massachusetts (each referred to hereinafter as the “Fund”).
RECITALS
     WHEREAS, each Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance policies and variable annuity contracts (collectively, the “Variable Insurance Products”) to be offered by insurance companies which have entered into participation agreements with the Fund and the Underwriter (hereinafter “Participating Insurance Companies”); and
     WHEREAS, the beneficial interest in each Fund is divided into several series of shares, each representing the interest in a particular managed portfolio of securities and other assets, any one or more of which may be made available under this Agreement, as may be amended from time to time by mutual agreement of the parties hereto (each such series hereinafter referred to as a “Portfolio”); and
     WHEREAS, each Fund has obtained an order from the Securities and Exchange Commission, dated October 15, 1985 (File No. 812-6102) or September 17, 1986 (File No. 812-

 

 

6422), granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the “1940 Act”) and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (hereinafter the “Shared Funding Exemptive Order”); and
     WHEREAS, each Fund is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (hereinafter the “1933 Act”); and
     WHEREAS, Fidelity Management & Research Company (“the Adviser”) is duly registered as an investment adviser under the federal Investment Advisers Act of 1940 and any applicable state securities law; and
     WHEREAS, the variable life insurance and/or variable annuity products identified on Schedule A hereto (“Contracts”) have been or will be registered by the Company under the 1933 Act, unless such Contracts are exempt from registration thereunder; and
     WHEREAS, each Account is a duly organized, validly existing segregated asset account, established by-the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to the aforesaid Contracts; and
     WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act, unless such Account is exempt from registration thereunder; and
     WHEREAS, the Underwriter is registered as a broker dealer with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended, (hereinafter the “1934 Act”), and is a member in good standing of the National Association of Securities Dealers, Inc. (hereinafter “NASD”); and
     WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Portfolios on behalf of each Account to fund certain of the aforesaid Contracts and the Underwriter is authorized to sell such shares to each Account at net asset value;

 

 

AGREEMENT
     NOW, THEREFORE, in consideration of their mutual promises, the Company, the Underwriter, and each Fund agree as follows:
ARTICLE A. Form of Agreement
     Although the parties have executed this Agreement in the form of a Master Participation Agreement for administrative convenience, this Agreement shall create a separate participation agreement for each Fund, as though the Company, and the Underwriter had executed a separate, identical form of participation agreement with each Fund. No rights, responsibilities or liabilities of any Fund shall be attributed to any other Fund.
ARTICLE I. Sale of Fund Shares
     1.1. The Underwriter agrees to sell to the Company those shares of the Fund which each Account orders, executing such orders on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the order for the shares of the Fund. For purposes of this Section 1.1, the Company shall be the designee of the Fund for receipt of such orders from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such order by 9:30 a.m. Boston time on the next following Business Day. Beginning no later than three months of the effective date of this Agreement, the Company agrees that all orders for the purchase and redemption of Fund shares on behalf of the Accounts will be placed by the Company with the Funds or their transfer agent by electronic transmission. “Business Day” shall mean any day on which the New York Stock Exchange is open for trading and on which the Fund calculates its net asset value pursuant to the rules of the Securities and Exchange Commission.
     1.2. The Fund agrees to make its shares available indefinitely for purchase at the applicable net asset value per share by the Company and its Accounts on those days on which the Fund calculates its net asset value pursuant to rules of the Securities and Exchange Commission and the Fund shall use reasonable efforts to calculate such net asset value on each day which the New York Stock Exchange is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter the “Board”) may refuse to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio.
     1.3. The Fund and the Underwriter agree that shares of the Fund will be sold only to Participating Insurance Companies and their separate accounts. No shares of any Portfolio will be sold to the general public.

 

 

     1.4. The Fund and the Underwriter will not sell Fund shares to any insurance company or separate account unless an agreement containing provisions substantially the same as Articles I, III, V, VII and Section 2.5 of Article II of this Agreement is in effect to govern such sales.
     1.5. The Fund agrees to redeem for cash, on the Company’s request, any full or fractional shares of each Portfolio held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt by the Fund or its designee of the request for redemption in accordance with Section 22(c) of the 1940 Act and the rules thereunder and the procedures and policies of the Fund as described in the then current prospectus. For purposes of this Section 1.5, the Company shall be the designee of the Fund for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such request for redemption on the next following Business Day.
     1.6. The Company agrees that purchases and redemptions of Portfolio shares offered by the then current prospectus of the Fund shall be made in accordance with the provisions of such prospectus. Without limiting the foregoing, the Company represents and warrants that:
     (a) all purchase and redemption orders it provides under sections 1.1 and 1.5, shall result solely from Contract Owner transactions fully received and recorded by the Company before the time as of which each applicable VIP Portfolio net asset value was calculated;
     (b) it will use its best efforts to discourage excessive or disruptive trading activity by third parties with power to act on behalf of multiple contract owners and by individual contract owners;
     (c) any annuity contract forms or variable life insurance policy forms not in use at the time of execution of this Agreement, but added to in the future via amendment of Schedule A hereto, will contain language reserving to the Company the right to refuse to accept instructions from persons that engage in other excessive or disruptive trading activity.
     1.7. The Company shall pay for Fund shares on the next Business Day after an order to purchase Fund shares is made in accordance with the provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund.
     1.8. Issuance and transfer of the Fund’s shares will be by book entry only. Stock certificates will not be issued to the Company or any Account. Shares ordered from the Fund will be recorded in an appropriate title for each Account or the appropriate subaccount of each Account.
     1.9. The Fund shall furnish same day notice (by wire or telephone, followed by written confirmation) to the Company of any income, dividends or capital gain distributions payable on the Fund’s shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on the Portfolio shares in additional shares of that Portfolio. The Company reserves the right to revoke this election and to receive all such income

 

 

dividends and capital gain distributions in cash. The Fund shall promptly notify the Company of the number of shares so issued as payment of such dividends and distributions.
     1.10. The Fund shall make the net asset value per share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per share is calculated (normally by 6:30 p.m. Boston time) and shall use its best efforts to make such net asset value per share available by 7:00 p.m. Boston time.
ARTICLE II. Representations and Warranties
     2.1. The Company represents and warrants that the Contracts are or will be registered under the 1933 Act or are exempt from registration thereunder and that the Company will perform its obligations with respect to the Contracts will be issued and sold in compliance in all material respects with all applicable Federal and State laws and that the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. The Company further represents and warrants that it is an insurance company duly organized and in good standing under applicable law and that it has legally and validly established each Account prior to any issuance or sale thereof as a segregated asset account under the State of California insurance laws and that each Account is either registered or exempt from registration as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts.
     2.2. The Fund represents and warrants that Fund shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with the laws of the State of California and all applicable federal and state securities laws and that the Fund is and shall remain registered under the 1940 Act. The Fund shall amend the Registration Statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Fund shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Fund or the Underwriter.
     2.3. The Fund represents that the Fund and each Portfolio is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended, (the “Code”) and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future.
     2.4 The Company represents that the Contracts are currently treated as endowment, life insurance or annuity insurance contracts, under applicable provisions of the Code and that it will make every effort to maintain such treatment and that it will notify the Fund and the Underwriter immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future.

 

 

     2.5 (a) With respect to Initial Class shares, the Fund currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-l under the 1940 Act or otherwise, although it may make such payments in the future. The Fund has adopted a “no fee” or “defensive” Rule 12b-l Plan under which it makes no payments for distribution expenses. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-l, the Fund undertakes to have a board of trustees, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b-l to finance distribution expenses.
          (b) With respect to Service Class shares and Service Class 2 shares, the Fund has adopted Rule 12b-l Plans under which it makes payments to finance distribution expenses. The Fund represents and warrants that it has a board of trustees, a majority of whom are not interested persons of the Fund, which has formulated and approved each of its Rule 12b-l Plans to finance distribution expenses of the Fund and that any changes to the Fund’s Rule 12b-l Plans will be approved by a similarly constituted board of trustees.
     2.6 The Fund makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) complies with the insurance laws or regulations of the various states except that the Fund represents that the Fund’s investment policies, fees and expenses are and shall at all times remain in compliance with the laws of the State of California and the Fund and the Underwriter represent that their respective operations are and shall at all times remain in material compliance with the laws of the State of California to the extent required to perform this Agreement.
     2.7. The Underwriter represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. The Underwriter further represents that it will sell and distribute the Fund shares in accordance with the laws of the Commonwealth of Massachusetts and all applicable state and federal securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
     2.8 The Fund represents that it is lawfully organized and validly existing under the laws of the Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act.
     2.9. The Underwriter represents and warrants that the Adviser is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that the Adviser shall perform its obligations for the Fund in compliance in all material respects with the laws of the Commonwealth of Massachusetts and any applicable state and federal securities laws.
     2.10 The Fund-and the Underwriter represent and warrant that all of their directors, officers, employees, investment advisers, and other individuals/entities dealing with the money and/or securities of the Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(l) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company.

 

 

     2.11 The Company represents and warrants that all of its directors, officers, employees, investment advisers, and other individuals/entities employed or controlled by the Company dealing with the money and/or securities of the Fund are covered by a blanket fidelity bond or similar coverage in an amount not less than $5 million. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company. The Company agrees that any amounts received under such bond in connection with claims that arise from the arrangements described in this Agreement will be held by the Company for the benefit of the Fund. The Company agrees to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, and agrees to notify the Fund and the Underwriter in the event that such coverage no longer applies. The Company agrees to exercise its best efforts to ensure that other individuals/entities not employed or controlled by the Company and dealing with the money and/or securities of the Fund maintain a similar bond or coverage in a reasonable amount.
     ARTICLE III. Prospectuses and Proxy Statements: Voting
     3.1. The Underwriter shall provide the Company with as many printed copies of the Fund’s current prospectus and Statement of Additional Information as the Company may reasonably request. If requested by the Company in lieu thereof, the Fund shall provide such documentation (including a final copy of the new prospectus as set in type, in pdf format, or on a diskette, at the Fund’s expense), and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus and/or Statement of Additional Information for the Fund is amended during the year) to have the prospectus, private offering memorandum or other disclosure document (“Disclosure Document”) for the Contracts and the Fund’s prospectus printed together in one document, and to have the Statement of Additional Information for the Fund and the Statement of Additional Information for the Contracts printed together in one document. Alternatively, the Company may print the Fund’s prospectus and/or its Statement of Additional Information in combination with other fund companies’ prospectuses and statements of additional information. Except as provided in the following three sentences, all expenses of printing and distributing Fund prospectuses and Statements of Additional Information shall be the expense of the Company. For prospectuses and Statements of Additional Information provided by the Company to its existing owners of Contracts in order to update disclosure annually as required by the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the Company chooses to receive camera-ready film in lieu of receiving printed copies of the Fund’s prospectus, the Fund will reimburse the Company in an amount equal to the product of A and B where A is the number of such prospectuses distributed to owners of the Contracts, and B is the Fund’s per unit cost of typesetting and printing the Fund’s prospectus. The same procedures shall be followed with respect to the Fund’s Statement of Additional Information. In the event that Portfolios of the Fund are made available in Contracts that were available for purchase before the date of this Agreement, the quantities above shall be limited to owners of Contracts issued after the date of this Agreement.
     The Company agrees to provide the Fund or its designee with such information as may be reasonably requested by the Fund to assure that the Fund’s expenses do not include the

 

 

cost of printing any prospectuses or Statements of Additional Information other than those actually distributed to existing owners of the Contracts.
     3.2. The Fund’s prospectus shall state that the Statement of Additional Information for the Fund is available from the Underwriter or the Company (or in the Fund’s discretion, the Prospectus shall state that such Statement is available from the Fund), and the Underwriter (or the Fund), at its expense, shall print, or otherwise reproduce, and provide sufficient copies of the Statement of Additional Information free of charge to the Company for any owner of a Contract who requests such Statement.
     3.3. The Fund, at its expense, shall provide the Company with copies of its proxy statements, reports to shareholders, and other communications (except for prospectuses and Statements of Additional Information, which are covered in Section 3.1) to shareholders in such quantity as the Company shall reasonably require for distributing to Contract owners who have allocated assets to subaccounts invested in the Funds.
     3.4. If and to the extent required by law the Company shall:
  (i)   solicit voting instructions from Contract owners;
 
  (ii)   vote the Fund shares in accordance with instructions received from Contract owners; and
 
  (iii)   vote Fund shares for which no instructions have been received in a particular separate account in the same proportion as Fund shares of such portfolio for which instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners or to the extent otherwise required by law. The Company reserves the right to vote Fund shares held in any segregated asset account in its own right, to the extent permitted by law. Participating Insurance Companies shall be responsible for assuring that each of their separate accounts participating in the Fund calculates voting privileges in a manner consistent with the standards set forth on Schedule B attached hereto.
     3.5. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Fund will either provide for annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in accordance with the Securities and Exchange Commission’s interpretation of the requirements of Section 16(a) with respect to periodic elections of directors or trustees and with whatever rules the Commission may promulgate with respect thereto.

 

 

ARTICLE IV. Sales Material and Information
     4.1. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee, each piece of sales literature or other promotional material that the Company develops or distributes and in which the Fund, the Adviser-or the Underwriter is named, at least fifteen Business Days prior to its use. No such material shall be used if the Fund or its designee reasonably objects to such use within fifteen Business Days after receipt of such material.
     4.2. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Fund shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or its designee or by the Underwriter, except with the written permission of the Fund or the Underwriter or the designee of such party.
     4.3. The Fund, Underwriter, or their designees shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company and/or its separate account(s), is named or its logo used at least fifteen Business Days prior to its use. No such material shall be used if the Company or its designee reasonably objects to such use within fifteen Business Days after receipt of such material. Except as otherwise expressly provided in this Agreement, neither the Fund nor any of its affiliates shall use any trademark, trade name, service mark or logo of the Company or the Adviser, or any of their affiliates, or any variation of such trademark, trade name, service mark or logo, without the prior written consent of the Company or the Adviser, as applicable, the granting of which shall be at that party’s sole option and subject to such quality control and other specifications and requirements as the Company or Adviser, as applicable, shall specify
     4.4. The Fund and the Underwriter shall not give any information or make any representations on behalf of the Company or concerning the Company, each Account, or the Contracts other than the information or representations contained in a registration statement, prospectus (which shall include an offering memorandum, if any) or Statement of Additional Information for the Contracts, as such registration statement, prospectus or Statement of Additional Information may be amended or supplemented from time to time, or in published reports for each Account which are in the public domain or approved by the Company for distribution to Contract owners, or in sales literature or other promotional material approved by the Company or its designee, except with the written permission of the Company.
     4.5. The Fund will provide to the Company at least one complete copy of all registration statements, prospectuses, Statements of Additional Information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Fund or its shares, contemporaneously with the filing of such document with the Securities and Exchange Commission or other regulatory authorities.

 

 

     4.6. The Company will provide to the Fund at least one complete copy of all registration statements, prospectuses or offering memoranda, Statements of Additional Information, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no action letters, and all amendments to any of the above, that relate to the Contracts or each Account, contemporaneously with the filing of such document with the SEC or other regulatory authorities or, if a Contract and its associated Account are exempt from registration, at the time such documents are first published.
     4.7. For purposes of this Article IV, the phrase “sales literature or other promotional material” includes, but is not limited to, any of the following that refer to the Fund or any affiliate of the Fund: advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, and registration statements, Disclosure Documents, Statements of Additional Information, shareholder reports, and proxy materials, and any other communications distributed or made generally available with regard to the Fund.
ARTICLE V. Fees and Expenses
     5.1. The Fund and Underwriter shall pay no fee or other compensation to the Company under this agreement, except that if the Fund or any Portfolio adopts and implements a plan pursuant to Rule 12b-l to finance distribution expenses, then the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing and such payments will be made out of existing fees otherwise payable to the Underwriter, past profits of the Underwriter or other resources available to the Underwriter. No such payments shall be made directly by the Fund.
     5.2. All expenses incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all shares of the Fund are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with applicable state laws prior to their sale. The Fund shall bear the expenses for the cost of registration and qualification of the Fund’s shares, preparation and filing of the Fund’s prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders (including the costs of printing a prospectus that constitutes an annual report), the preparation of all statements and notices required by any federal or state law, and all taxes on the issuance or transfer of the Fund’s shares. The Fund or the Underwriter will provide the Company with information concerning the Fund’s expenses to the extent such information is required for the Company to prepare prospectuses or offering memoranda, which information may include a table of fees and related narrative disclosure for use in any prospectus or other

 

 

descriptive document relating to a Contract and the Company is entitled to rely upon any information so provided.
     5.3. The Company shall bear the expenses of distributing the Fund’s prospectus and reports to owners of Contracts issued by the Company. The Fund shall bear the costs of soliciting Fund proxies from Contract owners, including the costs of mailing proxy materials and tabulating proxy voting instructions, not to exceed the costs charged by any service provider engaged by the Fund for this purpose. The Fund and the Underwriter shall not be responsible for the costs of any proxy solicitations other than proxies sponsored by the Fund.
ARTICLE VI. Diversification
     6.1. The Fund will at all times invest money from the Contracts in such a manner as to ensure that the Contracts will be treated as variable contracts under the Code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Fund will at all times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulations. In the event of a breach of this Article VI by the Fund, it will take all reasonable steps (a) to notify Company of such breach and (b) to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
     7.1. The Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts investing in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof.
     7.2. The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are disregarded.

 

 

     7.3. If it is determined by a majority of the Board, or a majority of its disinterested trustees, that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested trustees), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (1), withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another Portfolio of the Fund, or submitting the question whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (2), establishing a new registered management investment company or managed separate account.
     7.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Fund’s election, to withdraw the affected Account’s investment in the Fund and terminate this Agreement with respect to such Account; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Any such withdrawal and termination must take place within six (6) months after the Fund gives written notice that this provision is being implemented, and until the end of that six month period the Underwriter and Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund.
     7.5. If a material irreconcilable conflict arises because a particular state insurance regulator’s decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the affected Account’s investment in the Fund and terminate this Agreement with respect to such Account within six months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested members of the Board. Until the end of the foregoing six month period, the Underwriter and Fund shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund.
     7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of the disinterested members of the Board shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Fund be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially adversely affected by the irreconcilable material conflict. In the event that the Board determines that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will

 

 

withdraw the Account’s investment in the Fund and terminate this Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination, provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested members of the Board.
     7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Shared Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
     8.1. Indemnification By The Company
     8.1 (a). The Company agrees to indemnify and hold harmless the Fund and each trustee of the Board and officers and each person, if any, who controls the Fund within the meaning of Section 15 of the 1933 Act or who is under common control with the Fund, the Underwriter or the Adviser (collectively, the “Indemnified Parties” for purposes of this Section 8.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of, or investment in, the Fund’s shares or the Contracts and:
          (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement, prospectus (which shall include an offering memorandum, if any), or Statement of Additional Information for the Contracts or contained in the Contracts or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund for use in any Registration Statement, prospectus (which shall include an offering memorandum, if any) relating to the Contracts or in the Contracts or sales literature

 

 

or other promotional material (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or
          (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature of the Fund not supplied by the Company, or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund Shares; or
          (iii) arise out of any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement, prospectus, or sales literature or other promotional material of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to the Fund by or on behalf of the Company; or
          (iv) arise as a result of any material failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or
          (v) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof.
     8.1 (b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties under this Agreement or to the Fund, whichever is applicable.
     8.1 (c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company

 

 

will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.
     8.1 (d). The Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Fund Shares or the Contracts or the operation of the Fund.
     8.2. Indemnification by the Underwriter
     8.2(a). The Underwriter agrees to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or is under common control with such party (collectively, the “Indemnified Parties” for purposes of this Section 8.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of, or investment in, the Fund’s shares or the Contracts and:
  (i)   arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement, prospectus, statement of additional information or sales literature of the Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Underwriter, the Adviser or Fund by or on behalf of the Company for use in the registration statement or prospectus for the Fund or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or
 
  (ii)   arise out of or as a result of statements or representations (other than statements or representations contained in the Registration Statement, prospectus (which shall include an offering memorandum, if any), Statement of Additional Information or sales literature or other promotional material for the Contracts not supplied by the Underwriter, Adviser or persons under its control) or wrongful conduct of the Fund, Adviser or Underwriter or persons under their control, with respect to the sale or distribution of the Contracts or Fund shares; or
 
  (iii)   arise out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, prospectus (which shall

 

 

      include an offering memorandum, if any), Statement of Additional Information or sales literature or other promotional material covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund; or
 
  (iv)   arise as a result of any material failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification requirements specified in Article VI of this Agreement or the representations or warranties of the Fund as stated herein); or
 
  (v)   arise out of or result from any material breach of any representation and/or warranty made by the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof.
     8.2(b). The Underwriter shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations and duties under this Agreement or to the Company or the Account, whichever is applicable.
     8.2(c). The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. The Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.

 

 

     8.2(d). The Company agrees promptly to notify the Underwriter of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of each Account.
     8.3. Indemnification By the Fund
     8.3(a). The Fund agrees to indemnify and hold harmless the Company, and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or is under common control with such party (collectively, the “Indemnified Parties” for purposes of this Section 8.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Fund) or litigation (including legal and other expenses) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, are related to the operations of the Fund and:
  (i)   arise as a result of any material failure by the Fund to provide the services and furnish the materials under the terms of this Agreement (including a material failure, to comply with the diversification requirements specified in Article VI of this Agreement); or
 
  (ii)   arise out of or result from any material breach of any representation and/or warranty made by the Fund in this Agreement or arise out of or result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c) hereof.
     8.3(b). The Fund shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party’s willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations and duties under this Agreement or to the Company, the Fund, the Underwriter or each Account, whichever is applicable.
     8.3(c). The Fund shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Fund of any such claim shall not relieve the Fund from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Fund will be entitled to participate, at its own expense, in the defense thereof. The Fund also shall be entitled to assume the defense thereof,

 

 

with counsel satisfactory to the party named in the action. After notice from the Fund to such party of the Fund’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Fund will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.
     8.3(d). The Company and the Underwriter agree promptly to notify the Fund of the commencement of any litigation or proceedings against it or any of its respective officers or directors in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of either Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
     9.1. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts.
     9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the Securities and Exchange Commission may grant (including, but not limited to, the Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
     10.1. This Agreement shall continue in full force and effect until the first to occur of:
  (a)   termination by any party for any reason by sixty (60) days advance written notice delivered to the other parties; or
 
  (b)   termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio based upon the Company’s determination that shares of such Portfolio are not reasonably available to meet the requirements of the Contracts; or
 
  (c)   termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event any of the Portfolio’s shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or
 
  (d)   termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event that such Portfolio ceases to qualify

 

 

      as a Regulated Investment Company under Subchapter M of the Code or under any successor or similar provision, or if the Company reasonably believes that the Fund may fail to so qualify; or
 
  (e)   termination by the Company by written notice to the Fund and the Underwriter with respect to any Portfolio in the event that such Portfolio fails to meet the diversification requirements specified in Article VI hereof; or
 
  (f)   termination by the Fund or the Underwriter by written notice to the Company, upon a determination, in their sole judgment exercised in good faith, that the Company and/or its affiliated companies has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or
 
  (g)   termination by the Company by written notice to the Fund and, the Underwriter, if the Company shall determine, in its sole judgment exercised in good faith, that the Fund, the Underwriter, or the Adviser has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or
 
  (h)   termination by the Company upon any substitution of the shares of another investment company or series thereof for shares of a Portfolio of the Fund in accordance with the terms of the Contracts, provided that the Company has given at least forty-five days’ prior written notice to the Adviser and the Fund of the date of substitution; or
 
  (i)   termination by the Fund, Underwriter, or Adviser in the event that formal administrative proceedings are instituted against the Company by the NASD, the SEC, the Insurance Commissioner or like official of any state or any other regulatory body regarding the Company’s duties under this Agreement or related to the sale of the Contracts, the operation of any Account, or the purchase of the Fund shares; provided, however, that the Fund, Underwriter, or Adviser determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Company to perform its obligations under this Agreement; or
 
  (j)   termination by the Company in the event that formal administrative proceedings are instituted against the Fund, Underwriter, or Adviser by the NASD, the SEC, or any state securities or insurance department or any other regulatory body; provided, however, that the Company determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Fund, Underwriter, or Adviser to perform its obligations under this Agreement.

 

 

     10.2. Notwithstanding any termination of this Agreement, the Fund and the Underwriter shall at the option of the Company, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as “Existing Contracts”). Specifically, without limitation, the owners of the Existing Contracts shall be permitted to retain investments in the Fund, reallocate investments in the Fund, redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.2 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement.
     10.3. The provisions of Articles II (Representations and Warranties), VIII (Indemnification), IX (Applicable Law) and XII (Miscellaneous) shall survive termination of this Agreement. In addition, all other applicable provisions of this Agreement shall survive termination as long as shares of the Fund are held on behalf of Contract owners in accordance with section 10.2, except that the Fund and Underwriter shall have no further obligation to make Fund shares available in Contracts issued after termination.
     10.4. The Company shall not redeem Fund shares attributable to the Contracts (as opposed to Fund shares attributable to the Company’s assets held in the Account) except (i) as necessary to implement Contract Owner initiated or approved transactions, or (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a “Legally Required Redemption”) or (iii) pursuant to the terms of a substitution order issued by the SEC, or as otherwise permitted by the SEC, pursuant to Section 26(c) of the 1940 Act.. Except in cases where permitted under the terms of the Contracts, the Company shall not prevent Contract Owners from allocating payments to a Portfolio that was otherwise available under the Contracts without first giving the Fund or the Underwriter 90 days notice of its intention to do so.
ARTICLE XI. Notices
     Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Pacific Life Insurance Company

 

 

700 Newport Center Drive
Newport Beach, California 92660
Attention: General Counsel
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
     12.1 All persons dealing with the Fund must look solely to the property of the Fund for the enforcement of any claims against the Fund as neither the Board, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Fund.
     12.2 Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information until such time as it may come into the public domain without the express written consent of the affected party.
     12.3 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
     12.4 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument.
     12.5 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.
     12.6 Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. Notwithstanding the generality of the foregoing, each party hereto further agrees to furnish the California Insurance Commissioner, or such other state in which the Company becomes domesticated, with any information or reports in connection with services provided under this Agreement which such Commissioner may request in order to ascertain whether the insurance operations of the Company are being conducted in a manner consistent with the California Insurance Regulations and any other applicable law or regulations.

 

 

     12.7 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws.
     12.8. This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto; provided, however, that the Underwriter may assign this Agreement or any rights or obligations hereunder to any affiliate of or company under common control with the Underwriter, if such assignee is duly licensed and registered to perform the obligations of the Underwriter under this Agreement. The Company shall promptly notify the Fund and the Underwriter of any change in control of the Company.
     12.9. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee copies of the following reports:
  (a)   the Company’s annual statement (prepared under statutory accounting principles) and annual report (prepared under generally accepted accounting principles (“GAAP”), if any), as soon as practical and in any event within 90 days after the end of each fiscal year;
 
  (b)   the Company’s quarterly statements (statutory) (and GAAP, if any), as soon as practical and in any event within 45 days after the end of each quarterly period;
 
  (c)   any financial statement, proxy statement, notice or report of the Company sent to stockholders and/or policyholders, as soon as practical after the delivery thereof to stockholders;
 
  (d)   any registration statement (without exhibits) and financial reports of the Company filed with the Securities and Exchange Commission or any state insurance regulator, as soon as practical after the filing thereof;
 
  (e)   any other report submitted to the Company by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company, as soon as practical after the receipt thereof.

 

 

     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative.
PACIFICLIFE INSURANCE COMPANY
         
 
  By:                                                               
 
        
 
  Name:                                                               
 
        
 
  Its:                                                               
 
        
 
  By:                                                               
 
        
 
  Name:                                                               
 
        
 
  Its:                                                               
VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND II, and
VARIABLE INSURANCE PRODUCTS FUND III
         
 
  By:                                                               
 
        
 
  Name:   Christine Reynolds
 
  Their:   Treasurer, SVP
FIDELITY DISTRIBUTORS CORPORATION
         
 
  By:                                                               
 
        
 
  Name:   Don Holborn
 
  Its:   Executive Vice President

 

 

Schedule A
Separate Accounts and Associated Contracts
         
Name of Separate Account and
   Policy Form Numbers of Contracts    
Date Established by Board of Directors
   Funded By Separate Account    
 
        
Pacific Select Exec Separate Account
   Pacific Select Exec   88 -52
 
        
 
   Pacific Select Choice   93.55
Established 5/12/1988
   Pacific Select Estate Preserver   96-56
 
   Pacific Select Estate Preserver II   97-56
 
   Pacific Select Estate Preserver III   0056
 
   Pacific Select Estate Preserver IV   0057
 
   Pacific Select Estate Maximizer   97-50
 
   Pacific Select Estate Maximizer   97-50J
 
   Pacific Select Exec II   98-52
 
   M’s Versatile Product   98-52M
 
   Pacific Select Estate Preserver V   PS01SP5
 
   Pacific Select Performer 500   P03500
 
   Pacific Select Exec II   P04SEII
 
   M’s Versatile Product   P04MVP
 
   M’s Versatile Product SL   P03S5M
 
        
Pacific COLI
   Custom COLI 92-54    
Established 7/17/1992
        
 
        
COLI II
   Custom COLI II 98-42    
Established 10/12/1998
        
 
        
COLI III
   Custom COLI III 98-43    
Established 10/12/1998
        

 

 

SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the handling of proxies relating to the Fund by the Underwriter, the Fund and the Company. The defined terms herein shall have the meanings assigned in the Participation Agreement except that the term “Company” shall also include the department or third party assigned by the Insurance Company to perform the steps delineated below.
1.   The number of proxy proposals is given to the Company by the Underwriter as early as possible before the date set by the Fund for the shareholder meeting to facilitate the establishment of tabulation procedures. At this time the Underwriter will inform the Company of the Record, Mailing and Meeting dates. This will be done verbally approximately two months before meeting.
 
2.   Promptly after the Record Date, the Company will perform a “tape run”, or other activity, which will generate the names, addresses and number of units which are attributed to each contractowner/policyholder (the “Customer”) as of the Record Date. Allowance should be made for account adjustments made after this date that could affect the status of the Customers’ accounts as of the Record Date.
 
    Note: The number of proxy statements is determined by the activities described in Step #2. The Company will use its best efforts to call in the number of Customers to Fidelity, as soon as possible, but no later than two weeks after the Record Date.
 
3.   The Fund’s Annual Report no longer needs to be sent to each Customer by the Company either before or together with the Customers’ receipt of a proxy statement. Underwriter will provide the last Annual Report to the Company pursuant to the terms of Section 3.3 of the Agreement to which this Schedule relates.
 
4.   The text and format for the Voting Instruction Cards (“Cards” or “Card”) is provided to the Company by the Fund. The Company, at its expense, shall produce and personalize the Voting Instruction Cards. The Legal Department of the Underwriter or its affiliate (“Fidelity Legal”) must approve the Card before it is printed. Allow approximately 2-4 business days for printing information on the Cards. Information commonly found on the Cards includes:
  a.   name (legal name as found on account registration)
 
  b.   address
 
  c.   Fund or account number
 
  d.   coding to state number of units
 
  e.   individual Card number for use in tracking and verification of votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to possible uncertainties relating to the proposals.)

 

 

5.   During this time, Fidelity Legal will develop, produce, and the Fund will pay for the Notice of Proxy and the Proxy Statement (one document). Printed and folded notices and statements will be sent to Company for insertion into envelopes (envelopes and return envelopes are provided and paid for by the Insurance Company). Contents of envelope sent to Customers by Company will include:
  a.   Voting Instruction Card(s)
 
  b.   One proxy notice and statement (one document)
 
  c.   return envelope (postage pre-paid by Company) addressed to the Company or its tabulation agent
 
  d.   “urge buckslip” — optional, but recommended. (This is a small, single sheet of paper that requests Customers to vote as quickly as possible and that their vote is important. One copy will be supplied by the Fund.)
 
  e.   cover letter — optional, supplied by Company and reviewed and approved in advance by Fidelity Legal.
6.   The above contents should be received by the Company approximately 3-5 business days before mail date. Individual in charge at Company reviews and approves the contents of the mailing package to ensure correctness and completeness. Copy of this approval sent to Fidelity Legal.
 
7.   Package mailed by the Company.
  *   The Fund must allow at least a 15-day solicitation time to the Company as the shareowner. (A 5-week period is recommended.) Solicitation time is calculated as calendar days from (but not including) the meeting, counting backwards.
8.   Collection and tabulation of Cards begins. Tabulation usually takes place in another department or another vendor depending on process used. An often used procedure is to sort Cards on arrival by proposal into vote categories of all yes, no, or mixed replies, and to begin data entry.
 
    Note: Postmarks are not generally needed. A need for postmark information would be due to an insurance company’s internal procedure and has not been required by Fidelity in the past.
 
9.   Signatures on Card checked against legal name on account registration which was printed on the Card.
 
    Note: For Example, If the account registration is under “Bertram C. Jones, Trustee,” then that is the exact legal name to be printed on the Card and is the signature needed on the Card.

 

 

10.   If Cards are mutilated, or for any reason are illegible or are not signed properly, they are sent back to Customer with an explanatory letter, a new Card and return envelope. The mutilated or illegible Card is disregarded and considered to be not received for purposes of vote tabulation. Any Cards that have “kicked out” (e.g. mutilated, illegible) of the procedure are “hand verified,” i.e., examined as to why they did not complete the system. Any questions on those Cards are usually remedied individually.
 
11.   There are various control procedures used to ensure proper tabulation of votes and accuracy of that tabulation. The most prevalent is to sort the Cards as they first arrive into categories depending upon their vote; an estimate of how the vote is progressing may then be calculated. If the initial estimates and the actual vote do not coincide, then an internal audit of that vote should occur. This may entail a recount.
 
12.   The actual tabulation of votes is done in units which is then converted to shares. (It is very important that the Fund receives the tabulations stated in terms of a percentage and the number of shares.) Fidelity Legal must review and approve tabulation format.
 
13.   Final tabulation in shares is verbally given by the Company to Fidelity Legal on the morning of the meeting not later than 10:00 a.m. Boston time. Fidelity Legal may request an earlier deadline if required to calculate the vote in time for the meeting.
 
14.   A Certification of Mailing and Authorization to Vote Shares will be required from the Company as well as an original copy of the final vote. Fidelity Legal will provide a standard form for each Certification.
 
15.   The Company will be required to box and archive the Cards received from the Customers. In the event that any vote is challenged or if otherwise necessary for legal, regulatory, or accounting purposes, Fidelity Legal will be permitted reasonable access to such Cards.
 
16.   All approvals and “signing-off” may be done orally, but must always be followed up in writing.

 

EX-99.8(W)(1) 4 a59719bexv99w8xwyx1y.htm EXHIBIT 8(W)(1) exv99w8xwyx1y
AMENDMENT TO PARTICIPATION AGREEMENT
among
FIDELITY DISTRIBUTORS CORPORATION,
VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND II,
VARIABLE INSURANCE PRODUCTS FUND III
and
PACIFIC LIFE INSURANCE COMPANY
     The PARTICIPATION AGREEMENT (the “Agreement”), made and entered into on the 4th day of February, 2005 by and among Pacific Life Insurance Company, a Nebraska corporation (the “Company”), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A to the Agreement as may be amended from time to time (each such account hereinafter referred to as the “Account”), and Fidelity Distributors Corporation, a Massachusetts corporation (the “Distributor”), Variable Insurance Products Fund, Variable Insurance Products Fund II and Variable Insurance Products Fund III, each a Massachusetts unincorporated business trust (collectively the “Funds”), as amended in April of 2007, is hereby further amended effective August 10, 2007 as follows:
     1. Variable Insurance Products Fund V is added as a party to the Agreement; and
     2. SCHEDULE A to the Agreement is amended be adding a new Separate Account and corresponding Policy Funded by the Separate Account. The revised Schedule A is attached hereto and incorporated herewith.
                 
    PACIFIC LIFE INSURANCE COMPANY    
 
                
    By its authorized officer:    
 
                
 
      By:   /s/ James T. Morris    
 
          James T. Morris    
 
      Title:   President and Chief Executive Officer    
 
      Date:   August 10, 2007    

 

 

                 
    FIDELITY DISTRIBUTORS CORPORATION    
 
                
 
      By:        
 
         
 
    
 
      Name:        
 
               
 
                
 
      Title:        
 
               
 
                
 
      Date:        
 
               
 
                
    VARIABLE INSURANCE PRODUCTS FUND
VARIABLE INSURANCE PRODUCTS FUND II
VARIABLE INSURANCE PRODUCTS FUND III
VARIABLE INSURANCE PRODUCTS FUND V		    
 
                
 
      By:        
 
               
 
                
 
      Name:        
 
               
 
                
 
      Title:        
 
               
 
                
 
      Date:        
 
               

 

EX-99.8(W)(2) 5 a59719bexv99w8xwyx2y.htm EXHIBIT 8(W)(2) exv99w8xwyx2y
Amendment No. 2 to Participation Agreement
Among
Pacific Life Insurance Company
Variable Insurance Products Funds, and
Fidelity Distributors Corporation
     Pacific Life Insurance Company (the “Company”), on its behalf and on behalf of certain segregated asset accounts (“Accounts”) of the Company, the Variable Insurance Products Fund, Variable Insurance Products Fund II, Variable Insurance Products Fund III, Variable Insurance Products Fund V (collectively referred to as the “Fund”), and Fidelity Distributors Corporation (the “Underwriter”), have previously entered into a Participation Agreement dated February 4, 2005 (the “Agreement”), as amended. The parties now desire to further amend the Agreement by this amendment (the “Amendment”).
     Except as modified hereby, all other terms and conditions of the Agreement, as amended, shall remain in full force and effect. Unless otherwise indicated, the terms defined in the Agreement, as amended, shall have the same meaning in this Amendment.
A M E N D M E N T
     For good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree to amend the Agreement as follows:
1.   Schedule A of the Agreement is deleted and replaced in its entirety with the Schedule A attached hereto.
2.   All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original.
[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the undersigned has caused this Amendment to be executed as of January 2, 2012.
PACIFIC LIFE INSURANCE COMPANY:
             
    By its authorized officer    
 
            
 
  By:   /s/ Jose T. Miscolta    
 
  Name:   Jose T. Miscolta    
 
  Title:   Assistant Vice President    
 
            
 
  Attest:   /s/ Jane m. Guon    
 
      Jane M. Guon    
 
      Corporate Secretary    
VARIABLE INSURANCE PRODUCTS FUNDS,
VARIABLE INSURANCE PRODUCTS FUNDS II,
VARIABLE INSURANCE PRODUCTS FUNDS III,
VARIABLE INSURANCE PRODUCTS FUNDS V:
             
    By its authorized officer    
 
            
 
  By:   /s/ Joseph F. Zambello    
 
  Name:   Joseph F. Zambello    
 
  Title:   Deputy Treasurer    
FIDELITY DISTRIBUTORS CORPORATION:
             
    By its authorized officer    
 
            
 
  By:   /s/ William F. Loehning    
 
  Name:   William F. Loehning    
 
  Title:   Executive Vice President    

2

 

Schedule A
Separate Accounts and Associated Contracts
     
Name of Separate Account and Date Established   Contracts Funded By
by Board of Directors   Separate Account
Separate Account A of Pacific Life Insurance
  Pacific One Select
Company
  Pacific One
September 7, 1994
  Pacific Portfolios
 
  Pacific Portfolios for Chase
 
  Pacific Voyages
 
  Pacific Value
 
  Pacific Value Select
 
  Pacific Value Edge
 
  Pacific Innovations
 
  Pacific Innovations Select
 
  Pacific Journey
 
  Pacific Journey Select
 
  Pacific Odyssey
 
  Pacific Destinations
 
  Pacific Destinations B
 
  Pacific Destinations O-Series
 
    
Pacific Select Variable Annuity Separate Account of
  Pacific Select Variable Annuity
Pacific Life Insurance Company
    
November 30, 1989
    
 
Pacific Select Exec Separate Account of Pacific Life
  Pacific Select Exec
Insurance Company
  Pacific Select Exec II
May 12, 1988
  Pacific Select Exec III
 
  Pacific Select Exec IV
 
  Pacific Select Exec V
 
  Pacific Select Accumulator
 
  M’s Versatile Product
 
  M’s Versatile Product VI
 
  M’s Versatile Product VII
 
  M’s Versatile Product VIII
 
  M’s Versatile Product-Survivorship
 
  M’s Versatile Product-Survivorship II
 
  Pacific Select Estate Preserver
 
  Pacific Select Estate Preserver II
 
  Pacific Select Estate Preserver III
 
  Pacific Select Estate Preserver IV
 
  Pacific Select Estate Preserver V
 
  Pacific Select Estate Preserver VI
 
  Pacific Select Choice
 
  Pacific Select Performer 500
 
  Pacific Select Estate Maximizer
 
  Pacific Prime
 
    

3

 

     
Name of Separate Account and Date Established   Contracts Funded By
by Board of Directors   Separate Account
Pacific COLI Separate Account of Pacific Life
  Custom COLI
Insurance Company
  Custom COLI Rider
July 17, 1992
    
 
    
Pacific COLI Separate Account II of Pacific Life
  Custom COLI II
Insurance Company
  Custom COLI IV
October 12, 1998
    
 
    
Pacific COLI Separate Account III of Pacific Life
  Custom COLI III
Insurance Company
  Custom COLI V
October 12, 1998
    
 
    
Pacific COLI Separate Account IV of Pacific Life
  Custom COLI VI
Insurance Company
  Custom COLI VIII
July 8, 2008
    
 
    
Pacific COLI Separate Account V of Pacific Life
  Custom COLI VII
Insurance Company
  Custom COLI IX
July 8, 2008
    
 
    
Separate Account I of Pacific Life Insurance
  Magnastar
Company
  Magnastar — Survivorship
August 9, 2007
    

4

EX-99.8(X) 6 a59719bexv99w8xxy.htm EXHIBIT 8(X) exv99w8xxy
SERVICE CONTRACT
Variable Insurance Products Fund
Variable Insurance Products Fund II
Variable Insurance Products Fund III
To Fidelity Distributors Corporation:
We desire to enter into a Contract with you for activities in connection with (i) the distribution of shares of the portfolios of Variable Insurance Products Fund, Variable Insurance Products Fund II and Variable Insurance Products Fund III (collectively, the “Funds”) of which you are the principal underwriter as defined in the Investment Company Act of 1940 (the “Act”) and for which you are the agent for the continuous distribution of shares, and (ii) the servicing of holders of shares of the Funds and existing and prospective holders of Variable Products (as defined below).
The terms and conditions of this Contract are as follows:
1. We shall provide distribution and certain shareholder services for our clients who own or are considering the purchase of variable annuity contracts or variable life insurance policies for which shares of the Funds are available as underlying investment options (“Variable Products”), which services may include, without limitation, answering questions about the Funds from owners of Variable Products; receiving and answering correspondence (including requests for prospectuses and statements of additional information for the Funds); performing sub-accounting with respect to Variable Products’ values allocated to the Funds; preparing, printing and distributing reports of values to owners of Variable Products who have contract values allocated to the Funds; printing and distributing prospectuses, statements of additional information, any supplements to prospectuses and statements of additional information, and shareholder reports; preparing, printing and distributing marketing materials for Variable Products; assisting customers in completing applications for Variable Products and selecting underlying mutual fund investment options; preparing, printing and distributing subaccount performance figures for subaccounts investing in Fund shares; and providing other reasonable assistance in connection with the distribution of Fund shares to insurers.
2. We shall provide such office space and equipment, telephone facilities and personnel (which may be all or any part of the space, equipment and facilities currently used in our business, or all or any personnel employed by us) as is necessary or beneficial for us to provide information and services to existing and prospective owners of Variable Products, and to assist you in providing services with respect to Variable Products.
3. We agree to indemnify and hold you, the Funds, and the agents and affiliates of each, harmless from any and all direct or indirect liabilities or losses resulting from requests, directions, actions or inactions, of or by us or our officers, employees or agents in carrying out our obligations under this Service Contract. Such indemnification shall survive the termination of this Contract.
     Neither we nor any of our officers, employees or agents are authorized to make any representation concerning Fund shares except those contained in the registration statement or prospectus for the Fund shares, as such registration statement and prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund, or in sales literature or other promotional material approved by the Fund or its designee or by you, except with the permission of the Fund or you or the designee of either.
4. In consideration of the services and facilities described herein, we shall be entitled to receive, and you shall pay or cause to be paid to us, fees at an annual rate as set forth on the accompanying fee schedule. We understand that the payment of such fees has been authorized pursuant to, and shall be paid in accordance with, a Distribution and Service Plan approved by the Board of Trustees of the applicable Fund, by those Trustees who are not “interested persons” of the Fund (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Distribution and Service Plan or in any agreements related to the Distribution and Service Plan (“Qualified Trustees”), and by shareholders of such class; and that such fees are subject to change during the term of this Contract and shall be paid only so long as this Contract is in effect. We also understand and agree that, notwithstanding anything to the contrary, if at any time payment of all such fees would, in your reasonable determination, conflict with the limitations on sales or service charges set forth in Section 2830(d) of the NASD Conduct Rules, then such fees shall not be paid; provided that in such event each Fund’s Board of Trustees may, but is not required to, establish procedures to pay such fees, or a portion thereof, in such manner and amount as they shall deem appropriate.
         
Combination
   

Page 1 of 3

 

5. We agree to conduct our activities in accordance with any applicable federal or state laws and regulations, including securities laws and any obligation thereunder to disclose to our clients the receipt of fees in connection with their investment in Variable Products.
6. This Contract shall continue in force for one year from the effective date (see below), and thereafter shall continue automatically for successive annual periods, provided such continuance is specifically subject to termination without penalty at any time if a majority of each Fund’s Qualified Trustees or a majority of the outstanding voting securities (as defined in the 1940 Act) of the applicable class vote to terminate or not to continue the Distribution and Service Plan. Either of us also may cancel this Contract without penalty upon telephonic or written notice to the other; and upon telephonic or written notice to us, you may also amend or change any provision of this Contract. This Contract will also terminate automatically in the event of its assignment (as defined in the 1940 Act).
7. All communications to you shall be sent to you at your offices, 82 Devonshire Street, Boston, MA 02109. Any notice to us shall be duly given if mailed or telegraphed to us at the address shown in this Contract.
8. This Contract shall be construed in accordance with the laws of the Commonwealth of Massachusetts.
Very truly yours,
         
By:
                                              
 
        
Name:
                                              
 
        
Title:
                                              
For:   Pacific Select Distributors, Inc.
Name of Qualified Recipient (NASD Member Firm)
         
An affiliate of
  Pacific Life Insurance Company    
 
  Insurance Company Name(s)    
                                                            
Street
                                                            
City       State       Zip Code
Date:                                                                     
FIDELITY DISTRIBUTORS CORPORATION
       
By:
      
 
     
 
  Eric D. Roiter  
 
  Senior Vice President and General Counsel  
NOTE: Please return TWO signed copies of this Service Contract to Fidelity Distributors Corporation. Upon acceptance, one countersigned copy will be returned to you.
For Internal Use Only:
Effective Date:                                                                     
         
Combination
   

Page 2 of 3

 

FEE SCHEDULE FOR QUALIFIED RECIPIENTS
Variable Insurance Products Fund — All Portfolios
Variable Insurance Products Fund II — All Portfolios
Variable Insurance Products Fund III — All Portfolios
     (1) Those who have signed the Service Contract and who render distribution, administrative support and recordkeeping services as described in paragraph 1 of the Service Contract will hereafter be referred to as “Qualified Recipients.”
     (2) A Qualified Recipient providing services pursuant to the Service Contract will be paid a monthly fee at an annualized rate of: (a) 10 basis points of the average aggregate net assets of its clients invested in Service Class shares of the Funds listed above; plus (b) 25 basis points of the average aggregate net assets of its clients invested in Service Class 2 shares of the Funds listed above.
     (3) In addition, a Qualified Recipient providing services pursuant to the Service Contract will be paid a quarterly fee at an annualized rate of
  •   0.0010 (i.e., 10 bp annual rate) multiplied by Average VIP Assets, if Average VIP Assets are less than or equal to $350M; or
 
  •   an amount equal to (A) 0.0010 multiplied by $350 million plus (B) 0.0015 (i.e, 15 bp annual rate) multiplied by Average VIP Assets in excess of $350 million
multiplied, in any case, by the number of calendar days in the subject quarter and divided by the number of calendar days in the year. “Average VIP Assets” means the average aggregate net assets of Qualified Recipient’s clients invested in shares of the Funds referenced above, excluding the Money Market and Index 500 Portfolios during the subject quarter.
         
Combination
   

Page 3 of 3

EX-99.8(X)(1) 7 a59719bexv99w8xxyx1y.htm EXHIBIT 8(X)(1) exv99w8xxyx1y
AMENDMENT TO SERVICE CONTRACT
between
FIDELITY DISTRIBUTORS CORPORATION
and
PACIFIC SELECT DISTRIBUTOS, INC.
     The SERVICE CONTRACT (the “Contract”), made and entered into on the 1st day of July, 2005 by Fidelity Distributors Corporation and Pacific Select Distributors, Inc. is hereby amended effective August 10, 2007 as follows:
     1. Variable Insurance Products Fund V is added to the Agreement; and
     2. Variable Insurance Products Fund V is added to the FEE SCHEDULE FOR QUALIFIED RECIPIENTS of the Agreement.
               
  FIDELITY DISTRIBUTORS CORPORATION    
 
              
  By its authorized officer:    
 
              
 
    By:        
 
       
 
    
 
    Name:        
 
             
 
              
 
    Title:        
 
             
 
              
 
    Date:   August 10, 2007    
 
              
  PACIFIC SELECT DISTRIBUTORS, INC.    
 
              
  By its authorized officer:    
 
              
 
    By:   /s/ Adrian Griggs    
 
        Adrian Griggs    
 
    Title:   Vice President    
 
    Date:   August 10, 2007    
 
              
 
    ATTEST:   /s/ Audrey Milfs    
 
        Audrey Milfs    
 
        Corporate Secretary    

 

EX-99.8(Y) 8 a59719bexv99w8xyy.htm EXHIBIT 8(Y) exv99w8xyy
PARTICIPATION AGREEMENT
Among
PACIFIC LIFE INSURANCE COMPANY,
FIRST TRUST VARIABLE INSURANCE TRUST,
and
FIRST TRUST PORTFOLIOS, L.P.
     THIS AGREEMENT, made and entered into as of this 1st day of May, 2012 by and among PACIFIC LIFE INSURANCE COMPANY (“Company”), on its own behalf and on behalf of each of its segregated asset accounts named on Schedule A (the “Account”); First Trust Variable Insurance Trust, a business trust organized under the laws of the Commonwealth of Massachusetts (“Fund”); and First Trust Portfolios, L.P., an Illinois limited partnership(the “Distributor”) (each a “Party,” and collectively, the “Parties”).
     WHEREAS, the Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established for variable life insurance policies and/or variable annuity contracts (collectively, the “Variable Insurance Products”) to be offered by insurance companies, including the Company, which have entered into participation agreements similar to this Agreement (“Participating Insurance Companies”); and
     WHEREAS, the beneficial interest in the Fund may be divided into several series of shares, each designated a “Portfolio” and representing the interest in a particular managed portfolio of securities and other assets; and
     WHEREAS, the Fund may rely on an order from the Securities and Exchange Commission (“SEC”), dated January 17, 2001 (File No. 812-12282), granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended (“1940 Act”), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund to be sold to and held by variable annuity and variable life insurance separate accounts of life insurance companies that may or may not be affiliated with one another and qualified pension and retirement plans (“Qualified Plans”) (“Mixed and Shared Funding Exemptive Order”); and
     WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and shares of the Portfolio(s) are registered under the Securities Act of 1933, as amended (“1933 Act”); and
     WHEREAS, the Distributor is duly registered as a broker-dealer under the Securities Exchange Act of 1934, as amended (“1934 Act”), and is a member in good standing of the Financial Industry Regulatory Authority, Inc. (“FINRA”); and

 

 

     WHEREAS, the Company has registered interests under certain variable annuity contracts that are supported wholly or partially by the Account under the 1933 Act and that are listed in Schedule A hereto (“Contracts”); and
     WHEREAS, the Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company on September 7, 1994, under the insurance laws of the State of California, to set aside and invest assets attributable to the Contracts; and
     WHEREAS, the Company has registered the Account as a unit investment trust under the 1940 Act and has registered (or will register prior to sale) the securities deemed to be issued by the Account under the 1933 Act to the extent required; and
     WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Portfolio(s) listed in Schedule B hereto (the “Designated Portfolio(s)”), on behalf of the Account to fund the Contracts, and the Fund is authorized to sell such shares to unit investment trusts such as the Account at net asset value; and
     WHEREAS, the Company will perform certain services for the Fund in connection with the Contracts; and
     WHEREAS, the Fund, acting through the Fund’s transfer agent, has established a master account on its mutual fund shareholder account system (the “T/A Account”) reflecting the aggregate ownership of shares of the Portfolios and all transactions involving such shares by the Company on behalf of the Accounts; and
     WHEREAS, in the event both parties agree to use National Securities Clearing Corporation (“NSCC”) Fund/SERV System (“Fund/SERV System”), upon notification to the Fund of such availability, the parties may permit the Fund to receive, and the Company to transmit, purchase and redemption orders of Portfolio shares using the NSCC Fund/SERV System; and
     WHEREAS, upon such notification, in order to receive and transmit orders for Portfolio shares via Fund/SERV, it is intended that the Fund and the Company, or their duly authorized agents, will establish an account using Fund/SERV (the “Fund/SERV Account”) that will reflect corresponding transactions and Portfolio share balances in the T/A Account;
     NOW, THEREFORE, in consideration of their mutual promises, the Parties agree as follows:
ARTICLE I. Sale of Fund Shares
     1.1. The Fund agrees to make shares of the Designated Portfolio(s) available for purchase at the applicable net asset value per share by the Company and the Account on those days on which the Fund calculates its Designated Portfolio(s)’ net asset value pursuant to rules of the SEC, and the Fund shall use commercially reasonable efforts to calculate such net asset value on each day which

 

 

the New York Stock Exchange (“NYSE”) is open for regular trading. Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter the “Board”) may refuse to sell shares of any Designated Portfolio to any person, or suspend or terminate the offering of shares of any Designated Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Designated Portfolio.
     1.2. The Fund and Distributor will not sell shares of the Designated Portfolio(s) to any other Participating Insurance Company separate account unless an agreement containing provisions substantially the same as Sections 2.1, 2.4 and 2.10 of Article II, Sections 3.4 and 3.5 of Article III and Article VII of this Agreement is in effect to govern such sales.
     1.3. The Fund agrees to (a) sell to the Company those full and fractional shares of the Designated Portfolio(s) that the Company, on behalf of the Account, orders, and (b) redeem, on the Company’s order, any full or fractional shares of the Fund held by the Company, in each case executing such orders on each Business Day at the net asset value next computed after receipt by the Fund or its designee of the order for the shares of the Designated Portfolios, except that the Fund reserves the right to suspend the right of redemption or postpone the date of payment or satisfaction upon redemption consistent with Section 22(e) of the 1940 Act and any sales thereunder, and in accordance with the procedures and policies of the Fund as described in the then current prospectus of the Fund (“Fund Prospectus”). For purposes of this Section 1.3, the Company shall be the designee of the Fund for receipt of such orders and receipt by such designee shall constitute receipt by the Fund, provided that:
(i) if the Company transmits such request to the Fund via the NSCC Fund/SERV System and/or Defined Contribution Clearance & Settlement (“DCC&S”) platform, such request must be received by the Company by the close of regular trading on the NYSE and must be received from Fund/SERV by 9:00 a.m. Eastern Time on the next following Business Day; or
(ii) If there are technical problems with Fund/SERV, or if the Parties are not able to transmit or receive information through Fund/SERV (e.g., send requests via fax), such request must be received by the Fund by 10:00 a.m. Eastern Time on the next following Business Day.
With regard to purchase and redemptions of Shares under this Section 1.3, the Company is solely responsible for ensuring that each such purchase or redemption is the net result of requests from Contract owners for Contract transactions received by it or its duly designated agent each Business Day before the time(s) that the Fund calculates its net asset value. In the event that any Party is prohibited from communicating, processing or settling Portfolio share transactions via Fund/SERV or Networking, such Party shall notify the other Parties by 10:00 a.m. Eastern Time. “Business Day” shall mean any day on which the NYSE is open for trading and on which the Designated Portfolio calculates its net asset value pursuant to the rules of the SEC. The Company shall provide the Fund with net purchase and redemption requests computed in accordance with Section 1.7 hereof. The

 

 

Company agrees to purchase and redeem the shares of each Designated Portfolio offered by the Fund Prospectus in accordance with the provisions of such Prospectus.
     1.4. In the event of net purchases, the Company shall pay for Fund shares the same Business Day after an order to purchase Fund shares is made in accordance with the provisions of Section 1.3 hereof. Payment shall be in federal funds transmitted to the Fund by wire by 5:30 p.m. Eastern time. With respect to orders submitted via NSCC, payment shall be from the designated NSCC Settling Bank on behalf of the Company by the time specified by the Fund’s transfer agent (the “NSCC Wire Cut-off Time”). If payment in federal funds for any purchase is not received or is received by the Fund after 5:30 p.m. Eastern time on such Business Day or by the NSCC Wire Cut-Off Time, the Company shall promptly, upon the Fund’s request, reimburse the Fund for any charges, costs, fees, interest or other expenses incurred by the Fund in connection with any advances to, or borrowings or overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a result of portfolio transactions effected by the Fund based upon such purchase request. Upon receipt by the Fund of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund. “Settling Bank” shall mean the entity appointed by the party to perform such settlement services which entity agrees to abide by NSCC’s then current rules and procedures insofar as they related to funds settlement.
     1.5. In the event of net redemptions, the Fund shall pay and transmit the proceeds of redemptions of Fund shares the same Business Day after a redemption order is received in accordance with Section 1.3 hereof (with respect to orders submitted via NSCC), from the designated NSCC Settling Bank on behalf of the Fund. Payment shall be in federal funds transmitted to the Company or its designee by wire. Notwithstanding the foregoing, the Fund may delay the payment of redemptions and provide redemption proceeds up to three days (3) following the redemption date if the redemption request represents more than twenty percent (20%) of the assets of the Portfolio held by the Contract owners of the Company and the Company does not provide at least ten (10) days advances notice of the proposed redemption.
     1.6. The Fund shall make the net asset value per share for each Designated Portfolio available to the Company on each Business Day as soon as reasonably practical after the net asset value per share is calculated and shall use commercially reasonable efforts to make such net asset value per share available by 6:00 p.m. Eastern time. In the event that the Fund is unable to meet the 6:00 p.m. time stated herein, the Fund shall provide additional time for the Company to place orders received in good order for the purchase and redemption of shares equal to the additional time it takes the Fund to make the net asset value available to the Company. However, if net asset values are not available for inclusion in the next business cycle and purchase orders/redemptions are not able to be calculated and available for the Company to execute within the time frame identified in Section 1.3 hereof, the Company on behalf of the Account, shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct share net asset value.
     1.7. At the end of each Business Day, the Company shall use the information described herein to calculate Account unit values for the day. Using these unit values, the Company shall process each such Business Day’s separate account transactions based on requests and premiums received by it by the close of regular trading on the floor of the NYSE (currently 4:00 p.m., Eastern time) to determine the net dollar amount of Fund shares which shall be purchased or redeemed at

 

 

that day’s closing net asset value per share. The Fund hereby notifies the Company that separate account prospectuses or other separate account document disclosures regarding potential risks of mixed and shared funding may be appropriate.
     1.8. In the event of an error in the computation of a Designated Portfolio’s net asset value per share (“NAV”) or any dividend or capital gain distribution (each, a “pricing error”), the Fund’s adviser or the Fund shall notify the Company as soon as possible after discovery of the error. Such notification may be verbal, but shall be confirmed promptly in writing in accordance with Article XI of this Agreement. Any error in the calculation or reporting of the closing NAV or any dividend or capital gain distribution shall be reported promptly, upon discovery, to the Company. In such event, the Company shall be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct closing NAV and the Fund or the Fund’s adviser shall bear the reasonable and necessary expenses of correcting such errors including correcting statements previously provided to Contract owners in connection with Fund shares held by Contract owners or in adjusting proceeds paid to Contract owners who have redeemed interests under their Contracts. Upon notification by the Fund or Fund’s adviser of any overpayment, the Company shall promptly remit to the Fund or Fund’s adviser any overpayment that has not been paid to Contract owners; however, the Fund and the Fund’s adviser acknowledges that the Company does not intend to seek additional payments from any Contract owner who, because of a pricing error, may have underpaid for units of interest credited to his/her account.
     1.9. The Fund shall furnish same day notice (by wire or telephone, followed by written confirmation) to the Company of any income, dividends or capital gain distributions payable on the Designated Portfolio(s)’ shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on the Designated Portfolio shares in additional shares of that Designated Portfolio. The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions.
     1.10. Issuance and transfer of the Fund’s shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Shares ordered from the Fund will be recorded in an appropriate title for the Account or the appropriate sub-account of the Account.
     1.11. The Parties acknowledge that the arrangement contemplated by this Agreement is not exclusive; the Fund’s shares may be sold to other Participating Insurance Companies (subject to Section 1.2 and Article VI hereof) and the cash value of the Contracts may be invested in other investment companies.
ARTICLE II. Representations and Warranties
     2.1. The Company represents and warrants that the securities deemed to be issued by the Account under the Contracts are or will be registered under the 1933 Act or exempt from registration thereunder, and that the Contracts will be issued and sold in compliance in all material respects with all applicable laws, rules, and regulations (collectively, “laws”). The Company further represents and warrants that it is an insurance company duly organized and in good standing under applicable law and that it has legally and validly established the Account prior to any issuance or sale of units

 

 

thereof as a segregated asset account under the applicable state insurance laws and has registered the Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts and that it will maintain such registration for so long as any Contracts are outstanding as required by applicable law.
     2.2. The Fund represents and warrants that Designated Portfolio(s) shares sold pursuant to this Agreement shall be registered under the 1933 Act, duly authorized for issuance and sold in compliance with all applicable federal and state securities laws including without limitation the 1933 Act, the 1934 Act, and the 1940 Act, and that the Fund is and shall remain registered under the 1940 Act. The Fund shall amend the registration statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Fund shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Fund.
     2.3. The Fund has adopted a Rule 12b-1 Service Plan under which it makes payments to finance certain expenses. The Fund represents and warrants that it has a Board, a majority of whom are not interested persons of the Fund, which has formulated and approved its Rule 12b-1 Service Plan to finance certain expenses of the Fund and that any change to the Fund’s Rule 12b-1 Service Plan will be approved by a similarly constituted Board.
     2.4. The Fund makes no representations as to whether any aspect of its operations, including but not limited to, investment policies, fees and expenses, complies with the insurance and other applicable laws of the various states, except that the Fund represents that the Fund’s investment policies, fees and expenses are and shall at all times remain in compliance with the laws of the Commonwealth of Massachusetts to the extent required to perform this Agreement.
     2.5. The Fund represents and warrants that it is lawfully organized and validly existing under the laws of the Commonwealth of Massachusetts and that it does and will comply in all material respects with the 1940 Act.
     2.6. The Distributor represents and warrants that it is and shall remain duly qualified and registered under all applicable laws and that it shall perform its obligations for the Fund in compliance in all material respects with all applicable federal and state securities laws.
     2.7. The Fund represents and warrants that all of its Trustees, officers, employees, investment advisers, and other individuals or entities dealing with the money and/or securities of the Fund are, and shall continue to be at all times, covered by one or more blanket fidelity bonds or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage required by Rule 17g-1 under the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bonds shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company.
     2.8. The Fund will provide the Company with as much advance notice as is reasonably practicable of any material change affecting the Designated Portfolio(s) (including, but not limited to, any material change in the registration statement or prospectus affecting the Designated Portfolio(s)) and any proxy solicitation affecting the Designated Portfolio(s) and will consult with

 

 

the Company in order to implement any such change in an orderly manner, recognizing the expenses of changes and attempting to minimize such expenses by implementing them in conjunction with regular annual updates of the prospectus for the Contracts where reasonably practicable.
     2.9. The Fund represents and warrants that it has adopted a compliance program in accordance with Rule 38a-1 under the 1940 Act, which includes appointing a Chief Compliance Officer (“CCO”) for the Fund. The CCO is responsible for monitoring the operation of the Fund’s compliance program, and for reviewing the compliance programs of service providers to the Fund covered under Rule 38a-1 (“Covered Service Providers”). The CCO has completed or is in the process of completing an annual review to assess the adequacy of the Fund’s and Covered Service Providers’ policies and procedures and the effectiveness of their implementation.
     2.10. The Company represents and warrants, for purposes other than diversification under Section 817 of the Internal Revenue Code of 1986, as amended (“the Code”), that the Contracts are currently and at the time of issuance will be treated as annuity contracts under applicable provisions of the Code, and that it will make every effort to maintain such treatment and that it will notify the Fund, and the Distributor immediately upon having a reasonable basis for believing that the Contracts have ceased to be so treated or that they might not be so treated in the future. In addition, the Company represents and warrants that the Account is a “segregated asset account” and that interests in the Account are offered exclusively through the purchase of or transfer into a “variable contract” within the meaning of such terms under Section 817 of the Code and the regulations thereunder. The Company will use every effort to continue to meet such definitional requirements, and it will notify the Fund or the Distributor immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future. The Company represents and warrants that it will not purchase Fund shares with assets derived from tax-qualified retirement plans except, indirectly, through Contracts purchased in connection with such plans.
     2.11 Each of the Parties represents and warrants to the other that it has, or shall, to the extent required by applicable law, adopt, implement and maintain effective “disclosure controls and procedures” and “internal controls” (as such phrases are defined pursuant to the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder (hereinafter collectively the “S-Ox Act”)) and will cooperate with one another in exchanging copies of such policies and procedures and facilitating the filing by the relevant Parties and/or their respective officers and auditors of any and all certifications or attestations as required by the S-Ox Act, including, without limitation, furnishing such sub-certifications from relevant officers of each Party as such Party shall reasonably request from time to time.
     2.12 The Fund and the Company (if the Company uses NSCC) each represents and warrants to the other that it: (a) has entered into an agreement with NSCC, (b) has met and will continue to meet all of the requirements to participate in Fund/SERV and Networking, and (c) intends to remain at all times in compliance with the then current rules and procedures of NSCC, all to the extent necessary or appropriate to facilitate such communications, processing, and settlement of Portfolio share transactions.
     2.13. The Company represents and warrants that it has adopted, and will at all times

 

 

during the term of this Agreement maintain, reasonable and appropriate procedures (“Late Trading Procedures”) reasonably designed to ensure that any and all orders relating to the purchase, sale or exchange of Fund shares communicated to the Fund to be treated in accordance with Article I of this Agreement as having been received on a Business Day, have been received by the Valuation Time on such Business Day and were not modified after the Valuation Time, and that all orders received from Contract owners but not rescinded by the Valuation Time were communicated to the Fund or its agent as received for that Business Day. “Valuation Time” shall mean the time as of which the Fund calculates net asset value for the shares of the Portfolios on the relevant Business Day.
     2.14. Each transmission of orders by the Company shall constitute a representation by the Company that such orders are accurate and complete and relate to orders received by the Company by the Valuation Time on the Business Day for which the order is to be priced and that such transmission includes all orders relating to Fund shares received from Contract owners but not rescinded by the Valuation Time. The Company agrees to provide the Fund or its designee with a copy of the Late Trading Procedures and such certifications and representations regarding the Late Trading Procedures as the Fund or its designee may reasonably request. The Company will promptly notify the Fund in writing of any material change to the Late Trading Procedures.
ARTICLE III. Prospectuses and Proxy Statements; Voting
     3.1. At least annually, the Distributor shall provide the Company with as many printed copies of the Fund Prospectus or the Fund’s then current summary prospectus (as such term is defined in Rule 498 under the 1933 Act or any successor provision) (“Fund Summary Prospectus”), and any supplements thereto, for each Designated Portfolio as the Company may reasonably request for distribution to Contract owners. If requested by the Company, the Fund or Distributor shall provide such documentation (including a camera-ready copy of the Fund Prospectus or Fund Summary Prospectus for each Designated Portfolio as set in type, a diskette containing such documents in the form sent to the financial printer, or an electronic copy (in print ready PDF format) of the documents, all as the Company may reasonably request) and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the such prospectuses are amended) to have the Fund Prospectus or Fund Summary Prospectus printed, as the case may be, to the extent permitted by applicable law or other applicable guidance received from the SEC, including Rule 498, or posted on a website maintained by or for the Company. Expenses associated with providing such documentation shall be allocated in accordance with Schedule C hereto. Notwithstanding anything herein to the contrary, the delivery or use of Fund Summary Prospectuses shall be in the Fund’s sole discretion. The Fund shall use commercially reasonable efforts to provide the Fund Summary Prospectuses and Fund Prospectuses (which only includes the Designated Portfolios offered by the Company) and full SAI by a specified date as mutually agreed upon by the Fund and the Company.
  (i)   The Fund shall host and manage all of the electronic documents for purposes of compliance with Rule 498 requirements.

 

 

  (ii)   The Company shall be permitted, but not required, to post a copy of the Fund’s statutory prospectuses on the Company’s website. The Fund documents posted on the Company website are for informational purposes only and are not intended to comply with Rule 498. Notwithstanding the above, the Fund shall be and remain solely responsible for ensuring that the Fund electronic documents are hosted and managed by the Fund’s website and fully comply with the requirements of Rule 498.
     3.2. If applicable laws require that the Statement of Additional Information (“SAI”) for the Fund be distributed to all Contract owners, then the Fund or Distributor, as appropriate, shall provide the Company with copies of the Fund’s SAI, and any supplements thereto, for the Designated Portfolio(s) in such quantities, with expenses to be borne in accordance with Schedule C hereto, as the Company may reasonably require to permit timely distribution thereof to Contract owners. If requested by the Company, the Fund or Distributor shall provide an electronic copy of the Fund SAI in a format suitable for posting on an Internet website maintained by or on behalf of the Company. The Company shall send an SAI to any Contract owner within 3 Business Days of the receipt of a request or such shorter time as may be required by applicable law. The Fund, and/or Distributor, as appropriate, shall also provide SAIs to any Contract owner or prospective owner who requests such SAI from the Fund (although it is anticipated that such requests will be made to the Company).
     3.3. The Fund and/or Distributor shall use commercially reasonable efforts to provide the Company, within 10 (ten) business days of scheduled mailing date, with printed copies of the Fund’s proxy material, reports to shareholders, and other communications to shareholders for the Designated Portfolio(s) in such quantity, with expenses to be borne in accordance with Schedule C hereto, as the Company may reasonably require to permit timely distribution thereof to Contract owners. If requested by the Company, the Fund or Distributor shall provide an electronic copy of such documentation in a format suitable for posting on an Internet website maintained by or on behalf of the Company. In lieu of all or part of the foregoing, the Fund may elect to retain, at its own expense, a proxy solicitation firm to perform some or all of the tasks necessary for the Company to obtain voting instructions from Contract owners.
  (i)   The Fund shall provide the Company with printed copies of Fund annual and semiannual reports in such quantity as the Company shall reasonably require for distributing to Contract owners, with expenses to be borne in accordance with Schedule C hereto.
     3.4.  If and to the extent required by law and the Mixed and Shared Funding Exemptive Order, the Company shall:
  (i)   solicit voting instructions from Contract owners;
 
  (ii)   vote the Designated Portfolio(s) shares held in the Account in accordance with instructions timely received from Contract owners; and
 
  (iii)   vote Designated Portfolio shares held in the Account for which no instructions have been received in the same proportion as Designated

 

 

      Portfolio(s) shares for which instructions have been received from Contract owners, so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. The Company reserves the right to vote Fund shares held in its general account and in any segregated asset account in its own right, to the extent permitted by law.
  (iv)   assure that each of its separate accounts calculates voting privileges in a manner consistent with all other Participating Insurance Companies and/or as directed by the Fund for this purpose.
     3.5. The Company shall be responsible for assuring that each of it’s Accounts participating in a Designated Portfolio calculates voting privileges in a manner consistent with the standards set forth in the Mixed and Shared Funding Exemptive Order and consistent with any reasonable standards that the Fund may adopt, provided, however, the Company shall be free to vote Designated Portfolio shares attributable to the Account in any manner permitted by applicable law, to the extent the Mixed and Shared Funding Exemptive Order is superseded by SEC or administrative practice (including no-action relief).
     3.6. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Fund will either provide for annual meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not to require such meetings) or, as the Fund currently intends, comply with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when applicable, 16(b) of the 1940 Act. Further, the Fund will act in accordance with the SEC’s interpretation of the requirements of Section 16(a) with respect to periodic elections of directors or trustees and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
     4.1. The Company shall furnish, or shall cause to be furnished, to the Fund or its designee, a copy of each piece of sales literature or other promotional material that the Company develops or proposes to use and in which the Fund (or a Designated Portfolio thereof), its adviser, any of its sub-advisers, or the Distributor is named in connection with the Contracts, at least fifteen (15) Business Days prior to its use. No such material shall be used if the Fund or Distributor objects to such use within ten (10) Business Days after receipt of such material. The Fund and Distributor reserve the right to reasonably object to the continued use of any such sales literature or other promotional material in which the Fund (or a Designated Portfolio thereof), its adviser, any of its sub-advisers, or the Distributor is named and no such material shall be used if the Fund or Distributor, or any designee thereof, so objects.
     4.2. The Company shall not give any information or make any representations or statements on behalf of the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement, Fund Prospectus or SAI for the Fund shares, as the same may be amended or supplemented from time to time, or in sales

 

 

literature or other promotional material approved by the Fund Distributor, except with the permission of the Fund or Distributor.
     4.3. The Fund or Distributor shall furnish, or shall cause to be furnished, to the Company, a copy of each piece of sales literature or other promotional material in which the Company, its separate account(s) and/or any Contract is named fifteen (15) Business Days prior to its intended date of first use. No such material shall be used if the Company reasonably objects to such use within ten (10) Business Days after receipt of such material. The Company reserves the right to reasonably object to the continued use of any such sales literature or other promotional material in which the Company, its separate account(s), or any Contract is named, and no such material shall be used if the Company so objects.
     4.4. The Fund and the Distributor shall not give any information or make any representations on behalf of the Company or concerning the Company, the Account, or the Contracts other than the information or representations contained in a registration statement, prospectus (which shall include an offering memorandum, if any, if the Contracts issued by the Company or interests therein are not registered under the 1933 Act) or SAI for the Contracts, as the same may be amended or supplemented from time to time, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company.
     4.5. The Fund or its designee will provide to the Company, upon request, at least one complete copy of all registration statements, prospectuses, SAIs, sales literature and other promotional materials, applications for exemptions, requests for non-confidential no-action letters, and all amendments or supplements to any of the above, that relate to the Fund or its shares (collectively, “Fund materials”).
     4.6. The Company or its designee will provide to the Fund, upon request, at least one complete copy of all registration statements, prospectuses, SAIs, sales literature and other promotional materials, applications for exemptions, requests for non-confidential no-action letters, and all amendments or supplements to any of the above, that relate to the Contracts, (collectively, “Contract materials”).
     4.7. For purposes of Articles IV and VIII, the phrase “sales literature and other promotional material” includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media; e.g., on-line networks such as the Internet or other electronic media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, shareholder reports, proxy materials (including solicitations for voting instructions), and any other material constituting sales literature or advertising under FINRA rules, the 1933 Act or the 1940 Act.

 

 

ARTICLE V. Fees and Expenses
     5.1. The Fund, Distributor, and the Fund’s adviser shall pay no fee or other compensation to the Company under this Agreement, and the Company shall pay no fee or other compensation to the Fund, Distributor, or the Fund’s adviser under this Agreement, although the Parties hereto will bear certain expenses in accordance with Schedule C hereto, Articles III, V, and other provisions of this Agreement.
     5.2. Except as otherwise provided in this Agreement, including without limitation Schedule C hereto, each Party shall bear all expenses incident to the performance of its obligations hereunder. Nothing herein shall prevent the Parties hereto from otherwise agreeing to perform, and arranging for appropriate compensation for, other services relating to the Fund and /or to the Account pursuant to this Agreement. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal and state securities laws to the extent required or deemed advisable by the Fund. Except as otherwise set forth in Schedule C of this Agreement, the Fund shall bear the expenses for the cost of registration and qualification of the Fund’s shares, preparation and filing of the Fund Prospectus and registration statement, proxy materials and reports, setting the Fund Prospectus in type, setting in type and printing the proxy materials and reports to shareholders, the preparation of all statements and notices required by any federal or state law, and all taxes on the issuance or transfer of the Fund’s shares.
ARTICLE VI. Diversification and Qualification.
     6.1. The Fund and the Distributor each represents and warrants that the Fund will at all times sell its shares and invest its assets in such a manner as to ensure that the Contracts will be treated as annuity contracts under the Code, and the regulations issued thereunder. Without limiting the scope of the foregoing, each Designated Portfolio thereof will at all times comply with Section 817(h) of the Code and Treasury Regulation §1.817-5, as amended from time to time, and any Treasury interpretations thereof, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications or successor provisions to such Section or Regulations. In the event of a breach of this Article VI by the Fund, the Fund and Distributor will take all reasonable steps to: (a) notify the Company of such breach, and (b) adequately diversify the Fund so as to achieve compliance within the 30-day grace period afforded by Regulation 1.817-5.
     6.2. The Fund and the Distributor each represents and warrants that shares of the Designated Portfolio(s) will be sold only to Participating Insurance Companies and their separate accounts and to Qualified Plans, and that no person has or will purchase shares in any Portfolio for any purpose or under any circumstances that would preclude the Company from “looking through” to the investments of each Designated Portfolio in which it invests, pursuant to the “look through” rules found in Treasury Regulation 1.817-5. No shares of any Designated Portfolio of the Fund will be sold to the general public.

 

 

     6.3. The Fund and the Distributor each represents and warrants that the Fund and each Designated Portfolio intends to qualify as a “regulated investment company” under Subchapter M of the Code, and that each Designated Portfolio will maintain such qualification (under Subchapter M or any successor or similar provisions) as long as this Agreement is in effect.
     6.4. The Fund and Distributor each will notify the Company immediately upon having a reasonable basis for believing that the Fund or any Designated Portfolio has ceased to comply with the aforesaid Section 817(h) diversification or Subchapter M qualification requirements or might not so comply in the future.
     6.5. The Company agrees that if the Internal Revenue Service (“IRS”) asserts in writing in connection with any governmental audit or review of the Company or, to the Company’s knowledge, or any Contract owner that any Designated Portfolio has failed to comply with the diversification requirements of Section 817(h) of the Code or the Company otherwise becomes aware of any facts that could give rise to any claim against the Fund and Distributor as a result of such a failure or alleged failure:
(a) the Company shall promptly notify the Fund and the Distributor of such assertion or potential claim and promptly provide a copy of all correspondence and other materials received by the Company in connection therewith;
(b) the Company shall consult with, and work cooperatively with, the Fund and the Distributor as to how to minimize any liability that may arise as a result of such failure or alleged failure;
(c) the Company shall use commercially reasonable efforts to minimize any liability of the Fund and the Distributor resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations, Section 1.817-5(a)(2), to the commissioner of the IRS that such failure was inadvertent;
(d) any written materials to be submitted by the Company to the IRS, any Contract owner or any other claimant in connection with any of the foregoing proceedings or contests (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations, Section 1.817-5(a)(2)) shall be provided by the Company to the Fund and the Distributor (together with any supporting information or analysis) within at least two (2) Business Days prior to submission;
(e) the Company shall provide the Fund and the Distributor with such cooperation as the Fund and the Distributor shall reasonably request (including, without limitation, by permitting the Fund and the Distributor to review the relevant books and records of the Company) in order to facilitate review by the Fund and the Distributor of any written submissions provided to it or its assessment of the validity or amount of any claim against it arising from such failure or alleged failure; and
(f) the Company shall not with respect to any claim of the IRS or any Contract owner that would give rise to a claim against the Fund and the Distributor (i) compromise or settle any

 

 

claim, (ii) accept any adjustment on audit, or (iii) forego any allowable administrative or judicial appeals, without the express written consent of the Fund and the Distributor, which shall not be unreasonably withheld; provided that the Company shall not be required to appeal any adverse judicial decision unless the Fund shall have provided an opinion of independent counsel to the effect that a reasonable basis exists for taking such appeal; and further provided that the Fund and the Distributor shall bear the costs and expenses, including reasonable attorney’s fees, incurred by the Company in complying with this clause (f).
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order
     7.1. The Fund represents that the Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts and determine what action, if any, should be taken in response to such conflicts. A material irreconcilable conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Designated Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners or by contract owners of different Participating Insurance Companies; or (f) a decision by a Participating Insurance to disregard the voting instructions of contract owners. The Board shall promptly inform the Company in writing if it determines that a material irreconcilable conflict exists and the implications thereof.
     7.2. The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Mixed and Shared Funding Exemptive Order, by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are to be disregarded. Such responsibilities shall be carried out by the Company with a view only to the interests of its Contract owners.
     7.3. If it is determined by a majority of the Board, or a majority of its members who are not interested persons of the Fund, the Distributor, the adviser or any sub-adviser to any of the Designated Portfolios (the “Disinterested Members” ), that a material irreconcilable conflict exists, and it is a Participating Insurance Company for which a material irreconcilable conflict is relevant, the Company shall, together with other Participating Insurance Companies and at their expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Members), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, up to and including: (1) withdrawing the assets allocable to some or all of the separate accounts from the Fund or any Designated Portfolio and reinvesting such assets in a different investment medium, including (but not limited to) another portfolio of the Fund, or submitting the question whether such segregation should be implemented to a vote of all affected contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract

 

 

owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and (2) establishing a new registered management investment company or managed separate account. The Company’s responsibility to take remedial action shall be carried out by the Company with a view only to the interests of Contract owners.
     7.4. If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions and that decision represents a minority position or would preclude a majority vote, the Company may be required, at the Fund’s election, to withdraw the Account”s investment in the Fund and terminate this Agreement; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the Disinterested Members. Any such withdrawal and termination must take place within six (6) months after the Fund gives written notice that this provision is being implemented, and until the end of that six month period the Fund and the Distributor shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund subject to the terms and conditions of this Agreement. No charge or penalty will be imposed as a result of such withdrawal. The responsibility to take such remedial action shall be carried out with a view only to the interests of the Contract owners.
     7.5. If a material irreconcilable conflict arises because a particular state insurance regulator’s decision applicable to the Company conflicts with the majority of other state regulators, then the Company will withdraw the Account’s investment in the Fund and terminate this Agreement within six (6) months after the Board informs the Company in writing that it has determined that such decision has created an irreconcilable material conflict; provided, however, that such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the Disinterested Members. Until the end of the foregoing six month period, the Fund and the Distributor shall continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Fund subject to the terms and conditions of this Agreement. The responsibility to take such action shall be carried out with a view only to the interests of the Contract owners.
     7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of the Disinterested Members shall determine whether any proposed action adequately remedies any material irreconcilable conflict, but in no event will the Fund, the Disstributor or its affiliates, as relevant, be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 to establish a new funding medium for the Contracts if an offer to do so has been declined by vote of a majority of Contract owners materially and adversely affected by the material irreconcilable conflict. In the event that the Board determines that any proposed action does not adequately remedy any material irreconcilable conflict, then the Company will withdraw the Account’s investment in the Fund and terminate this Agreement within six (6) months after the Board informs the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the Disinterested Members.
     7.7. If and to the extent that Rule 6e-2 under the 1940 Act and Rule 6e-3(T) under the 1940 Act are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision of

 

 

the 1940 Act or the rules promulgated thereunder with respect to mixed or shared funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund and/or the Company, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the extent that terms and conditions substantially identical to such Sections are contained in such Rule(s) as so amended or adopted.
     7.8 Upon the reasonable request by the Fund, the Company will submit to the Fund such reports, material, or data as the Fund may reasonably request so that the Fund’s Board may carry out its responsibilities imposed under the Mixed and Shared Exemptive Order.
ARTICLE VIII. Indemnification
     8.1. Indemnification by the Company
     (a). The Company agrees to indemnify and hold harmless the Fund, the Distributor and the Fund’s adviser and each of their respective officers, directors, members, managers, partners or trustees, employees and agents and each person, if any, who controls the Fund, Distributor or Fund’s adviser within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 8.1) against any and all losses, claims, expenses, damages and liabilities (including amounts paid in settlement with the written consent of the Company) or litigation (including reasonable legal and other expenses) (collectively, a “Loss”) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such Loss is related to the sale or acquisition of the Fund’s shares or the Contracts and:
  (i)   arises out of or is based upon any untrue statements or alleged untrue statements of any material fact contained in any Contract materials as defined in Section 4.5 and 4.6 herein, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this Agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Fund, Distributor, or Fund’s adviser for use in the Contract materials or otherwise for use in connection with the sale of the Contracts or Fund shares; or
 
  (ii)   arises out of or as a result of statements or representations (other than statements or representations contained in Fund materials not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund shares; or
 
  (iii)   arises out of any untrue statement or alleged untrue statement of a material fact contained in Fund Materials, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein

 

 

      not misleading, if such a statement or omission was made in reliance upon and conformity with information furnished in writing to the Fund by or on behalf of the Company; or
  (iv)   arises out of or results from any failure by the Company to perform the obligations, provide the services, and furnish the materials required of it under the terms of this Agreement; or
 
  (v)   arises out of or results from any material breach of any representation and/or warranty made by the Company in this Agreement or arises out of or results from any other material breach of this Agreement by the Company, including without limitation Section 2.10 and 6.5 hereof,
as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) hereof.
     (b). The Company shall not be liable under this indemnification provision with respect to any Loss to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties under this Agreement or to any of the Indemnified Parties.
     (c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim within a reasonable time shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Company has been prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, the Company shall be entitled to participate, at its own expense, in the defense of such action, and unless the Indemnified Parties release the Company from any further obligation under this Section 8.1 with respect to such claim(s), the Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the Party named in the action. The Company may not settle any such claim without the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld, conditioned or delayed. After notice from the Company to such Party of the Company’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such Party under this Agreement for any legal or other expenses subsequently incurred by such Party independently in connection with the defense thereof other than reasonable costs of investigation.
     (d). Each Indemnified Party will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the Agreement, the issuance or sale of the Fund shares or the Contracts or the operation of the Fund.

 

 

     8.2. Indemnification by the Fund.
     (a). The Fund agrees to indemnify and hold harmless the Company and each of their respective directors and officers, employees and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 8.2) against any Loss to which the Indemnified Parties may be required to pay or become subject under any statute or regulation, at common law or otherwise, insofar as such Loss, is related to the operations of the Fund and:
  (i)   arises as a result of any material failure by the Fund to perform the obligations, provide the services and furnish the materials required of it under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification and other qualification requirements specified in Article VI of this Agreement); or
 
  (ii)   arises out of or results from any material breach of any representation and/or warranty made by the Fund in this Agreement or arises out of or result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof.
     (b). The Fund shall not be liable under this indemnification provision with respect to any Loss to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties under this Agreement or to any of the Indemnified Parties.
     (c). The Fund shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Fund of any such claim within a reasonable time shall not relieve it from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Fund has been prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, the Fund will be entitled to participate, at its own expense, in the defense thereof and unless the Indemnified Parties release the Fund from any further obligation under this Section 8.2 with respect to such claim(s), the Fund shall also be entitled to assume the defense thereof, with counsel satisfactory to the Party named in the action. The Fund may not settle any such claim without the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld, conditioned or delayed.After notice from the Fund to such Party of the Fund’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Fund will not be liable to such Party under this Agreement for any legal or other expenses subsequently incurred by such Party independently in connection with the defense thereof other than reasonable costs of investigation.

 

 

     (d). The Company agrees to notify the Fund promptly of the commencement of any litigation or proceeding against itself or any of its respective officers or directors in connection with the Agreement, the issuance or sale of the Contracts, the operation of the Account, or the sale or acquisition of shares of the Fund.
     8.3. Indemnification by the Distributor.
     (a). The Distributor agrees to indemnify and hold harmless the Company and each of their respective directors and officers, employees and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the “Indemnified Parties” for purposes of this Section 8.3) against any Loss to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such Loss is related to the sale or acquisition of the Fund’s shares or the Contracts and:
  (i)   arises out of or is based upon any untrue statement or alleged untrue statement of any material fact contained in Fund materials, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this Agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished in writing to the Fund or Distributor by or on behalf of the Company for use in the Fund materials or otherwise for use in connection with the sale of the Contracts or Fund shares; or
 
  (ii)   arises out of or as a result of statements or representations (other than statements or representations contained in Fund materials not supplied by the Distributor or persons under its control) or wrongful conduct of the Distributor or persons under its control, with respect to the sale or distribution of the Contracts or Fund shares; or
 
  (iii)   arises out of any untrue statement or alleged untrue statement of a material fact contained in any Contract materials, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Distributor; or
 
  (iv)   arises as a result of any failure by the Distributor to perform the obligations, provide the services and furnish the materials required of it under the terms of this Agreement; or
 
  (v)   arises out of or result from any material breach of any representation and/or warranty made by the Distributor in this Agreement or arises out of or results from any other material breach of this Agreement by the Distributor;

 

 

as limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c) hereof. This indemnification is in addition to and apart from the responsibilities and obligations of the Distributor specified in Article VI hereof.
     (b). The Distributor shall not be liable under this indemnification provision with respect to any Loss to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or negligence in the performance or such Indemnified Party’s duties or by reason of such Indemnified Party’s reckless disregard of obligations or duties under this Agreement or to any of the Indemnified Parties.
     (c). The Distributor shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Distributor in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Distributor of any such claim within a reasonable time shall not relieve the Distributor from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision, except to the extent that the Distributor has been prejudiced by such failure to give notice. In case any such action is brought against an Indemnified Party, the Distributor will be entitled to participate, at its own expense, in the defense thereof and unless the Indemnified Parties release the Distributor from any further obligation under this Section 8.3 with respect to such claim(s), the Distributor also shall be entitled to assume the defense thereof, with counsel satisfactory to the Party named in the action. The Distributor may not settle any such claim without the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld, conditioned or delayed.After notice from the Distributor to such Party of the Distributor’s election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Distributor will not be liable to such Party under this Agreement for any legal or other expenses subsequently incurred by such Party independently in connection with the defense thereof other than reasonable costs of investigation.
     (d). The Company agrees to promptly notify the Distributor of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of the Contracts or the operation of the Account.

 

 

ARTICLE IX. Applicable Law
     9.1 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of New York.
     9.2 This Agreement shall be subject to the provisions of the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant (including, but not limited to, any Mixed and Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
     10.1. This Agreement shall terminate:
(a) at the option of any Party, with or without cause, with respect to some or all Designated Portfolios, upon three (3) months’ advance written notice delivered to the other Parties; provided, however, that such notice shall not be given earlier than six (6) months following the date of this Agreement; or
(b) at the option of the Company by written notice to the other Parties with respect to any Designated Portfolio based upon the Company’s determination that shares of such Designated Portfolio are not reasonably available to meet the requirements of the Contracts; or
(c) at the option of the Company by written notice to the other Parties with respect to any Designated Portfolio in the event any of the Designated Portfolio’s shares are not registered, issued or sold in accordance with applicable law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or
(d) at the option of the Fund or Distributor upon written notice to the other Parties in the event that formal administrative proceedings are instituted against the Company by FINRA, the SEC, the Insurance Commissioner or like official of any state or any other regulatory body regarding the Company’s duties under this Agreement or related to the sale of the Contracts, the operation of any Account, or the purchase of the Fund shares, if, in each case, the Fund or Distributor, as the case may be, reasonably determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Company to perform its obligations under this Agreement; or
(e) at the option of the Company upon written notice to the other Parties in the event that formal administrative proceedings are instituted against the Fund or the Distributor by FINRA, the SEC, or any state securities or insurance department or any other regulatory body, if the Company reasonably determines in its sole

 

 

judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Fund or the Distributor to perform their respective obligations under this Agreement; or
(f) at the option of the Company by written notice to the other Parties with respect to any Designated Portfolio in the event that such Portfolio fails to meet the requirements and comply with the representations and warranties specified in Article VI hereof; or
(g) at the option of the Company by written notice to the other Parties with respect to any Designated Portfolio in the event that such Portfolio ceases to qualify as a regulated investment company under Subchapter M of the Code or under any successor or similar provision; or
(h) at the option of the Fund or the Distributor, if (i) the Fund or Distributor, respectively, shall determine, in its sole judgment reasonably exercised in good faith, that either the Company has suffered a material adverse change in its business or financial condition or is the subject of material adverse publicity, (ii) the Fund or Distributor notifies the Company of that determination and its intent to terminate this Agreement, and (iii) after considering the actions taken by the Company and any other changes in circumstances since the giving of such a notice, the determination of the Fund or Distributor shall continue to apply on the sixtieth (60) day following the giving of that notice, which sixtieth day shall be the effective date of termination; or
(i) at the option of the Company, if (i) the Company, shall determine, in its sole judgment reasonably exercised in good faith, that the Fund or Distributor has suffered a material adverse change in its business or financial condition or is the subject of material adverse publicity, (ii) the Company notifies the Fund or Distributor, as appropriate, of that determination and its intent to terminate this Agreement, and (iii) after considering the actions taken by the Fund or Distributor and any other changes in circumstances since the giving of such a notice, the determination of the Company shall continue to apply on the sixtieth (60) day following the giving of that notice, which sixtieth day shall be the effective date of termination; or
(j) termination by the Fund or Distributor by written notice to the Company in the event that the Contracts fail to meet the qualifications specified in Section 2.10 hereof; or
(k) at the option of any non-defaulting Party hereto in the event of a material breach of this Agreement by any Party hereto (the “defaulting Party”) other than as described in 10.1(a)-(j); provided, that the non-defaulting Party gives written notice thereof to the defaulting Party, with copies of such notice to all other non-defaulting Parties, and if such breach shall not have been remedied within thirty (30) days after such written notice is given, then the non-defaulting Party giving such written notice

 

 

may terminate this Agreement by giving thirty (30) days written notice of termination to the defaulting Party.
     10.2. Notice Requirement. Except as provided in 10.1(a) and (k) above, no termination of this Agreement shall be effective unless and until the Party terminating this Agreement gives at least sixty (60) days’ prior written notice to all other Parties of its intent to terminate, which notice shall set forth the basis for the termination.
     10.3. Effect of Termination.
(a) Notwithstanding any termination of this Agreement, other than as a result of a failure by either the Fund or the Company to meet Section 817(h) of the Code diversification requirements, the Fund and the Distributor shall, at the option of the Company, continue, to make available additional shares of the Designated Portfolio(s) pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as “Existing Contracts”) unless such further sale of Designated Portfolio shares is proscribed by law, regulation, or applicable regulatory authority, or unless the Board determines that the sale of Designated Portfolio shares to the Existing Contract owners is not in the best interests of the Designated Portfolio or that liquidation of the Designated Portfolio following termination of this Agreement is in the best interests of the Designated Portfolio. Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investments among the Designated Portfolio(s), redeem investments in the Designated Portfolio(s) and/or invest in the Designated Portfolio(s) upon the making of additional purchase payments under the Existing Contracts. The Parties agree that this Section 10.3 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement.
     10.4. Surviving Provisions. Notwithstanding any termination of this Agreement, the following provisions shall survive: Article V, Article VIII and Section 12.1 of Article XII. In addition, with respect to Existing Contracts assets under which continue to be invested in the Designated Portfolios, all provisions of this Agreement shall also survive and not be affected by any termination of this Agreement to the extent such assets remain invested in the Designated Portfolios.
ARTICLE XI. Notices
     Any notice shall be sufficiently given when sent by registered or certified mail, or overnight delivery service, by the notifying Party to each other Party entitled to notice at the addresses set forth below or at such other address as a Party may from time to time specify in writing to the other Parties.

 

 

If to the Fund:
First Trust Variable Insurance Trust
120 E. Liberty Drive
Wheaton, IL 60187
Attention: Scott Jardine, Secretary
If to the Distributor:
First Trust Portfolios L.P.
120 E. Liberty Drive
Wheaton, IL 60187
Attention: Scott Jardine, General Counsel
If to the Company:
Pacific Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1.
(a) Each Party agrees that all information supplied by one Party and its affiliates and agents (collectively, the “Disclosing Party”) to another (“Receiving Party”) including, without limitation, any unpublished information concerning research activities and plans, customers, marketing or sales plans, sales forecasts or results of marketing efforts, pricing or pricing strategies, costs, operational techniques, strategic plans, portfolio holdings, and unpublished financial information, including information concerning revenues, profits and profit margins will be deemed confidential and proprietary to the Disclosing Party, regardless of whether such information was disclosed intentionally or unintentionally or marked as “confidential” or “proprietary” (“Confidential Information”). In addition, the Company will not use any Confidential Information concerning each Fund’s portfolio holdings, including, without limitation, the names of the portfolio holdings and the values thereof, for purposes of making any decision about whether to purchase or redeem shares of each Fund or to execute any other securities transaction. The foregoing definition shall also include any Confidential Information provided by any Party’s vendors.

 

 

(b) Confidential Information will not include any information or material, or any element thereof, whether or not such information or material is Confidential Information for the purposes of this Agreement, to the extent any such information or material, or any element thereof:
(i) has previously become or is generally known, unless it has become generally known through a breach of this Agreement or a similar confidentiality or non-disclosure agreement;
(ii) was already rightfully known to the Receiving Party prior to being disclosed by or obtained from the Disclosing Party as evidenced by written records kept in the ordinary course of business of or by proof of actual use by the Receiving Party;
(iii) has been or is hereafter rightfully received by the Receiving Party from a third person (other than the Disclosing Party) without restriction or disclosure and without breach of a duty of confidentiality to the Disclosing Party;
(iv) has been independently developed by the Receiving Party without access to Confidential Information of the Disclosing Party; or
(v) must be disclosed to third party vendors, to the extent reasonably necessary for the Receiving Party to perform its duties and obligations assigned under the Agreement. In the event such information is disclosed to a third party vendor, the Receiving Party will require such third party vendor to protect Confidential Information to the same extent the Receiving Party is required to protect such Confidential Information under this Agreement.
It will be presumed that any Confidential Information in a Receiving Party’s possession is not within exceptions (ii), (iii) or (iv) above, and the burden will be upon the Receiving Party to prove otherwise by records and documentation.
(c) Each Party recognizes the importance of each other Party’s Confidential Information. In particular, each Party recognizes and agrees that the Confidential Information of another Party is critical to its business and that no Party would enter into this Agreement without assurance that such information and the value thereof will be protected as provided in this Section 12.1 and elsewhere in this Agreement. Accordingly, each Party agrees as follows:
(i) The Receiving Party will hold any and all Confidential Information it obtains in strictest confidence and will use and permit use of Confidential Information solely for the purposes of this Agreement. Without limiting the foregoing, the Receiving Party shall use at least the same degree of care, but no less than reasonable care, to avoid disclosure or use of this Confidential Information as the Receiving Party employs with respect to its own Confidential Information of a like importance;
(ii) The Receiving Party may disclose or provide access to its responsible employees who have a need to know and may make copies of Confidential

 

 

Information only to the extent reasonably necessary for the Receiving Party to carry out its obligations hereunder;
(iii) The Receiving Party currently has, and in the future will maintain in effect and enforce, rules and policies to protect against access to or use or disclosure of Confidential Information other than in accordance with this Agreement, to ensure that such employees and agents protect the confidentiality of Confidential Information. The Receiving Party expressly will instruct its employees and agents not to disclose Confidential Information to third parties, including without limitation customers, subcontractors or consultants, without the Disclosing Party’s prior written consent; and
(iv) The Receiving Party will notify the Disclosing Party immediately of any unauthorized disclosure or use, and will cooperate with the Disclosing Party to protect all proprietary rights in and ownership of its Confidential Information.
     12.2. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
     12.3. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument.
     12.4. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.
     12.5. Each Party hereto shall cooperate with each other Party and all appropriate governmental authorities (including without limitation the SEC, FINRA and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.
     12.6. The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the Parties hereto are entitled to under state and federal laws.
     12.7. This Agreement or any of the rights and obligations hereunder may not be assigned by any Party without the prior written consent of all Parties hereto.
     12.9. (a) It is expressly acknowledged and agreed that the obligations of the Fund hereunder shall not be binding upon any of the shareholders, Trustees, officers, employees or agents of the Fund personally, but shall bind only the trust property of the Fund or property of a Series as provided in the Fund’s Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Fund and signed by an officer of the Fund, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to

 

 

impose any liability on any of them personally, but shall bind only the trust property of the Fund or property of a Series as provided in the Fund’s Declaration of Trust.
     (b) The Fund and the Distributor agree that the obligations assumed by the Company pursuant to this Agreement shall be limited in any case to the Company and its assets, and neither the Fund nor Distributor shall seek satisfaction of any such obligation from the shareholders of the Company, the directors, officers, employees, or agents of the Company.
     12.10. Schedules A through C hereto, as the same may be amended from time to time by mutual written agreement of the Parties, are attached hereto and incorporated herein by reference.
     12.11 If requested by the Fund, the Company shall furnish, or shall cause to be furnished, to the Fund or its designee copies of the following reports:
  (a)   the Company’s annual statement (prepared under statutory accounting principles) and annual report (prepared under generally accepted accounting principles (“GAAP”), if any), as soon as practical and in any event within 90 days after the end of each fiscal year; and
 
  (b)   any registration statement (without exhibits) and financial reports of the Company filed with the SEC or any state insurance regulator, as soon as practical after the filing thereof.
ARTICLE XIII. Anti-Money Laundering
     13.1. The Company represents and warrants that it is in compliance and will continue to be in compliance with all applicable anti-money laundering laws and regulations, including the relevant provisions of the USA PATRIOT Act (Pub. L. No. 107-56 (2001)) (“the Patriot Act”) and the regulations issued thereunder.
     13.2. The Company hereby certifies that it has established and maintains an anti-money laundering program that includes written policies, procedures and internal controls reasonably designed to identify its Contract owners and has undertaken appropriate due diligence efforts to “know its customers” in accordance with all applicable anti-money laundering regulations in its jurisdiction including, where applicable, the Patriot Act. The Company further confirms that it will monitor for suspicious activity in accordance with the requirements of the Patriot Act. In addition, the Company represents and warrants that it has adopted and implemented policies and procedures reasonably designed to achieve compliance with the applicable requirements administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury. The Company agrees to provide the Distributor with such information as it may reasonably request, including but not limited to the filling out of questionnaires, attestations and other documents, to enable the Distributor to fulfill its obligations under applicable law, and, upon its request, to file a notice pursuant to Section 314 of the Patriot Act and the implementing regulations related thereto to permit the voluntary sharing of information between the parties hereto. Upon filing such a notice, the Company agrees to forward a copy to the Distributor, and

 

 

further agrees to comply with all requirements under the Patriot Act and implementing regulations concerning the use, disclosure, and security of any information that is shared.
ARTICLE IX. Shareholder Information (Rule 22c-2)
     14.1 Pursuant to Rule 22c-2 under the 1940 Act, the Company agrees to provide to the Fund, upon written request, the taxpayer identification number (“TIN”), the Individual/International Taxpayer Identification Number (“ITIN”), or other government-issued identifier (“GII”) and the Contract Owner number or participant account number, if known, of any or all Contract Owner(s) of the account, and the amount, date and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of shares held through an account maintained by the Company during the period covered by the request. Unless otherwise specifically requested by the Fund, the Company shall only be required to provide information relating to Contract Owner Initiated Transfer Purchases or Contract Owner Initiated Transfer Redemptions.
(a) Period Covered by Request. Requests must set forth a specific period, not to exceed 90 90days from the date of the request, for which transaction information is sought. The Fund may request transaction information older than 90 90 days from the date of the request as it deems necessary to investigate compliance with policies established or utilized by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by a Portfolio. If requested by the Fund, the Company will provide the information specified in this Section 14.1 for each trading day.
(b) Form and Timing of Response. The Company agrees to provide, promptly upon request of the Fund, the requested information specified in this Section 14.1. The Company agrees to use commercially reasonable efforts to determine promptly whether any specific person about whom it has received the identification and transaction information specified in this section is itself a “financial intermediary,” as that term is defined in Rule 22c-2 under the 1940 Act (an “Indirect Intermediary”) and, upon request of the Fund, promptly either (i) provide (or arrange to have provided) the information set forth in this section for those Contract Owners who hold an account with an Indirect Intermediary or (ii) restrict or prohibit the Indirect Intermediary from purchasing shares in nominee name on behalf of other persons. The Company additionally agrees to inform the Fund whether it plans to perform (i) or (ii) above. Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To the extent practicable, the format for any Contract Owner and transaction information provided to the Fund should be consistent with the NSCC Standardized Data Reporting Format.
(c) Limitations on Use of Information. The Fund agrees not to use the information received under this section for marketing or any other similar purpose without the prior written consent of the Company; provided, however, that this provision shall not limit the use of publicly available information, information already in the possession of the Fund or their affiliates at the time the information is received or information which comes into the possession of the Distributor, the Fund or their affiliates from a third party.

 

 

(d) Agreement to Restrict Trading. The Company agrees to execute written instructions from the Fund to restrict or prohibit further purchases or exchanges of Portfolio shares by a Contract Owner that has been identified by the Fund as having engaged in transactions in Portfolio shares (directly or indirectly through the Company’s account) that violate policies established or utilized by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by a Portfolio. Unless otherwise directed by the Fund, any such restrictions or prohibitions shall only apply to Contract Owner Initiated Transfer Purchases or Contract Owner Initiated Transfer Redemptions that are affected directly or indirectly through the Company.
(e) Form of Instructions. Instructions must include the TIN, ITIN or GII and the specific individual Contract Owner number or participant account number associated with the Contract Owner, if known, and the specific restriction(s) to be executed. If the TIN, ITIN, GII or the specific individual Contract Owner number or participant account number associated with the Contract Owner is not known, the instructions must include an equivalent identifying number of the Contract Owner(s) or account(s) or other agreed upon information to which the instruction relates.
(f) Timing of Response. The Company agrees to execute instructions from the Fund as soon as reasonably practicable, but not later than five (5) Business Days after receipt of the instructions by the Company.
(g) Confirmation by the Company. The Company must provide written confirmation to the Fund that the Fund’s instructions to restrict or prohibit trading have been executed. The Company agrees to provide confirmation as soon as reasonably practicable, but not later than ten (10) Business Days after the instructions have been executed.
(h) Definitions. For purposes of this Section 14.1, the following terms shall have the following meanings, unless a different meaning is clearly required by the context:

 

 

(i)The term “Contract Owner” means the holder of interests in a Contract or a participant in an employee benefit plan with a beneficial interest in a Contract.
(ii) The term “Contract Owner Initiated Transfer Purchase” means a transaction that is initiated or directed by a Contract owner that results in a transfer of assets within a Contract to a Portfolio, but does not include transactions that are executed: (i) automatically pursuant to a contractual or systematic program or enrollment such as a transfer of assets within a Contract to a Portfolio as a result of “dollar cost averaging” programs, insurance company approved asset allocation programs, or automatic rebalancing programs; (ii) pursuant to a Contract death benefit; (iii) as a result of a one-time step-up in Contract value pursuant to a Contract death benefit; (iv) as a result of an allocation of assets to a Portfolio through a Contract as a result of payments such as loan repayments, scheduled contributions, retirement plan salary reduction contributions, or planned premium payments to the Contract; or (v) pre-arranged transfers at the conclusion of a required “free look” period.
(iii) The term “Contract Owner Initiated Transfer Redemption” means a transaction that is initiated or directed by a Contract Owner that results in a transfer of assets within a Contract out of a Portfolio, but does not include transactions that are executed: (i) automatically pursuant to a contractual or systematic program or enrollments such as transfers of assets within a Contract out of a Portfolio as a result of annuity payouts, loans, systematic withdrawal programs, insurance company approved asset allocation programs and automatic rebalancing programs; (ii) as a result of any deduction of charges or fees under a Contract; (iii) within a Contract out of a Portfolio as a result of scheduled withdrawals or surrenders from a Contract; or (iv) as a result of payment of a death benefit from a Contract.
(iv) The term “Portfolios” shall mean the constituent series of the Fund, but for purposes of this Section 14.1 shall not include Portfolios excepted from the requirements of paragraph (a) of Rule 22c-2 by paragraph (b) of Rule 22c-2.
(v) The term “promptly” shall mean as soon as practicable but in no event later than ten (10) Business Days from the Company’s receipt of the request for information from theDistributor.
(vi) The term “written” includes electronic writings and facsimile transmissions.
(vii) In addition, for purposes of this Section 14.1, the term “purchase” does not include the automatic reinvestment of dividends or distributions.

 

 

     IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative as of the date first above written.
         
  PACIFIC LIFE INSURANCE COMPANY

By its authorized officer,
 		  
  By:      
    Name:      
    Title:      
         
  Attest:     
         
  FIRST TRUST VARIABLE INSURANCE TRUST

By its authorized officer,
 		  
  By:      
    Name:      
    Title:      
 
  FIRST TRUST PORTFOLIOS, L.P.

By its authorized officer,
 		  
  By:      
    Name:      
    Title:      

 

 

         
SCHEDULE A
Segregated Asset Accounts:
All segregated asset Accounts utilizing any Designated Portfolio.
Contracts:
All Contracts funded by the segregated asset Accounts that utilize any Designated Portfolio.

 

 

SCHEDULE B
Designated Portfolios
First Trust/Dow Jones Dividend & Income Allocation Portfolio

 

 

SCHEDULE C
EXPENSES
The Fund and/or the Distributor and/or Fund’s adviser, and the Company will coordinate the functions and pay the costs of completing these functions based upon an allocation of costs in the tables below.
             
        Party Responsible   Party Responsible
Item   Function   for Coordination   for Expense
Mutual Fund
Prospectus and, if
applicable, Summary
Prospectus
  Fund, Distributor or Fund’s adviser shall supply the Company with such numbers of the Designated Portfolio(s) prospectus(es) as the Company may reasonably request and/or provide the Company with a print-ready PDF of the Designated Portfolio(s) prospectus(es) for printing and expense reimbursement   Fund and/or Company   Fund, Distributor or Fund’s adviser, as applicable, will pay for printing and delivering (including postage) copies to existing Contract owners who allocate contract value to any Designated Portfolio.
 
            
Product Prospectus
  Printing, Filing and Distribution   Company   Company will pay printing and delivery.
 
            
Mutual Fund
Prospectus and, if
applicable, Summary
Prospectus Update &
Distribution
(Supplements)
  Fund, Distributor or Fund’s adviser shall supply the Company with such numbers of the Designated Portfolio(s) prospectus supplements as the Company may reasonably request and/or provide the Company with a print -ready PDF of the Designated Portfolio(s) prospectus supplements for printing and expense reimbursement   Fund and/or Company   Fund, Distributor or Fund’s adviser, as applicable, will pay for printing and delivering (including postage) to existing Contract owners who allocate contract value to any Designated Portfolio.

 

 

             
        Party Responsible   Party Responsible
Item   Function   for Coordination   for Expense
Product Prospectus
Update &
Distribution
(Supplements)
  If Required by Fund or
Distributor 		  Company   Fund or Distributor
 
            
 
  If Required by the
Company 		  Company   Company
 
            
Mutual Fund SAI
  Printing   Fund or Distributor   Fund or Distributor
 
            
 
  Distribution   Company   Fund or Distributor
 
            
Product SAI
  Printing & Distribution   Company   Company
 
            
Proxy Material for
Mutual Fund:
  Printing   Fund or Distributor
or a proxy
solicitation firm
chosen by the Fund 		  Fund or Distributor
 
            
 
  Distribution (including labor and postage)   Company or a proxy
solicitation firm
chosen by the Fund 		  Fund or Distributor
 
            
Mutual Fund Annual
& Semi-Annual
Report
  Fund, Distributor or Fund’s adviser shall supply the Company with such numbers as the Company may reasonably request and/or provide the Company with a print -ready PDF for printing and expense reimbursement   Company   Fund, Distributor or Fund’s adviser, as applicable, will pay for printing and delivering (including postage) copies to existing Contract owners who allocate contract value to any Designated Portfolio.
 
            
Other communication to Prospective clients
  If Required by the
Fund or Distributor 		  Company   Fund or Distributor
 
            
 
  If Required by the
Company 		  Company   Company

 

 

             
        Party Responsible   Party Responsible
Item   Function   for Coordination   for Expense
Other communication to existing Contract owners
  Distribution (including labor and printing) if required by the Fund or Distributor   Company   Fund or Distributor
 
            
 
  Distribution (including labor and printing) if required by the Company   Company   Company
 
            
Operations of the Fund
  All operations and related expenses, including the cost of registration and qualification of shares, taxes on the issuance or transfer of shares, cost of management of the business affairs of the Fund, and expenses paid or assumed by the Fund pursuant to any Rule 12b-1 plan   Fund or Distributor   Fund or Fund’s
adviser
 
            
Operations of the Account
  Federal registration of units of separate account (24f-2 fees)   Company   Company

 

EX-99.8(Z) 9 a59719bexv99w8xzy.htm EXHIBIT 8(Z) exv99w8xzy
ADMINISTRATIVE SERVICES AGREEMENT
     PACIFIC LIFE INSURANCE COMPANY (“INSURER”) and FIRST TRUST VARIABLE INSURANCE TRUST (“FUND”) (collectively, the “Parties”) mutually agree to the arrangements set forth in this Administrative Services Agreement (the “Agreement”) dated as of May 1, 2012.
     WHEREAS, FUND is a business trust organized under the laws of Massachusetts; and
     WHEREAS, INSURER issues variable life insurance policies and/or variable annuity contracts (collectively, the “Contracts”); and
     WHEREAS, INSURER has entered into a participation agreement, dated May 1, 2012 (“Participation Agreement”) with the FUND, pursuant to which the FUND has agreed to make shares of certain of its portfolios (“Portfolios”) available for purchase by one or more of INSURER’s separate accounts or divisions thereof (each, a “Separate Account”), in connection with the allocation by Contract owners of purchase payments to corresponding investment options offered under the Contracts; and
     WHEREAS, INSURER and FUND expect that the FUND, and its Portfolios, can derive substantial savings in administrative expenses by virtue of having one or more Separate Accounts of INSURER each as a single shareholder of record of Portfolio shares, rather than having numerous public shareholders of such shares; and
     WHEREAS, INSURER and FUND expect that the FUND, and its Portfolios as listed on Schedule A hereto, as amended from time to time, can derive such substantial savings because INSURER performs the administrative services listed on Schedule B hereto for the FUND in connection with the Contracts issued by INSURER; and
     WHEREAS, INSURER has no contractual or other legal obligation to perform such administrative services, other than pursuant to this Agreement and the Participation Agreement; and
     WHEREAS, INSURER desires to be compensated for providing such administrative services; and
     WHEREAS, FUND desires to benefit from the lower administrative expenses resulting from the administrative services performed by INSURER; and
     WHEREAS, FUND desires to retain the administrative services of INSURER and to compensate INSURER for providing such administrative services;
     NOW, THEREFORE, the Parties agree as follows:

 

 

Section 1. Administrative Services; Payments Therefor.
     (a) INSURER shall provide the administrative services set out in Schedule A hereto and made a part hereof, as the same may be amended from time to time. For such services, FUND agrees to pay to INSURER a quarterly fee (“Quarterly Fee”) equal to a percentage of the average daily net assets of the applicable Portfolio(s) attributable to the Contracts issued by INSURER (“INSURER Fund Assets”) at the following annual rates:
     Annual Rate
             0.20%
     (b) FUND shall calculate the Quarterly Fee at the end of each calendar quarter and will make such payment to INSURER, without demand or notice by INSURER, within 30 days thereafter, in a manner mutually agreed upon by the Parties from time to time.
Section 2. Nature of Payments.
     The Parties to this Agreement recognize and agree that FUND’S payments hereunder are for administrative services only and do not constitute payment in any manner for investment advisory services or for costs of distribution of Contracts or of Portfolio shares, and are not otherwise related to investment advisory or distribution services or expenses. INSURER represents and warrants that the fees to be paid by FUND for services to be rendered by INSURER pursuant to the terms of this Agreement are to compensate the INSURER for providing administrative services to the Fund, and are not designed to reimburse or compensate INSURER for providing administrative services with respect to the Contracts or any Separate Account.
Section 3. Term and Termination.
     Either Party may terminate this Agreement, without penalty, on 60 days written notice to the other Party. Unless so terminated, this Agreement shall continue in effect for so long as First Trust Advisors L.P. or its successor(s) in interest, or any affiliate thereof, continues to perform in a similar capacity for the FUND, and for so long as INSURER provides the services contemplated hereunder with respect to Contracts under which values or monies are allocated to a Portfolio.
Section 4. Amendment.
     This Agreement may be amended upon mutual agreement of the Parties in writing.
Section 5. Notices.
     All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered to:
PACIFIC LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, CA 92660
Facsimile: (949) 219-6952
Attn: General Counsel

 

 

FIRST TRUST VARIABLE INSURANCE TRUST
120 East Liberty Drive
Wheaton, IL 60187
Facsimile: (630) 517-7437
Attention: Scott Jardine, Secretary
Section 6. Miscellaneous.
     (a) Successors and Assigns. This Agreement shall be binding upon the Parties and their transferees, successors and assigns. The benefits of and the right to enforce this Agreement shall accrue to the Parties and their transferees, successors and assigns.
     (b) Assignment. Neither this Agreement nor any of the rights, obligations or liabilities of any Party hereto shall be assigned without the written consent of the other Party.
     (c) Intended Beneficiaries. Nothing in this Agreement shall be construed to give any person or entity other than the Parties any legal or equitable claim, right or remedy. Rather, this Agreement is intended to be for the sole and exclusive benefit of the Parties.
     (d) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall together constitute one and the same instrument.
     (e) Applicable Law. This Agreement shall be interpreted, construed, and enforced in accordance with the laws of the State of New York without reference to the conflict of law principles thereof.
     (f) Severability. If any portion of this Agreement shall be found to be invalid or unenforceable by a court or tribunal or regulatory agency of competent jurisdiction, the remainder shall not be affected thereby, but shall have the same force and effect as if the invalid or unenforceable portion had not been inserted.

 

 

     IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date of first above written.
         
  PACIFIC LIFE INSURANCE COMPANY
 		  
  By:      
    Name:      
    Title:      
         
  Attest:      
    Name:      
    Title:      
     
         
  FIRST TRUST VARIABLE INSURANCE TRUST
 		  
  By:      
    Title:  
       

 

 

         
SCHEDULE A
LIST OF PORTFOLIOS
First Trust/Dow Jones Dividend & Income Allocation Portfolio

 

 

SCHEDULE B
ADMINISTRATIVE SERVICES
     INSURER shall provide certain administrative services respecting the operations of the FUND, as set forth below. This Schedule, which may be amended from time to time as mutually agreed upon by INSURER and FUND, constitutes an integral part of the Agreement to which it is attached. Capitalized terms used herein shall, unless otherwise noted, have the same meaning as the defined terms in the Agreement to which this Schedule relates.
A. Records of Portfolio Share Transactions; Miscellaneous Records
     1. INSURER shall maintain master accounts with the FUND, on behalf of each Portfolio, which accounts shall bear the name of INSURER as the record owner of Portfolio shares on behalf of each Separate Account investing in the Portfolio.
     2. INSURER shall maintain records setting out the number of shares of each Portfolio purchased, redeemed or exchanged by Contract owners, as well as the net purchase or redemption orders for Portfolio shares submitted each day, to assist the FUND and/or the FUND’s transfer agent in tracking and recording Portfolio share transactions, and to facilitate the computation of each Portfolio’s net asset value per share. INSURER shall provide such other assistance to the FUND and the FUND’s transfer agent as may be necessary to cause various Portfolio share transactions effected by Contract owners to be properly reflected on the books and records of the FUND.
     3. In addition to the foregoing records, and without limitation, INSURER shall maintain and preserve all records as required by law to be maintained and preserved in connection with providing administrative services hereunder.
B. Order Placement and Payment
     1. INSURER shall determine the net amount to be transmitted to the Separate Accounts as a result of redemptions of each Portfolio’s shares based on Contract owner redemption requests and shall disburse or credit to the Separate Accounts all proceeds of redemptions of Portfolio shares. INSURER shall notify the FUND of the cash required to meet redemption payments.
     2. INSURER shall determine the net amount to be transmitted to the FUND as a result of purchases of Portfolio shares based on Contract owner purchase payments and transfers allocated to the Separate Accounts investing in each Portfolio. INSURER shall transmit net purchase payments to the FUND’s custodian.

 

 

C. Accounting Services
     INSURER shall perform miscellaneous accounting services as may be reasonably requested from time to time by the FUND, which services shall relate to the business contemplated by the Participation Agreement between INSURER and the FUND, as amended from time to time. Such services shall include, without limitation, periodic reconciliation and balancing of INSURER’s books and records with those of the FUND with respect to such matters as cash accounts, Portfolio share purchase and redemption orders placed with the FUND, dividend and distribution payments by the FUND, and such other accounting matters that may arise from time to time in connection with the operations of the FUND as related to the business contemplated by the Participation Agreement.
D. Reports
     INSURER acknowledges that FUND shall be required to provide the FUND’s Board of Trustees (“Board”) various types of information pertaining to the operations of the FUND and related matters. Accordingly, INSURER agrees to provide FUND with such assistance as FUND may reasonably request so that FUND can report such information to the Board in a timely manner. INSURER acknowledges that such information and assistance shall be in addition to the information and assistance required of INSURER pursuant to the FUND’s mixed and shared funding SEC exemptive order, described in the Participation Agreement.
     INSURER further agrees to provide FUND with such assistance as FUND may reasonably request with respect to the preparation and submission of reports and other documents pertaining to the FUND to appropriate regulatory bodies and third party reporting services.
E. Fund-related Contract Owner Services
     INSURER agrees to distribute, in a timely manner, prospectuses, statements of additional information, supplements thereto, periodic reports and any other materials of the FUND required by law or otherwise to be given to Contract owners investing in Portfolio shares. INSURER further agrees to provide telephonic support for Contract owners, including, without limitation, inquiries about the FUND and each Portfolio thereof (not including information about performance or related to sales), communicating with Contract owners about FUND (and Separate Account) performance, and assisting with proxy solicitations where appropriate.
F. Miscellaneous Services
     INSURER shall provide such other administrative support to the FUND as mutually agreed between INSURER and FUND from time to time. INSURER shall, from time to time, relieve the FUND of other usual or incidental administration services of the type ordinarily borne by mutual funds that offer shares to individual members of the general public.

 

EX-99.8(AA) 10 a59719bexv99w8xaay.htm EXHIBIT 8(AA) exv99w8xaay
Support Agreement
Between First Trust Advisors L.P. and Pacific Life Insurance Company

 
     This Support Agreement (“Agreement”) is made this 1st day of May, 2012, by and between First Trust Advisors L.P., an Illinois limited partnership, having a principal place of business at 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187 (“First Trust”), and Pacific Life Insurance Company, organized under the laws of the state of Nebraska, having a principal place of business at 700 Newport Center Drive, Newport Beach, California 92660 (“Participating Insurance Company”).
     Whereas, First Trust is the investment advisor to the funds set forth on Exhibit A (each, a “Fund”), each a series of the First Trust Variable Insurance Trust (the “Trust”);
     Whereas, Participating Insurance Company has entered into a participation agreement with First Trust dated May 1, 2012, whereby the Trust, through First Trust, will make shares of a Fund (“Fund Shares”) available to Participating Insurance Company, who will in turn make Fund Shares available for purchase to its variable insurance accounts (“Accounts”), to fund the benefits of the variable annuity and variable life insurance contracts issued by Participating Insurance Company;
     Whereas, Participating Insurance Company and First Trust wish to enhance the relationship between the parties whereby Participating Insurance Company makes Fund Shares available to its Accounts and provides certain other agreed upon information and services to First Trust, designed to enhance First Trust’s opportunity to expand sales of Fund Shares; and
     Whereas, First Trust and Participating Insurance Company desire to enter into this Agreement to specify certain payments from First Trust to Participating Insurance Company with regard to the relationship and services provided.
     Now, Therefore, First Trust and Participating Insurance Company hereby agree as follows:
     1. Relationship Enhancement Services Provided by Participating Insurance Company. In connection with its efforts to make Fund Shares available to its Accounts, Participating Insurance Company shall provide to First Trust certain relationship enhancement services as may be requested by First Trust from time to time and as may be mutually agreed upon by the parties, all upon the terms and conditions set forth herein.
     2. Compensation. First Trust agrees to make quarterly payments to Participating Insurance Company of [.0%] of the daily average net assets of the fund identified on Exhibit A, payable no later than the 15th of the first month of each calendar quarter (the “Support Fee”). First Trust agrees to make payments beginning as of the date of this Agreement and on a calendar quarterly basis thereafter. First Trust and Participating Insurance Company understand, acknowledge and agree that payment of the Support Fee: (i) is not conditioned upon Participating Insurance Company meeting particular sales goals, assets volumes or revenue targets in connection with its sales of Fund Shares to the Accounts; (ii) does not entitle the Fund

 

 

Shares to exclusive or preferential treatment, access or participation within Participating Insurance Company’s distribution channels; and (iii) does not entitle the Fund Shares to inclusion on any “preferred,” “recommended” or “select” list, nor does it provide for preferential consideration in investment recommendations made to Participating Company’s Accounts. First Trust acknowledges that Participating Insurance Company may charge amounts in addition to the amounts described above for First Trust’s participation at Participating Insurance Company’s internal events, including seminars, conferences and meetings, and for expenses associated with certain of the services.
     3. Disclosure.
          (a) First Trust represents and warrants that payment of the Support Fee will be made from its own revenues, profits or retained earnings, which may include lawful profits from its duties and responsibilities as investment advisor to a Fund, and not directly from the assets of a Fund, investment company or other entity subject to regulation under the Investment Company Act of 1940. First Trust hereby represents, warrants and covenants that (i) it shall make such disclosures (if any) as are required, upon the reasonable advice of counsel, to comply, in all material respects with all applicable laws and rules (the “Required Disclosure”); and (ii) First Trust shall provide Participating Insurance Company with a current copy of the Required Disclosure and prompt notice of any material amendment to the Required Disclosure in any Fund prospectus.
          (b) Participating Insurance Company hereby represents, warrants and covenants that it shall (i) at its discretion, make a general reference in its prospectus that payments are received from First Trust, and (ii) otherwise comply, in all material respects, with all applicable laws and rules. These payments shall not be used by Participating Insurance Company to pay compensation to its financial advisors or to provide additional, direct incentives for a financial advisor to offer Fund Shares.
     4. Amendment. This Agreement may be amended by mutual agreement signed by both parties.
     5. Termination. The Agreement shall continue for successive quarterly periods unless either party terminates the agreement upon 60 days’ prior written notice. Termination of this Agreement will not affect the obligation of the parties accruing under this Agreement prior to such termination. First Trust and Participating Insurance Company acknowledge and agree that the quarterly payment due from First Trust hereunder shall accrue on a daily basis, and thus if the Agreement is terminated prior to the end of any calendar quarter as to which First Trust has paid the quarterly payment, Participating Insurance Company shall promptly refund the applicable pro rata portion of the quarterly fee that has not yet accrued.

 

 

     In Witness Whereof, each of the parties hereto has caused this Agreement to be executed by a duly authorized representative thereof as of the date first above written.
         
  First Trust Advisors L.P.
 		  
  By:      
    Name:      
    Title:      
 
         
  Pacific Life Insurance Company
 		  
  By:      
    Name:      
    Title:      
 
    Attest:      

 

 

         
Exhibit A
Funds
First Trust/Dow Jones Dividend & Income Allocation Portfolio

 

EX-99.10 11 a59719bexv99w10.htm EXHIBIT 10 exv99w10
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Post-Effective Amendment No. 11 to Registration Statement No. 333-148865 on Form N-4 of our report dated February 28, 2012, relating to the financial statements and financial highlights of Separate Account A, comprised of Cash Management, Diversified Bond, Floating Rate Loan, High Yield Bond, Inflation Managed, Inflation Protected, Managed Bond, Short Duration Bond, American Funds® Growth, American Funds Growth-Income, Comstock, Dividend Growth, Equity Index, Focused 30, Growth LT, Large-Cap Growth, Large-Cap Value, Long/Short Large-Cap, Main Street® Core, Mid-Cap Equity, Mid-Cap Growth, Mid-Cap Value, Small-Cap Equity, Small-Cap Growth, Small-Cap Index, Small-Cap Value, Health Sciences, Real Estate, Technology, Emerging Markets, International Large-Cap, International Small-Cap, International Value, American Funds Asset Allocation, Pacific Dynamix — Conservative Growth, Pacific Dynamix — Moderate Growth, Pacific Dynamix — Growth, Portfolio Optimization Conservative, Portfolio Optimization Moderate-Conservative, Portfolio Optimization Moderate, Portfolio Optimization Growth, Portfolio Optimization Aggressive-Growth, Invesco V.I. Balanced-Risk Allocation Series II (formerly named Invesco Van Kampen V.I. Global Tactical Asset Allocation Series II), AllianceBernstein VPS Balanced Wealth Strategy Class B, BlackRock Capital Appreciation V.I. Class III, BlackRock Global Allocation V.I. Class III, Franklin Templeton VIP Founding Funds Allocation Class 2, Franklin Templeton VIP Founding Funds Allocation Class 4, Mutual Global Discovery Securities Class 2, Templeton Global Bond Securities Class 2, GE Investments Total Return Class 3, Lord Abbett International Core Equity Class VC, Lord Abbett Total Return Class VC, MFS Investors Growth Stock Series — Service Class, MFS Total Return Series — Service Class, MFS Value Series — Service Class, PIMCO Global Multi-Asset — Advisor Class, Jennison Class II, Value Class II, SP International Growth Class II, SP Prudential U.S. Emerging Growth Class II, JPMorgan Insurance Trust Core Bond Class 1, JPMorgan Insurance Trust Equity Index Class 1, JPMorgan Insurance Trust U.S. Equity Class 1, JPMorgan Insurance Trust Mid Cap Value Class 1, JPMorgan Insurance Trust Intrepid Growth Class 1, and JPMorgan Insurance Trust Mid Cap Growth Class 1 Variable Accounts (collectively, the “Variable Accounts”), appearing in the Annual Report on Form N-30D of Separate Account A of Pacific Life Insurance Company for the year ended December 31, 2011, and to the reference to us under the heading “Independent Registered Public Accounting Firm and Independent Auditors” in the Statement of Additional Information, which is part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
April 24, 2012

 

 

CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Post-Effective Amendment No. 11 to Registration Statement No. 333-148865 on Form N-4 of our report dated April 12, 2012 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to (1) the change in the method of accounting and reporting for deferred policy acquisition costs in 2011 and (2) change in the method of accounting and reporting for other than temporary impairments as required by accounting guidance adopted in 2009) relating to the consolidated financial statements of Pacific Life Insurance Company and Subsidiaries appearing in the Statement of Additional Information, which is part of such Registration Statement, and to the reference to us under the heading “Independent Registered Public Accounting Firm and Independent Auditors” in the Statement of Additional Information, which is part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
April 24, 2012

 

EX-99.13 12 a59719bexv99w13.htm EXHIBIT 13 exv99w13
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822 , 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
     
Dated: 1-26-12
/s/ Khanh T. Tran
 
  Khanh T. Tran

 

 

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822, 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
     
Dated: 1-27-12
  /s/ James T. Morris
 
  James T. Morris

 

 

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822, 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
     
Dated: 1-25-12
  /s/ Edward R. Byrd
 
  Edward R. Byrd

 

 

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822, 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
     
Dated: 1-25-12
  /s/ Brian D. Klemens
 
  Brian D. Klemens

 

 

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822, 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
     
Dated: 1-30-12
  /s/ Dewey P. Bushaw
 
  Dewey P. Bushaw

 

 

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822, 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
     
Dated: 1-25-12
  /s/ Sharon A. Cheever
 
  Sharon A. Cheever

 

 

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822, 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
     
Dated: 1-26-12
  /s/ Denis P. Kalscheur
 
  Denis P. Kalscheur

 

 

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822, 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
     
Dated: 1-25-12
  /s/ Jane M. Guon
 
  Jane M. Guon

 

 

POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer and/or director of Pacific Life Insurance Company (“Company”) constitutes and appoints Sharon A. Cheever, Brandon J. Cage, Charlene A. Grant and Jeffrey S. Puretz, each individually as his/her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution for his/her name, place, and stead, in any and all capacities, to sign and file on behalf of the Company and/or any of its Separate Accounts, any and all Registration Statements, amendments, supplements and/or exhibits thereto, and any other instruments necessary or desirable in connection therewith, with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his/her substitute or substituted, may lawfully do or cause to be done by virtue hereof:
  •   Registration Statements under Separate Account A of Pacific Life Insurance Company (811-08946): 033-88458, 333-53040, 333-93059, 033-88460, 333-60833, 333-136597, 333-140881, 333-141135, 333-145822, 333-148865, 333-160772, 333-160999, 333-168026, 333-168284, 333-175279 and 333-178739.
 
  •   Registration Statement under Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company (811-05980): 033-32704.
 
  •   Registration Statement under Separate Account B of Pacific Life Insurance Company (811-07859): 333-14131.
 
  •   Registration Statement under Pacific Corinthian Variable Separate Account of Pacific Life Insurance Company (811-07082): 333-39209.
This Power of Attorney is intended to supersede any and all prior Power of Attorneys in connection with the above mentioned acts, and remains in effect until revoked or revised.
             
 
            3-20-12       /s/ Adrian S. Griggs
Dated:
            
 
 
 
      
 
 Adrian S. Griggs

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