CORRESP 1 filename1.htm responseletterforwf.htm - Generated by SEC Publisher for SEC Filing

 

July 15, 2013

 

VIA EDGAR

 

Sonny Oh

Senior Counsel

Division of Investment Management

Office of Insurance Products

Securities and Exchange Commission

100 F Street, N.E.

Mail Stop 8629

Washington D.C. 20549-8629

 

RE:      Principal Life Insurance Company Separate Account B

            Principal Investment Plus Variable AnnuitySM

            (For Applications Signed On Or After August 1, 2013)

            Post-Effective Amendment on Form N-4 number 171

File Numbers 333-188293, 811-02091

 

Dear Mr. Oh:

 

This letter responds, on behalf of Principal Life Insurance Company Separate Account B (the “Registrant”), to the comments of the Staff of the Securities and Exchange Commission (“Commission”), which you communicated to me by letter dated July 2, 2013, with respect to the initial registration statement and pre-effective amendment number 1 to the Registrant’s registration statement on Form N-4 (“the Amendment”).  The Initial Registration Statement was filed on May 2, 2013, and the Amendment was filed with the Commission on May 6, 2013, pursuant to Rule 485(a) under the Securities Act of 1933 (the “1933 Act”).  Changes in response to Staff comments as described below will be made by the Registrant in a post-effective amendment that will be filed with the Commission.

 

GENERAL MATTERS 

 

COMMENT 1.

Please  revise  the  prospectus  such  that  the  prospectus  only  discusses  and  offers  the riders that  will  actually  be  available  upon  the  effective  date  of  the  registration  statement and  delete  all  references  to  "older"  versions  of  the  rider  "for  applications  signed  before August 1,  2013." 

 

 

 

 

RESPONSE: Registrant will make the requested revisions.

 

 

 

COMMENT 2.

Please advise  the  staff  whether  there  are  any  types  of  guarantees  (e.g.,  as  to  any  of the  insurance  company's  obligations  under  the  contract)  or  will  the  company  be  solely responsible for  any  such  obligations.  Please  also  advise  the  staff  whether  there  are  any support agreements  with  third  parties  pertaining  to  the  capitalization  of  the  company. 

 

 

 

 

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RESPONSE: Principal Life Insurance Company will be solely responsible for its obligations under the contracts. In other words, there are neither reinsurance arrangements nor any other third party support agreements pertaining to the contracts. With regard to the second sentence of this comment, we do not utilize a third party support agreement at this time.  Rather, our risk management processes of evaluating potential capital needs under stressed scenarios and events are utilized in our capital planning efforts to ensure an appropriate capital reserve is maintained.

 

 

 

COMMENT 3.

Please revise the Class identifier so that it is identical to the contract name appearing on the front cover page of the prospectus.

 

 

 

 

RESPONSE: Registrant has made the requested revision.

 

 

 

COMMENT 4.

Premium Payment  Credit  Rider 

 

 

 

 

a. The  front  cover  page  of  the  prospectus  explains  that  the  credit  may  be recaptured if  the  Contract  is  returned  during  the  examination  offer  period  or  upon full annuitization  of  the  Contract  prior  to  the  third  Contract  anniversary. 

 

 

 

 

Please advise  the  staff  how  such  recapture  is  consistent  with  Section  27(i)  of  the Investment Company  Act  of  1940.  If  recapture  will  be  pursuant  to  an  order  of the Commission, then  please  also  provide  the  citations  for  the  applicable  notice  and order.

 

 

 

 

RESPONSE: The recapture is allowable pursuant to an Order of the Commission. The citation for such Order is Release No. IC-26743, and it is dated February 1, 2005. The File Number is 812-13109. The notice of the filing of the application was issued on January 3, 2005 (Rel. No. IC-26716). For the same reasons set forth in the foregoing notice of filing and because the bonus credits (and the recapture thereof) under the present registration will be calculated the same as contemplated in the Commission’s Order, the terms of the Order should extend to the present registration.

 

 

 

 

b. Based  on  the  description  of  the  Separate  Account  charge  when  the  rider  is elected at  bottom  of  page  11  and  the  shaded  box  at  the  bottom  of  page  82,  please revise the  example  at  the  top  of  page  83  to  better  explain  how  the  charge  results  in the values  provided  under  the  "Sample  Division  Unit  Value"  column. 

 

 

 

 

RESPONSE: Registrant will footnote the “Sample Division Unit Value” heading in the table as follows:

 

 

 

 

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“(1) For a detailed description of how the unit value is calculated, see subsection Accumulated Value under 1. THE CONTRACT.”

 

 

 

 

c. For  the  illustration  on  page  84,  please  note  that  when  "non-standardized" performance is  shown  with  the  credit,  "standardized"  performance must  also  be shown, i.e.,  the  surrender  charge  is  reflected  in  performance.  Please  revise  the illustration accordingly. 

 

 

 

 

RESPONSE: Registrant confirms that the table to which the Staff refers does reflect surrender charges. In addition, Registrant will add the following language as the second sentence to the paragraph immediately above the table:

 

 

 

 

“The table reflects surrender charges, when applicable.”

 

 

 

 

d. Please  highlight  the  third  to  last  bullet  point  on  page  82  and  the  second  to last bullet  point  after  the  chart  on  page  83. 

 

 

 

 

RESPONSE: The lack of shading on which the Staff is commenting only appears in the compare document. The bullet points identified by the Staff are shaded in the “clean” version filed with the Commission and it will be shaded in the version provided to customers.

 

 

 

PROSPECTUS

 

 

 

 

 

COMMENT 5.

Front Cover  Page 

 

 

 

 

 

a. On  the  front  cover  page  and  as  a  preamble  to  the  Glossary,  please  briefly explain that  certain  terms  are  defined  in  the  Glossary  and  the  means  by  which  a reader can  identify  such  terms  in  the  prospectus,  e.g.,  words  that  are  capitalized  or italicized.

 

 

 

 

RESPONSE: Registrant will make the requested revisions.

 

 

 

 

b. In  the  shaded  text  regarding  the  Premium  Payment  Credit  Rider,  please state that  a  contract  with  the  rider  will  cost  more  than  a  contract  without  the  rider rather than  "[a]  Contract  without  this  rider  will  cost  less."  For  example,  note  the second sentence  of  the  first  paragraph  of  the  preamble  to  the  fee  tables  on  page 10.

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

 

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c. Please  add  that  the  prospectus  describes  all  material  features  of  the contract. Please  note  that  this  should  include  material  differences  due  to  state variations, e.g.,  states  in  which  certain  riders  are  not  available. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

COMMENT 6.

Summary of  Expense  Information  (page 10)

 

 

 

 

a. Contract owner  transaction  expense. 

 

 

 

 

Please reverse  the  order  of  all  maximum  and  current  charges  so  that  the higher fee  is  shown  first,  e.g.,  the  surrender  charges. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

 

b. Periodic Expenses 

 

 

 

 

Please provide  a  clear  caption  preceding  the  actual  Separate  Account Annual expenses  on  page  11. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

 

c. Optional Riders 

 

 

 

 

i. Please include  a  brief  description  of  the  For  Life  withdrawal benefit base  and  Investment  Back  withdrawal  benefit  base  in, respectively, footnotes  7  and  8  on  page  14. 

 

 

 

 

RESPONSE: Registrant will make the requested revisions.

 

 

 

 

ii. Please briefly  explain  how  election  of  the  step-up  may  impact  the current and  maximum  charges  of  the  PIB  3  and  PIB  10  riders ("GMWB Riders")  in,  respectively,  footnotes  7  and  8  on  page  14. 

 

 

 

 

RESPONSE: Registrant will make the requested revisions. Registrant also notes to the Staff that owners do not elect the step-up; rather, the step-up feature is automatic unless the owner opts out.

 

 

 

 

d. Example

 

 

 

 

Please note  that  pursuant  to  General  Instruction  21(h)  and  (i),  the  example may not  necessarily  have  to  provide  values  for  when  the  contract  is  annuitized. Please revise  accordingly. 

 

 

 

 

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RESPONSE: Registrant has not revised the example. With regard to General Instruction 21(h), the example includes values for complete surrender because surrender charges are incurred for certain of the years required to be provided under the General Instructions. With regard to General Instruction 21(i), Registrant is required to show values for fully annuitizing because the owner would receive different amounts than if the owner fully surrenders the contract.

 

 

 

COMMENT 7.  

The Contract (page  21) 

 

 

 

 

 

a. Allocating Premium  Payments  (page  22) 

 

 

 

 

As you  have  done  in  footnote  1 to the  list  of  underlying  mutual  funds  on page 2,  please  disclose  that  there  are  allocation  restrictions  when  a  GMWB  Rider is elected. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

 

b. Accumulated Value  (page  24) 

 

 

 

 

i. For clarity,  in  the  first  sentence  of  the  last  paragraph  on  page  24, please  specify  that  the  time  for  the  close  of  normal  trading  on  the NYSE is  generally  4:00  p.m.  Eastern  Time. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

 

ii. The last  sentence  of  the  last  paragraph  of  this  subsection  on  page 25  appears  to  be  the  one  time  the  disclosure  regarding  the  ability  to increase your  accumulated  value  to  avoid  termination  is  set  forth  in the  prospectus.  Therefore,  in  the  first  bullet  point  appearing  under "Termination"  in  the  Summary  on  page  20,  please  disclose  the ability to  increase  accumulation  value  to  avoid  termination. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

COMMENT 8.

Charges and  Deductions  (page  26) 

 

 

 

 

a. Surrender  Charge  (page  26) 

 

 

 

 

Please explain  whether  the  charge  is  deducted  from  the  amount surrendered or  the  remaining  accumulated  value.  For  example,  please  refer  to  the last sentence  of  the  first  paragraph  under  "Transaction  Fee"  on  page  30. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

 

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b. Principal  Income  Builder  10  (PIB  10)  Rider  (page  34) 

 

 

 

 

Please reconcile  the  description  of  the  basis  of  the  charge  in  the  first  two paragraphs which  refer  to  the  For  Life  withdrawal  benefit  base  with  the  third paragraph and  the  fee  table  on  page  12  which  refer  to  the  Investment  Back withdrawal benefit  base. 

 

 

 

 

RESPONSE: The references to “For Life” in the provision identified by the Staff should have stated “Investment Back”. Registrant will correct these errors.

 

 

 

COMMENT 9.

Living Benefit-  Guaranteed  Minimum  Withdrawal  Benefit  (GMWB)  –  page 39)

 

 

 

 

a. The  paragraph  following  the  chart  at  the  top  of  page  40  is  very  confusing because it  refers  to  riders  no  longer  offered  and  described  in  a  completely different prospectus.  Please  delete  it. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

 

b. Please  delete  the  first  three  paragraphs  under  "Calculating  the  Principal Income Builder  3  For  Life  Withdrawal  Benefit  Payment"  and  "Calculating  the Principal Income  Builder  10  For  Life  Withdrawal  Benefit  Payment"  on, respectively, pages  47  and  66. 

 

 

 

 

RESPONSE: Registrant will make the requested revisions.

 

 

 

 

c. Please  delete  the  second  through  fourth  paragraphs  under  "Principal Income  Builder  3  -  GMWB  Bonus"  and  "Principal  Income  Builder  10  -  GMWB Bonus"  on,  respectively,  pages  53  and  71. 

 

 

 

 

RESPONSE: Registrant will make the requested revisions.

 

 

 

 

d. In  the  second  paragraph  under  "Required  Minimum  Distribution  (RMD) Program for  GMWB  Riders"  on  page  52,  please  highlight,  if  true,  that  an  owner must be  enrolled  in  the  Program  in  order  for  an  RMD  amount  not  to  be  deemed  an excess withdrawal. 

 

 

 

 

This comment  also  applies  to  the  corresponding  subsection  of  the  PIB  10  section on page  70. 

 

 

 

 

RESPONSE: Registrant will make the requested clarifications.

 

 

 

 

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e. Under  "Principal  Income  Builder  3-  GMWB  Step-Up"  beginning  on  page  55,  please  provide  more  details  as  to  how  the  Step-Up  value  is  calculated.  In  the first sentence  of  the  second  paragraph,  it  appears  to  equal  accumulated  value  if that value  is  greater  than  the  withdrawal  benefit  base.  However,  on  page  45,  the formula for  calculating  the  withdrawal  benefit  base  is  the  greater  of  two  prongs, one  of which is also  accumulated  value. 

 

 

 

 

This comment  also  applies  to  the  corresponding  subsections  of  the  PIB  10  section on pages  71  (second  sentence  of  second  paragraph)  and  64  (two  prongs  of  benefit base formula). 

 

 

 

 

RESPONSE: For both riders, the GMWB Step-Up is an automatic feature that will increase a withdrawal benefit base to the contract accumulated value if the contract accumulated value is greater on the contract anniversary. The withdrawal benefit base is calculated as indicated in item 2 under the withdrawal benefit base section of each GMWB rider. Since the withdrawal benefit base may reflect the contract accumulated value (as a result of step-up) instead of the calculation reflected in item 2, Registrant reflected in the definition of withdrawal benefit base that it will be the greater of the contract accumulated value or the calculation shown in item 2. For the PIB 10 rider, which has both a For Life and Investment Back withdrawal option, the withdrawal benefit base for each withdrawal option is compared independently to the contract accumulated value to determine if a step-up will apply and this information is included in both the withdrawal benefit base and GMWB Step-Up descriptions.

 

 

 

 

To further clarify the mechanics of the above relationship, Registrant has revised the Principal Income Builder 3 - Withdrawal Benefit Base subsection to read as follows:

 

 

 

 

“On each Contract anniversary, the withdrawal benefit base is reset to the greater of 1 or 2, where:

 

 

 

 

1= the accumulated value on the Contract anniversary (see Principal  

Income Builder 3 – GMWB Step-Up).” 

 

 

 

 

 

Registrant has made a similar revision in the Principal Income Builder 10 - Withdrawal Benefit Base subsection.

 

 

 

 

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f. The subsection  "Remaining Withdrawal  Benefit  Base"  is  provided  on page 65  for  PIB  10.  Please  provide  a  corresponding  subsection  for  the  PIB  3. 

 

 

 

 

RESPONSE: Registrant has not made the suggested revision because there is no remaining withdrawal benefit base feature offered with the Principal Income Builder 3 rider. In the “Principal Income Builder 10 Terms”, which is a part of the Overview of Principal Income Builder 10 subsection, Registrant already has included the following to clarify to readers that the remaining withdrawal benefit base feature does not apply to PIB 3:

 

 

 

 

“Remaining withdrawal benefit base — the amount available for future withdrawal benefit payments under a withdrawal option. The remaining withdrawal benefit base for each withdrawal option is calculated separately. (not applicable to PIB3)”

 

 

 

COMMENT 10.  

Annuity Benefit  Payment  Options  (page  91) 

 

 

 

 

In the  fifth  paragraph,  please  also  briefly  describe  the  impact  that  frequency  and duration  of  payments  has  on  the  level  of  the  annuity  payment. 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

 

 

COMMENT 11.  

Death Benefit  (page  93) 

 

 

 

 

a. Standard  Death  Benefit  Formula (page  94) 

 

 

 

 

Please clarify  who  is  eligible  or  required  to  elect  the  standard  death benefit.

 

 

 

 

RESPONSE: Registrant will make the requested clarification.

 

 

 

 

b. GMWB  Death  Benefit  -  Principal Income  Builder  3  (page  95) 

 

 

 

 

The formula  for  calculating  the  PIB  3  Death  Benefit  on  page  95  (greatest of 1,  2,  or  3)  appears  identical  to  the  formula  for  the  standard  death  benefit  on page 94  (greatest  of  a,  b,  or  c). 

 

 

 

 

Please revise  either  or  both  formulas  to  better  distinguish  their  differences  and revise Appendix  G  accordingly. 

 

 

 

 

This comment  also  applies  to  the  formula  for  the  PIB  10  Death  Benefit  on  page 99.

 

 

 

 

RESPONSE: Registrant will add the following clarification in the GMWB Death Benefit subsections:

 

 

 

 

“The GMWB Death Benefit is similar to the Standard Death Benefit with the exception of how withdrawals reduce the death benefit amount.”

 

 

 

 

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For further response to this Comment, Registrant points out that language following each of the death benefit calculations describes the differences relating to how withdrawals reduce the respective death benefit amounts. Registrant has added a footnote within the formula that directs the reader to the more detailed description of the difference between how withdrawals affect death benefits under the standard death benefit as opposed to the GMWB death benefit. To further clarify the different treatment, Registrant has added the following language under the GMWB Death Benefit - Principal Income Builder 3 and GMWB Death Benefit - Principal Income Builder 10 subsections:

 

 

 

 

“Note, this is different than how withdrawals reduce the standard death benefit.”

 

 

 

 

c. In  the  "If  the  Contract  Accumulated  Value  is  Zero"  table  beginning  on page 101,  please  confirm  the  accuracy  of  the  disclosure  in  the "Then ..."  column of the  first  and  fourth  rows.  For  example,  compare  these  to  the  disclosure  in  the "Then ..."  column  of  the  first  and  third  rows  of  the  corresponding  table  for  the PIB 3  beginning  on  page  96. 

 

 

 

 

RESPONSE: Registrant confirms the accuracy of information included in the cells identified by the Staff. For further response, Registrant notes that the PIB 3 and PIB 10 tables differ because there is no remaining withdrawal benefit base feature in the PIB 3 rider.

 

 

 

COMMENT 12. 

Appendix G 

 

 

 

 

 

a. In  each  of  the  examples  appearing  in  Appendix  G,  please  clarify  how  the "Available  For  Life  withdrawal  benefit  payment"  is  determined. 

 

 

 

 

RESPONSE: Registrant will make the clarification immediately above the first example.

 

 

 

 

b. At  the  end  of  examples  3,  4,  and  5,  please  revise  the  disclosure  to  better explain how  prong  "2"  of  the  calculation  of  the  GMWB  Death  Benefit  on respectively,  January  15,  January  15,  and  December  30  relate  to  the  first  "NOTE" following  the  GMWB  Death  Benefit  formula  on  page  95  of  the  prospectus. 

 

 

 

 

In addition,  please  expand  either  prong  2  of  the  formula  and/or  the  first  "NOTE" to  better  explain  the  proportional  reduction  that  takes  place  with  Excess Withdrawals. 

 

 

 

 

RESPONSE: Registrant will make the requested revisions to examples 3, 4, and 5. Registrant will make further revisions to the “NOTE” to which the Staff refers to expand on the description of how the proportional reduction works.

 

 

 

 

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STATEMENT OF  ADDITIONAL  INFORMATION  ("SAl") 

 

 

 

COMMENT 13.  

Please disclose  the  name  of  the  depositor  on  the  front  cover  page  of  the  SAI.  Item  15(a)(ii).

 

 

 

 

RESPONSE: Registrant will make the requested disclosure.

 

 

 

COMMENT 14.  

Please update  the  second  paragraph  under  "Calculation of  Performance  Data"  on page 4  in  light  of  the  fact  that  this  is  an  initial  filing  of  the  registration  statement. 

 

 

 

 

Also,  please  confirm  that  any  standardized  performance  data  provided  does  not  pre-date the creation  of  the  applicable  sub-account.  If  any  do,  please  revise  the  performance information to  reflect  performance  since  the  creation  of  the  subaccount. 

 

 

 

 

RESPONSE: Registrant will make the requested revision. Registrant also confirms the information set forth in the second paragraph of this Comment.

 

 

 

PART C

 

 

 

 

 

COMMENT 15.  

For any  exhibits  incorporated  by  reference  to  another  filing,  please  provide  the applicable file  numbers  and  clearly  label  all  applicable  accession  numbers,  e.g.  ,  exhibits 8e4 and  8g2. 

 

 

 

 

RESPONSE: Registrant will add the requested disclosure with the exhibit list expanded to include the requested information (when applicable).

 

 

 

COMMENT 16.  

In the  initial  registration  statement,  please  note  that  all  exhibits  for  exhibit  3  and exhibit 4  have  been  labeled  "EX-3"  and  "EX-4,"  respectively.  Please  revise  the  labels such that  the  EDGAR  exhibit  labels  match  up  with  those  provided  in  Part  C. 

 

 

 

 

RESPONSE: Registrant will make the requested revisions.

 

 

 

COMMENT 17.  

For Item  25,  please  provide  the  principal  business  addresses  for  the  executive officers (other  than  directors). 

 

 

 

 

RESPONSE: Registrant will make the requested revision.

 

******************

 

 

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We understand that the Registrant is responsible for the accuracy and adequacy of the disclosure in the filing and that Staff comments or our changes to the disclosure in response to the Staff comments do not foreclose the Commission from taking any action with respect to the filing.  In addition, the Registrant may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

 

Please call me at 515-362-2384 if you have any questions.

Sincerely,

 

/s/ Doug Hodgson

 

Doug Hodgson

Counsel, Registrant

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