This document sets forth the administrative procedures that will be followed by Pacific Life
Insurance Company (“Pacific Life”) in connection with the issuance of its M’s Versatile Product
VII, M’s Versatile Product VIII, M’s Versatile Product IX, and M’s Versatile Product VUL 10
Flexible Premium Variable Life Insurance Policies (collectively referred herein as “Policy”), the
transfer of assets held under the Policies, and the redemption by Policy owners of their interests
in said Policies.
I. PURCHASE AND RELATED TRANSACTIONS
A. Premium Schedules and Underwriting Standards
The Policy is a flexible premium variable life insurance policy. The Policy provides lifetime
insurance protection on the life of the insured named in the Policy, with a death benefit payable
when the insured dies while the Policy is in force. A Policy owner may elect one of three options
to calculate the amount of death benefit payable under the Policy. The Policy will be offered and
sold pursuant to an established mortality structure and underwriting standards in accordance with
state insurance laws which prohibit unfair discrimination among Policy owners, but allow cost of
insurance rates to be based upon factors such as age, health or occupation.
A Policy owner may choose the amount and frequency of premium payments, subject to a minimum
of $50 per payment.
B. Application and Initial Premium Processing
Upon receipt of a completed application for a Policy, Pacific Life will follow certain
insurance underwriting (i.e., evaluation of risk) procedures designed to determine whether the
proposed insured is insurable. This process may involve verification procedures and may require
that further information be provided by the applicant before a determination can be made. Pacific
Life will first become obligated under a Policy when the total initial premium is received or on
the date the application is accepted by Pacific Life, whichever is later.
After the Policy is issued, insurance coverage under the Policy will be deemed to have begun
as of the Policy Date. The Policy Date is usually the date that the Policy is issued. The Policy
Date is the date used to determine Policy years, Policy months, and Policy monthly, quarterly,
semi-annual and annual anniversaries.
C. Additional Premium Payments
The Policy is a flexible premium policy, and it provides flexibility to pay premiums at the
Policy owner’s discretion. When applying for a Policy, a Policy owner will determine a planned
periodic premium that provides for the payment of level premiums of fixed intervals over a
specified period of time. Each Policy owner will receive a premium reminder notice or listbill on
either an annual, semi-annual, or quarterly basis (or monthly (listbill only)), at the option of
the Policy owner; however, the Policy owner is not required to pay planned periodic premiums.
Payment of the planned periodic premium will not guarantee that a Policy will remain in force.
Instead, the duration of the Policy depends upon the Policy’s accumulated value. Even if planned
periodic premiums are paid, the Policy will lapse any time accumulated value less Policy debt is
insufficient to pay the current monthly deduction and a grace period expires without sufficient
payment. Any premium payment must be for at least $50. Pacific Life also may reject or limit any
premium payment that would result in an immediate increase in the net amount at risk under the
Policy, although such a premium may be accepted with satisfactory evidence of insurability.
D. Premium Allocation
A Policy owner may allocate net premiums among the variable accounts and/or the fixed
accounts. When a Policy is issued and all delivery requirements are received at Pacific Life’s
Administrative Offices, the Accumulated Value will be automatically allocated according to the
Policy owner’s instructions in the application or more recent instructions if any (except for
amounts allocated to the Loan Account to secure any Debt). The initial allocation must be made in
the application for the Policy. All net premiums are allocated to the Policy owner’s instructions
the later of 15 days after the Policy is issued or when all requirements for the Policy to be
considered in force are delivered to the Administrative Offices (the Free-Look Transfer Date).
Additional net premium payments will be allocated among the investment alternatives according
to the Policy owner’s instructions (after the Free-Look Transfer Date). A Policy owner may change
the allocation of accumulated value by submitting a proper written request to Pacific Life’s
Administrative Offices.
Pacific Life reserves the right to limit the amount allocated to the Fixed Accounts to
$1,000,000 for net premium payments and $100,000 for loan repayments and transfers during the most
recent 12 months for all of a Policy owner’s policies. Any excess over these limits would be
transferred to a Policy owner’s other Investment Options according to the Policy owner’s most
recent instructions.
E. Reinstatement
Pacific Life will reinstate a lapsed Policy (see “Policy Lapsation”, Section III.C. of this
document) at any time within five years after the end of the grace period, provided Pacific Life
receives the following: (1) a written application of the Policy owner; (2) evidence of insurability
satisfactory to Pacific Life for each insured; and (3) payment sufficient, after deduction of
premium load, to cover all monthly charges and deductions that were due and unpaid during the grace
period, and keep the Policy in force for 3 months following reinstatement.
When the Policy is reinstated, the accumulated value will be equal to the accumulated value on
the date of the lapse subject to the following: (1) if the Policy is reinstated on the monthly
payment date next following lapse, any Policy debt on the date of lapse will also be reinstated;
(2) if the Policy is reinstated after the first monthly payment date following lapse, the
accumulated value will be reduced by the amount of the Policy debt on the date of lapse and no
Policy debt will exist on the date of reinstatement, unless the Policy owner requests, in writing,
that the Policy debt be reinstated; and (3) no interest on amounts held in Pacific Life’s Loan
Account to secure Policy debt will be paid or credited between lapse and reinstatement.
Reinstatement will be effective as of the monthly payment date on or next following the date
of approval by Pacific Life, and accumulated value minus any Policy debt as of the date of
reinstatement will be allocated among the variable accounts and the fixed accounts in accordance
with the Policy owner’s current premium allocation instructions.
Any policy that is reinstated by return of the surrender proceeds as a result of Pacific
Life’s conservation measures will be reinstated as of the effective date of the surrender. The
Policies’ accumulated value, net of any applicable fees and charges, will be allocated among the
variable accounts and the fixed accounts in accordance with the Policy owner’s most recent premium
allocation instructions. Any lag loss resulting from the reinstatement will be borne by Pacific
Life.
F. Policy Loans
A Policy owner may borrow from Pacific Life an amount up to the amount of the accumulated
value less 3 times the most recent monthly deduction for policy charges, minus any surrender charge
applicable on the date of the loan and less any outstanding Policy debt. The minimum loan that may
be taken is $200. A Policy is the only security required for a loan.
When a Policy owner takes a loan, an amount equal to the loan is transferred out of the Policy
owner’s accumulated value in the Investment Options and/or the Fixed Options in proportion to the
Accumulated Value in each Investment Option, unless the Policy owner instructs Pacific Life
otherwise.
The interest rate on loans is 2.75% (2.25% for M’s Versatile Product VUL 10) annually for all
years. Pacific Life will credit interest monthly on amounts held in the Loan Account to secure the
loan at an annual rate of at least 2.5% (2.00% for M’s Versatile Product VUL 10) in all Policy
years. The owner may repay all or a part of the loan at any time while the Policy is in force. If
not repaid, the Policy debt will reduce the amount of death proceeds paid upon the death of the
insured, the cash surrender value paid upon surrender, or the refund of premium upon exercise of
the Free-Look Right.
A loan may affect the length of time the Policy remains in force. The Policy will lapse when
accumulated value minus Policy debt is insufficient to cover the monthly deduction against
the
Policy’s accumulated value on any monthly payment date and the minimum payment required is not made
during the grace period. Moreover, the Policy may enter the grace period more quickly when a loan
is outstanding, because the loaned amount is not available to cover monthly deductions.
II. TRANSFER AMONG INVESTMENT OPTIONS
Transfers are limited to 25 for each calendar year, starting in 2005. If all available transfers
have been used, transfer requests will no longer be accepted until the start of the following
calendar year. However, a Policy owner may make one transfer of all or a portion of the Policy’s
accumulated value remaining in the variable investment options into the Money Market investment
option prior to the start of the next calendar year. A Policy owner may only make 2 transfers in
any calendar month to or from each of the following investment options: American Funds
Growth-Income, American Funds Growth, American Funds Asset Allocation, Fidelity VIP
Contrafund® Service Class 2, Fidelity VIP Freedom Income Service Class 2, Fidelity VIP
Freedom 2010 Service Class 2, Fidelity VIP Freedom 2015 Service Class 2, Fidelity VIP Freedom 2020
Service Class 2, Fidelity VIP Freedom 2025 Service Class 2, Fidelity VIP Freedom 2030 Service Class
2, Fidelity VIP Freedom 2035 Service Class 2, Fidelity VIP Freedom 2045 Service Class 2,Fidelity
VIP Growth Service Class 2, Fidelity VIP Mid Cap Service Class 2 and Fidelity VIP Freedom Value
Strategies Service Class 2, T. Rowe Price Blue Chip Growth Portfolio – II, T. Rowe Price Equity
Income Portfolio – II. Additionally, only 2 transfers in any calendar month may involve any of the
following investment options: International Value, International Small-Cap, International
Large-Cap, Emerging Markets, Emerging Markets Debt, Variable Account I (M International Equity
Fund), BlackRock Global Allocation V.I. Fund Class III, GE Investments Total Return Fund
Class 3, Invesco V.I. International Growth Fund Series II, Janus Aspen Series
Overseas Service Class, PIMCO Global Multi-Asset Portfolio Advisor Class, Templeton Foreign
Securities Fund Class 2,Templeton Global Bond Securities Fund Class II or Van Eck Worldwide Hard
Assets Fund. For the purposes of applying the limitations, any transfers that occur on the same day
are considered 1 transfer. A transfer of accumulated value from the loan account into the
investment options following a loan payment is considered a transfer under these limitations.
Transfers into the loan account, or transfers that occur as a result of the dollar cost averaging
program, the portfolio rebalancing program, certain corporate owned life insurance policy
rebalancing programs, the first year transfer program or an asset allocation program approved by
Pacific Life are excluded from the limitations. A Policy owner may request a transfer between
variable accounts at any time. The Pacific Select Exec Separate Account (the “Separate Account”) is
a separate investment account of Pacific Life used to support the variable death benefits and
policy values of Pacific Life’s life insurance policies. The Separate Account currently is made up
of 80 variable accounts which invest in shares of corresponding portfolios of Pacific Select Fund,
AIM Variable Insurance Funds (Invesco Variable Insurance Funds), American Century Variable
Portfolios, Inc., BlackRock® Variable Series Fund, Inc., Fidelity® Variable Insurance Products
Funds, Franklin Templeton Variable Insurance Products Trust, GE Investments Funds, Inc., Janus
Aspen Series, Lazard Retirement Series, Inc., Legg Mason Partners Variable Equity Trust, Lord
Abbett Series Fund, Inc., MFS® Variable Insurance Trust, M Funds, PIMCO Variable Insurance Trust,
Royce Capital Fund, T. Rowe Price Equity Series, Inc. or Van Eck VIP Trust, the investment vehicles
of the Separate Account. Each Fund is registered with the Securities and
Exchange Commission under
the Investment Company Act of 1940 as an open-end management
investment company of the series type.
A Policy owner may allocate accumulated value from the variable accounts to the fixed accounts
or the Indexed Accounts where available. However, such a transfer will only be permitted in the
Policy month preceding a Policy anniversary. Transfers from the fixed accounts or the Indexed
Accounts to the variable accounts are also permitted, subject to the following restrictions: (1)
the Policy owner may not make more than one transfer from the fixed accounts to the variable
accounts in any 12-month period, unless the Policy owner has elected to participate in the First
Year Transfer Program service; and, during any 12- month period, (2) such transfers are limited to
the greater of: $5,000, 25% of your Policy’s Accumulated Value in the Fixed Account, and 25% of the
amount transferred from the Fixed Account in the prior policy year; and $5,000, 10% of your
Policy’s Accumulated Value in the Fixed LT Account, and 10% of the amount transferred from the
Fixed LT Account in the prior policy year. Restrictions in Indexed Account transfers are outlined
in the Indexed Account Rider and in the applicable prospectus.
Pacific Life reserves the right to limit the amount allocated to the Fixed Accounts and the
Indexed Accounts to $1,000,000 for net premium payments and $100,000 for loan repayments and
transfers during the most recent 12 months for all of a Policy owner’s policies. Any excess over
these limits would be transferred to a Policy owner’s other Investment Options according to the
Policy owner’s most recent instructions.
III. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Net Cash Surrender Value
A Policy owner can make partial withdrawals of the net cash surrender value of the Policy
starting on the first Policy anniversary. During the first fifteen Policy years, the portion of a
partial withdrawal of up to the lesser of $10,000 or 10% of premium paid will not reduce the face
amount under the Policy. The excess of any withdrawal over this amount may cause a reduction in
Face Amount if the Death Benefit Option is Option A, as described below.
A partial withdrawal must be for at least $200, and the Policy’s net cash surrender value
after the withdrawal must be at least $500.
When a partial withdrawal is made on a Policy on which the owner has selected Death benefit
Option A, the face amount under the Policy is decreased by the excess, if any, of the face amount
over the result of the death benefit immediately prior to the partial withdrawal minus the amount
of the partial withdrawal. A partial withdrawal will not change the face amount of a Policy on
which the owner has selected Death Benefit Option B or Death Benefit Option C. However, assuming
that the death benefit is not equal to accumulated value times a death benefit percentage, the
partial withdrawal will reduce the death benefit by the amount of the partial withdrawal. To the
extent the death benefit is based upon the accumulated value times the death benefit percentage
applicable to the insureds, a partial withdrawal may cause the death benefit to decrease by an
amount greater than the amount of the partial withdrawal.
B. Death Claims
Upon the death of the insured, Pacific Life will pay to a named beneficiary death benefit
proceeds, either in a lump sum or under a payment plan offered under the Policy. The proceeds will
be the death benefit under the Policy, plus any insurance proceeds provided by rider, reduced by
adjustments for any outstanding Policy debt (and, if in the grace period, any overdue charges).
The death benefit will be the greater of the Guideline Minimum Death Benefit or one of the
following three options: (1) Death Benefit Option A — the face amount of the Policy; (2) Death
Benefit Option B — the face amount of the Policy plus the accumulated value; or (3) Death Benefit
Option C (if available under the Policy for M’s Versatile Product VUL 10) — the face amount of the
Policy plus the total premiums paid minus total withdrawals. Because the specified percentage is
applied to a Policy owner’s accumulated value, an increase in accumulated value may increase the
death benefit. Under Death Benefit Option C, the death benefit could be less than the face amount
if the total withdrawals are greater than the total premiums paid.
The face amount of the Policy may be decreased by the Policy owner. A decrease in face amount
may only be made after the first Policy year. Such a change may change the death benefit,
depending, among other things, upon the death benefit option chosen by the owner and whether, and
the degree to which, the death benefit under a Policy exceeds the face amount prior to the change.
A change in the face amount may affect the net amount at risk under a Policy, which may affect a
Policy owner’s cost of insurance charge. For these purposes, the net amount at risk is equal to the
death benefit less the policy owner’s accumulated value.
Any request for a change in face amount must be by written application to Pacific Life’s
Service Center. A Policy owner may make only one such request per Policy year.
C. Policy Lapsation
If the accumulated value less Policy debt of a Policy is insufficient to cover deductions and
charges on a monthly payment date, Pacific Life will give written notice to the Policy owner that
if the amount shown in the notice (which will be sufficient to cover the deduction amount(s) due)
is not paid within 61 days (the “grace period”), the Policy owner faces a danger of lapse. The
Policy will remain in force through the grace period, but if no payment is forthcoming, it will
terminate at the end of the grace period. In order to avoid termination, the Policy owner must pay
an amount equal to three times the charges and deductions due on the monthly payment date in which
the insufficiency occurred, plus premium load.
If the required payment is made during the grace period, such payment will be allocated among
the variable accounts and the fixed accounts in accordance with the Policy owner’s allocation
instructions. If the insured dies during the grace period, the death benefit proceeds will equal
the amount of the death benefit immediately prior to the commencement of the grace period, reduced
by any unpaid monthly deductions and charges due and any Policy debt. A lapsed Policy may be
reinstated at any time within five years after the end of the grace period but before the maturity
date. See “Reinstatement”, Section I.E. above.
