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– Release Delayed ·As Of Filer Filing For·On·As Docs:Size Issuer Agent 4/26/10 Pacific Select Exec Sep Acct… Ins 485BPOS¶ 5/01/10 11:6.9M Donnelley … Solutions/FA → Pacific Select Exec Separate Account of Pacific Life (811-05563) ⇒ M’s Versatile Product VII — M’s Versatile Product VIII |
Document/Exhibit Description Pages Size 1: 485BPOS Post-Effective Amendment HTML 4.67M 11: COVER ¶ Comment-Response or Cover Letter to the SEC HTML 4K 9: EX-99.(14)(A) Miscellaneous Exhibit HTML 9K 10: EX-99.(14)(B) Miscellaneous Exhibit HTML 7K 8: EX-99.(8)(BB) Miscellaneous Exhibit HTML 54K 2: EX-99.(8)(T) Miscellaneous Exhibit HTML 119K 3: EX-99.(8)(U) Miscellaneous Exhibit HTML 46K 4: EX-99.(8)(V) Miscellaneous Exhibit HTML 167K 5: EX-99.(8)(V)(1) Miscellaneous Exhibit HTML 31K 6: EX-99.(8)(W) Miscellaneous Exhibit HTML 38K 7: EX-99.(8)(W)(1) Miscellaneous Exhibit HTML 75K
e485bpos |
SECURITIES AND EXCHANGE COMMISSION
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | x | |
Pre-Effective Amendment No. | o | |
Post-Effective Amendment No. 9 | x | |
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | x | |
Amendment No. 276 | x | |
PACIFIC SELECT EXEC SEPARATE ACCOUNT OF PACIFIC LIFE INSURANCE COMPANY
PACIFIC LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, California 92660
(Address of Depositor’s Principal Executive Offices) (Zip Code)
(949) 219-7286
(Depository’s Telephone Number, including Area Code)
Charlene Grant
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, 2010 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 date for a previously filed post-effective amendment. | |||
Title of Securities being registered: interests in the Separate Account under M's Versatile Product VII and M's Versatile Product VIII Flexible Premium Variable Life Insurance Policies. | ||||
Filing fee: None | ||||
M’S VERSATILE PRODUCT VII |
PROSPECTUS MAY 1, 2010 | |
• | Flexible premium means you can vary the amount and frequency of your premium payments. You must, however, pay enough premiums to cover the ongoing cost of Policy benefits. |
• | Variable means the Policy’s value depends on the performance of the Investment Options you choose. |
• | Life insurance means the Policy provides a Death Benefit to the Beneficiary you choose. |
International Value Long/Short Large-Cap International Small-Cap Mid-Cap Value Equity Index Small-Cap Index Small-Cap Equity Equity American Funds® Asset Allocation American Funds® Growth-Income |
American
Funds®
Growth Large-Cap Value Technology Floating Rate Loan Small-Cap Growth Short Duration Bond Comstock Growth LT Focused 30 Health Sciences |
Mid-Cap Equity International Large-Cap Mid-Cap Growth Real Estate Small-Cap Value Multi-Strategy Main Street® Core Emerging Markets Cash Management (formerly Money Market) |
High Yield Bond Managed Bond Inflation Managed Pacific Dynamix – Conservative Growth Pacific Dynamix – Moderate Growth Pacific Dynamix – Growth Dividend Growth (formerly Diversified Research) Large-Cap Growth Diversified Bond |
M Fund | ||
Variable Account I: M International Equity Fund (formerly Brandes International Equity) Variable Account II: M Large Cap Growth Fund (formerly Turner Core Growth) |
Variable Account III: M Capital Appreciation Fund (formerly Frontier Capital Appreciation) Variable Account V: M Business Opportunity Value Fund (formerly Business Opportunity Value) |
BlackRock Variable Series Funds, Inc.
BlackRock Basic Value V.I. Fund Class III BlackRock Global Allocation V.I. Fund Class III Fidelity® Variable Insurance Products Funds Fidelity VIP Contrafund® Portfolio 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 Growth Portfolio Service Class 2 Fidelity VIP Mid Cap Portfolio Service Class 2 Fidelity VIP Value Strategies Portfolio Service Class 2 Franklin Templeton Variable Insurance Products Trust Templeton Global Bond Securities Fund Class 2 GE Investments Funds, Inc. GE Investments Total Return Fund Class 3 Janus Aspen Series Overseas Portfolio Service Class Enterprise Portfolio Service Class |
Lazard Retirement Series, Inc.
Lazard Retirement U.S. Strategic Equity Portfolio Legg Mason Partners Variable Equity Trust Legg Mason ClearBridge Variable Aggressive Growth Portfolio – Class II Legg Mason ClearBridge Variable Mid Cap Core Portfolio – Class II Lord Abbett Series Fund, Inc. Lord Abbett Fundamental Equity Portfolio Class VC MFS® Variable Insurance Trust MFS® New Discovery Series Service Class MFS® Utilities Series Service Class Royce Capital Fund Royce Micro-Cap Service Class Portfolio T. Rowe Price Equity Series, Inc. T. Rowe Price Blue Chip Growth Portfolio – II T. Rowe Price Equity Income Portfolio – II Van Eck VIP Trust Van Eck VIP Global Hard Assets Fund (formerly Van Eck Worldwide Hard Assets Fund) |
Benefits and Risks of M’s Versatile Product VII | 3 | |
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Appendices
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A-1 | ||
B-1 | ||
back cover |
2
• | choose the timing, amount and frequency of premium payments |
• | change the Death Benefit Option |
• | increase or decrease the Policy’s Face Amount |
• | change the Beneficiary |
• | change your investment selections. |
• | Option A – your Death Benefit will be the Total Face Amount of your Policy. |
• | Option B – your Death Benefit will be the Total Face Amount of your Policy plus its Accumulated Value. |
• | Option C – your Death Benefit will be the Total Face Amount of your Policy plus the total premiums you’ve paid minus any withdrawals or distributions made. However, the Death Benefit will never exceed the Option C Death Benefit Limit shown in the Policy Specifications. |
• | Cash Value Accumulation Test – generally does not limit the amount of premiums you can pay into your Policy. |
• | Guideline Premium Test – limits the amount of premiums you can pay on your Policy, and the Minimum Death Benefit will generally be smaller than under the Cash Value Accumulation Test. |
• | Withdrawals – you can withdraw part of your Policy’s Net Cash Surrender Value. |
• | Loans – you can take out a loan from us using your Policy’s Accumulated Value as security. |
• | Surrender – you can surrender or cash in your Policy for its Net Cash Surrender Value while the Insured is alive. |
3
• | Income benefits – you can use withdrawal or surrender benefits to buy an income benefit that provides a monthly income. In addition, your Policy’s Beneficiary can use Death Benefit proceeds to buy an income benefit. |
• | change your Policy’s tax status |
• | reduce your Policy’s Total Face Amount |
• | reduce your Policy’s Death Benefit |
• | reduce the Death Benefit Proceeds paid to your Beneficiary |
• | make your Policy more susceptible to lapsing. |
4
5
CHARGE | WHEN CHARGE IS DEDUCTED | AMOUNT DEDUCTED | ||
Maximum premium load
|
Upon receipt of premium | 7.95% of premium | ||
Maximum surrender charge
|
Upon full surrender of Policy if any Coverage Layer has been in effect for less than 10 Policy Years | $0.81-$47.16 per $1,000 of Face Amount1 | ||
Charge at end of Policy Year 1 for a male non-smoker who is Age 45 at Policy issue, and the Policy is issued with Guideline Premium Test and Death Benefit Option A | $10.78 per $1,000 of Face Amount | |||
Withdrawal charge
|
Upon partial withdrawal of Accumulated Value | $25 per withdrawal2 | ||
Transfer fees
|
Upon transfer of Accumulated Value between Investment Options | $25 per transfer in excess of 12 per Policy Year2 | ||
ADMINISTRATIVE AND UNDERWRITING SERVICE
FEES2
|
||||
Audits of premium/loan
|
Upon request of audit of over 2 years or more | $25 | ||
Duplicate
Policy3
|
Upon request of duplicate Policy | $50 | ||
Illustration request
|
Upon request of Policy illustration in excess of 1 per year | $25 | ||
Face Amount increase
|
Upon effective date of requested Face Amount increase | $100 | ||
Risk Class change
|
Upon request for Risk Class change | $100 | ||
Adding an optional Rider
|
Upon approval of specific request | $100 | ||
1 | The surrender charge is based on the Age and Risk Class of the Insured, as well as the Death Benefit Option you choose. The surrender charge reduces to $0 after 10 years from the effective date of each Coverage Layer. The surrender charge shown in the table may not be typical of the surrender charge you will pay. Ask your registered representative for information on this charge for your Policy. The surrender charge for your Policy will be stated in the Policy Specifications. | |
2 | We currently do not impose this charge. |
3 | Certificate of Coverage is available without charge. |
6
AMOUNT
DEDUCTED— |
||||||
WHEN CHARGE IS |
MAXIMUM
GUARANTEED |
AMOUNT
DEDUCTED— |
||||
CHARGE | DEDUCTED | CHARGE | CURRENT CHARGES | |||
Cost of
Insurance1,2
Minimum and maximum |
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy issue
|
$0.23 per $1,000 of Net Amount At Risk | $0.08 per $1,000 of Net Amount At Risk | ||||
Administrative
charge1
|
Monthly Payment Date | $7.50 | Same | |||
Coverage
charge1,4
Minimum and maximum |
Monthly Payment Date, beginning on effective date of each Coverage Layer | $0.05–$3.37 per $1,000 of Coverage Layer | $0.00–$3.37 per $1,000 of Coverage Layer | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy issue, with Death Benefit
Option A3
|
$0.39 per $1,000 of Coverage Layer | Same | ||||
Asset
charge1
|
Monthly Payment Date | 0.45% annually (0.0375% monthly) of first $25,000 of Accumulated Value in Investment Options, plus 0.05% annually (0.0042% monthly) of Accumulated Value in excess of $25,000 in Investment Options | 0.40% annually (0.0333% monthly) of first $25,000 of Accumulated Value in Investment Options, plus 0.00% annually (0.0000% monthly) of Accumulated Value in excess of $25,000 in Investment Options | |||
Loan interest charge
|
Policy Anniversary | 2.75% of Policy’s Loan Account balance annually5 | Same | |||
OPTIONAL RIDERS AND BENEFITS
Minimum and Maximum6 |
||||||
Accelerated Living Benefits Rider
|
At exercise of benefit | $150 | Same | |||
Accidental Death Benefit Rider
|
Monthly Payment Date | $0.05–$0.18 per $1,000 of Coverage Layer | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.10 per $1,000 of Coverage Layer | Same | ||||
Annual Renewable Term Rider
|
||||||
Cost of insurance
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
Issue3
|
$0.23 per $1,000 of Net Amount At Risk | $0.08 per $1,000 of Net Amount At Risk | ||||
Coverage
charge4
|
Monthly Payment Date | $0.22–$3.44 per $1,000 of Coverage Layer | $0 | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.91 per $1,000 of Coverage Layer | $0 | ||||
Annual Renewable Term Rider – Additional Insured
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Rider Face Amount | Same | |||
Charge during Policy Year 1 for a female non-smoker who
is Age 45 at Policy
issue3
|
$0.16 per $1,000 of Rider Face Amount | $0.08 per $1,000 of Rider Face Amount | ||||
Children’s Term Rider
|
Monthly Payment Date | $1.05 per $1,000 of insurance coverage on each child | Same |
7
AMOUNT
DEDUCTED— |
||||||
WHEN CHARGE IS |
MAXIMUM
GUARANTEED |
AMOUNT
DEDUCTED— |
||||
CHARGE | DEDUCTED | CHARGE | CURRENT CHARGES | |||
Disability Benefit Rider
|
Monthly Payment Date | $0.40–$1.00 per $10 of monthly benefit | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.45 per $10 of monthly benefit | Same | ||||
Guaranteed Insurability Rider
|
Monthly Payment Date | $0.10–$0.29 per $1,000 of Coverage Layer | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 35 at Policy
issue3,7
|
$0.28 per $1,000 of Coverage Layer | Same | ||||
Minimum Earnings Benefit Rider
|
Monthly Payment Date | 0.10% of the alternate accumulated value10 on the Monthly Payment Date | 0.05% of the alternate accumulated value on the monthly payment date | |||
Overloan Protection II Rider
|
At exercise of benefit | 1.12%-4.52% of Accumulated Value on date of exercise12 | Same | |||
Charge for a male non-smoker who exercises the Rider at
Age 85
|
2.97% of Accumulated Value on date of exercise | Same | ||||
Short-term No-lapse Guarantee Rider
|
Monthly Payment Date | $0.01–$0.10 per $1,000 of Net Amount At Risk | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.01 per $1,000 of Net Amount At Risk | Same | ||||
Surrender Value Enhancement Rider – Individual
|
||||||
Cost of insurance
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.23 per $1,000 of Net Amount At Risk | $0.08 per $1,000 of Net Amount At Risk | ||||
Coverage
charge4
|
Monthly Payment Date | $0.00–$7.71 per $1,000 of Coverage Layer | $0.00–$7.71 per $1,000 of Coverage Layer | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.00 per $1,000 of Coverage Layer | Same | ||||
Surrender Value Enhancement Rider – Trust/Executive
Benefit
|
||||||
Rider Coverage
Charge4
|
Monthly Payment Date | $0.00–$4.92 per $1,000 of Rider Coverage Layer | $0.00–$4.92 per $1,000 of Rider Coverage Layer | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.00 per $1,000 of initial Rider Coverage Layer | Same | ||||
Cost of insurance
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount at Risk | $0.02–$59.10 per $1,000 of Net Amount at Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.23 per $1,000 of Net Amount at Risk | $0.08 per $1,000 of Net Amount At Risk | ||||
Termination Credit charge
|
Monthly Payment Date | $0.01–$0.21 per $1,000 of Rider Coverage Layer | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.05 per $1,000 of Rider Coverage Layer | Same |
8
AMOUNT
DEDUCTED— |
||||||
WHEN CHARGE IS |
MAXIMUM
GUARANTEED |
AMOUNT
DEDUCTED— |
||||
CHARGE | DEDUCTED | CHARGE | CURRENT CHARGES | |||
SVER Term Insurance Rider
|
||||||
Cost of insurance
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.23 per $1,000 of Net Amount At Risk | $0.08 per $1,000 of Net Amount At Risk | ||||
Coverage
charge4
|
Monthly Payment Date | $0.00–$3.99 of Coverage Layer | $0.00–$3.99 per $1,000 of Coverage Layer | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue8
|
$0.00 per $1,000 of Coverage Layer | Same | ||||
Administrative charge for increase in face amount
|
At increase | $100 | Same | |||
SVER Term Insurance Rider – Trust/Executive
Benefit
|
||||||
Rider Coverage
Charge4
|
Monthly Payment Date | $0.00–$3.84 per $1,000 of Rider Coverage Layer | $0.00–$3.84 per $1,000 of Rider Coverage Layer | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue9
|
$0.00 per $1,000 of initial Rider Coverage Layer | Same | ||||
Cost of insurance
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy issue
|
$0.23 per $1,000 of Net Amount At Risk | $0.08 per $1,000 of Net Amount At Risk | ||||
Termination Credit charge
|
Monthly Payment Date | $0.01–$0.21 per $1,000 of Rider Coverage Layer | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.05 per $1,000 of Rider Coverage Layer | Same | ||||
Administrative charge for increase in face amount
|
At increase | $100 | Same | |||
Waiver of Charges Rider
|
Monthly Payment Date | $0.04–$0.55 per $1,000 of Net Amount At Risk11 | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.07 per $1,000 of Net Amount At Risk11 | Same | ||||
1 | This charge is reduced to zero on and after your Policy’s Monthly Deduction End Date. |
2 | Cost of insurance rates apply uniformly to all members of the same Class. The cost of insurance charges shown in the table may not be typical of the charges you will pay. Your Policy Specifications will indicate the guaranteed cost of insurance charge applicable to your Policy, and more detailed information concerning your cost of insurance charges is available on request from your registered representative or us. Also, before you purchase the Policy, you may request personalized illustrations of your future benefits under the Policy based upon the Insured’s Class, the Death Benefit Option, Face Amount, planned periodic premiums, and any Riders requested. Cost of insurance rates for your Policy will be stated in the Policy Specifications and calculated using the Net Amount At Risk. |
3 | Charges shown for this sample Policy may not be typical of the charges you will pay. | |
4 | The Coverage Charge rate is based on the Age and Risk Class of the Insured on the Policy Date or date Rider is effective. It also varies with the Death Benefit Option you choose. Each Coverage Layer will have a corresponding Coverage charge related to the amount of the increase, based on the Age and Risk Class of the Insured at the time of the increase. Ask your registered representative for information regarding this charge for your Policy. The Coverage Charge for your Policy will be stated in the Policy Specifications. | |
5 | In addition to the loan interest charge, the Loan Account Value that is used to secure Policy Debt will be credited at a minimum of 2.50%. Interest on the Loan Account and Policy Debt accrues daily. On each Policy Anniversary, we transfer the excess of the Policy Debt over Loan Account Value from the Investment Options to the Loan Account. If the Loan Account Value is greater than Policy Debt, then such excess is transferred from the Loan Account to the Investment Options. | |
6 | Riders are briefly described under The Death Benefit: Optional Riders and more information appears in the SAI. Except for the Childrens Term Rider, Rider charges are based on the Age and Risk Class of the person insured under the Rider on the effective date of the Rider. Ask your registered representative for information on optional Rider charges for your Policy. The charges for any optional benefit Riders you add to your Policy will be stated in the Policy Specifications. | |
7 | Guaranteed Insurability Rider is only available to Insureds age 37 and under at Policy issue. |
9
8 | The SVER Term Insurance Rider maximum guaranteed Coverage charge for this sample Policy (assuming Death Benefit Option A or C is used) is $0/month per $1,000 of Coverage Layer in Policy Year 1, $0.33/month per $1,000 of Coverage Layer in Policy Year 2, and $0.50/month per $1,000 of Coverage Layer in Policy Years 3-10. In Policy Year 11 and thereafter, the charge is reduced to $0.33/month per $1,000 of Coverage Layer. | |
9 | The SVER Term Insurance Rider – Trust/Executive Benefit maximum guaranteed Coverage Charge for this sample Policy (assuming Death Benefit Option A or C is used) is $0/month per $1,000 of Coverage Layer in Policy Year 1, $0.78/month per $1,000 of Coverage Layer in Policy Year 2, and $1.17/month per $1,000 of Coverage Layer in Policy Years 3-10. In Policy Year 11 and thereafter, the charge is reduced to $0.78/month per $1,000 of Coverage Layer. | |
10 | The alternate accumulated value is a calculated value reflecting a minimum level of earnings for the Policy. It is based on actual premiums paid less an alternate premium load, actual monthly deductions taken from the Policy’s Accumulated Value, and an alternate accumulated value monthly factor representing an annual interest crediting rate. The alternate accumulated value monthly factor will never be less than 1.00295 (3.6% annually), and the alternate premium load rate will never exceed 25% of premiums paid. The Rider also has a minimum premium requirement to remain in force. Cumulative premium paid by the end of the 9th Policy Year must be equal to or greater than the Rider’s minimum premium requirement, which will never exceed 450% of the guideline level premiums at Policy issue. The alternate accumulated value monthly factor, alternate premium load and minimum premium requirement are shown in the Policy Specifications. |
11 | Plus any Annual Renewable Term Rider – Additional Insured Face Amount. |
12 | The charge to exercise the Overloan Protection II Rider is shown as a table in your Policy Specifications. The charge varies by the Insured’s gender, Risk Class and Age at the time the Rider is exercised. For more information on this Rider, see Withdrawals, Surrenders and Loans: Overloan Protection II Rider. |
Minimum | Maximum1 | |||||||
Range of total annual portfolio operating expenses before any
waivers or expense reimbursements
|
0.28% | 4.67% |
Minimum | Maximum1 | |||||||
Range of total annual portfolio operating expenses after
waivers or expense reimbursements
|
0.28% | 1.56% |
1 | Pacific Life Fund Advisors, LLC, adviser to Pacific Select Fund, and M Financial Investment Advisers, adviser to M Fund, and other advisers to the Funds and/or other service providers to the other Funds 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 fee reduction or expense reimbursement arrangement. The range of expenses in the second row above shows the effect of contractual fee reduction and expense reimbursement arrangements that will remain in effect at least through April 30, 2011. There can be no assurance that expense waivers or reimbursement contracts will be extended beyond their current terms, and they may not cover certain expenses such as extraordinary expenses. See each Fund’s prospectus for complete information regarding annual operating expenses of that Fund. |
10
11
12
• | all necessary contractual and administrative requirements are met, and |
• | we receive and apply the initial premium to the Policy. |
• | the Insured dies |
• | the grace period expires and your Policy lapses, or |
• | you surrender your Policy. |
• | You can name one or more primary Beneficiaries who each receive an equal share of the Death Benefit Proceeds unless you tell us otherwise. If one Beneficiary dies, his or her share will pass to the surviving primary Beneficiaries in proportion to the share of the Death Benefit Proceeds they’re entitled to receive, unless you tell us otherwise. |
13
• | You can also name a contingent Beneficiary for each primary Beneficiary you name. The contingent Beneficiary will receive the Death Benefit Proceeds if the primary Beneficiary dies. |
• | You can choose to make your Beneficiary permanent (sometimes called irrevocable). You cannot change a permanent Beneficiary’s rights under the Policy without his or her permission. |
• | the date your Policy is delivered to you and you paid initial premium, or |
• | the date we received the initial premium, if earlier than the delivery date. |
14
• | any charges or taxes we’ve deducted from your premiums |
• | the Net Premiums allocated to the Fixed Options |
• | the Accumulated Value allocated to the Variable Investment Options |
• | any monthly charges and fees we’ve deducted from your Policy’s Accumulated Value in the Variable Investment Options. |
• | on your application |
• | in writing any time prior to the end of the 30-day free look period. |
• | any charges or taxes we’ve deducted from your premiums |
• | the Net Premiums allocated to the Fixed Options |
• | the Accumulated Value allocated to the Variable Investment Options |
• | any monthly charges and fees we’ve deducted from your Policy’s Accumulated Value in the Variable Investment Options. |
15
• | the New York Stock Exchange closes on a day other than a regular holiday or weekend |
• | trading on the New York Stock Exchange is restricted |
• | an emergency exists as determined by the SEC, as a result of which the sale of securities is not practicable, or it is not practicable to determine the value of a Variable Account’s assets, or |
• | the SEC permits a delay for the protection of policy owners. |
• | a confirmation for certain financial transactions, usually including premium payments and transfers, loans, loan repayments, withdrawals and surrenders. Monthly deductions and scheduled transactions made under the dollar cost averaging, portfolio rebalancing and first year transfer services are reported on your quarterly Policy statement. |
• | a quarterly Policy statement. The statement will tell you the Accumulated Value of your Policy by Investment Options, Cash Surrender Value, the amount of the Death Benefit, the Policy’s Face Amount, and any Policy Debt. It will also include a summary of all transactions that have taken place since the last quarterly statement, as well as any other information required by law. |
• | supplemental schedules of benefits and planned periodic premiums. We’ll send these to you if you change your Policy’s Face Amount or change any of the Policy’s other benefits. |
• | financial statements, at least annually or as required by law, of the Separate Account and Pacific Select Fund, that include a listing of securities for each portfolio of the Pacific Select Fund. We’ll also send you financial statements that we receive from the other Funds. |
16
• | transfers between Investment Options |
• | initiate the dollar cost averaging and portfolio rebalancing service |
• | change future premium allocation instructions |
• | initiate Policy loans. |
• | If your Policy is jointly owned, all Joint Owners must sign the telephone and electronic authorization. We’ll take instructions from any Owner or anyone you appoint. |
• | We may use any reasonable method to confirm that your telephone or electronic instructions are genuine. For example, we may ask you to provide personal identification or we may record all or part of the telephone conversation. We may refuse any transaction request made by telephone or electronically. |
• | we can accept and act upon instructions you or anyone you appoint give us over the telephone or electronically |
• | neither we, any of our affiliates, the Pacific Select Fund, or any director, trustee, officer, employee or agent of ours or theirs will be liable for any loss, damages, cost or expenses that result from transactions processed because of a request by telephone or submitted electronically that we believe to be genuine, as long as we have followed our own procedures |
• | you bear the risk of any loss that arises from your right to make loans or transfers over the telephone or electronically. |
17
Understanding Policy Expenses and Cash Flow (including fees and charges of Fund portfolios) | ||
The chart to the right illustrates how cash normally flows through a M’s Versatile Product VII Policy.
Under a flexible premium life insurance policy, you have the flexibility to choose the amount and frequency of your premium payments. You must, however, pay enough premiums to cover the ongoing cost of Policy benefits. Investment earnings will increase your Policy’s Accumulated Value, while investment losses will decrease it. The premium payments you’ll be required to make to keep your Policy In Force will be influenced by the investment results of the Investment Options you choose. The dark shaded boxes show the fees and expenses you pay directly or indirectly under your Policy. In some states we’ll hold your Net Premium payments in the Cash Management Investment Option until the Free Look Transfer Date. Please turn to Your Free Look Right for details. |
|
18
• | You choose your Death Benefit Option and Death Benefit Qualification Test on your Policy application. |
• | If you do not choose a Death Benefit Option, we’ll assume you’ve chosen Option A. |
• | If you do not choose a Death Benefit Qualification Test, we’ll assume you’ve chosen the Guideline Premium Test. |
• | The Death Benefit will always be the greater of the Death Benefit under the Option you choose or the Minimum Death Benefit, calculated using the Death Benefit Qualification Test you’ve chosen. |
• | The Death Benefit will never be lower than the Total Face Amount of your Policy if you’ve chosen Option A or B. The Death Benefit Proceeds will always be reduced by any Policy Debt. |
• | We’ll pay the Death Benefit Proceeds to your Beneficiary when we receive proof of the Insured’s death. |
Option A – the Face Amount of your Policy. | Option B – the Face Amount of your Policy plus its Accumulated Value. | Option C – the Face Amount of your Policy plus the total premiums you’ve paid minus any withdrawals or distributions made. | ||
The Death Benefit changes as your Policy’s Accumulated Value changes. The better your Investment Options perform, the larger the Death Benefit will be. | The more premiums you pay and the less you withdraw, the larger the Death Benefit will be. |
• | To elect Option C, the Insured must be Age 80 or younger at the time the Policy is issued. |
• | The Death Benefit calculated under Option C will be limited to the amount shown in the Policy Specifications as the “Option C Death Benefit Limit,” an amount which will never exceed four times the Initial Total Face Amount of your Policy on the Policy Date. Once the Policy is issued, the “Option C Death Benefit Limit” will not change, even if you increase or decrease the Face Amount of your Policy or any Rider. We will not approve any increase in Face Amount to the Policy or any Rider that would cause the Death Benefit to exceed the “Option C Death Benefit Limit”. The Death Benefit as calculated above is subject to any increase required by the minimum death benefit provisions set out in the Death Benefit and General Provisions sections of the policy to satisfy certain federal tax qualification requirements. |
19
• | premium limitations |
• | amount of Minimum Death Benefit |
• | monthly cost of insurance charges |
• | flexibility to reduce Face Amount. |
• | the lowest Death Benefit amount that’s needed for the Policy to qualify as life insurance under the Cash Value Accumulation Test in the Tax Code, or |
• | 101% of the Policy’s Accumulated Value. |
• | the guideline single premium or |
• | the sum of the guideline level annual premiums to date. |
Cash Value |
||||
Accumulation Test | Guideline Premium Test | |||
Premium
payments1
|
Allows flexibility to pay more premium | Premium payments are limited under the Tax Code | ||
Death Benefit
|
Generally higher as Policy duration increases | May be higher in early years of Policy | ||
Monthly cost of insurance charges
|
May be higher, if the Death Benefit is higher | May be lower, except perhaps in early years of Policy | ||
Face Amount decreases
|
Will not require return of premium or distribution of Accumulated Value | May require return of premium or distribution of Accumulated Value to continue Policy as life insurance | ||
1 | If you want to pay a premium that increases the Net Amount At Risk, you will need to provide us with satisfactory evidence of insurability before we can increase the Death Benefit. In this event, your cost of insurance charges will also increase. Cost of insurance charges are based, among other things, upon your Policy’s Net Amount At Risk. See Your Accumulated Value for more information on how cost of insurance charges are calculated. |
20
• | the Insured is Age 45 at the time the Policy was issued and dies at the beginning of the sixth Policy Year |
• | Face Amount is $100,000 |
• | Accumulated Value at the date of death is $25,000 |
• | total premium paid into the Policy is $30,000 |
• | the Minimum Death Benefit under the Guideline Premium Test is $46,250 (assuming a Guideline Premium Test factor of 185% × Accumulated Value) |
• | the Minimum Death Benefit under the Cash Value Accumulation Test is $75,575 (assuming a Net Single Premium factor of $3.0230 of the Accumulated Value). |
If you select the
Guideline |
||||||||
Premium Test, the
Death |
||||||||
Benefit is the
larger of these |
||||||||
two amounts | ||||||||
Death |
Death Benefit |
Net Amount At
Risk |
||||||
Benefit |
How it’s |
under the |
Minimum |
used for cost
of |
||||
Option | calculated | Death Benefit Option | Death Benefit | insurance charge | ||||
Option A
|
Total Face Amount | $100,000 | $46,250 | $74,794.44 | ||||
Option B
|
Total Face Amount plus Accumulated Value | $125,000 | $46,250 | $99,743.05 | ||||
Option C
|
Total Face Amount plus premiums less distributions | $130,000 | $46,250 | $104,732.78 | ||||
If you select the
Cash Value |
||||||||
Accumulation
Test, the Death |
||||||||
Benefit is the
larger of these |
||||||||
two amounts | ||||||||
Death |
Death Benefit |
Net Amount At
Risk |
||||||
Benefit |
How it’s |
under the |
Minimum |
used for cost
of |
||||
Option | calculated | Death Benefit Option | Death Benefit | insurance charge | ||||
Option A
|
Total Face Amount | $100,000 | $75,575 | $74,794.44 | ||||
Option B
|
Total Face Amount plus Accumulated Value | $125,000 | $75,575 | $99,743.05 | ||||
Option C
|
Total Face Amount plus premiums less distributions | $130,000 | $75,575 | $104,732.78 | ||||
• | $138,750 for the Guideline Premium Test |
• | $226,725 for the Cash Value Accumulation Test. |
If you select the
Guideline |
||||||||
Premium Test, the
Death |
||||||||
Benefit is the
larger of these |
||||||||
two amounts | ||||||||
Death |
Death Benefit |
Net Amount At
Risk |
||||||
Benefit |
How it’s |
under the |
Minimum |
used for cost
of |
||||
Option | calculated | Death Benefit Option | Death Benefit | insurance charge | ||||
Option A
|
Total Face Amount | $100,000 | $138,750 | $63,464.79 | ||||
Option B
|
Total Face Amount plus Accumulated Value | $175,000 | $138,750 | $99,640.28 | ||||
Option C
|
Total Face Amount plus premiums less distributions | $130,000 | $138,750 | $63,464.79 | ||||
21
If you select the
Cash Value |
||||||||
Accumulation
Test, the Death |
||||||||
Benefit is the
larger of these |
||||||||
two amounts | ||||||||
Death |
Death Benefit |
Net Amount At
Risk |
||||||
Benefit |
How it’s |
under the |
Minimum |
used for cost
of |
||||
Option | calculated | Death Benefit Option | Death Benefit | insurance charge | ||||
Option A
|
Total Face Amount | $100,000 | $226,725 | $151,258.95 | ||||
Option B
|
Total Face Amount plus Accumulated Value | $175,000 | $226,725 | $151,258.95 | ||||
Option C
|
Total Face Amount plus premiums less distributions | $130,000 | $226,725 | $151,258,95 | ||||
• | You can change the Death Benefit Option once in any Policy Year. |
• | You must send us your Written Request. |
• | You can change from any Death Benefit Option to Option A or Option B. |
• | You cannot change from any Death Benefit Option to Option C. |
• | The change will become effective on the first Monthly Payment Date after we receive your request. If we receive your request on a Monthly Payment Date, we’ll process it that day. |
• | The total Face Amount of your Policy will change by the amount needed to make the Death Benefit under the new Death Benefit Option equal the Death Benefit under the old Death Benefit Option just before the change. We will not let you change the Death Benefit Option if doing so means the Face Amount of your Policy will become less than $1,000. |
• | Changing the Death Benefit Option can also affect the monthly cost of insurance charge since this charge varies with the Net Amount At Risk. |
• | The new Death Benefit Option will be used in all future calculations. |
• | You can change the Face Amount as long as the Insured is alive. |
• | You must send us your Written Request while your Policy is In Force. |
22
• | Unless you request otherwise, the change will become effective on the first Monthly Payment Date on or after we receive and approve your request. |
• | The Insured will also need to agree to the change in Face Amount, if you are not the Insured. |
• | Increasing the Face Amount may increase the Death Benefit, and decreasing the Face Amount may decrease the Death Benefit. The amount the Death Benefit changes will depend, among other things, on the Death Benefit Option you’ve chosen and whether, and by how much, the Death Benefit is greater than the Face Amount before you make the change. |
• | Changing the Face Amount can affect the Net Amount At Risk, which affects the cost of insurance charge. An increase in the Face Amount may increase the cost of insurance charge, while a decrease may decrease the charge. |
• | We can refuse your request to make the Face Amount less than $1,000.00. We can waive this minimum amount in certain situations, such as group or sponsored arrangements. |
• | The Insured must be Age 90 or younger at the time of the increase. |
• | You must give us satisfactory evidence of insurability. |
• | Each increase you make to the Face Amount must be $25,000 or more. |
• | We may charge you a fee of up to $100 for each increase. We deduct the fee on the day the increase is effective from all of your Investment Options in proportion to the Accumulated Value you have in each Investment Option. |
• | Each increase in Face Amount will have an associated cost of insurance rate, coverage charge and surrender charge. |
• | We reserve the right to limit Face Amount increases to one per Policy Year. |
• | part of your premium payments to you if you’ve chosen the Guideline Premium Test, or |
• | make distributions from the Accumulated Value, which may be taxable. For more information, please see Variable Life Insurance and Your Taxes. |
• | The initial Face Amount and any additional Coverage Layer are eligible for decrease on or after the first anniversary of its effective date. |
• | We’ll apply any decrease in the Face Amount to eligible Coverage Layers in the following order: |
• | to the most recent eligible increases you made to the Face Amount | |
• | to the initial Face Amount. |
• | We do not charge you for a decrease in Face Amount. |
• | We can refuse your request to decrease the total Face Amount if making the change means: |
• | your Policy will no longer qualify as life insurance |
• | the distributions we’ll be required to make from your Policy’s Accumulated Value will be greater than your Policy’s Net Cash Surrender Value |
• | your Policy will become a Modified Endowment Contract and you have not told us in writing that this is acceptable to you. |
23
• |
Accelerated Living Benefits Rider Gives the Policy Owner access to a portion of the Policy’s Death Benefit if the Insured has been diagnosed with a terminal illness resulting in a life expectancy of six months or less (or longer than six months in some states). |
• | Accidental Death Rider Provides additional insurance coverage in the event of the accidental death of the Insured. |
• | Annual Renewable Term Rider Provides annual renewal term insurance on the Insured. |
• | Annual Renewable Term Rider–Additional Insured Provides annual renewal term insurance on members of the Insured’s immediate family. |
• | Children’s Term Rider Provides term insurance for the children of the Insured. |
• | Disability Benefit Rider Provides a monthly addition to the Policy’s Accumulated Value when the Insured has a qualifying disability, until he or she reaches age 65. |
• | Guaranteed Insurability Rider Gives the right to buy additional insurance on the life of the Insured on certain specified dates without proof of insurability. |
• | Waiver of Charges Rider Waives certain charges if the Insured becomes totally disabled before age 60. |
• | Minimum Earnings Benefit Rider |
• | the Alternate Accumulated Value immediately prior to the calculation, | |
• | increased by any premiums paid since the prior Monthly Payment Date, less the Alternate Premium Load, | |
• | reduced by the Policy’s actual monthly deduction on the Monthly Payment Date and any other Policy charges since the prior Monthly Payment Date, and | |
• | reduced by any withdrawals that have been taken since the prior Monthly Payment Date, | |
• | with the result multiplied by the Alternate Accumulated Value Monthly Factor. |
24
• | Overloan Protection II Rider |
• | The minimum five-year premium requirement was met. |
• | The Death Benefit Option is Option A. |
• | The Policy must have been In Force for at least 15 years. |
• | The Insured’s Age is within the range of Ages shown in the Overloan Protection Rider section of the Policy Specifications. The Rider may not be exercised if the Insured is younger than Age 75 or older than Age 120. |
• | There must be sufficient Accumulated Value to cover the rider exercise charge as described below. |
• | The Policy Debt is greater than the Face Amount, but less than 99.9% of the Accumulated Value after the charge for this Rider has been deducted from the Accumulated Value. |
• | There are no projected forced distributions of Accumulated Value for any Policy Year. |
• | The Guideline Premium Limit for the Policy will remain greater than zero at all times prior to Insured’s Age 100. |
• | The Policy must not be a Modified Endowment Contract, and exercising this Rider must not cause the Policy to become a Modified Endowment Contract. |
• | There are no Riders requiring charges after the exercise effective date, other than this Rider and any term insurance Rider on the Insured, and there must not be any change in term insurance Rider Face Amount scheduled to take effect after the exercise effective date. You must terminate any Riders requiring charges and any scheduled changes in term insurance prior to exercise of this Rider. |
• | The policy must not be in the grace period. |
1. | Transfer any Accumulated Value in the Investment Options into the Fixed LT Account. No transfer charge will be assessed for such transfer, nor will it count against, or be subject to, any transfer limitations that may be in effect. |
2. | Deduct the charge for this Rider from your Policy’s Accumulated Value. |
25
• | You do not pay enough premium to meet the minimum five-year premium requirement; |
• | The Policy terminates; |
• | You make a Written Request to terminate this Rider; or |
• | If, after the exercise effective date: |
• | any premium is paid |
• | any withdrawal is taken |
• | any loan repayment is made, other than for loan interest due |
• | any Policy benefit is changed or added at your request |
• | any transfer among the Investment Options is done at your request. |
• | Short-term No-lapse Guarantee Rider |
• | the No Lapse Credit as of the prior Monthly Payment Date multiplied by (1 + i) where i equals 0.327374% if the No Lapse Credit is negative, otherwise it equals the rate shown in the Policy Specifications; | |
• | plus the premiums received since the prior Monthly Payment Date; | |
• | less withdrawals taken since the prior Monthly Payment Date; and | |
• | less one-twelfth of the then current No Lapse Premium. |
26
• | Surrender Value Enhancement Rider–Individual |
• | SVER Term Insurance Rider |
27
• | Surrender Value Enhancement Rider-Trust/Executive Benefit |
• | the rider coverage charge | |
• | the rider cost of insurance charge; and | |
• | the termination credit charge. |
1. | The Rider modifies the Death Benefit of the Policy to include the Face Amount of the Rider, so that the Death Benefit as calculated under the Death Benefit Option you choose on the Policy is increased by the Face Amount of the Rider. | |
2. | If you surrender the Policy, we will pay you a termination credit in addition to the Net Cash Surrender Value, unless either of the following is true: |
• | the Policy is surrendered in connection with the purchase of a replacement life insurance policy including, but not limited to, a replacement intended to qualify as a tax free exchange under Section 1035 of the Tax Code; or | |
• | the Owner at the time of Policy surrender is different from the Owner on the Policy application, and the Owner at the time of Policy surrender is a life insurance company. |
A | = | the termination credit percentage; and | ||||
B | = | the termination credit basis. |
C | = | the termination credit factor; | ||||
D | = | the lesser of 60 and the number of whole Policy months that have elapsed; | ||||
E | = | the maximum annual termination credit basis; | ||||
F | = | the sum of premiums paid; and | ||||
G | = | 1 + the number of whole Policy Years elapsed. |
a | = | the total amount of premiums paid on the Policy; | ||||
b | = | the maximum annual termination credit basis, multiplied by 1 + the number of whole Policy Years elapsed; and | ||||
c | = | the total amount of any withdrawals you have taken from your Policy’s Accumulated Value. |
28
• | SVER Term Insurance Rider – Trust/Executive Benefit |
• | the rider coverage charge | |
• | the rider cost of insurance charge; and | |
• | the termination credit charge. You will be responsible for the termination credit charge even if the termination credit is reduced to zero. |
1. | The Rider modifies the Death Benefit of the Policy to include the Face Amount of the Rider, so that the Death Benefit as calculated under the Death Benefit Option you choose on the Policy is increased by the Face Amount of the Rider. For purposes of determining the minimum Death Benefit of the Policy, the amount of the termination credit will be added to the Policy’s Accumulated Value before the minimum Death Benefit Under the Death Benefit Qualification Test is calculated. | |
2. | If you surrender the Policy, we will pay you a termination credit in addition to the Net Cash Surrender Value, unless either of the following is true: |
• | the Policy is surrendered in connection with the purchase of a replacement life insurance policy including, but not limited to, a replacement intended to qualify as a tax free exchange under Section 1035 of the Tax Code; or | |
• | the Owner at the time of Policy surrender is different from the Owner on the Policy application, and the Owner at the time of Policy surrender is a life insurance company. |
1. | an amount added to the Policy’s surrender value to the premiums paid (subject to a maximum disclosed in the Policy Specifications for this Rider), less withdrawals, multiplied by a percentage that varies by policy duration; and | |
2. | a refund of the rider charge if the premiums paid under the Policy are less than the maximum premium upon which the first component is determined.” |
A | = | the termination credit percentage; and | ||||
B | = | the termination credit basis. |
C | = | the termination credit factor; | ||||
D | = | the lesser of 60 and the number of whole Policy months that have elapsed; | ||||
E | = | the maximum annual termination credit basis; | ||||
F | = | the sum of premiums paid; and | ||||
G | = | 1 + the number of whole Policy Years elapsed. |
29
a | = | the total amount of premiums paid on the Policy; | ||||
b | = | the maximum annual termination credit basis, multiplied by 1 + the number of whole Policy Years elapsed; and | ||||
c | = | the total amount of any withdrawals you have taken from your Policy’s Accumulated Value. |
• | (A) | = | 5% | |||
• | (B) | = | $50,000 | |||
• | (C) | = | 0.25% | |||
• | (D) | = | 60 | |||
• | (E) | = | $10,000 | |||
• | (F) | = | $50,000 | |||
• | (G) | = | 5 |
30
• | On your application, you choose a fixed amount of at least $50 for each premium payment. |
• | You indicate whether you want to make premium payments annually, semi-annually, or quarterly. You can also choose monthly payments using our monthly Electronic Funds Transfer Plan, which is described below. |
• | We send you a notice to remind you of your scheduled premium payment (except for monthly Electronic Funds Transfer Plan payments, which are paid automatically). If you own more than one Policy, you can request us to send one notice — called a listbill — that reminds you of your payments for all of your Policies. You can choose to receive the listbill every month. |
• | If you have any Policy Debt, we’ll treat any payment you make during the life of your Policy as a loan repayment, not as a premium payment, unless you tell us otherwise in writing. When a payment, or any portion of it, exceeds your Policy Debt, we’ll treat it as a premium payment. |
• | by personal check, drawn on a U.S. bank |
• | by cashier’s check, if it originates in a U.S. bank |
• | by money order in a single denomination of more than $10,000, if it originates in a U.S. bank |
• | by third party payments, when there is a clear relationship between the payor (individual, corporation, trust, etc.) and the Insured and/or Owner |
• | wire transfers that originate in U.S. banks. |
• | cash |
• | credit card or check drawn against a credit card account |
• | traveler’s checks |
31
• | cashier’s check or money order drawn on a non-U.S. bank, even if the payment may be effected through a U.S. bank |
• | money order in a single denomination of $10,000 or less |
• | third party payments, if there is not a clear relationship between the payor (individual, corporation, trust, etc.) and the Insured and/or Owner |
• | wires that originate from foreign bank accounts. |
• | You authorize us to withdraw a specified amount from your checking account, savings account or money market account each month. |
• | You can choose any day between the 4th and 28th of the month. |
• | If you do not specify a day for us to make the withdrawal, we’ll withdraw the premium payment on your Policy’s monthly anniversary. If your Policy’s monthly anniversary falls on the 1st, 2nd or 3rd of the month, we’ll withdraw the payment on the 4th of each month. |
• | If you make monthly payments by the Electronic Funds Transfer Plan, we will apply the payments as premium payments unless we receive a new form requesting that payments be applied as a loan repayment. |
• | If you’ve chosen the Guideline Premium Test as your Death Benefit Qualification Test and accepting the premium means your Policy will no longer qualify as life insurance for federal income tax purposes. |
• | If applying the premium in that Policy Year means your Policy will become a Modified Endowment Contract. You may direct us to accept premium payments or other instructions that will cause your Policy to be treated as a Modified Endowment Contract by signing a Modified Endowment Contract Election Form. You’ll find a detailed discussion of Modified Endowment Contracts in Variable Life Insurance and Your Taxes. You should speak to a qualified tax adviser for complete information regarding Modified Endowment Contracts. |
• | If applying the premium payment to your Policy will increase the Net Amount At Risk. This will happen if your Policy’s Death Benefit is equal to the Minimum Death Benefit or would be equal to it once we applied your premium payment. |
32
33
34
35
Model A |
Model B |
Model C |
Model D |
Model E |
||||||||
Conservative | Moderate-Conservative | Moderate | Moderate-Aggressive | Aggressive | ||||||||
Investor Profile |
||||||||||||
You are looking for a
relatively stable investment and do not tolerate short-term market swings. |
Your focus is on keeping pace with inflation and you can tolerate a moderate level of risk.
|
You want the opportunity for long-term moderate growth.
|
You want an investment that is geared for growth and are willing to accept above average risk.
|
You are an aggressive investor and can tolerate short-term market swings.
|
||||||||
Shorter Investment Time
Horizon◄———►Longer
Investment Time Horizon
|
||||||||||||
Investor Objective |
||||||||||||
Primarily preservation of capital
|
Moderate growth
|
Steady growth in asset values
|
Moderately high growth in asset values
|
High growth in asset values
|
||||||||
Risk Characteristics |
||||||||||||
There may be some losses in the values of the investment as asset values fluctuate.
|
There may be some losses in the values of the investment from year to year.
|
There will probably be some losses in the values of the underlying investments from
year to year. |
||||||||||
Fluctuations in value should be less than those of the overall stock markets.
|
Some of these might be large, but the overall fluctuations in asset values should be less than those of the U.S. stock market.
|
|||||||||||
Lower
Risk◄———►Higher
Risk
|
||||||||||||
Asset Class Target Exposure |
Model A | Model B | Model C | Model D | Model E | ||||||||||||||||||||
Cash Equivalents
|
7 | % | 5 | % | 2 | % | — | — | ||||||||||||||||
Fixed Income
|
73 | 57 | 42 | 25 | % | 8 | % | |||||||||||||||||
Domestic Equity
|
15 | 29 | 41 | 54 | 66 | |||||||||||||||||||
International Equity
|
5 | 9 | 15 | 21 | 26 | |||||||||||||||||||
Portfolio Optimization Model
Target Allocations |
||||||||||||||||||||||||
|
Model A | Model B | Model C | Model D | Model E | |||||||||||||||||||
Small-Cap Growth
|
— | — | 1 | % | 2 | % | 2 | % | ||||||||||||||||
International Value
|
2 | % | 2 | % | 3 | 4 | 4 | |||||||||||||||||
Long/Short Large-Cap
|
2 | 3 | 4 | 4 | 5 | |||||||||||||||||||
International Small-Cap
|
— | 1 | 2 | 3 | 3 | |||||||||||||||||||
Equity Index
|
2 | 3 | 4 | 5 | 6 | |||||||||||||||||||
Small-Cap Index
|
— | — | — | — | 2 | |||||||||||||||||||
Mid-Cap Value
|
— | 2 | 3 | 3 | 4 | |||||||||||||||||||
Dividend Growth (formerly called Diversified Research)
|
— | 2 | 2 | 3 | 3 | |||||||||||||||||||
American
Funds®
Growth-Income
|
— | — | 3 | 4 | 4 | |||||||||||||||||||
American
Funds®
Growth
|
— | 1 | 2 | 2 | 3 | |||||||||||||||||||
Large-Cap Value
|
5 | 6 | 7 | 7 | 8 | |||||||||||||||||||
Short Duration Bond
|
11 | 8 | 3 | 2 | — | |||||||||||||||||||
Floating Rate Loan
|
8 | 6 | 3 | — | — | |||||||||||||||||||
Growth LT
|
— | 2 | 3 | 3 | 4 | |||||||||||||||||||
Mid-Cap Equity
|
3 | 2 | 3 | 5 | 6 | |||||||||||||||||||
International Large-Cap
|
3 | 4 | 4 | 6 | 8 | |||||||||||||||||||
Small-Cap Value
|
— | 1 | 1 | 1 | 2 | |||||||||||||||||||
Main
Street®
Core
|
— | 2 | 2 | 3 | 3 | |||||||||||||||||||
Emerging Markets
|
— | — | 3 | 4 | 5 | |||||||||||||||||||
Managed Bond
|
21 | 17 | 14 | 8 | 4 | |||||||||||||||||||
Inflation Managed
|
18 | 14 | 11 | 8 | — | |||||||||||||||||||
High Yield Bond
|
5 | 4 | 3 | — | — | |||||||||||||||||||
Large-Cap Growth
|
2 | 3 | 3 | 3 | 4 | |||||||||||||||||||
Mid-Cap Growth
|
— | 2 | 2 | 3 | 4 | |||||||||||||||||||
Comstock
|
2 | 3 | 5 | 6 | 6 | |||||||||||||||||||
Real Estate
|
— | — | — | 2 | 3 | |||||||||||||||||||
Small-Cap Equity
|
— | — | 1 | 5 | 5 | |||||||||||||||||||
Diversified Bond
|
16 | 12 | 8 | 4 | 2 | |||||||||||||||||||
Less Volatile◄———►More Volatile | ||||||||||||||||||||||||
36
• | cost of insurance |
• | administrative charge |
• | coverage charge |
• | asset charge |
• | charges for optional Riders. |
37
• | Step 1: we divide the Death Benefit that would be payable at the beginning of the Policy month by 1.0020598. |
• | Step 2: we subtract your Policy’s Accumulated Value at the beginning of the Policy month from the amount we calculated in Step 1. |
38
• | Under Death Benefit Option A or Option C, is $135.10 during the first 10 Policy Years (($350,000 ¸ 1,000) × 0.386); and $81.20 in Policy Year 11 and thereafter (($350,000 ¸ 1,000) × 0.232) |
• | Under Death Benefit Option B, is $340.55 during the first 10 Policy Years (($350,000 ¸ 1,000) × 0.973); and $204.40 in Policy Year 11 and thereafter (($350,000 ¸ 1,000) × 0.584) |
• | loans or withdrawals you make from your Policy |
• | not making planned premium payments |
• | the performance of your Investment Options |
• | charges under the Policy. |
39
• | a written application |
• | evidence satisfactory to us that the Insured is still insurable |
• | a premium payment sufficient, after deduction of premium load, to: |
• | cover all unpaid monthly charges and Policy loan interest that were due in the grace period, and | |
• | keep your Policy In Force for three months after the day your Policy is reinstated. |
• | Surrender charges and policy charges other than Cost of Insurance Charges will resume on their schedule as of the Monthly Payment Date when lapse occurred. |
• | Cost of Insurance Charges will be calculated using Cost of Insurance Rates that resume their original schedule as if lapse had never occurred, reflecting the Insureds’ Ages at reinstatement and policy duration measured from the original Policy Date. |
• | If we reinstate your Policy on the first Monthly Payment Date that immediately follows the lapse, we’ll also reinstate the Policy Debt that was outstanding on the day your Policy lapsed. |
• | If we reinstate your Policy on any Monthly Payment Date other than the Monthly Payment Date that immediately follows the lapse, we’ll deduct the Policy Debt from your Policy’s Accumulated Value. This means you will no longer have Policy Debt when your Policy is reinstated. However, we will reinstate your Policy Debt if you ask us to in writing. |
40
41
42
PACIFIC SELECT
FUND |
THE
PORTFOLIO’S |
|||||
PORTFOLIO |
INVESTMENT
GOAL |
MAIN INVESTMENTS |
MANAGER |
|||
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. | Invests primarily in a diversified portfolio of equity securities of relatively large non-U.S. companies that the manager believes to be undervalued. | AllianceBernstein L.P. | |||
Long/Short Large-Cap |
Seeks above-average total returns. | Invests at least 80% of its assets in securities of companies with large market capitalizations. |
Analytic Investors, LLC & J.P. Morgan Investment Management, Inc. |
|||
International Small-Cap |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities of companies with small market capitalizations. | Batterymarch Financial Management, Inc. | |||
Mid-Cap Value |
Seeks long-term growth of capital. | Invests at least 80% of its assets in equity securities of mid-capitalization companies. |
BlackRock Capital Management, Inc. |
|||
Equity Index |
Seeks to provide investment results that correspond to the total return of common stocks that are publicly traded in the U.S. |
Invests at least 80% of its assets in equity securities of
companies included in the portfolio’s applicable benchmark
index, including instruments representative of that index (such
as derivatives). |
BlackRock Investment Management, LLC | |||
Small-Cap Index |
Seeks investment results that correspond to the total return of an index of small capitalization companies. | Invests at least 80% of its assets in securities of companies with small market capitalizations included in the portfolio’s applicable benchmark index, including instruments representative of that index (such as derivatives). | BlackRock Investment Management, LLC | |||
Small-Cap Equity |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities of companies with small market capitalizations, including instruments with characteristics of small-capitalization equity securities (such as derivatives). |
BlackRock Investment Management, LLC & Franklin Advisory Services, LLC |
|||
Equity |
Seeks capital appreciation; current income is of secondary importance. | Invests at least 80% of its assets in equity securities. | Capital Guardian Trust Company | |||
American Funds Asset Allocation |
Seeks high total returns (including income and capital gains) consistent with preservation of capital over the long-term. | Invests all of its assets in Class 1 shares of the Asset Allocation Fund, a series of American Funds Insurance Series®, a registered open-end investment company (Master Asset Allocation Fund). |
Capital Research and Management Company (adviser to the Master Asset Allocation Fund) |
|||
American Funds Growth-Income |
Seeks long-term growth of capital and income. | Invests all of its assets in Class 1 shares of the Growth-Income Fund, a series of the American Funds Insurance Series®, a registered open-end investment company (Master Growth-Income Fund). |
Capital Research and Management Company (adviser to the Master Growth-Income Fund) |
|||
American Funds Growth |
Seeks long-term growth of capital. | Invests all of its assets in Class 1 shares of the Growth Fund, a series of American Funds Insurance Series®, a registered open-end investment company (Master Growth Fund, together with the Master Growth-Income Fund and the Master Asset Allocation Fund, the Master Funds). |
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. | Invests at least 80% of its assets in common stocks of large companies. | ClearBridge Advisors, LLC | |||
Technology |
Seeks long-term growth of capital. | Invests at least 80% of its assets in equity securities of technology companies that may benefit from technological improvements, advancements or developments. |
Columbia Management |
|||
Floating Rate Loan |
Seeks to provide high level of current income. | Invests at least 80% of its assets in floating rate loans. | Eaton Vance Management | |||
Small-Cap Growth |
Seeks capital appreciation; no consideration is given to income. | Invests at least 80% of its assets in small-capitalization equity securities. | Fred Alger Management, Inc. | |||
Short Duration Bond |
Seeks current income; capital appreciation is of secondary importance. | Invests at least 80% of its assets in fixed income securities (including derivatives on such securities). | Goldman Sachs Asset Management, L.P. | |||
Comstock |
Seeks long-term growth of capital. | Invests its assets in equity securities. | Invesco Advisers, Inc. | |||
Invesco Ltd. has entered in to a definitive agreement to acquire certain portfolios of the retail asset management business of Morgan Stanley Investment Management Inc. (MSIM) (“the Transaction”). The Transaction includes a sale of the asset management business that sub-advises the Comstock Portfolio and is subject to certain approvals and other conditions prior to its expected closing in mid-2010. MSIM is the current subadviser to the Comstock Portfolio and upon closing of the Transaction, Invesco Advisers, Inc. will become the subadviser. | ||||||
Growth LT |
Seeks long-term growth of capital. | Invests in companies of any size, from small emerging growth to well-established companies with a focus on companies with large market capitalizations. | Janus Capital Management LLC | |||
43
THE
PORTFOLIO’S |
||||||
PACIFIC SELECT FUND PORTFOLIO |
INVESTMENT
GOAL |
MAIN INVESTMENTS |
MANAGER |
|||
Focused 30 |
Seeks long term growth of capital. | Invests primarily in domestic and foreign equity securities (including common stock, preferred stock, warrants, and securities convertible into common or preferred stock) selected for their growth potential. | Janus Capital Management LLC | |||
Health Sciences |
Seeks long-term growth of capital. | Invests at least 80% of its assets in equity securities and derivatives of companies in the health sciences sector. | Jennison Associates LLC | |||
Mid-Cap Equity |
Seeks capital appreciation. | Invests at least 80% of its assets in equity securities of companies with medium market capitalizations. | Lazard Asset Management LLC | |||
International Large-Cap |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities of companies with large market capitalizations. | MFS Investment Management | |||
Mid-Cap Growth |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities of companies with medium market capitalizations. | Morgan Stanley Investment Management Inc. | |||
Real Estate |
Seeks current income and long-term capital appreciation. | Invests at least 80% of its assets in securities of companies operating in the real estate and related industries. | Morgan Stanley Investment Management Inc. | |||
Small-Cap Value |
Seeks long-term growth of capital. | Invests at least 80% of its assets in small-capitalization equity securities. | NFJ Investment Group LLC | |||
Multi-Strategy |
Seeks to provide a high total return from a portfolio of equity and fixed income securities. | Invests in a mix of equity and fixed income securities, although there is no requirement to weight the portfolio holdings in any fixed proportion. | OppenheimerFunds, Inc. | |||
Main Street Core |
Seeks long-term growth of capital and income. | Invests in common stocks of companies of different capitalization ranges, with a focus on U.S. companies with large market capitalizations. | OppenheimerFunds, Inc. | |||
Emerging Markets |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities (including American Depositary Receipts (ADRs)) of companies whose principal activities are conducted in countries that are generally regarded as emerging market countries. | OppenheimerFunds, Inc. | |||
Cash Management (formerly Money Market) |
Seeks current income consistent with preservation of capital. | Invests in money market instruments that the portfolio manager believes have minimal credit risk. | Pacific Asset Management | |||
High Yield Bond |
Seeks a high level of current income. | Invests at least 80% of its assets in non-investment grade (high yield/high risk) debt instruments or in instruments with characteristics of non-investment grade debt instruments. | Pacific Asset Management | |||
Managed Bond |
Seeks to maximize total return consistent with prudent investment management. | Invests at least 80% of its assets in debt instruments, including instruments with characteristics of debt instruments (such as derivatives). | Pacific Investment Management Company LLC | |||
Inflation Managed |
Seeks to maximize total return consistent with prudent investment management. | Invests its assets in fixed income securities. | Pacific Investment Management Company LLC | |||
Pacific Dynamix – Conservative Growth |
Seeks current income and moderate growth of capital. | Targets an equity/debt blend of 40/60 through investment in certain underlying portfolios of Pacific Select Fund. | Pacific Life Fund Advisors LLC | |||
Pacific Dynamix – Moderate Growth |
Seeks long-term growth of capital and low to moderate income. | Targets an equity/debt blend of 60/40 through investment in certain underlying portfolios of Pacific Select Fund. | Pacific Life Fund Advisors LLC | |||
Pacific Dynamix – Growth |
Seeks moderately high, long-term growth of capital with low, current income. | Targets an equity/debt blend of 80/20 through investment in certain underlying portfolios of Pacific Select Fund. | Pacific Life Fund Advisors LLC | |||
Dividend Growth (formerly Diversified Research) |
Seeks long-term growth of capital. | Invests at least 65% of its assets in equity securities of dividend paying companies that the manager expects to increase their dividends over time and also provide long-term appreciation. | T. Rowe Price Associates, Inc. | |||
Large-Cap Growth |
Seeks long-term growth of capital; current income is of secondary importance. | Invests at least 80% of its assets in equity securities of large-capitalization companies. | UBS Global Asset Management (Americas) Inc. | |||
Diversified Bond |
Seeks to maximize total return consistent with prudent investment management. | Invests at least 80% of its assets in fixed income securities. |
Western Asset Management Company |
|||
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M FUND |
THE
PORTFOLIO’S |
PORTFOLIO |
||||
PORTFOLIO | INVESTMENT GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
M International Equity Fund (formerly Brandes International Equity) |
Long-term capital appreciation. | Equity securities of foreign issuers. Focuses on stocks with capitalizations of $1 billion or more. | Brandes Investment Partners, L.P. | |||
M Large Cap Growth Fund (formerly Turner Core Growth) |
Long-term capital appreciation. | Common stocks of U.S. companies that the subadviser believes have strong earnings growth potential. | DSM Capital Partners | |||
M Capital Appreciation (formerly Frontier Capital Appreciation) |
Maximum capital appreciation. | Common stock of U.S. companies of all sizes, with emphasis on stocks of companies with capitalizations that are consistent with the capitalizations of those companies found in the Russell 2500. | Frontier Capital Management Company, Inc. | |||
M Business Opportunity Value Fund (formerly Business Opportunity Value) |
Long-term capital appreciation. | Equity securities of U.S. issuers in the large-to-medium-capitalization segment of the U.S. stock market. | Iridian Asset Management LLC | |||
BLACKROCK
VARIABLE |
PORTFOLIO |
|||||
SERIES FUNDS, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
BlackRock Basic Value V.I. Fund Class III |
Capital appreciation. (Income is of secondary importance.) | Equity securities believed to be undervalued. |
BlackRock Investment Management, LLC and BlackRock Asset
Management U.K. Limited |
|||
BlackRock Global Allocation V.I. Fund Class III |
High total investment return. | A mix of U.S. and foreign equity, debt and money market securities |
BlackRock Investment Management, LLC and BlackRock Asset Management U.K. Limited |
FIDELITY
VARIABLE |
||||||
INSURANCE
PRODUCTS |
PORTFOLIO |
|||||
FUNDS |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER |
|||
Fidelity VIP
Contrafund® Portfolio Service Class 2 |
Long-term capital appreciation. | Equity securities of companies whose value is believed not fully recognized by the public. | Fidelity Management & Research Co., Inc. | |||
Fidelity VIP Freedom Income Service Class 2 |
High total return. (Principal preservation is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers®, Inc. | |||
Fidelity VIP Freedom 2010 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers, Inc. | |||
Fidelity VIP Freedom 2015 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term. | Strategic Advisers, Inc. | |||
Fidelity VIP Freedom 2020 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers, Inc. | |||
Fidelity VIP Freedom 2025 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers, Inc. | |||
Fidelity VIP Freedom 2030 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers, Inc. | |||
Fidelity VIP Growth Portfolio Service Class 2 |
Capital appreciation. | Equity securities of companies believed to have above-average growth potential. | Fidelity Management & Research Co., Inc. | |||
Fidelity VIP Mid Cap Portfolio Service Class 2 |
Long-term growth of capital. | Equity securities primarily of companies with medium market capitalization. | Fidelity Management & Research Co., Inc. | |||
Fidelity VIP Value Strategies Portfolio Service Class 2 |
Capital appreciation. | Equity securities of companies believed to be undervalued in the marketplace. | Fidelity Management & Research Co., Inc. | |||
45
FRANKLIN
TEMPLETON |
||||||
VARIABLE
INSURANCE |
PORTFOLIO |
|||||
PRODUCTS TRUST |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER |
|||
Templeton Global Bond Securities Fund Class 2 | High current income. |
The Fund invests mainly in debt securities of governments,
government agencies and companies located around the world,
including a significant amount in emerging markets. |
Franklin Advisers, Inc. |
GE INVESTMENTS |
PORTFOLIO |
|||||
FUNDS, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
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. | Invests primarily in a combination of U.S. and foreign equity and debt securities and cash. | GE Asset Management Incorporated |
PORTFOLIO |
||||||
JANUS ASPEN
SERIES |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Overseas Portfolio Service Class | Long-term growth of capital. | Securities of issuers from countries outside the United States. | Janus Capital Management LLC | |||
Enterprise Portfolio Service Class | Long-term growth of capital. | Equity securities of mid-sized companies. | Janus Capital Management LLC |
LAZARD
RETIREMENT |
PORTFOLIO |
|||||
SERIES, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Lazard Retirement U.S. Strategic Equity Portfolio |
Long-term capital appreciation. |
Equity securities, principally common stocks. | Lazard Asset Management LLC |
LEGG MASON |
||||||
PARTNERS |
PORTFOLIO |
|||||
VARIABLE EQUITY TRUST |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER |
|||
Legg Mason ClearBridge Variable Aggressive Growth
Portfolio – Class II |
Capital appreciation. | Common stocks of companies the portfolio manager believes are experiencing, or will experience, growth of earnings that exceeds the average rate of earnings growth of companies which comprise the S&P 500 Index. | ClearBridge Advisors, LLC | |||
Legg Mason ClearBridge Variable Mid Cap Core
Portfolio – Class II |
Long-term growth of capital. | Equity securities or investments with similar characteristics of medium sized companies. | ClearBridge Advisors, LLC |
LORD ABBETT |
PORTFOLIO |
|||||
SERIES FUND, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Lord Abbett Fundamental Equity Portfolio Class VC |
Long-term growth of capital and income without excessive
fluctuations in market value. |
Primarily purchases equity securities of U.S. and multinational companies that appear to be undervalued in all market capitalization ranges. | Lord Abbett & Co., LLC |
MFS VARIABLE |
PORTFOLIO |
|||||
INSURANCE TRUST |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
MFS New Discovery Series Service Class |
Capital appreciation. | Equity securities of companies believed to have above average earnings growth potential. | Massachusetts Financial Services Company | |||
MFS Utilities Series Service Class |
Total return. | Securities of issuers in the utilities industry1. | Massachusetts Financial Services Company | |||
PORTFOLIO |
||||||
ROYCE CAPITAL
FUND |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Royce Micro-Cap Service Class Portfolio |
Long-term growth of capital. |
Equity securities of micro-cap companies, a universe of more
than 4,100 companies with market capitalizations up to $500
million. |
Royce & Associates, Inc. |
46
T. ROWE PRICE
EQUITY |
PORTFOLIO |
|||||
SERIES, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
T. Rowe Price Blue Chip Growth Portfolio – II |
Long-term capital growth. (Current income is a secondary objective.) |
Common stocks of well-established large and medium-sized
companies with the potential for above-average earnings
increases |
T. Rowe Price Associates, Inc. | |||
T. Rowe Price Equity Income Portfolio – II |
Substantial dividend income and long-term capital growth. | Common stocks of established companies. In selecting such stocks, the Fund emphasizes companies that appear to be temporarily undervalued by various measures, such as price/earnings (P/E) rations. | T. Rowe Price Associates, Inc. |
PORTFOLIO |
||||||
VAN ECK VIP
TRUST |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Van Eck VIP Global Hard Assets Fund (formerly Van Eck Worldwide Hard Assets Fund) |
Long-term capital appreciation. (Income is a secondary consideration.) | A mix of U.S. and foreign hard asset2 securities | Van Eck Associates Corporation | |||
1 | Issuers in the utilities industry include issuers engaged in the manufacture, production, generation, transmission, sale or distribution of electric, gas or other types of energy, water or other sanitary services; and issuers engaged in telecommunications, including telephone, cellular telephone, telegraph, satellite, microwave, cable television, and other communications media (but not engaged in public broadcasting). | |
2 | Hard asset securities are stocks, bonds and other securities of companies that derive at least 50% of their revenues from exploration, development, production, distribution or facilitation of processes relating to: a) precious metals, b) natural resources, c) real estate and d) commodities. In addition, hard asset securities shall include any derivative securities the present value of which are based upon hard asset securities and/or hard asset commodities. |
• | the investment performance of the underlying portfolio |
• | any dividends or distributions paid by the underlying portfolio |
• | any charges for any taxes that are, or may become, associated with the operation of the Variable Account. |
47
• | Accumulated Value allocated to the Fixed Options earns interest on a daily basis, using a 365-day year. Our minimum annual interest rate is 2.5%. |
• | We may offer a higher annual interest rate on the Fixed Options. If we do, we’ll guarantee the higher rate until your next Policy Anniversary. |
• | There are no investment risks or direct charges. Policy charges still apply. |
• | There are limitations on when and how much you can transfer from the Fixed Options. These limitations are described below, in Transferring Among Investment Options. It may take several Policy Years to transfer your Accumulated Value out of either of the Fixed Options. |
• | We may place a limit of $1,000,000 for Net Premiums and $100,000 for loan repayments and transfers allocated to the Fixed Options in any 12-month period. This is an aggregate limit for all Pacific Life policies you own. Any allocations in excess of these limits will be allocated to your other Investment Options according to your most recent instructions. We may increase the limits at any time at our sole discretion. To find out if higher limits are in effect, ask your registered representative or contact us. |
• | We have not registered the Fixed Options with the SEC, and the staff of the SEC has not reviewed the disclosure in this prospectus relating to the Fixed Options. Disclosures regarding the Fixed Options, however, are subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in the prospectus. |
• | Transfers are limited to 25 for each calendar year. |
• | 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 one (1) transfer of all or a portion of your Policy’s Accumulated Value remaining in the Variable Investment Options into the Cash Management Investment Option prior to the start of the next calendar year. |
• | You may only make two (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 Growth Service Class 2, Fidelity VIP Mid Cap Service Class 2 and Fidelity VIP Value Strategies Service Class 2, T. Rowe Price Blue Chip Growth Portfolio – II, T. Rowe Price Equity Income Portfolio – II. |
• | Additionally, only two (2) transfers in any calendar month may involve any of the following Investment Options: International Value, International Small-Cap, International Large-Cap, Emerging Markets, Variable Account I (M International Equity Fund), BlackRock Global Allocation V.I. Fund Class III, Janus Aspen Series Overseas Service Class, Templeton Global Bond Securities Fund Class II or Van Eck VIP Global Hard Assets Fund. |
• | For the purpose of applying the limitations, multiple transfers that occur on the same day are considered one (1) transfer. Transfers into the Loan Account, a transfer of Accumulated Value from the Loan Account into your Investment Options following a loan payment, or transfers that occur as a result of the dollar cost averaging service, the portfolio rebalancing service, approved corporate owned life insurance policy rebalancing programs, the first year transfer service or an approved asset allocation service are excluded from the transfer limitations. Also, allocations of premium payments are not subject to these limitations. |
48
• | 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 Diversified Research 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. |
• | There is no minimum amount required if you’re making transfers between Variable Investment Options. |
• | You can only make transfers from the Variable Investment Options to the Fixed Options 30 days prior to and 30 days after each Policy Anniversary. However, if your Policy was issued in Connecticut, Georgia, Maryland, Massachusetts, North Carolina, North Dakota or Pennsylvania, you can make transfers to the Fixed Account any time during the first 18 months of your Policy. |
• | You can make one transfer in any 12-month period from each Fixed Option, except if you’ve signed up for the first year transfer service (see Transfer Services later in this section). Such transfers are limited to the greater of: |
• | $5,000 or 25% of your Policy’s Accumulated Value in the Fixed Account | |
• | $5,000 or 10% of your Policy’s Accumulated Value in the Fixed LT Account |
• | Currently, there is no charge for making a transfer but we may charge you in the future. The maximum fee we will charge for a transfer is $25 per transfer in excess of 12 in a Policy Year. |
• | There is no minimum required value for the Investment Option you’re transferring to or from. |
• | You cannot make a transfer if your Policy is in the grace period and is in danger of lapsing. |
• | We can restrict or suspend transfers. |
• | We will notify you or your representative if we refuse or delay your transfer request. |
• | We have the right to impose limits on transfer amounts, the value of the Investment Options you’re transferring to or from, or impose further limits on the number and frequency of transfers you can make. Any policy we establish with regard to the exercise of any of these rights will be applied uniformly to all Policy Owners. |
• | not accepting transfer instructions from a representative acting on behalf of more than one Policy Owner, and |
49
• | not accepting preauthorized transfer forms from market timers or other entities acting on behalf of more than one Policy Owner at a time. |
50
• | You must send us a Written Request that’s signed by all owners. |
• | Each withdrawal must be at least $200, and the Net Cash Surrender Value of your Policy after the withdrawal must be at least $500. |
• | We will not accept your request to make a withdrawal if it will cause your Policy to become a Modified Endowment Contract, unless you’ve told us in writing that you want your Policy to become a Modified Endowment Contract. |
• | We may charge you $25 for each withdrawal you make. (There is no charge currently imposed upon a withdrawal.) |
• | You can choose to receive your withdrawal in a lump sum or use it to buy an income benefit. Please see the discussion about income benefits in General Information About Your Policy. |
• | If you do not tell us which Investment Options to take the withdrawal from, we’ll deduct the withdrawal and any withdrawal charge from all of your Investment Options in proportion to the Accumulated Value you have in each Investment Option. |
• | The Accumulated Value, Cash Surrender Value and Net Cash Surrender Value of your Policy will be reduced by the amount of each withdrawal. |
• | If the Insured dies after you’ve sent a withdrawal request to us, but before we’ve made the withdrawal, we’ll deduct the amount of the withdrawal from any Death Benefit Proceeds owing. |
• | If your Policy’s Death Benefit does not equal the Minimum Death Benefit, the Death Benefit may decrease by the amount of your withdrawal. |
• | If your Policy’s Death Benefit equals the Minimum Death Benefit, the Death Benefit may decrease by more than the amount of your withdrawal. |
51
• | To secure the loan, we transfer an amount equal to the amount you’re borrowing from your Accumulated Value in the Investment Options to the Loan Account. We’ll transfer this amount from your Investment Options in proportion to the Accumulated Value you have in each Investment Option, unless you tell us otherwise. |
• | Interest owing on the amount you’ve borrowed accrues daily at an annual rate of 2.75%. Interest that has accrued during the Policy Year is due on your Policy Anniversary. |
• | The amount in the Loan Account earns interest daily at an annual rate of at least 2.5%. On each Policy Anniversary, if the Policy Debt exceeds the Loan Account Value, then the excess is transferred from your Policy’s Investment Options to the Loan Account on a proportionate basis to the Loan Account. If the Loan Account Value exceeds Policy Debt, then the excess will be transferred from the Loan Account to the Investment Options according to your most recent premium allocation instructions. |
• | We currently intend to credit interest on the amount in the Loan Account at an annual rate of 2.75% in Policy Year 6 and thereafter. We can decrease the rate credited if we believe the change is needed to ensure that your Policy loan is not treated as a taxable distribution under federal income tax laws, or under any applicable ruling, regulation, or court decision. We will not decrease the annual rate to less than 2.5% on the amount in the Loan Account. |
• | three times the most recent monthly deduction; |
• | any surrender charge; and |
• | any existing Policy Debt. |
• | You authorize us to withdraw a specified amount from your checking account, savings account or money market account each month by completing an Electronic Funds Transfer Form. Please contact us or your registered representative for a copy of this form. |
• | You can choose any day between the 4th and 28th of the month for us to make the withdrawal. |
• | Loan payments made by the Electronic Funds Transfer Plan must be at least $50. |
• | the Death Benefit Proceeds before we pay them to your Beneficiary |
• | the Cash Surrender Value if you surrender your Policy |
52
• | the rate of return you expect to earn on your Investment Options |
• | how long you would like to receive regular income |
• | the amount of Accumulated Value you want to maintain in your Policy. |
53
• | You must send us your Policy and a Written Request. |
• | We’ll send you the Policy’s Net Cash Surrender Value. You can choose to receive your money in a lump sum or use it to buy an income benefit. Please see the discussion about income benefits in General Information About Your Policy. |
• | If you surrender your Policy during the first 10 Policy Years, we’ll deduct a surrender charge. |
• | Each Policy Coverage Layer has a surrender charge. The charge is based on the Age and Risk Class of the Insured as well as the Death Benefit Option and the Face Amount of the Coverage Layer at the Coverage effective date. If you increase your Policy’s Face Amount, we’ll send you a supplemental schedule of benefits that shows the surrender charge factors and associated with the increase. |
• | There’s no surrender charge on any Coverage Layer after 10 Policy Years from the date the Coverage Layer is effective. |
• | We guarantee the surrender charge rates will not increase. |
• | If you decrease the Policy Face Amount, the decrease will not affect your Policy’s surrender charge. |
54
• | The income benefit is based on the life of the person receiving the income. If the Policy Owner is buying the income benefit, monthly income will be based on the Owner’s life. If the Policy’s Beneficiary buys the income benefit, monthly income will be based on the Beneficiary’s life. |
• | We’ll pay a monthly income for at least 10 years regardless of whether the person receiving the income is still alive. |
• | After 10 years, we’ll only pay the monthly income for as long as the person receiving it is still alive. |
• | The minimum monthly income benefit calculated must be at least $100. |
• | For this income benefit, the amount you receive will always be at least as much as the amount guaranteed by your Policy. |
1) | any such increase in Total Face Amount will be excluded; | |
2) | refund of the portion of monthly deductions associated with any such increase will be included; and | |
3) | premium load associated with the portion of monthly deductions referred to in 2) above will be included. |
• | lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or otherwise terminated |
• | converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values |
• | amended to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid |
• | reissued with any reduction in cash value, or |
• | pledged as collateral or subject to borrowing, whether in a single loan or under a schedule of borrowing over a period of time. |
• | You will pay new acquisition costs; |
• | You may have to submit to new medical examinations; |
• | You may pay increased premiums because of the increased age or changed health of the insured; |
• | Claims made in the early policy years may be contested; |
• | You may have to pay surrender charges and/or income taxes on your current policy or contract values; |
55
• | Your new policy or contract values may be subject to surrender charges; and |
• | If part of a financed purchase, your existing policy or contract values or Death Benefit may be reduced. |
• | the Death Benefit based on a Net Amount At Risk adjusted by the ratio of the incorrect cost of insurance rate to the correct cost of insurance rate for the Insured’s gender and Age, or |
• | the Minimum Death Benefit for the correct gender and birth date. |
56
• | In general, your Policy’s Beneficiary will not be subject to federal income taxes when he or she receives the Death Benefit Proceeds. |
• | You will generally not be taxed on your Policy’s Accumulated Value unless you receive a cash distribution by making a withdrawal, surrendering your Policy, or in some instances, taking a loan from your Policy. |
• | substandard risk policies |
• | policies with term insurance on the Insured |
• | life insurance policies that continue coverage beyond Age 100, or other advanced ages. |
57
• | Section 101(j) of the Internal Revenue Code generally provides that Death Benefits paid in connection with certain life insurance policies involving an employer will be taxable income. Employer-involved policies issued or materially modified on or after August 18, 2006 may be subject to income tax liability on the Policy’s Death Benefit unless certain requirements and conditions of Internal Revenue Code Section 101(j) are met. |
• | Using your Policy to informally fund a promised deferred compensation benefit for executives may have special tax consequences. |
• | Corporate ownership of a Policy may affect your liability under the alternative minimum tax (Section 56 of the Tax Code) and the environmental tax (Section 59A of the Tax Code). |
58
CONVENTIONAL LIFE INSURANCE POLICY | MODIFIED ENDOWMENT CONTRACT | |
Surrendering your Policy | ||
Proceeds are taxed to the extent they exceed the investment in the contract1. | Proceeds are taxed to the extent they exceed the investment in the contract. | |
Making a withdrawal | ||
If you make a withdrawal after your Policy has been In Force for 15 years, you’ll only be taxed on the amount you withdraw that exceeds the investment in the contract. | You will be taxed on the amount of the withdrawal that’s considered income2, including all previously non-taxed gains. | |
Special rules apply if you make a withdrawal within the first 15 Policy Years. You may be taxed on all or a portion of the withdrawal amount, and there is a reduction in Policy benefits. | ||
Taking out a loan | ||
You will not pay tax on the loan amount unless your Policy is surrendered, lapses or matures and you have not repaid your Policy Debt. | You will be taxed on the amount of the loan that’s considered income, including all previously non-taxed gains. |
1 | The investment in the contract is generally the premiums you’ve paid plus any taxable distributions less any withdrawals or premiums previously recovered that were taxable. | |
2 | Income is the difference between the Accumulated Value and the investment in the contract. |
• | you’re at least 591/2 years old |
• | you’re receiving an amount because you’ve become disabled |
• | you’re receiving an amount that’s part of a series of substantially equal periodic payments, paid out at least annually. These payments may be made for your life or life expectancy or for the joint lives or joint life expectancies of you and your Beneficiaries. |
• | is a director, officer or employee of the person receiving the benefit, or |
• | has a financial interest in a business of the person receiving the benefit. |
59
• | any portfolio is no longer available for investment; or |
• | our management believes that a portfolio is no longer appropriate in view of the purposes of the Policy. |
60
• | operate the Separate Account as a management investment company, unit investment trust, or any other form permitted under securities or other laws |
• | register or deregister the Separate Account under securities law |
• | combine the Separate Account with one of our other separate accounts or our affiliates’ separate accounts |
• | combine one or more Variable Accounts |
• | create a committee, board or other group to manage the Separate Account |
• | change the classification of any Variable Account. |
• | would change a portfolio’s investment objective or subclassification |
• | would approve or disapprove an investment advisory contract. |
• | our disapproval is reasonable |
• | we determine in good faith that the change would be against state law or otherwise be inappropriate, considering the portfolio’s objectives and purpose, and considering what effect the change would have on us. |
61
62
• | Illustrations based on information you give us about the Age of the person to be insured by the Policy, their Risk Class, the Face Amount of all Coverage Layers, the Death Benefit and premium payments. |
• | Illustrations that show the allocation of premium payments to specified Variable Accounts. These will reflect the expenses of the portfolio of the Fund in which the Variable Account invests. |
• | Illustrations that use a hypothetical gross rate of return up to 12% are available. Illustrations that use a hypothetical gross rate of return greater than 12% are available only to certain large institutional investors. |
63
64
Age | Percentage | Age | Percentage | Age | Percentage | Age | Percentage | |||||||
0-40
|
250 | 50 | 185 | 60 | 130 | 70 | 115 | |||||||
41
|
243 | 51 | 178 | 61 | 128 | 71 | 113 | |||||||
42
|
236 | 52 | 171 | 62 | 126 | 72 | 111 | |||||||
43
|
229 | 53 | 164 | 63 | 124 | 73 | 109 | |||||||
44
|
222 | 54 | 157 | 64 | 122 | 74 | 107 | |||||||
45
|
215 | 55 | 150 | 65 | 120 | 75-90 | 105 | |||||||
46
|
209 | 56 | 146 | 66 | 119 | 91 | 104 | |||||||
47
|
203 | 57 | 142 | 67 | 118 | 92 | 103 | |||||||
48
|
197 | 58 | 138 | 68 | 117 | 93 | 102 | |||||||
49
|
191 | 59 | 134 | 69 | 116 | >93 | 101 | |||||||
A-1
B-1
M’S VERSATILE PRODUCT VII |
WHERE TO GO FOR MORE INFORMATION |
The M’s Versatile Product VII variable life insurance policy is underwritten by Pacific Life Insurance Company. |
You’ll find more information about the Policy and Pacific Select Exec Separate Account in the SAI dated May 1, 2010. The SAI has been filed with the SEC and is considered to be part of this prospectus because it’s incorporated by reference.
You can get a copy of the SAI without charge by calling or writing to us, or you can view it online at our website. You can also contact the SEC to get the SAI, material incorporated into this prospectus by reference, and other information about registrants that file electronically with the SEC. The SEC may charge you a fee for this information. You may obtain the current prospectus and SAI for any of the portfolios underlying the Variable Accounts by calling 1-800-347-7787. If you ask us, we’ll provide you with Illustrations of Policy benefits based on different sets of assumptions. Illustrations may help you understand how your Policy’s Death Benefit, Cash Surrender Value and Accumulated Value would vary over time based on different assumptions. You can get one Policy Illustration free of charge per Policy Year by calling or writing to us. We reserve the right to charge $25 for additional Illustrations. |
|
How to Contact Us
|
Pacific Life Insurance Company
P.O. Box 2030 Omaha, NE 68103 1-800-347-7787 5 a.m. through 5 p.m. Pacific time www.Pacificlife.com We accept faxes or emails for variable transaction requests (transfers, allocation changes, rebalancing and loans) at: 1-866-398-0467 VULTransactions@pacificlife.com PREMIUM PAYMENTS Unless you receive premium notices via listbill, send premiums (other than initial premium) to: Pacific Life Insurance Company P.O. Box 100957 Pasadena, California 91189-0957 |
|
How to Contact the SEC
|
You can also find reports and other information about the Policy and Separate Account from the SEC. The SEC may charge you a fee for this information.
Commission’s Public Reference Section 100 F Street, NE Washington, D.C. 20549 1-202-551-8090 Website: www.sec.gov e-mail: publicinfo@sec.gov |
|
FINRA Public Disclosure Program
|
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 Public Disclosure program may be obtained from FINRA. The FINRA Public Disclosure hotline number is (800) 289-9999. FINRA does not charge a fee for the Public Disclosure program services. | |
1 “Standard & Poor’s, “Standard & Poor’s 500®” and “S&P 500® are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Pacific Life Insurance Company. The Product is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of purchasing the Product. |
- 2 -
- 3 -
AMOUNT DEDUCTED | AMOUNT DEDUCTED | ||||||||||
WHEN CHARGE IS | MAXIMUM | – CURRENT | |||||||||
CHARGE | DEDUCTED | GUARANTEED CHARGE | CHARGES | ||||||||
Indexed Account charge
|
Monthly Payment Date | 0.30% annually
(0.025% monthly) of
Indexed Fixed
Accumulated Value |
Same | ||||||||
- 4 -
a | = | the Closing Value of the Index as of the day before the beginning of the Segment Term; and | |
b | = | the Closing Value of the Index as of the day before the end of the Segment Term. |
a | = | Index Growth Rate | |
b | = | Participation Rate | |
c | = | Growth Cap | |
d | = | Cumulative Segment Guaranteed Interest Rate |
- 5 -
a | = | the Segment Value as of the previous day; | |
b | = | the Segment Guaranteed Interest since the previous day; | |
c | = | any Segment Deductions since the previous day; and | |
d | = | any Segment Indexed Interest credited at Segment Maturity. |
- 6 -
- 7 -
• | Segment Creation. A new Segment is created when there is a transfer to the Indexed Account. The Segment continues until the end of the Segment Term. | |
• | Segment Value Change. The Segment is credited with the Segment Guaranteed Interest and is reduced by Segment Deductions (discussed below). | |
• | Segment Deductions. Over the Segment Term, money may be transferred from the Segments for the Policy’s Monthly Deductions, for withdrawals and for policy loans. | |
• | Segment Indexed Interest. Based in part on any positive change of the Index, additional interest may be credited to the Segment at the end of the Segment Term. It is possible, however, that Segment Indexed Interest will not be greater than zero. | |
• | Segment Maturity. At the end of a Segment Term, the Segment Maturity Value is transferred to a new Segment or to the Fixed Account, based on your instructions. |
- 8 -
• | Net Premiums and Accumulated Value aren’t directly deposited in or allocated to the Indexed Fixed Account. Such amounts are first allocated or transferred to the Fixed Account. On a Segment Start Date, we then transfer such Designated Amounts to the Indexed Fixed Account. | ||
• | All Segment Start Dates currently begin on the 15th of a month. Each Segment Start Date has a Cutoff Date. To begin a Segment on a particular Segment Start Date, we must receive your instructions by the Cutoff Date for that Segment Start Date. | ||
• | You can only allocate all or a portion of your Net Premiums or transfer Accumulated Value to the Indexed Fixed Account if your Policy is not in a Lockout Period (discussed below). However, during a Lockout Period, you may reallocate Accumulated Value in the Indexed Fixed Account to a new Segment at Segment Maturity. | ||
• | We assess a charge on Accumulated Value in an Indexed Account. | ||
• | We first deduct all Monthly Deductions, loans, and withdrawals from Accumulated Value in the Fixed Accounts and Variable Accounts. We then deduct amounts in excess of Accumulated Value in the Fixed Accounts and Variable Accounts from the Indexed Fixed Account. | ||
• | There is no guarantee that Segment Indexed Interest will be greater than zero at Segment Maturity. However, we credit Segment Guaranteed Interest daily to Accumulated Value in an Indexed Account. | ||
• | The Total Interest Credited at Segment Maturity will never exceed the Growth Cap. | ||
• | You can’t transfer Accumulated Value from an Indexed Account until Segment Maturity. | ||
• | At Segment Maturity, we will automatically invest Segment Maturity Value in a new Segment unless you tell us otherwise by a Cutoff Date. |
- 9 -
• | A Segment with $10,000 Accumulated Value was created on 12/15/2004. | ||
• | There are no deductions for Policy charges, including the .30% Indexed Account Charge (this assumes all charges are deducted from the Fixed Account and/or the Variable Accounts). | ||
• | The Growth Cap is 10% for all time periods. | ||
• | Accumulated Value is reallocated to a new Segment at Segment Maturity. |
Segment Start Date |
12/15/2004 | 12/15/2005 | 12/15/2006 | 12/15/2007 | 12/15/2008 | ||||||||||||||||||||||
Segment End Date |
12/15/2005 | 12/15/2006 | 12/15/2007 | 12/15/2008 | 12/15/2009 | ||||||||||||||||||||||
Amount at Start of Segment |
10,000.00 | 10,576.00 | 11527.84 | 11,756.09 | 11,878.65 | ||||||||||||||||||||||
Average Segment Monthly Balance |
10,000.00 | 10,576.00 | 11,527.84 | 11,756.09 | 11,878.65 | ||||||||||||||||||||||
Starting Index Value |
1,203.38 | 1,272.74 | 1,425.49 | 1,467.95 | 868.57 | ||||||||||||||||||||||
Ending Index Value |
1,272.74 | 1,425.49 | 1,467.95 | 868.57 | 1,114.11 | ||||||||||||||||||||||
Index Growth Rate |
5.76% | 12.00% | 2.98% | -40.83% | 28.27% | ||||||||||||||||||||||
Growth Cap |
10% | 10% | 10% | 10% | 10% | ||||||||||||||||||||||
Cumulative Segment Guaranteed Interest Rate |
1% | 1% | 1% | 1% | 1% | ||||||||||||||||||||||
Segment Guaranteed Interest |
100.00 | 105.76 | 115.28 | 117.56 | 118.74 | ||||||||||||||||||||||
Segment Indexed Interest Rate |
4.76% | 9.00% | 1.98% | 1.00% | 9.00% | ||||||||||||||||||||||
Segment Indexed Interest |
476.00 | 951.84 | 228.25 | 117.56 | 1,068.63 | ||||||||||||||||||||||
Total Interest Credited over Term |
576.00 | 1,057.60 | 343.53 | 235.12 | 1,187.37 | ||||||||||||||||||||||
Segment Maturity Value |
10,576.00 | 11,527.84 | 11,756.09 | 11,873.65 | 13,942.28 | ||||||||||||||||||||||
Total Return over Period |
29.42% | ||||||||||||||||||||||||||
Annual Return over Period |
5.29% | ||||||||||||||||||||||||||
- 10 -
• | We create the Segment on January 15, 2010 with a $1,000 allocation. | ||
• | You have not taken a loan, and we have not deducted Policy charges from the Segment. | ||
• | On July 15, you take a single withdrawal (or Policy loan) of $300 from the Segment. | ||
• | At the end of the Segment Term, the Index Growth Rate and corresponding Segment Indexed Interest Rate are 10%. |
End of Segment Month | Segment Monthly Balance | |
2/14/2010
|
$1,000 | |
3/14/2010 | $1,000 | |
4/14/2010 | $1,000 | |
5/14/2010 | $1,000 | |
6/14/2010 | $1,000 | |
7/14/2010 | $1,000 | |
8/14/2010 | $700 | |
9/14/2010 | $700 | |
10/14/2010 | $700 | |
11/14/2010 | $700 | |
12/14/2010 | $700 | |
1/14/2015 | $700 |
- 11 -
• | Net Premiums or loan repayments that you have instructed us to transfer to the Indexed Option; | ||
• | Transfers you request from the Fixed Account; | ||
• | Transfers from the Variable Accounts and Fixed LT Account, which can be made to the Fixed Account under policy Transfer guidelines, and then transferred from the Fixed Account into the Indexed Account. |
- 12 -
• | Payment and Reallocation Instructions; | ||
• | Transfers by Written Request |
1. | Payment Instructions: are your instructions to us to transfer a portion of a Net Premium or Loan Repayment to the Indexed Account. The portion of the Net Premium or Loan repayment that you designated will be deposited into the Fixed Account on the day it is received and will remain there until the next Segment Start Date, assuming we received your instructions by the Cutoff Date for that Segment Start Date. The Fixed Account will earn interest and be assessed Policy charges during this period. On the Segment Start Date, we will transfer the lesser of the amount of Net Premium or Loan Repayment you designated for transfer, or the value of the Fixed Account. If you did not give us instructions by the Cutoff Date or if your Policy is in a Lockout Period, we will not make the transfer to the Indexed Account. | ||
An example: | |||
We receive and apply a premium payment of $10,000 on January 2, which corresponds to a Net Premium of $9,305. Based upon your payment instructions, 100% of the Net Premium is applied to the Indexed Fixed Account and the Designated Amount = $9,305. | |||
On January 2, the Designated Amount is applied to the Fixed Account and the Fixed Account balance is $9,305. The Policy earns interest and charges are deducted, and on January 15 (the Segment Start Date), the Fixed Account balance is equal to $9,300. | |||
On January 15, the Segment Start Date, the Fixed Account balance is $9,300, which is less than the Designated Amount. This amount will be transferred to the Indexed Account and the Fixed Account balance will be zero. | |||
Another example: | |||
Using the same examples as above, but assuming that the Fixed Account Value is $9,500 on the Segment Start Date: | |||
On January 15, the Segment Start Date, the Designated Amount of $9,305 will be transferred to the Indexed Account. The Fixed Account value will be $195. | |||
2. | Reallocation Instructions: are your instructions to us to reallocate the Segment Maturity Value to the Indexed Account at the end of a Segment Term or the Fixed Options. If you did not give us instructions, the Segment Maturity Value automatically will be reallocated to the same Indexed Account to create a new Segment. Transfer of the Segment Maturity Value from the Fixed Account to other Investment Options must be |
- 13 -
made in compliance with your Policy’s transfer restrictions. See Transferring Among Investment Options and Market-timing Restrictions. |
You may also make transfers to the Indexed Account by Written Request. We must receive your request before the Cutoff Date. If you want to transfer Accumulated Value from other Investment Options into the Indexed Account, your Accumulated Value will first be transferred from the Investment Options to the Fixed Account, according to the Transfer provisions in your Policy, and then transferred from the Fixed Account to the Indexed Account. See Transferring Among Investment Options and Market-timing Restrictions. | |||
Any reallocation of Segment Maturity Value from the Indexed Account to the Fixed Options will occur before any other transfer. |
- 14 -
a | = | Index Growth Rate; | |
b | = | Participation Rate (guaranteed to be not less than 100%)-%; | |
c | = | Growth Cap (currently 10%, but will not be less than 3%); and | |
d | = | Cumulative Segment Guaranteed Interest Rate (1%). |
- 15 -
M’S VERSATILE PRODUCT VIII |
PROSPECTUS MAY 1, 2010 | |
• | Flexible premium means you can vary the amount and frequency of your premium payments. You must, however, pay enough premiums to cover the ongoing cost of Policy benefits. |
• | Variable means the Policy’s value depends on the performance of the Investment Options you choose. |
• | Life insurance means the Policy provides a Death Benefit to the Beneficiary you choose. |
International Value Long/Short Large-Cap International Small-Cap Mid-Cap Value Equity Index Small-Cap Index Small-Cap Equity Equity American Funds® Asset Allocation American Funds® Growth-Income |
American
Funds®
Growth Large-Cap Value Technology Floating Rate Loan Small-Cap Growth Short Duration Bond Comstock Growth LT Focused 30 Health Sciences |
Mid-Cap Equity International Large-Cap Mid-Cap Growth Real Estate Small-Cap Value Multi-Strategy Main Street® Core Emerging Markets Cash Management (formerly Money Market) |
High Yield Bond Managed Bond Inflation Managed Pacific Dynamix – Conservative Growth Pacific Dynamix – Moderate Growth Pacific Dynamix – Growth Dividend Growth (formerly Diversified Research) Large-Cap Growth Diversified Bond |
M Fund | ||
Variable Account I: M International Equity Fund (formerly Brandes International Equity) Variable Account II: M Large Cap Growth Fund (formerly Turner Core Growth) |
Variable Account III: M Capital Appreciation Fund (formerly Frontier Capital Appreciation) Variable Account V: M Business Opportunity Value Fund (formerly Business Opportunity Value) |
BlackRock Variable Series Funds, Inc.
BlackRock Basic Value V.I. Fund Class III BlackRock Global Allocation V.I. Fund Class III Fidelity® Variable Insurance Products Funds Fidelity VIP Contrafund® Portfolio 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 Growth Portfolio Service Class 2 Fidelity VIP Mid Cap Portfolio Service Class 2 Fidelity VIP Value Strategies Portfolio Service Class 2 Franklin Templeton Variable Insurance Products Trust Templeton Global Bond Securities Fund Class 2 GE Investments Funds, Inc. GE Investments Total Return Fund Class 3 Janus Aspen Series Overseas Portfolio Service Class Enterprise Portfolio Service Class |
Lazard Retirement Series, Inc.
Lazard Retirement U.S. Strategic Equity Portfolio Legg Mason Partners Variable Equity Trust Legg Mason ClearBridge Variable Aggressive Growth Portfolio – Class II Legg Mason ClearBridge Variable Mid Cap Core Portfolio – Class II Lord Abbett Series Fund, Inc. Lord Abbett Fundamental Equity Portfolio Class VC MFS® Variable Insurance Trust MFS® New Discovery Series Service Class MFS® Utilities Series Service Class Royce Capital Fund Royce Micro-Cap Service Class Portfolio T. Rowe Price Equity Series, Inc. T. Rowe Price Blue Chip Growth Portfolio – II T. Rowe Price Equity Income Portfolio – II Van Eck VIP Trust Van Eck VIP Global Hard Assets Fund (formerly Van Eck Worldwide Hard Assets Fund) |
Benefits and Risks of M’s Versatile Product VIII | 3 | |
6 | ||
11 | ||
13 | ||
13 | ||
13 | ||
14 | ||
14 | ||
15 | ||
16 | ||
17 | ||
18 | ||
19 | ||
19 | ||
19 | ||
19 | ||
20 | ||
21 | ||
22 | ||
22 | ||
22 | ||
23 | ||
30 | ||
30 | ||
30 | ||
30 | ||
31 | ||
31 | ||
31 | ||
36 | ||
36 | ||
36 | ||
36 | ||
38 | ||
40 | ||
40 | ||
47 | ||
47 | ||
49 | ||
50 | ||
50 | ||
50 | ||
52 | ||
52 | ||
52 | ||
52 | ||
54 | ||
56 | ||
59 | ||
Appendices
|
||
A-1 | ||
B-1 | ||
back cover |
2
• | choose the timing, amount and frequency of premium payments |
• | change the Death Benefit Option |
• | increase or decrease the Policy’s Face Amount |
• | change the Beneficiary |
• | change your investment selections. |
• | Option A – your Death Benefit will be the Total Face Amount of your Policy. |
• | Option B – your Death Benefit will be the Total Face Amount of your Policy plus its Accumulated Value. |
• | Option C – your Death Benefit will be the Total Face Amount of your Policy plus the total premiums you’ve paid minus any withdrawals or distributions made. However, the Death Benefit will never exceed the Option C Death Benefit Limit shown in the Policy Specifications. |
• | Cash Value Accumulation Test – generally does not limit the amount of premiums you can pay into your Policy. |
• | Guideline Premium Test – limits the amount of premiums you can pay on your Policy, and the Minimum Death Benefit will generally be smaller than under the Cash Value Accumulation Test. |
• | Withdrawals – you can withdraw part of your Policy’s Net Cash Surrender Value. |
• | Loans – you can take out a loan from us using your Policy’s Accumulated Value as security. |
• | Surrender – you can surrender or cash in your Policy for its Net Cash Surrender Value while the Insured is alive. |
3
• | Income benefits – you can use withdrawal or surrender benefits to buy an income benefit that provides a monthly income. In addition, your Policy’s Beneficiary can use Death Benefit proceeds to buy an income benefit. |
• | change your Policy’s tax status |
• | reduce your Policy’s Total Face Amount |
• | reduce your Policy’s Death Benefit |
• | reduce the Death Benefit Proceeds paid to your Beneficiary |
• | make your Policy more susceptible to lapsing. |
4
5
CHARGE | WHEN CHARGE IS DEDUCTED | AMOUNT DEDUCTED | ||
Maximum premium load
|
Upon receipt of premium | 7.95% of premium | ||
Maximum surrender charge
|
Upon full surrender of Policy if any Coverage Layer has been in effect for less than 10 Policy Years | $0.81-$47.16 per $1,000 of Face Amount1 | ||
Charge at end of Policy Year 1 for a male non-smoker who is Age 45 at Policy issue, and the Policy is issued with Guideline Premium Test and Death Benefit Option A | $10.78 per $1,000 of Face Amount | |||
Withdrawal charge
|
Upon partial withdrawal of Accumulated Value | $25 per withdrawal2 | ||
Transfer fees
|
Upon transfer of Accumulated Value between Investment Options | $25 per transfer in excess of 12 per Policy Year2 | ||
ADMINISTRATIVE AND UNDERWRITING SERVICE
FEES2
|
||||
Audits of premium/loan
|
Upon request of audit of over 2 years or more | $25 | ||
Duplicate
Policy5
|
Upon request of duplicate Policy | $50 | ||
Illustration request
|
Upon request of Policy illustration in excess of 1 per year | $25 | ||
Face Amount increase
|
Upon effective date of requested Face Amount increase | $100 | ||
Risk Class change
|
Upon request for Risk Class change | $100 | ||
Adding an optional Rider
|
Upon approval of specific request | $100 | ||
1 | The surrender charge is based on the Age and Risk Class of the Insured, as well as the Death Benefit Option you choose. The surrender charge reduces to $0 after 10 years from the effective date of each Coverage Layer. The surrender charge shown in the table may not be typical of the surrender charge you will pay. Ask your registered representative for information on this charge for your Policy. The surrender charge for your Policy will be stated in the Policy Specifications. | |
2 | We currently do not impose this charge. |
3 | Certificate of Coverage is available without charge. |
6
AMOUNT
DEDUCTED— |
||||||
WHEN CHARGE IS |
MAXIMUM
GUARANTEED |
AMOUNT
DEDUCTED— |
||||
CHARGE | DEDUCTED | CHARGE | CURRENT CHARGES | |||
Cost of
Insurance1,2
Minimum and maximum |
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy issue
|
$0.23 per $1,000 of Net Amount At Risk | $0.12 per $1,000 of Net Amount At Risk | ||||
Administrative
charge1
|
Monthly Payment Date | $7.50 | Same | |||
Coverage
charge1,4
Minimum and maximum |
Monthly Payment Date, beginning on effective date of each Coverage Layer | $0.05–$3.37 per $1,000 of Coverage Layer | $0.00–$3.37 per $1,000 of Coverage Layer | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy issue, with Death Benefit
Option A3
|
$0.39 per $1,000 of Coverage Layer | Same | ||||
Asset
charge1
|
Monthly Payment Date | 0.45% annually (0.0375% monthly) of first $25,000 of Accumulated Value in Investment Options, plus 0.05% annually (0.0042% monthly) of Accumulated Value in excess of $25,000 in Investment Options | 0.40% annually (0.0333% monthly) of first $25,000 of Accumulated Value in Investment Options, plus 0.00% annually (0.0000% monthly) of Accumulated Value in excess of $25,000 in Investment Options | |||
Loan interest charge
|
Policy Anniversary | 2.75% of Policy’s Loan Account balance annually5 | Same | |||
OPTIONAL RIDERS AND BENEFITS
Minimum and Maximum6 |
||||||
Accelerated Living Benefits Rider
|
At exercise of benefit | $150 | Same | |||
Accidental Death Benefit Rider
|
Monthly Payment Date | $0.05–$0.18 per $1,000 of Coverage Layer | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.10 per $1,000 of Coverage Layer | Same | ||||
Annual Renewable Term Rider
|
||||||
Cost of insurance
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
Issue3
|
$0.23 per $1,000 of Net Amount At Risk | $0.12 per $1,000 of Net Amount At Risk | ||||
Coverage
charge4
|
Monthly Payment Date | $0.22–$3.44 per $1,000 of Coverage Layer | $0 | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.91 per $1,000 of Coverage Layer | $0 | ||||
Annual Renewable Term Rider – Additional Insured
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Rider Face Amount | Same | |||
Charge during Policy Year 1 for a female non-smoker who
is Age 45 at Policy
issue3
|
$0.16 per $1,000 of Rider Face Amount | $0.08 per $1,000 of Rider Face Amount | ||||
Children’s Term Rider
|
Monthly Payment Date | $1.05 per $1,000 of insurance coverage on each child | Same |
7
AMOUNT
DEDUCTED— |
||||||
WHEN CHARGE IS |
MAXIMUM
GUARANTEED |
AMOUNT
DEDUCTED— |
||||
CHARGE | DEDUCTED | CHARGE | CURRENT CHARGES | |||
Disability Benefit Rider
|
Monthly Payment Date | $0.40–$1.00 per $10 of monthly benefit | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.45 per $10 of monthly benefit | Same | ||||
Guaranteed Insurability Rider
|
Monthly Payment Date | $0.10–$0.29 per $1,000 of Coverage Layer | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 35 at Policy
issue3,7
|
$0.28 per $1,000 of Coverage Layer | Same | ||||
Minimum Earnings Benefit Rider
|
Monthly Payment Date | 0.10% of the alternate accumulated value10 on the Monthly Payment Date | 0.05% of the alternate accumulated value on the monthly payment date | |||
Overloan Protection II Rider
|
At exercise of benefit | 1.12%-4.52% of Accumulated Value on date of exercise12 | Same | |||
Charge for a male non-smoker who exercises the Rider at
Age 85
|
2.97% of Accumulated Value on date of exercise | Same | ||||
Short-term No-lapse Guarantee Rider
|
Monthly Payment Date | $0.01–$0.10 per $1,000 of Net Amount At Risk | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.01 per $1,000 of Net Amount At Risk | Same | ||||
SVER Term Insurance Rider
|
||||||
Cost of insurance
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.23 per $1,000 of Net Amount At Risk | $0.12 per $1,000 of Net Amount At Risk | ||||
Coverage
charge4
|
Monthly Payment Date | $0.00–$3.99 of Coverage Layer | $0.00–$3.99 per $1,000 of Coverage Layer | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue8
|
$0.00 per $1,000 of Coverage Layer | Same | ||||
Administrative charge for increase in face amount
|
At increase | $100 | Same | |||
SVER Term Insurance Rider – Trust/Executive
Benefit
|
||||||
Rider Coverage
Charge4
|
Monthly Payment Date | $0.00–$3.84 per $1,000 of Rider Coverage Layer | $0.00–$3.84 per $1,000 of Rider Coverage Layer | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue9
|
$0.00 per $1,000 of initial Rider Coverage Layer | Same | ||||
Cost of insurance
|
Monthly Payment Date | $0.02–$83.34 per $1,000 of Net Amount At Risk | $0.02–$59.10 per $1,000 of Net Amount At Risk | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy issue
|
$0.23 per $1,000 of Net Amount At Risk | $0.12 per $1,000 of Net Amount At Risk | ||||
Termination Credit charge
|
Monthly Payment Date | $0.01–$0.21 per $1,000 of Rider Coverage Layer | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.05 per $1,000 of Rider Coverage Layer | Same | ||||
Administrative charge for increase in face amount
|
At increase | $100 | Same | |||
8
AMOUNT
DEDUCTED— |
||||||
WHEN CHARGE IS |
MAXIMUM
GUARANTEED |
AMOUNT
DEDUCTED— |
||||
CHARGE | DEDUCTED | CHARGE | CURRENT CHARGES | |||
Waiver of Charges Rider
|
Monthly Payment Date | $0.04–$0.55 per $1,000 of Net Amount At Risk11 | Same | |||
Charge during Policy Year 1 for a male non-smoker who is
Age 45 at Policy
issue3
|
$0.07 per $1,000 of Net Amount At Risk11 | Same | ||||
1 | This charge is reduced to zero on and after your Policy’s Monthly Deduction End Date. |
2 | Cost of insurance rates apply uniformly to all members of the same Class. The cost of insurance charges shown in the table may not be typical of the charges you will pay. Your Policy Specifications will indicate the guaranteed cost of insurance charge applicable to your Policy, and more detailed information concerning your cost of insurance charges is available on request from your registered representative or us. Also, before you purchase the Policy, you may request personalized illustrations of your future benefits under the Policy based upon the Insured’s Class, the Death Benefit Option, Face Amount, planned periodic premiums, and any Riders requested. Cost of insurance rates for your Policy will be stated in the Policy Specifications and calculated using the Net Amount At Risk. |
3 | Charges shown for this sample Policy may not be typical of the charges you will pay. | |
4 | The Coverage Charge rate is based on the Age and Risk Class of the Insured on the Policy Date or date Rider is effective. It also varies with the Death Benefit Option you choose. Each Coverage Layer will have a corresponding Coverage charge related to the amount of the increase, based on the Age and Risk Class of the Insured at the time of the increase. Ask your registered representative for information regarding this charge for your Policy. The Coverage Charge for your Policy will be stated in the Policy Specifications. | |
5 | In addition to the loan interest charge, the Loan Account Value that is used to secure Policy Debt will be credited interest at a minimum of 2.50%. Interest on the Loan Account and Policy Debt accrues daily. On each policy anniversary, we transfer the excess of the Policy Debt over Loan Account Value from the Investment Options to the Loan Account. If the Loan Account Value is greater than Policy Debt, then such excess is transferred from the Loan Account to the Investment Options. | |
6 | Riders are briefly described under The Death Benefit: Optional Riders and more information appears in the SAI. Except for the Childrens Term Rider, Rider charges are based on the Age and Risk Class of the person insured under the Rider on the effective date of the Rider. Ask your registered representative for information on optional Rider charges for your Policy. The charges for any optional benefit Riders you add to your Policy will be stated in the Policy Specifications. | |
7 | Guaranteed Insurability Rider is only available to Insureds age 37 and under at Policy issue. | |
8 | The SVER Term Insurance Rider maximum guaranteed Coverage charge for this sample Policy (assuming Death Benefit Option A or C is used) is $0/month per $1,000 of Coverage Layer in Policy Year 1, $0.33/month per $1,000 of Coverage Layer in Policy Year 2, and $0.50/month per $1,000 of Coverage Layer in Policy Years 3-10. In Policy Year 11 and thereafter, the charge is reduced to $0.33/month per $1,000 of Coverage Layer. | |
9 | The SVER Term Insurance Rider – Trust/Executive Benefit maximum guaranteed Coverage Charge for this sample Policy (assuming Death Benefit Option A or C is used) is $0/month per $1,000 of Coverage Layer in Policy Year 1, $0.78/month per $1,000 of Coverage Layer in Policy Year 2, and $1.17/month per $1,000 of Coverage Layer in Policy Years 3-10. In Policy Year 11 and thereafter, the charge is reduced to $0.78/month per $1,000 of Coverage Layer. | |
10 | The alternate accumulated value is a calculated value reflecting a minimum level of earnings for the Policy. It is based on actual premiums paid less an alternate premium load, actual monthly deductions taken from the Policy’s Accumulated Value, and an alternate accumulated value monthly factor representing an annual interest crediting rate. The alternate accumulated value monthly factor will never be less than 1.00295 (3.6% annually), and the alternate premium load rate will never exceed 25% of premiums paid. The Rider also has a minimum premium requirement to remain in force. Cumulative premium paid by the end of the 9th Policy Year must be equal to or greater than the Rider’s minimum premium requirement, which will never exceed 450% of the guideline level premiums at Policy issue. The alternate accumulated value monthly factor, alternate premium load and minimum premium requirement are shown in the Policy Specifications. |
11 | Plus any Annual Renewable Term Rider – Additional Insured Face Amount. |
12 | The charge to exercise the Overloan Protection II Rider is shown as a table in your Policy Specifications. The charge varies by the Insured’s gender, Risk Class and Age at the time the Rider is exercised. For more information on this Rider, see Withdrawals, Surrenders and Loans: Overloan Protection II Rider. |
9
Minimum | Maximum1 | |||||||
Range of total annual portfolio operating expenses before any
waivers or expense reimbursements
|
0.28% | 4.67% |
Minimum | Maximum1 | |||||||
Range of total annual portfolio operating expenses after
waivers or expense reimbursements
|
0.28% | 1.56% |
1 | Pacific Life Fund Advisors, LLC, adviser to Pacific Select Fund, and M Financial Investment Advisers, adviser to M Fund, and other advisers to the Funds and/or other service providers to the other Funds 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 fee reduction or expense reimbursement arrangement. The range of expenses in the second row above shows the effect of contractual fee reduction and expense reimbursement arrangements that will remain in effect at least through April 30, 2011. There can be no assurance that expense waivers or reimbursement contracts will be extended beyond their current terms, and they may not cover certain expenses such as extraordinary expenses. See each Fund’s prospectus for complete information regarding annual operating expenses of that Fund. |
10
11
12
• | all necessary contractual and administrative requirements are met, and |
• | we receive and apply the initial premium to the Policy. |
• | the Insured dies |
• | the grace period expires and your Policy lapses, or |
• | you surrender your Policy. |
13
• | You can name one or more primary Beneficiaries who each receive an equal share of the Death Benefit Proceeds unless you tell us otherwise. If one Beneficiary dies, his or her share will pass to the surviving primary Beneficiaries in proportion to the share of the Death Benefit Proceeds they’re entitled to receive, unless you tell us otherwise. |
• | You can also name a contingent Beneficiary for each primary Beneficiary you name. The contingent Beneficiary will receive the Death Benefit Proceeds if the primary Beneficiary dies. |
• | You can choose to make your Beneficiary permanent (sometimes called irrevocable). You cannot change a permanent Beneficiary’s rights under the Policy without his or her permission. |
• | the date your Policy is delivered to you and you paid initial premium, or |
• | the date we received the initial premium, if earlier than the delivery date. |
14
• | any charges or taxes we’ve deducted from your premiums |
• | the Net Premiums allocated to the Fixed Options |
• | the Accumulated Value allocated to the Variable Investment Options |
• | any monthly charges and fees we’ve deducted from your Policy’s Accumulated Value in the Variable Investment Options. |
• | on your application |
• | in writing any time prior to the end of the 30-day free look period. |
• | any charges or taxes we’ve deducted from your premiums |
• | the Net Premiums allocated to the Fixed Options |
• | the Accumulated Value allocated to the Variable Investment Options |
• | any monthly charges and fees we’ve deducted from your Policy’s Accumulated Value in the Variable Investment Options. |
15
• | the New York Stock Exchange closes on a day other than a regular holiday or weekend |
• | trading on the New York Stock Exchange is restricted |
• | an emergency exists as determined by the SEC, as a result of which the sale of securities is not practicable, or it is not practicable to determine the value of a Variable Account’s assets, or |
• | the SEC permits a delay for the protection of policy owners. |
• | a confirmation for certain financial transactions, usually including premium payments and transfers, loans, loan repayments, withdrawals and surrenders. Monthly deductions and scheduled transactions made under the dollar cost averaging, portfolio rebalancing and first year transfer services are reported on your quarterly Policy statement. |
• | a quarterly Policy statement. The statement will tell you the Accumulated Value of your Policy by Investment Options, Cash Surrender Value, the amount of the Death Benefit, the Policy’s Face Amount, and any Policy Debt. It will also include a summary of all transactions that have taken place since the last quarterly statement, as well as any other information required by law. |
• | supplemental schedules of benefits and planned periodic premiums. We’ll send these to you if you change your Policy’s Face Amount or change any of the Policy’s other benefits. |
• | financial statements, at least annually or as required by law, of the Separate Account and Pacific Select Fund, that include a listing of securities for each portfolio of the Pacific Select Fund. We’ll also send you financial statements that we receive from the other Funds. |
16
• | transfers between Investment Options |
• | initiate the dollar cost averaging and portfolio rebalancing service |
• | change future premium allocation instructions |
• | initiate Policy loans. |
• | If your Policy is jointly owned, all Joint Owners must sign the telephone and electronic authorization. We’ll take instructions from any Owner or anyone you appoint. |
• | We may use any reasonable method to confirm that your telephone or electronic instructions are genuine. For example, we may ask you to provide personal identification or we may record all or part of the telephone conversation. We may refuse any transaction request made by telephone or electronically. |
• | we can accept and act upon instructions you or anyone you appoint give us over the telephone or electronically |
• | neither we, any of our affiliates, the Pacific Select Fund, or any director, trustee, officer, employee or agent of ours or theirs will be liable for any loss, damages, cost or expenses that result from transactions processed because of a request by telephone or submitted electronically that we believe to be genuine, as long as we have followed our own procedures |
• | you bear the risk of any loss that arises from your right to make loans or transfers over the telephone or electronically. |
17
Understanding Policy Expenses and Cash Flow (including fees and charges of Fund portfolios) | ||
The chart to the right illustrates how cash normally flows through a M’s Versatile Product VIII Policy.
Under a flexible premium life insurance policy, you have the flexibility to choose the amount and frequency of your premium payments. You must, however, pay enough premiums to cover the ongoing cost of Policy benefits. Investment earnings will increase your Policy’s Accumulated Value, while investment losses will decrease it. The premium payments you’ll be required to make to keep your Policy In Force will be influenced by the investment results of the Investment Options you choose. The dark shaded boxes show the fees and expenses you pay directly or indirectly under your Policy. In some states we’ll hold your Net Premium payments in the Cash Management Investment Option until the Free Look Transfer Date. Please turn to Your Free Look Right for details. |
|
18
• | You choose your Death Benefit Option and Death Benefit Qualification Test on your Policy application. |
• | If you do not choose a Death Benefit Option, we’ll assume you’ve chosen Option A. |
• | If you do not choose a Death Benefit Qualification Test, we’ll assume you’ve chosen the Guideline Premium Test. |
• | The Death Benefit will always be the greater of the Death Benefit under the Option you choose or the Minimum Death Benefit, calculated using the Death Benefit Qualification Test you’ve chosen. |
• | The Death Benefit will never be lower than the Total Face Amount of your Policy if you’ve chosen Option A or B. The Death Benefit Proceeds will always be reduced by any Policy Debt. |
• | We’ll pay the Death Benefit Proceeds to your Beneficiary when we receive proof of the Insured’s death. |
Option A – the Face Amount of your Policy. | Option B – the Face Amount of your Policy plus its Accumulated Value. | Option C – the Face Amount of your Policy plus the total premiums you’ve paid minus any withdrawals or distributions made. | ||
The Death Benefit changes as your Policy’s Accumulated Value changes. The better your Investment Options perform, the larger the Death Benefit will be. | The more premiums you pay and the less you withdraw, the larger the Death Benefit will be. |
• | To elect Option C, the Insured must be Age 80 or younger at the time the Policy is issued. |
• | The Death Benefit calculated under Option C will be limited to the amount shown in the Policy Specifications as the “Option C Death Benefit Limit,” an amount which will never exceed four times the Initial Total Face Amount of your Policy on the Policy Date. Once the Policy is issued, the “Option C Death Benefit Limit” will not change, even if you increase or decrease the Face Amount of your Policy or any Rider. We will not approve any increase in Face Amount to the Policy or any Rider that would cause the Death Benefit to exceed the “Option C Death Benefit Limit”. The Death Benefit as calculated above is subject to any increase required by the minimum death benefit provisions set out in the Death Benefit and General Provisions sections of the policy to satisfy certain federal tax qualification requirements. |
19
• | premium limitations |
• | amount of Minimum Death Benefit |
• | monthly cost of insurance charges |
• | flexibility to reduce Face Amount. |
• | the lowest Death Benefit amount that’s needed for the Policy to qualify as life insurance under the Cash Value Accumulation Test in the Tax Code, or |
• | 101% of the Policy’s Accumulated Value. |
• | the guideline single premium or |
• | the sum of the guideline level annual premiums to date. |
Cash Value |
||||
Accumulation Test | Guideline Premium Test | |||
Premium
payments1
|
Allows flexibility to pay more premium | Premium payments are limited under the Tax Code | ||
Death Benefit
|
Generally higher as Policy duration increases | May be higher in early years of Policy | ||
Monthly cost of insurance charges
|
May be higher, if the Death Benefit is higher | May be lower, except perhaps in early years of Policy | ||
Face Amount decreases
|
Will not require return of premium or distribution of Accumulated Value | May require return of premium or distribution of Accumulated Value to continue Policy as life insurance | ||
1 | If you want to pay a premium that increases the Net Amount At Risk, you will need to provide us with satisfactory evidence of insurability before we can increase the Death Benefit. In this event, your cost of insurance charges will also increase. Cost of insurance charges are based, among other things, upon your Policy’s Net Amount At Risk. See Your Accumulated Value for more information on how cost of insurance charges are calculated. |
20
• | the Insured is Age 45 at the time the Policy was issued and dies at the beginning of the sixth Policy Year |
• | Face Amount is $100,000 |
• | Accumulated Value at the date of death is $25,000 |
• | total premium paid into the Policy is $30,000 |
• | the Minimum Death Benefit under the Guideline Premium Test is $46,250 (assuming a Guideline Premium Test factor of 185% × Accumulated Value) |
• | the Minimum Death Benefit under the Cash Value Accumulation Test is $75,575 (assuming a Net Single Premium factor of $3.0230 of the Accumulated Value). |
If you select the
Guideline |
||||||||
Premium Test, the
Death |
||||||||
Benefit is the
larger of these |
||||||||
two amounts | ||||||||
Death |
Death Benefit |
Net Amount At
Risk |
||||||
Benefit |
How it’s |
under the |
Minimum |
used for cost
of |
||||
Option | calculated | Death Benefit Option | Death Benefit | insurance charge | ||||
Option A
|
Total Face Amount | $100,000 | $46,250 | $74,794.44 | ||||
Option B
|
Total Face Amount plus Accumulated Value | $125,000 | $46,250 | $99,743.05 | ||||
Option C
|
Total Face Amount plus premiums less distributions | $130,000 | $46,250 | $104,732.78 | ||||
If you select the
Cash Value |
||||||||
Accumulation
Test, the Death |
||||||||
Benefit is the
larger of these |
||||||||
two amounts | ||||||||
Death |
Death Benefit |
Net Amount At
Risk |
||||||
Benefit |
How it’s |
under the |
Minimum |
used for cost
of |
||||
Option | calculated | Death Benefit Option | Death Benefit | insurance charge | ||||
Option A
|
Total Face Amount | $100,000 | $75,575 | $74,794.44 | ||||
Option B
|
Total Face Amount plus Accumulated Value | $125,000 | $75,575 | $99,743.05 | ||||
Option C
|
Total Face Amount plus premiums less distributions | $130,000 | $75,575 | $104,732.78 | ||||
• | $138,750 for the Guideline Premium Test |
• | $226,725 for the Cash Value Accumulation Test. |
If you select the
Guideline |
||||||||
Premium Test, the
Death |
||||||||
Benefit is the
larger of these |
||||||||
two amounts | ||||||||
Death |
Death Benefit |
Net Amount At
Risk |
||||||
Benefit |
How it’s |
under the |
Minimum |
used for cost
of |
||||
Option | calculated | Death Benefit Option | Death Benefit | insurance charge | ||||
Option A
|
Total Face Amount | $100,000 | $138,750 | $63,464.79 | ||||
Option B
|
Total Face Amount plus Accumulated Value | $175,000 | $138,750 | $99,640.28 | ||||
Option C
|
Total Face Amount plus premiums less distributions | $130,000 | $138,750 | $63,464.79 | ||||
21
If you select the
Cash Value |
||||||||
Accumulation
Test, the Death |
||||||||
Benefit is the
larger of these |
||||||||
two amounts | ||||||||
Death |
Death Benefit |
Net Amount At
Risk |
||||||
Benefit |
How it’s |
under the |
Minimum |
used for cost
of |
||||
Option | calculated | Death Benefit Option | Death Benefit | insurance charge | ||||
Option A
|
Total Face Amount | $100,000 | $226,725 | $151,258.95 | ||||
Option B
|
Total Face Amount plus Accumulated Value | $175,000 | $226,725 | $151,258.95 | ||||
Option C
|
Total Face Amount plus premiums less distributions | $130,000 | $226,725 | $151,258.95 | ||||
• | You can change the Death Benefit Option once in any Policy Year. |
• | You must send us your Written Request. |
• | You can change from any Death Benefit Option to Option A or Option B. |
• | You cannot change from any Death Benefit Option to Option C. |
• | The change will become effective on the first Monthly Payment Date after we receive your request. If we receive your request on a Monthly Payment Date, we’ll process it that day. |
• | The total Face Amount of your Policy will change by the amount needed to make the Death Benefit under the new Death Benefit Option equal the Death Benefit under the old Death Benefit Option just before the change. We will not let you change the Death Benefit Option if doing so means the Face Amount of your Policy will become less than $1,000. |
• | Changing the Death Benefit Option can also affect the monthly cost of insurance charge since this charge varies with the Net Amount At Risk. |
• | The new Death Benefit Option will be used in all future calculations. |
• | You can increase or decrease your Policy’s Face Amount as long as we approve it. If you change the Face Amount, we’ll send you a supplemental schedule of benefits and premiums. Here’s how it works: |
• | You can change the Face Amount as long as the Insured is alive. |
• | You must send us your Written Request while your Policy is In Force. |
22
• | Unless you request otherwise, the change will become effective on the first Monthly Payment Date on or after we receive and approve your request. |
• | The Insured will also need to agree to the change in Face Amount, if you are not the Insured. |
• | Increasing the Face Amount may increase the Death Benefit, and decreasing the Face Amount may decrease the Death Benefit. The amount the Death Benefit changes will depend, among other things, on the Death Benefit Option you’ve chosen and whether, and by how much, the Death Benefit is greater than the Face Amount before you make the change. |
• | Changing the Face Amount can affect the Net Amount At Risk, which affects the cost of insurance charge. An increase in the Face Amount may increase the cost of insurance charge, while a decrease may decrease the charge. |
• | We can refuse your request to make the Face Amount less than $1,000.00. We can waive this minimum amount in certain situations, such as group or sponsored arrangements. |
• | The Insured must be Age 90 or younger at the time of the increase. |
• | You must give us satisfactory evidence of insurability. |
• | Each increase you make to the Face Amount must be $25,000 or more. |
• | We may charge you a fee of up to $100 for each increase. We deduct the fee on the day the increase is effective from all of your Investment Options in proportion to the Accumulated Value you have in each Investment Option. |
• | Each increase in Face Amount will have an associated cost of insurance rate, coverage charge and surrender charge. |
• | We reserve the right to limit Face Amount increases to one per Policy Year. |
• | part of your premium payments to you if you’ve chosen the Guideline Premium Test, or |
• | make distributions from the Accumulated Value, which may be taxable. For more information, please see Variable Life Insurance and Your Taxes. |
• | The initial Face Amount and any additional Coverage Layer are eligible for decrease on or after the first anniversary of its effective date. |
• | We’ll apply any decrease in the Face Amount to eligible Coverage Layers in the following order: |
• | to the most recent eligible increases you made to the Face Amount | |
• | to the initial Face Amount. |
• | We do not charge you for a decrease in Face Amount. |
• | We can refuse your request to decrease the total Face Amount if making the change means: |
• | your Policy will no longer qualify as life insurance | |
• | the distributions we’ll be required to make from your Policy’s Accumulated Value will be greater than your Policy’s Net Cash Surrender Value | |
• | your Policy will become a Modified Endowment Contract and you have not told us in writing that this is acceptable to you. |
23
• |
Accelerated Living Benefits
Rider Gives the Policy Owner access to a portion of the Policy’s Death Benefit if the Insured has been diagnosed with a terminal illness resulting in a life expectancy of six months or less (or longer than six months in some states). |
• | Accidental Death Rider Provides additional insurance coverage in the event of the accidental death of the Insured. |
• | Annual Renewable Term Rider Provides annual renewal term insurance on the Insured. |
• | Annual Renewable Term
Rider–Additional Insured Provides annual renewal term insurance on members of the Insured’s immediate family. |
• | Children’s Term Rider Provides term insurance for the children of the Insured. |
• | Disability Benefit Rider Provides a monthly addition to the Policy’s Accumulated Value when the Insured has a qualifying disability, until he or she reaches age 65. |
• | Guaranteed Insurability
Rider Gives the right to buy additional insurance on the life of the Insured on certain specified dates without proof of insurability. |
• | Waiver of Charges Rider Waives certain charges if the Insured becomes totally disabled before age 60. |
• | Minimum Earnings Benefit Rider |
• | the Alternate Accumulated Value immediately prior to the calculation, | |
• | increased by any premiums paid since the prior Monthly Payment Date, less the Alternate Premium Load, | |
• | reduced by the Policy’s actual monthly deduction on the Monthly Payment Date and any other Policy charges since the prior Monthly Payment Date, and | |
• | reduced by any withdrawals that have been taken since the prior Monthly Payment Date, | |
• | with the result multiplied by the Alternate Accumulated Value Monthly Factor. |
24
• | Overloan Protection II Rider |
• | The minimum five-year premium requirement was met. |
• | The Death Benefit Option is Option A. |
• | The Policy must have been In Force for at least 15 years. |
• | The Insured’s Age is within the range of Ages shown in the Overloan Protection Rider section of the Policy Specifications. The Rider may not be exercised if the Insured is younger than Age 75 or older than Age 120. |
• | There must be sufficient Accumulated Value to cover the rider exercise charge as described below. |
• | The Policy Debt is greater than the Face Amount, but less than 99.9% of the Accumulated Value after the charge for this Rider has been deducted from the Accumulated Value. |
• | There are no projected forced distributions of Accumulated Value for any Policy Year. |
• | The Guideline Premium Limit for the Policy will remain greater than zero at all times prior to Insured’s Age 100. |
• | The Policy must not be a Modified Endowment Contract, and exercising this Rider must not cause the Policy to become a Modified Endowment Contract. |
• | There are no Riders requiring charges after the exercise effective date, other than this Rider and any term insurance Rider on the Insured, and there must not be any change in term insurance Rider Face Amount scheduled to take effect after the exercise effective date. You must terminate any Riders requiring charges and any scheduled changes in term insurance prior to exercise of this Rider. |
• | The policy must not be in the grace period. |
1. | Transfer any Accumulated Value in the Investment Options into the Fixed LT Account. No transfer charge will be assessed for such transfer, nor will it count against, or be subject to, any transfer limitations that may be in effect. |
25
2. | Deduct the charge for this Rider from your Policy’s Accumulated Value. |
• | You do not pay enough premium to meet the minimum five-year premium requirement; |
• | The Policy terminates; |
• | You make a Written Request to terminate this Rider; or |
• | If, after the exercise effective date: |
• | any premium is paid |
• | any withdrawal is taken |
• | any loan repayment is made, other than for loan interest due |
• | any Policy benefit is changed or added at your request |
• | any transfer among the Investment Options is done at your request. |
• | Short-term No-lapse Guarantee Rider |
• | the No Lapse Credit as of the prior Monthly Payment Date multiplied by (1 + i) where i equals 0.327374% if the No Lapse Credit is negative, otherwise it equals the rate shown in the Policy Specifications; | |
• | plus the premiums received since the prior Monthly Payment Date; | |
• | less withdrawals taken since the prior Monthly Payment Date; and | |
• | less one-twelfth of the then current No Lapse Premium. |
26
• | SVER Term Insurance Rider |
• | SVER Term Insurance Rider – Trust/Executive Benefit |
• | the rider coverage charge | |
• | the rider cost of insurance charge; and | |
• | the termination credit charge. You will be responsible for the termination credit charge even if the termination credit is reduced to zero. |
1. | The Rider modifies the Death Benefit of the Policy to include the Face Amount of the Rider, so that the Death Benefit as calculated under the Death Benefit Option you choose on the Policy is increased by the Face Amount of the Rider. For purposes of determining the minimum Death Benefit of the Policy, the amount of the termination credit will be added to the Policy’s Accumulated Value before the minimum Death Benefit Under the Death Benefit Qualification Test is calculated. | |
2. | If you surrender the Policy, we will pay you a termination credit in addition to the Net Cash Surrender Value, unless either of the following is true: |
• | the Policy is surrendered in connection with the purchase of a replacement life insurance policy including, but not limited to, a replacement intended to qualify as a tax free exchange under Section 1035 of the Tax Code; or |
27
• | the Owner at the time of Policy surrender is different from the Owner on the Policy application, and the Owner at the time of Policy surrender is a life insurance company. |
1. | an amount added to the Policy’s surrender value to the premiums paid (subject to a maximum disclosed in the Policy Specifications for this Rider), less withdrawals, multiplied by a percentage that varies by policy duration; and | |
2. | a refund of the rider charge if the premiums paid under the Policy are less than the maximum premium upon which the first component is determined.” |
A | = | the termination credit percentage; and | ||||
B | = | the termination credit basis. |
C | = | the termination credit factor; | ||||
D | = | the lesser of 60 and the number of whole Policy months that have elapsed; | ||||
E | = | the maximum annual termination credit basis; | ||||
F | = | the sum of premiums paid; and | ||||
G | = | 1 + the number of whole Policy Years elapsed. |
a | = | the total amount of premiums paid on the Policy; | ||||
b | = | the maximum annual termination credit basis, multiplied by 1 + the number of whole Policy Years elapsed; and | ||||
c | = | the total amount of any withdrawals you have taken from your Policy’s Accumulated Value. |
• | (A) | = | 5% | |||
• | (B) | = | $50,000 | |||
• | (C) | = | 0.25% | |||
• | (D) | = | 60 | |||
• | (E) | = | $10,000 | |||
• | (F) | = | $50,000 | |||
• | (G) | = | 5 |
28
29
• | On your application, you choose a fixed amount of at least $50 for each premium payment. |
• | You indicate whether you want to make premium payments annually, semi-annually, or quarterly. You can also choose monthly payments using our monthly Electronic Funds Transfer Plan, which is described below. |
• | We send you a notice to remind you of your scheduled premium payment (except for monthly Electronic Funds Transfer Plan payments, which are paid automatically). If you own more than one Policy, you can request us to send one notice — called a listbill — that reminds you of your payments for all of your Policies. You can choose to receive the listbill every month. |
• | If you have any Policy Debt, we’ll treat any payment you make during the life of your Policy as a loan repayment, not as a premium payment, unless you tell us otherwise in writing. When a payment, or any portion of it, exceeds your Policy Debt, we’ll treat it as a premium payment. |
• | by personal check, drawn on a U.S. bank |
• | by cashier’s check, if it originates in a U.S. bank |
• | by money order in a single denomination of more than $10,000, if it originates in a U.S. bank |
• | by third party payments, when there is a clear relationship between the payor (individual, corporation, trust, etc.) and the Insured and/or Owner |
• | wire transfers that originate in U.S. banks. |
• | cash |
• | credit card or check drawn against a credit card account |
• | traveler’s checks |
• | cashier’s check or money order drawn on a non-U.S. bank, even if the payment may be effected through a U.S. bank |
• | money order in a single denomination of $10,000 or less |
30
• | third party payments, if there is not a clear relationship between the payor (individual, corporation, trust, etc.) and the Insured and/or Owner |
• | wires that originate from foreign bank accounts. |
• | You authorize us to withdraw a specified amount from your checking account, savings account or money market account each month. |
• | You can choose any day between the 4th and 28th of the month. |
• | If you do not specify a day for us to make the withdrawal, we’ll withdraw the premium payment on your Policy’s monthly anniversary. If your Policy’s monthly anniversary falls on the 1st, 2nd or 3rd of the month, we’ll withdraw the payment on the 4th of each month. |
• | If you make monthly payments by the Electronic Funds Transfer Plan, we will apply the payments as premium payments unless we receive a new form requesting that payments be applied as a loan repayment. |
• | If you’ve chosen the Guideline Premium Test as your Death Benefit Qualification Test and accepting the premium means your Policy will no longer qualify as life insurance for federal income tax purposes. |
• | If applying the premium in that Policy Year means your Policy will become a Modified Endowment Contract. You may direct us to accept premium payments or other instructions that will cause your Policy to be treated as a Modified Endowment Contract by signing a Modified Endowment Contract Election Form. You’ll find a detailed discussion of Modified Endowment Contracts in Variable Life Insurance and Your Taxes. You should speak to a qualified tax adviser for complete information regarding Modified Endowment Contracts. |
• | If applying the premium payment to your Policy will increase the Net Amount At Risk. This will happen if your Policy’s Death Benefit is equal to the Minimum Death Benefit or would be equal to it once we applied your premium payment. |
31
32
33
34
Model A |
Model B |
Model C |
Model D |
Model E |
||||||||
Conservative | Moderate-Conservative | Moderate | Moderate-Aggressive | Aggressive | ||||||||
Investor Profile |
||||||||||||
You are looking for a
relatively stable investment and do not tolerate short-term market swings. |
Your focus is on keeping pace with inflation and you can tolerate a moderate level of risk.
|
You want the opportunity for long-term moderate growth.
|
You want an investment that is geared for growth and are willing to accept above average risk.
|
You are an aggressive investor and can tolerate short-term market swings.
|
||||||||
Shorter Investment Time
Horizon◄———►Longer
Investment Time Horizon
|
||||||||||||
Investor Objective |
||||||||||||
Primarily preservation of capital
|
Moderate growth
|
Steady growth in asset values
|
Moderately high growth in asset values
|
High growth in asset values
|
||||||||
Risk Characteristics |
||||||||||||
There may be some losses in the values of the investment as asset values fluctuate.
|
There may be some losses in the values of the investment from year to year.
|
There will probably be some losses in the values of the underlying investments from
year to year. |
||||||||||
Fluctuations in value should be less than those of the overall stock markets.
|
Some of these might be large, but the overall fluctuations in asset values should be less than those of the U.S. stock market.
|
|||||||||||
Lower
Risk◄———►Higher
Risk
|
||||||||||||
Asset Class Target Exposure |
Model A | Model B | Model C | Model D | Model E | ||||||||||||||||||||
Cash Equivalents
|
7 | % | 5 | % | 2 | % | — | — | ||||||||||||||||
Fixed Income
|
73 | 57 | 42 | 25 | % | 8 | % | |||||||||||||||||
Domestic Equity
|
15 | 29 | 41 | 54 | 66 | |||||||||||||||||||
International Equity
|
5 | 9 | 15 | 21 | 26 | |||||||||||||||||||
Portfolio Optimization Model
Target Allocations |
||||||||||||||||||||||||
|
Model A | Model B | Model C | Model D | Model E | |||||||||||||||||||
Small-Cap Growth
|
— | — | 1 | % | 2 | % | 2 | % | ||||||||||||||||
International Value
|
2 | % | 2 | % | 3 | 4 | 4 | |||||||||||||||||
Long/Short Large-Cap
|
2 | 3 | 4 | 4 | 5 | |||||||||||||||||||
International Small-Cap
|
— | 1 | 2 | 3 | 3 | |||||||||||||||||||
Equity Index
|
2 | 3 | 4 | 5 | 6 | |||||||||||||||||||
Small-Cap Index
|
— | — | — | — | 2 | |||||||||||||||||||
Mid-Cap Value
|
— | 2 | 3 | 3 | 4 | |||||||||||||||||||
Dividend Growth (formerly called Diversified Research)
|
— | 2 | 2 | 3 | 3 | |||||||||||||||||||
American
Funds®
Growth-Income
|
— | — | 3 | 4 | 4 | |||||||||||||||||||
American
Funds®
Growth
|
— | 1 | 2 | 2 | 3 | |||||||||||||||||||
Large-Cap Value
|
5 | 6 | 7 | 7 | 8 | |||||||||||||||||||
Short Duration Bond
|
11 | 8 | 3 | 2 | — | |||||||||||||||||||
Floating Rate Loan
|
8 | 6 | 3 | — | — | |||||||||||||||||||
Growth LT
|
— | 2 | 3 | 3 | 4 | |||||||||||||||||||
Mid-Cap Equity
|
3 | 2 | 3 | 5 | 6 | |||||||||||||||||||
International Large-Cap
|
3 | 4 | 4 | 6 | 8 | |||||||||||||||||||
Small-Cap Value
|
— | 1 | 1 | 1 | 2 | |||||||||||||||||||
Main
Street®
Core
|
— | 2 | 2 | 3 | 3 | |||||||||||||||||||
Emerging Markets
|
— | — | 3 | 4 | 5 | |||||||||||||||||||
Managed Bond
|
21 | 17 | 14 | 8 | 4 | |||||||||||||||||||
Inflation Managed
|
18 | 14 | 11 | 8 | — | |||||||||||||||||||
High Yield Bond
|
5 | 4 | 3 | — | — | |||||||||||||||||||
Large-Cap Growth
|
2 | 3 | 3 | 3 | 4 | |||||||||||||||||||
Mid-Cap Growth
|
— | 2 | 2 | 3 | 4 | |||||||||||||||||||
Comstock
|
2 | 3 | 5 | 6 | 6 | |||||||||||||||||||
Real Estate
|
— | — | — | 2 | 3 | |||||||||||||||||||
Small-Cap Equity
|
— | — | 1 | 5 | 5 | |||||||||||||||||||
Diversified Bond
|
16 | 12 | 8 | 4 | 2 | |||||||||||||||||||
Less Volatile◄———►More Volatile | ||||||||||||||||||||||||
35
• | cost of insurance |
• | administrative charge |
• | coverage charge |
• | asset charge |
• | charges for optional Riders. |
36
• | Step 1: we divide the Death Benefit that would be payable at the beginning of the Policy month by 1.0020598. |
• | Step 2: we subtract your Policy’s Accumulated Value at the beginning of the Policy month from the amount we calculated in Step 1. |
37
• | Under Death Benefit Option A or Option C, is $135.10 during the first 10 Policy Years (($350,000 ¸ 1,000) × 0.386); and $81.20 in Policy Year 11 and thereafter (($350,000 ¸ 1,000) × 0.232) |
• | Under Death Benefit Option B, is $340.55 during the first 10 Policy Years (($350,000 ¸ 1,000) × 0.973); and $204.40 in Policy Year 11 and thereafter (($350,000 ¸ 1,000) × 0.584) |
• | loans or withdrawals you make from your Policy |
• | not making planned premium payments |
• | the performance of your Investment Options |
• | charges under the Policy. |
38
• | a written application |
• | evidence satisfactory to us that the Insured is still insurable |
• | a premium payment sufficient, after deduction of premium load, to: |
• | cover all unpaid monthly charges and Policy loan interest that were due in the grace period, and | |
• | keep your Policy In Force for three months after the day your Policy is reinstated. |
• | Surrender charges and policy charges other than Cost of Insurance Charges will resume on their schedule as of the Monthly Payment Date when lapse occurred. |
• | Cost of Insurance Charges will be calculated using Cost of Insurance Rates that resume their original schedule as if lapse had never occurred, reflecting the Insureds’ Ages at reinstatement and policy duration measured from the original Policy Date. |
• | If we reinstate your Policy on the first Monthly Payment Date that immediately follows the lapse, we’ll also reinstate the Policy Debt that was outstanding on the day your Policy lapsed. |
• | If we reinstate your Policy on any Monthly Payment Date other than the Monthly Payment Date that immediately follows the lapse, we’ll deduct the Policy Debt from your Policy’s Accumulated Value. This means you will no longer have Policy Debt when your Policy is reinstated. However, we will reinstate your Policy Debt if you ask us to in writing. |
39
40
41
PACIFIC SELECT
FUND |
THE
PORTFOLIO’S |
|||||
PORTFOLIO |
INVESTMENT
GOAL |
MAIN INVESTMENTS |
MANAGER |
|||
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. | Invests primarily in a diversified portfolio of equity securities of relatively large non-U.S. companies that the manager believes to be undervalued. | AllianceBernstein L.P. | |||
Long/Short Large-Cap |
Seeks above-average total returns. | Invests at least 80% of its assets in securities of companies with large market capitalizations. |
Analytic Investors, LLC & J.P. Morgan Investment Management, Inc. |
|||
International Small-Cap |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities of companies with small market capitalizations. | Batterymarch Financial Management, Inc. | |||
Mid-Cap Value |
Seeks long-term growth of capital. | Invests at least 80% of its assets in equity securities of mid-capitalization companies. |
BlackRock Capital Management, Inc. |
|||
Equity Index |
Seeks to provide investment results that correspond to the total return of common stocks that are publicly traded in the U.S. |
Invests at least 80% of its assets in equity securities of
companies included in the portfolio’s applicable benchmark
index, including instruments representative of that index (such
as derivatives). |
BlackRock Investment Management, LLC | |||
Small-Cap Index |
Seeks investment results that correspond to the total return of an index of small capitalization companies. | Invests at least 80% of its assets in securities of companies with small market capitalizations included in the portfolio’s applicable benchmark index, including instruments representative of that index (such as derivatives). | BlackRock Investment Management, LLC | |||
Small-Cap Equity |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities of companies with small market capitalizations, including instruments with characteristics of small-capitalization equity securities (such as derivatives). |
BlackRock Investment Management, LLC & Franklin Advisory Services, LLC |
|||
Equity |
Seeks capital appreciation; current income is of secondary importance. | Invests at least 80% of its assets in equity securities. | Capital Guardian Trust Company | |||
American Funds Asset Allocation |
Seeks high total returns (including income and capital gains) consistent with preservation of capital over the long-term. | Invests all of its assets in Class 1 shares of the Asset Allocation Fund, a series of American Funds Insurance Series®, a registered open-end investment company (Master Asset Allocation Fund). |
Capital Research and Management Company (adviser to the Master Asset Allocation Fund) |
|||
American Funds Growth-Income |
Seeks long-term growth of capital and income. | Invests all of its assets in Class 1 shares of the Growth-Income Fund, a series of the American Funds Insurance Series®, a registered open-end investment company (Master Growth-Income Fund). |
Capital Research and Management Company (adviser to the Master Growth-Income Fund) |
|||
American Funds Growth |
Seeks long-term growth of capital. | Invests all of its assets in Class 1 shares of the Growth Fund, a series of American Funds Insurance Series®, a registered open-end investment company (Master Growth Fund, together with the Master Growth-Income Fund and the Master Asset Allocation Fund, the Master Funds). |
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. | Invests at least 80% of its assets in common stocks of large companies. | ClearBridge Advisors, LLC | |||
Technology |
Seeks long-term growth of capital. | Invests at least 80% of its assets in equity securities of technology companies that may benefit from technological improvements, advancements or developments. |
Columbia Management |
|||
Floating Rate Loan |
Seeks to provide high level of current income. | Invests at least 80% of its assets in floating rate loans. | Eaton Vance Management | |||
Small-Cap Growth |
Seeks capital appreciation; no consideration is given to income. | Invests at least 80% of its assets in small-capitalization equity securities. | Fred Alger Management, Inc. | |||
Short Duration Bond |
Seeks current income; capital appreciation is of secondary importance. | Invests at least 80% of its assets in fixed income securities (including derivatives on such securities). | Goldman Sachs Asset Management, L.P. | |||
Comstock |
Seeks long-term growth of capital. | Invests its assets in equity securities. | Invesco Advisers, Inc. | |||
Invesco Ltd. has entered in to a definitive agreement to acquire certain portfolios of the retail asset management business of Morgan Stanley Investment Management Inc. (MSIM) (“the Transaction”). The Transaction includes a sale of the asset management business that sub-advises the Comstock Portfolio and is subject to certain approvals and other conditions prior to its expected closing in mid-2010. MSIM is the current subadviser to the Comstock Portfolio and upon closing of the Transaction, Invesco Advisers, Inc. will become the subadviser. | ||||||
Growth LT |
Seeks long-term growth of capital. | Invests in companies of any size, from small emerging growth to well-established companies with a focus on companies with large market capitalizations. | Janus Capital Management LLC | |||
42
THE
PORTFOLIO’S |
||||||
PACIFIC SELECT FUND PORTFOLIO |
INVESTMENT
GOAL |
MAIN INVESTMENTS |
MANAGER |
|||
Focused 30 |
Seeks long term growth of capital. | Invests primarily in domestic and foreign equity securities (including common stock, preferred stock, warrants, and securities convertible into common or preferred stock) selected for their growth potential. | Janus Capital Management LLC | |||
Health Sciences |
Seeks long-term growth of capital. | Invests at least 80% of its assets in equity securities and derivatives of companies in the health sciences sector. | Jennison Associates LLC | |||
Mid-Cap Equity |
Seeks capital appreciation. | Invests at least 80% of its assets in equity securities of companies with medium market capitalizations. | Lazard Asset Management LLC | |||
International Large-Cap |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities of companies with large market capitalizations. | MFS Investment Management | |||
Mid-Cap Growth |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities of companies with medium market capitalizations. | Morgan Stanley Investment Management Inc. | |||
Real Estate |
Seeks current income and long-term capital appreciation. | Invests at least 80% of its assets in securities of companies operating in the real estate and related industries. | Morgan Stanley Investment Management Inc. | |||
Small-Cap Value |
Seeks long-term growth of capital. | Invests at least 80% of its assets in small-capitalization equity securities. | NFJ Investment Group LLC | |||
Multi-Strategy |
Seeks to provide a high total return from a portfolio of equity and fixed income securities. | Invests in a mix of equity and fixed income securities, although there is no requirement to weight the portfolio holdings in any fixed proportion. | OppenheimerFunds, Inc. | |||
Main Street Core |
Seeks long-term growth of capital and income. | Invests in common stocks of companies of different capitalization ranges, with a focus on U.S. companies with large market capitalizations. | OppenheimerFunds, Inc. | |||
Emerging Markets |
Seeks long-term growth of capital. | Invests at least 80% of its assets in securities (including American Depositary Receipts (ADRs)) of companies whose principal activities are conducted in countries that are generally regarded as emerging market countries. | OppenheimerFunds, Inc. | |||
Cash Management (formerly Money Market) |
Seeks current income consistent with preservation of capital. | Invests in money market instruments that the portfolio manager believes have minimal credit risk. | Pacific Asset Management | |||
High Yield Bond |
Seeks a high level of current income. | Invests at least 80% of its assets in non-investment grade (high yield/high risk) debt instruments or in instruments with characteristics of non-investment grade debt instruments. | Pacific Asset Management | |||
Managed Bond |
Seeks to maximize total return consistent with prudent investment management. | Invests at least 80% of its assets in debt instruments, including instruments with characteristics of debt instruments (such as derivatives). | Pacific Investment Management Company LLC | |||
Inflation Managed |
Seeks to maximize total return consistent with prudent investment management. | Invests its assets in fixed income securities. | Pacific Investment Management Company LLC | |||
Pacific Dynamix – Conservative Growth |
Seeks current income and moderate growth of capital. | Targets an equity/debt blend of 40/60 through investment in certain underlying portfolios of Pacific Select Fund. | Pacific Life Fund Advisors LLC | |||
Pacific Dynamix – Moderate Growth |
Seeks long-term growth of capital and low to moderate income. | Targets an equity/debt blend of 60/40 through investment in certain underlying portfolios of Pacific Select Fund. | Pacific Life Fund Advisors LLC | |||
Pacific Dynamix – Growth |
Seeks moderately high, long-term growth of capital with low, current income. | Targets an equity/debt blend of 80/20 through investment in certain underlying portfolios of Pacific Select Fund. | Pacific Life Fund Advisors LLC | |||
Dividend Growth (formerly Diversified Research) |
Seeks long-term growth of capital. | Invests at least 65% of its assets in equity securities of dividend paying companies that the manager expects to increase their dividends over time and also provide long-term appreciation. | T. Rowe Price Associates, Inc. | |||
Large-Cap Growth |
Seeks long-term growth of capital; current income is of secondary importance. | Invests at least 80% of its assets in equity securities of large-capitalization companies. | UBS Global Asset Management (Americas) Inc. | |||
Diversified Bond |
Seeks to maximize total return consistent with prudent investment management. | Invests at least 80% of its assets in fixed income securities. |
Western Asset Management Company |
|||
43
M FUND |
THE
PORTFOLIO’S |
PORTFOLIO |
||||
PORTFOLIO | INVESTMENT GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
M International Equity Fund (formerly Brandes International Equity) |
Long-term capital appreciation. | Equity securities of foreign issuers. Focuses on stocks with capitalizations of $1 billion or more. | Brandes Investment Partners, L.P. | |||
M Large Cap Growth Fund (formerly Turner Core Growth) |
Long-term capital appreciation. | Common stocks of U.S. companies that the subadviser believes have strong earnings growth potential. | DSM Capital Partners | |||
M Capital Appreciation (formerly Frontier Capital Appreciation) |
Maximum capital appreciation. | Common stock of U.S. companies of all sizes, with emphasis on stocks of companies with capitalizations that are consistent with the capitalizations of those companies found in the Russell 2500. | Frontier Capital Management Company, Inc. | |||
M Business Opportunity Value Fund (formerly Business Opportunity Value) |
Long-term capital appreciation. | Equity securities of U.S. issuers in the large-to-medium-capitalization segment of the U.S. stock market. | Iridian Asset Management LLC | |||
BLACKROCK
VARIABLE |
PORTFOLIO |
|||||
SERIES FUNDS, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
BlackRock Basic Value V.I. Fund Class III |
Capital appreciation. (Income is of secondary importance.) | Equity securities believed to be undervalued. |
BlackRock Investment Management, LLC and BlackRock Asset
Management U.K. Limited |
|||
BlackRock Global Allocation V.I. Fund Class III |
High total investment return. | A mix of U.S. and foreign equity, debt and money market securities |
BlackRock Investment Management, LLC and BlackRock Asset Management U.K. Limited |
FIDELITY
VARIABLE |
||||||
INSURANCE
PRODUCTS |
PORTFOLIO |
|||||
FUNDS |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER |
|||
Fidelity VIP
Contrafund® Portfolio Service Class 2 |
Long-term capital appreciation. | Equity securities of companies whose value is believed not fully recognized by the public. | Fidelity Management & Research Co., Inc. | |||
Fidelity VIP Freedom Income Service Class 2 |
High total return. (Principal preservation is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers®, Inc. | |||
Fidelity VIP Freedom 2010 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers, Inc. | |||
Fidelity VIP Freedom 2015 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term. | Strategic Advisers, Inc. | |||
Fidelity VIP Freedom 2020 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers, Inc. | |||
Fidelity VIP Freedom 2025 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers, Inc. | |||
Fidelity VIP Freedom 2030 Service Class 2 |
High total return. (Principal preservation as the fund approaches its target date and beyond is of secondary importance.) | Underlying Fidelity VIP equity, fixed-income, and short-term funds. | Strategic Advisers, Inc. | |||
Fidelity VIP Growth Portfolio Service Class 2 |
Capital appreciation. | Equity securities of companies believed to have above-average growth potential. | Fidelity Management & Research Co., Inc. | |||
Fidelity VIP Mid Cap Portfolio Service Class 2 |
Long-term growth of capital. | Equity securities primarily of companies with medium market capitalization. | Fidelity Management & Research Co., Inc. | |||
Fidelity VIP Value Strategies Portfolio Service Class 2 |
Capital appreciation. | Equity securities of companies believed to be undervalued in the marketplace. | Fidelity Management & Research Co., Inc. | |||
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FRANKLIN
TEMPLETON |
||||||
VARIABLE
INSURANCE |
PORTFOLIO |
|||||
PRODUCTS TRUST |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER |
|||
Templeton Global Bond Securities Fund Class 2 | High current income. |
The Fund invests mainly in debt securities of governments,
government agencies and companies located around the world,
including a significant amount in emerging markets. |
Franklin Advisers, Inc. |
GE INVESTMENTS |
PORTFOLIO |
|||||
FUNDS, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
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. | Invests primarily in a combination of U.S. and foreign equity and debt securities and cash. | GE Asset Management Incorporated |
PORTFOLIO |
||||||
JANUS ASPEN
SERIES |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Overseas Portfolio Service Class | Long-term growth of capital. | Securities of issuers from countries outside the United States. | Janus Capital Management LLC | |||
Enterprise Portfolio Service Class | Long-term growth of capital. | Equity securities of mid-sized companies. | Janus Capital Management LLC |
LAZARD
RETIREMENT |
PORTFOLIO |
|||||
SERIES, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Lazard Retirement U.S. Strategic Equity Portfolio |
Long-term capital appreciation. |
Equity securities, principally common stocks. | Lazard Asset Management LLC |
LEGG MASON |
||||||
PARTNERS |
PORTFOLIO |
|||||
VARIABLE EQUITY TRUST |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER |
|||
Legg Mason ClearBridge Variable Aggressive Growth
Portfolio – Class II |
Capital appreciation. | Common stocks of companies the portfolio manager believes are experiencing, or will experience, growth of earnings that exceeds the average rate of earnings growth of companies which comprise the S&P 500 Index. | ClearBridge Advisors, LLC | |||
Legg Mason ClearBridge Variable Mid Cap Core
Portfolio – Class II |
Long-term growth of capital. | Equity securities or investments with similar characteristics of medium sized companies. | ClearBridge Advisors, LLC |
LORD ABBETT |
PORTFOLIO |
|||||
SERIES FUND, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Lord Abbett Fundamental Equity Portfolio Class VC |
Long-term growth of capital and income without excessive
fluctuations in market value. |
Primarily purchases equity securities of U.S. and multinational companies that appear to be undervalued in all market capitalization ranges. | Lord Abbett & Co., LLC |
MFS VARIABLE |
PORTFOLIO |
|||||
INSURANCE TRUST |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
MFS New Discovery Series Service Class |
Capital appreciation. | Equity securities of companies believed to have above average earnings growth potential. | Massachusetts Financial Services Company | |||
MFS Utilities Series Service Class |
Total return. | Securities of issuers in the utilities industry1. | Massachusetts Financial Services Company | |||
PORTFOLIO |
||||||
ROYCE CAPITAL
FUND |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Royce Micro-Cap Service Class Portfolio |
Long-term growth of capital. |
Equity securities of micro-cap companies, a universe of more
than 4,100 companies with market capitalizations up to $500
million. |
Royce & Associates, Inc. |
45
T. ROWE PRICE
EQUITY |
PORTFOLIO |
|||||
SERIES, INC. |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
T. Rowe Price Blue Chip Growth Portfolio – II |
Long-term capital growth. (Current income is a secondary objective.) |
Common stocks of well-established large and medium-sized
companies with the potential for above-average earnings
increases |
T. Rowe Price Associates, Inc. | |||
T. Rowe Price Equity Income Portfolio – II |
Substantial dividend income and long-term capital growth. | Common stocks of established companies. In selecting such stocks, the Fund emphasizes companies that appear to be temporarily undervalued by various measures, such as price/earnings (P/E) rations. | T. Rowe Price Associates, Inc. |
PORTFOLIO |
||||||
VAN ECK VIP
TRUST |
INVESTMENT
GOAL |
THE
PORTFOLIO’S MAIN INVESTMENTS |
MANAGER | |||
Van Eck VIP Global Hard Assets Fund (formerly Van Eck Worldwide Hard Assets Fund) |
Long-term capital appreciation. (Income is a secondary consideration.) | A mix of U.S. and foreign hard asset2 securities | Van Eck Associates Corporation | |||
1 | Issuers in the utilities industry include issuers engaged in the manufacture, production, generation, transmission, sale or distribution of electric, gas or other types of energy, water or other sanitary services; and issuers engaged in telecommunications, including telephone, cellular telephone, telegraph, satellite, microwave, cable television, and other communications media (but not engaged in public broadcasting). | |
2 | Hard asset securities are stocks, bonds and other securities of companies that derive at least 50% of their revenues from exploration, development, production, distribution or facilitation of processes relating to: a) precious metals, b) natural resources, c) real estate and d) commodities. In addition, hard asset securities shall include any derivative securities the present value of which are based upon hard asset securities and/or hard asset commodities. |
• | the investment performance of the underlying portfolio |
• | any dividends or distributions paid by the underlying portfolio |
• | any charges for any taxes that are, or may become, associated with the operation of the Variable Account. |
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• | Accumulated Value allocated to the Fixed Options earns interest on a daily basis, using a 365-day year. Our minimum annual interest rate is 2.5%. |
• | We may offer a higher annual interest rate on the Fixed Options. If we do, we’ll guarantee the higher rate until your next Policy Anniversary. |
• | There are no investment risks or direct charges. Policy charges still apply. |
• | There are limitations on when and how much you can transfer from the Fixed Options. These limitations are described below, in Transferring Among Investment Options. It may take several Policy Years to transfer your Accumulated Value out of either of the Fixed Options. |
• | We may place a limit of $1,000,000 for Net Premiums and $100,000 for loan repayments and transfers allocated to the Fixed Options in any 12-month period. This is an aggregate limit for all Pacific Life policies you own. Any allocations in excess of these limits will be allocated to your other Investment Options according to your most recent instructions. We may increase the limits at any time at our sole discretion. To find out if higher limits are in effect, ask your registered representative or contact us. |
• | Transfers are limited to 25 for each calendar year. |
• | 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 one (1) transfer of all or a portion of your Policy’s Accumulated Value remaining in the Variable Investment Options into the Cash Management Investment Option prior to the start of the next calendar year. |
• | You may only make two (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 Growth Service Class 2, Fidelity VIP Mid Cap Service Class 2 and Fidelity VIP Value Strategies Service Class 2, T. Rowe Price Blue Chip Growth Portfolio – II, T. Rowe Price Equity Income Portfolio – II. |
• | Additionally, only two (2) transfers in any calendar month may involve any of the following Investment Options: International Value, International Small-Cap, International Large-Cap, Emerging Markets, Variable Account I (M International Equity Fund), BlackRock Global Allocation V.I. Fund Class III, Janus Aspen Series Overseas Service Class, Templeton Global Bond Securities Fund Class II or Van Eck VIP Global Hard Assets Fund. |
• | For the purpose of applying the limitations, multiple transfers that occur on the same day are considered one (1) transfer. Transfers into the Loan Account, a transfer of Accumulated Value from the Loan Account into your Investment Options following a loan payment, or transfers that occur as a result of the dollar cost averaging service, the portfolio rebalancing service, approved corporate owned life insurance policy rebalancing programs, the first year transfer service or an approved asset allocation service are excluded from the transfer limitations. Also, allocations of premium payments are not subject to these limitations. |
• | 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. |
47
For example, if you make a transfer into the Diversified Research 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. |
• | There is no minimum amount required if you’re making transfers between Variable Investment Options. |
• | You can only make transfers from the Variable Investment Options to the Fixed Options 30 days prior to and 30 days after each Policy Anniversary. However, if your Policy was issued in Connecticut, Georgia, Maryland, Massachusetts, North Carolina, North Dakota or Pennsylvania, you can make transfers to the Fixed Account any time during the first 18 months of your Policy. |
• | You can make one transfer in any 12-month period from each Fixed Option, except if you’ve signed up for the first year transfer service (see Transfer Services later in this section). Such transfers are limited to the greater of: |
• | $5,000, 25% of your Policy’s Accumulated Value in the Fixed Account, or the amount transferred from the Fixed Account to the Variable Accounts in the prior year. You may transfer 100% of the value in the Fixed Account to the Fixed LT Account. |
• | $5,000, 10% of your Policy’s Accumulated Value in the Fixed LT Account, or the amount transferred from the Fixed LT Account to the Variable Accounts or Fixed Account in the prior year. |
• | Currently, there is no charge for making a transfer but we may charge you in the future. The maximum fee we will charge for a transfer is $25 per transfer in excess of 12 in a Policy Year. |
• | There is no minimum required value for the Investment Option you’re transferring to or from. |
• | You cannot make a transfer if your Policy is in the grace period and is in danger of lapsing. |
• | We can restrict or suspend transfers. |
• | We will notify you or your representative if we refuse or delay your transfer request. |
• | We have the right to impose limits on transfer amounts, the value of the Investment Options you’re transferring to or from, or impose further limits on the number and frequency of transfers you can make. Any policy we establish with regard to the exercise of any of these rights will be applied uniformly to all Policy Owners. |
• | not accepting transfer instructions from a representative acting on behalf of more than one Policy Owner, and |
• | not accepting preauthorized transfer forms from market timers or other entities acting on behalf of more than one Policy Owner at a time. |
48
49
• | You must send us a Written Request that’s signed by all owners. |
• | Each withdrawal must be at least $200, and the Net Cash Surrender Value of your Policy after the withdrawal must be at least $500. |
• | We will not accept your request to make a withdrawal if it will cause your Policy to become a Modified Endowment Contract, unless you’ve told us in writing that you want your Policy to become a Modified Endowment Contract. |
• | We may charge you $25 for each withdrawal you make. (There is no charge currently imposed upon a withdrawal.) |
• | You can choose to receive your withdrawal in a lump sum or use it to buy an income benefit. Please see the discussion about income benefits in General Information About Your Policy. |
• | We deduct the withdrawal from the investment Options that make up your Policy’s Accumulated Value, in proportion to the Accumulated Value you have in each investment Option. You may choose to have such deductions taken from either the Variable Investment Options or the Fixed Account. |
• | The Accumulated Value, Cash Surrender Value and Net Cash Surrender Value of your Policy will be reduced by the amount of each withdrawal. |
• | If the Insured dies after you’ve sent a withdrawal request to us, but before we’ve made the withdrawal, we’ll deduct the amount of the withdrawal from any Death Benefit Proceeds owing. |
• | If your Policy’s Death Benefit does not equal the Minimum Death Benefit, the Death Benefit may decrease by the amount of your withdrawal. |
• | If your Policy’s Death Benefit equals the Minimum Death Benefit, the Death Benefit may decrease by more than the amount of your withdrawal. |
50
• | To secure the loan, we transfer an amount equal to the amount you’re borrowing from your Accumulated Value in the Investment Options to the Loan Account. We transfer the loan from the investment Options that make up your Policy’s Accumulated Value, in proportion to the Accumulated Value you have in each investment Option. You may choose to have such deductions taken from either the Variable Investment Options or the Fixed Account. |
• | Interest owing on the amount you’ve borrowed accrues daily at an annual rate of 2.75%. Interest that has accrued during the Policy Year is due on your Policy Anniversary. |
• | The amount in the Loan Account earns interest daily at an annual rate of at least 2.5%. On each Policy Anniversary, if the Policy Debt exceeds the Loan Account Value, then the excess is transferred from your Policy’s Investment Options to the Loan Account on a proportionate basis to the Loan Account. If the Loan Account Value exceeds Policy Debt, then the excess will be transferred from the Loan Account to the Investment Options according to your most recent premium allocation instructions. |
• | We currently intend to credit interest on the amount in the Loan Account at an annual rate of 2.75% in Policy Year 6 and thereafter. We can decrease the rate credited if we believe the change is needed to ensure that your Policy loan is not treated as a taxable distribution under federal income tax laws, or under any applicable ruling, regulation, or court decision. We will not decrease the annual rate to less than 2.5% on the amount in the Loan Account. |
• | three times the most recent monthly deduction; |
• | any surrender charge; and |
• | any existing Policy Debt. |
• | You authorize us to withdraw a specified amount from your checking account, savings account or money market account each month by completing an Electronic Funds Transfer Form. Please contact us or your registered representative for a copy of this form. |
• | You can choose any day between the 4th and 28th of the month for us to make the withdrawal. |
• | Loan payments made by the Electronic Funds Transfer Plan must be at least $50. |
• | the Death Benefit Proceeds before we pay them to your Beneficiary |
• | the Cash Surrender Value if you surrender your Policy |
51
• | the rate of return you expect to earn on your Investment Options |
• | how long you would like to receive regular income |
• | the amount of Accumulated Value you want to maintain in your Policy. |
• | You must send us your Policy and a Written Request. |
52
• | We’ll send you the Policy’s Net Cash Surrender Value. You can choose to receive your money in a lump sum or use it to buy an income benefit. Please see the discussion about income benefits in General Information About Your Policy. |
• | If you surrender your Policy during the first 10 Policy Years, we’ll deduct a surrender charge. |
• | Each Policy Coverage Layer has a surrender charge. The charge is based on the Age and Risk Class of the Insured as well as the Death Benefit Option and the Face Amount of the Coverage Layer at the Coverage effective date. If you increase your Policy’s Face Amount, we’ll send you a supplemental schedule of benefits that shows the surrender charge factors and associated with the increase. |
• | There’s no surrender charge on any Coverage Layer after 10 Policy Years from the date the Coverage Layer is effective. |
• | We guarantee the surrender charge rates will not increase. |
• | If you decrease the Policy Face Amount, the decrease will not affect your Policy’s surrender charge. |
53
• | The income benefit is based on the life of the person receiving the income. If the Policy Owner is buying the income benefit, monthly income will be based on the Owner’s life. If the Policy’s Beneficiary buys the income benefit, monthly income will be based on the Beneficiary’s life. |
• | We’ll pay a monthly income for at least 10 years regardless of whether the person receiving the income is still alive. |
• | After 10 years, we’ll only pay the monthly income for as long as the person receiving it is still alive. |
• | The minimum monthly income benefit calculated must be at least $100. |
• | For this income benefit, the amount you receive will always be at least as much as the amount guaranteed by your Policy. |
1) | any such increase in Total Face Amount will be excluded; | |
2) | refund of the portion of monthly deductions associated with any such increase will be included; and | |
3) | premium load associated with the portion of monthly deductions referred to in 2) above will be included. |
• | lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or otherwise terminated |
• | converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values |
• | amended to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid |
• | reissued with any reduction in cash value, or |
• | pledged as collateral or subject to borrowing, whether in a single loan or under a schedule of borrowing over a period of time. |
• | You will pay new acquisition costs; |
• | You may have to submit to new medical examinations; |
• | You may pay increased premiums because of the increased age or changed health of the insured; |
• | Claims made in the early policy years may be contested; |
• | You may have to pay surrender charges and/or income taxes on your current policy or contract values; |
54
• | Your new policy or contract values may be subject to surrender charges; and |
• | If part of a financed purchase, your existing policy or contract values or Death Benefit may be reduced. |
• | the Death Benefit based on a Net Amount At Risk adjusted by the ratio of the incorrect cost of insurance rate to the correct cost of insurance rate for the Insured’s gender and Age, or |
• | the Minimum Death Benefit for the correct gender and birth date. |
55
• | In general, your Policy’s Beneficiary will not be subject to federal income taxes when he or she receives the Death Benefit Proceeds. |
• | You will generally not be taxed on your Policy’s Accumulated Value unless you receive a cash distribution by making a withdrawal, surrendering your Policy, or in some instances, taking a loan from your Policy. |
• | substandard risk policies |
• | policies with term insurance on the Insured |
• | life insurance policies that continue coverage beyond Age 100, or other advanced ages. |
56
• | Section 101(j) of the Internal Revenue Code generally provides that Death Benefits paid in connection with certain life insurance policies involving an employer will be taxable income. Employer-involved policies issued or materially modified on or after August 18, 2006 may be subject to income tax liability on the Policy’s Death Benefit unless certain requirements and conditions of Internal Revenue Code Section 101(j) are met. |
• | Using your Policy to informally fund a promised deferred compensation benefit for executives may have special tax consequences. |
• | Corporate ownership of a Policy may affect your liability under the alternative minimum tax (Section 56 of the Tax Code) and the environmental tax (Section 59A of the Tax Code). |
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CONVENTIONAL LIFE INSURANCE POLICY | MODIFIED ENDOWMENT CONTRACT | |
Surrendering your Policy | ||
Proceeds are taxed to the extent they exceed the investment in the contract1. | Proceeds are taxed to the extent they exceed the investment in the contract. | |
Making a withdrawal | ||
If you make a withdrawal after your Policy has been In Force for 15 years, you’ll only be taxed on the amount you withdraw that exceeds the investment in the contract. | You will be taxed on the amount of the withdrawal that’s considered income2, including all previously non-taxed gains. | |
Special rules apply if you make a withdrawal within the first 15 Policy Years. You may be taxed on all or a portion of the withdrawal amount, and there is a reduction in Policy benefits. | ||
Taking out a loan | ||
You will not pay tax on the loan amount unless your Policy is surrendered, lapses or matures and you have not repaid your Policy Debt. | You will be taxed on the amount of the loan that’s considered income, including all previously non-taxed gains. |
1 | The investment in the contract is generally the premiums you’ve paid plus any taxable distributions less any withdrawals or premiums previously recovered that were taxable. | |
2 | Income is the difference between the Accumulated Value and the investment in the contract. |
• | you’re at least 591/2 years old |
• | you’re receiving an amount because you’ve become disabled |
• | you’re receiving an amount that’s part of a series of substantially equal periodic payments, paid out at least annually. These payments may be made for your life or life expectancy or for the joint lives or joint life expectancies of you and your Beneficiaries. |
• | is a director, officer or employee of the person receiving the benefit, or |
• | has a financial interest in a business of the person receiving the benefit. |
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• | any portfolio is no longer available for investment; or |
• | our management believes that a portfolio is no longer appropriate in view of the purposes of the Policy. |
59
• | operate the Separate Account as a management investment company, unit investment trust, or any other form permitted under securities or other laws |
• | register or deregister the Separate Account under securities law |
• | combine the Separate Account with one of our other separate accounts or our affiliates’ separate accounts |
• | combine one or more Variable Accounts |
• | create a committee, board or other group to manage the Separate Account |
• | change the classification of any Variable Account. |
• | would change a portfolio’s investment objective or subclassification |
• | would approve or disapprove an investment advisory contract. |
• | our disapproval is reasonable |
• | we determine in good faith that the change would be against state law or otherwise be inappropriate, considering the portfolio’s objectives and purpose, and considering what effect the change would have on us. |
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• | Illustrations based on information you give us about the Age of the person to be insured by the Policy, their Risk Class, the Face Amount of all Coverage Layers, the Death Benefit and premium payments. |
• | Illustrations that show the allocation of premium payments to specified Variable Accounts. These will reflect the expenses of the portfolio of the Fund in which the Variable Account invests. |
• | Illustrations that use a hypothetical gross rate of return up to 12% are available. Illustrations that use a hypothetical gross rate of return greater than 12% are available only to certain large institutional investors. |
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63
Age | Percentage | Age | Percentage | Age | Percentage | Age | Percentage | |||||||
0-40
|
250 | 50 | 185 | 60 | 130 | 70 | 115 | |||||||
41
|
243 | 51 | 178 | 61 | 128 | 71 | 113 | |||||||
42
|
236 | 52 | 171 | 62 | 126 | 72 | 111 | |||||||
43
|
229 | 53 | 164 | 63 | 124 | 73 | 109 | |||||||
44
|
222 | 54 | 157 | 64 | 122 | 74 | 107 | |||||||
45
|
215 | 55 | 150 | 65 | 120 | 75-90 | 105 | |||||||
46
|
209 | 56 | 146 | 66 | 119 | 91 | 104 | |||||||
47
|
203 | 57 | 142 | 67 | 118 | 92 | 103 | |||||||
48
|
197 | 58 | 138 | 68 | 117 | 93 | 102 | |||||||
49
|
191 | 59 | 134 | 69 | 116 | >93 | 101 | |||||||
A-1
B-1
M’S VERSATILE PRODUCT VIII |
WHERE TO GO FOR MORE INFORMATION |
The M’s Versatile Product VIII variable life insurance policy is underwritten by Pacific Life Insurance Company. |
You’ll find more information about the Policy and Pacific Select Exec Separate Account in the SAI dated May 1, 2010. The SAI has been filed with the SEC and is considered to be part of this prospectus because it’s incorporated by reference.
You can get a copy of the SAI without charge by calling or writing to us, or you can view it online at our website. You can also contact the SEC to get the SAI, material incorporated into this prospectus by reference, and other information about registrants that file electronically with the SEC. The SEC may charge you a fee for this information. You may obtain the current prospectus and SAI for any of the portfolios underlying the Variable Accounts by calling 1-800-347-7787. If you ask us, we’ll provide you with Illustrations of Policy benefits based on different sets of assumptions. Illustrations may help you understand how your Policy’s Death Benefit, Cash Surrender Value and Accumulated Value would vary over time based on different assumptions. You can get one Policy Illustration free of charge per Policy Year by calling or writing to us. We reserve the right to charge $25 for additional Illustrations. |
|
How to Contact Us
|
Pacific Life Insurance Company
P.O. Box 2030 Omaha, NE 68103 1-800-347-7787 5 a.m. through 5 p.m. Pacific time www.Pacificlife.com We accept faxes or emails for variable transaction requests (transfers, allocation changes, rebalancing and loans) at: 1-866-398-0467 VULTransactions@pacificlife.com PREMIUM PAYMENTS Unless you receive premium notices via listbill, send premiums (other than initial premium) to: Pacific Life Insurance Company P.O. Box 100957 Pasadena, California 91189-0957 |
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How to Contact the SEC
|
You can also find reports and other information about the Policy and Separate Account from the SEC. The SEC may charge you a fee for this information.
Commission’s Public Reference Section 100 F Street, NE Washington, D.C. 20549 1-202-551-8090 Website: www.sec.gov e-mail: publicinfo@sec.gov |
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FINRA Public Disclosure Program
|
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 Public Disclosure program may be obtained from FINRA. The FINRA Public Disclosure hotline number is (800) 289-9999. FINRA does not charge a fee for the Public Disclosure program services. | |
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Financial Statements of Pacific Select Exec Separate Account
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SA-1 | |||
Financial Statements of Pacific Life Insurance Company
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PL-1 |
i
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2
• | the guideline single premium or | |
• | the sum of the guideline level annual premiums. |
3
• | You can set up this service at any time while your Policy is In Force. | |
• | You need to complete a request form to enroll in the service. You may enroll by telephone or electronically if we have your completed telephone and electronic authorization on file. | |
• | You must have at least $5,000 in a Variable Investment Option to start the service. | |
• | We’ll automatically transfer Accumulated Value from one Variable Investment Option to one or more of the other Variable Investment Options you’ve selected. | |
• | We’ll process transfers as of the end of the Business Day on your Policy’s monthly, quarterly, semi-annual or annual anniversary, depending on the interval you’ve chosen. We will not make the first transfer until after the Free Look Transfer Date in states that require us to return your premiums if you exercise your Free Look Right. | |
• | We will not charge you for the dollar cost averaging service or for transfers made under this service, even if we decide to charge you in the future for transfers outside of the service, except if we have to by law. | |
• | We have the right to discontinue, modify or suspend the service at any time. | |
• | We’ll keep making transfers at the intervals you’ve chosen until one of the following happens: |
• | the total amount you’ve asked us to transfer has been transferred | |
• | there is no more Accumulated Value in the Investment Option you’re transferring from | |
• | your Policy enters the grace period and is in danger of lapsing | |
• | we receive your Written Request to cancel the service | |
• | we discontinue the service. |
4
• | You can set up this service at any time while your Policy is In Force. | |
• | You enroll in the service by sending us a Written Request or a completed Automatic Rebalancing Form. You may enroll by telephone or electronically if we have your completed telephone and electronic authorization on file. | |
• | Unless you choose a different start date, your first rebalancing will take place at the end of the Business Day we receive your request. Subsequent rebalancing will take place at the end of the Business Day on your Policy’s quarterly, semi-annual or annual anniversary, depending on the interval you chose. | |
• | We will not make the first transfer until after the Free Look Transfer Date, if your Policy was issued in a state that requires us to return your premiums if you exercise your Free Look Right. | |
• | If you cancel this service, you must wait 30 days to begin it again. | |
• | We do not charge for the portfolio rebalancing service, and we do not currently charge for transfers made under this service. |
• | We can discontinue, suspend or change the service at any time. |
• | You enroll in the service when you apply for your Policy and include specific details on your application. | |
• | You choose a regular amount to be transferred every month for 12 months. | |
• | Transfers under the first year transfer service take place on your Policy’s Monthly Payment Date, starting on the first Monthly Payment Date following the Free Look Transfer Date. | |
• | If you sign up for this service, we’ll waive the usual transfer limit for the Fixed Account during the first 12 Policy months from the date your initial premium is applied to your Policy. | |
• | If we make the last transfer during the second Policy Year, we will not count it toward the usual one transfer per year limit for the Fixed Account. | |
• | If the Accumulated Value in the Fixed Account is less than the amount to be transferred, we’ll transfer the balance and then cancel the service. | |
• | If there is Accumulated Value remaining in the Fixed Account at the end of the service, the transfer limitations for the Fixed Account will apply. | |
• | We do not charge for the first year transfer service, and we do not currently charge for transfers made under this service. |
• | You can set up the income stream from your Policy on either a monthly or annual basis. Each scheduled income payment must be at least $500 if you choose to receive monthly payments, or $1,000 if you choose annual payments. | |
• | You may choose to receive either a fixed amount of income or an amount based on a fixed duration. Depending upon your objectives, you may wish to reduce your Face Amount or change your Policy’s Death Benefit Option in order to maximize your income. |
5
• | You choose the scheduled income payment date. You may elect to have your income payments sent either by check or by electronic deposit to a bank account. The effective date of the withdrawal or loan will be the Business Day before any income payment date. | |
• | If the scheduled income payment date falls on a weekend or holiday, the actual income payment date will be the Business Day before the scheduled income payment date. | |
• | The withdrawal or loan will be taken from your Policy’s Investment Options in proportion to the Accumulated Value in each Investment Option. |
• | If the AIO program start date is six months or more from your next Policy Anniversary, the income period will end on the next Policy Anniversary. In this case, the first income period will last at least six months, but not more than one year. | |
• | If the AIO program start date is less than six months from your next Policy Anniversary, the income period will extend to the following Policy Anniversary. In this case, the first income period will last at least one year, but no more than 18 months. |
6
7
8
9
• | 100% of premiums paid up to the first target premium | |
• | 18% of premiums paid up to the second target premium. | |
• | 7% of premiums paid under targets 3-10 | |
• | 3% of premiums paid in excess of the 10th target premium |
10
11
• | other variable life separate accounts, mutual funds, or investment products tracked by research firms, rating services, companies, publications, or persons who rank separate accounts or investment products on overall performance or other criteria | |
• | the Consumer Price Index, to assess the real rate of return from buying a Policy by taking inflation into consideration | |
• | various indices that are unmanaged. |
12
YIELD = 2[( |
a − b cd |
+ 1)6 − 1] |
where:
|
a | = | net investment income earned during the period by the underlying portfolio of the Variable Account, | |||
b | = | expenses accrued for the period (net of reimbursements), | ||||
c | = | the average daily number of accumulation units outstanding during the period that were entitled to receive dividends, and | ||||
d | = | the unit value of the accumulation units on the last day of the period. |
YIELD = 2[( |
a − b cd |
+ 1)6 − 1] |
where:
|
a | = | dividends and interest earned during the period, | |||
b | = | expenses accrued for the period (net of reimbursements), | ||||
c | = | the average daily number of shares outstanding during the period that were entitled to receive dividends, and | ||||
d | = | the maximum offering price per share on the last day of the period. |
13
14
SA-1
Variable Accounts | Underlying Portfolios/Funds | Shares | Cost | Value | ||||||||||
Pacific Select Fund (Affiliated Mutual Fund) | ||||||||||||||
Diversified Bond |
Diversified Bond | 3,146,440 | $ | 30,129,209 | $ | 30,027,123 | ||||||||
Floating Rate Loan |
Floating Rate Loan | 2,015,375 | 15,299,882 | 14,760,272 | ||||||||||
High Yield Bond |
High Yield Bond | 16,035,594 | 90,271,387 | 97,202,400 | ||||||||||
Inflation Managed |
Inflation Managed | 15,835,742 | 178,943,177 | 175,218,226 | ||||||||||
Managed Bond |
Managed Bond | 40,821,136 | 449,490,452 | 452,533,074 | ||||||||||
Money Market |
Money Market | 29,082,539 | 294,148,090 | 293,482,920 | ||||||||||
Short Duration Bond |
Short Duration Bond | 4,833,417 | 45,665,962 | 44,837,735 | ||||||||||
American Funds® Growth |
American Funds Growth | 8,342,271 | 78,914,586 | 59,372,679 | ||||||||||
American Funds Growth-Income |
American Funds Growth-Income | 7,129,022 | 78,178,915 | 59,949,825 | ||||||||||
Comstock |
Comstock | 8,373,656 | 78,528,794 | 63,233,337 | ||||||||||
Diversified Research |
Diversified Research | 3,947,482 | 46,086,204 | 34,983,734 | ||||||||||
Equity |
Equity | 2,089,629 | 39,493,087 | 31,424,327 | ||||||||||
Equity Index |
Equity Index | 17,902,602 | 465,877,743 | 436,543,982 | ||||||||||
Focused 30 |
Focused 30 | 3,069,640 | 39,844,425 | 34,755,973 | ||||||||||
Growth LT |
Growth LT | 11,099,111 | 199,467,350 | 200,271,045 | ||||||||||
Large-Cap Growth |
Large-Cap Growth | 10,004,453 | 64,779,029 | 51,736,448 | ||||||||||
Large-Cap Value |
Large-Cap Value | 11,884,556 | 145,277,127 | 124,817,305 | ||||||||||
Long/Short Large-Cap |
Long/Short Large-Cap | 2,867,330 | 24,547,532 | 23,800,006 | ||||||||||
Main Street® Core |
Main Street Core | 6,491,277 | 123,345,450 | 109,273,310 | ||||||||||
Mid-Cap Equity |
Mid-Cap Equity | 10,556,775 | 166,112,376 | 126,956,712 | ||||||||||
Mid-Cap Growth |
Mid-Cap Growth | 7,074,008 | 57,941,750 | 53,288,952 | ||||||||||
Mid-Cap Value (1) |
Mid-Cap Value | 1,476,566 | 15,039,266 | 17,610,387 | ||||||||||
Small-Cap Equity |
Small-Cap Equity | 1,607,493 | 18,777,189 | 19,202,912 | ||||||||||
Small-Cap Growth |
Small-Cap Growth | 4,128,609 | 41,717,987 | 38,860,763 | ||||||||||
Small-Cap Index |
Small-Cap Index | 19,131,003 | 240,463,469 | 176,660,022 | ||||||||||
Small-Cap Value |
Small-Cap Value | 5,360,974 | 68,950,094 | 59,758,062 | ||||||||||
Emerging Markets |
Emerging Markets | 10,504,007 | 160,939,175 | 142,859,859 | ||||||||||
International Large-Cap |
International Large-Cap | 24,312,820 | 197,031,114 | 147,687,981 | ||||||||||
International Small-Cap |
International Small-Cap | 3,187,898 | 27,978,317 | 22,136,212 | ||||||||||
International Value |
International Value | 15,011,598 | 228,885,811 | 164,331,253 | ||||||||||
Health Sciences |
Health Sciences | 2,129,555 | 20,512,558 | 19,972,720 | ||||||||||
Real Estate |
Real Estate | 5,740,667 | 92,162,517 | 64,880,774 | ||||||||||
Technology |
Technology | 3,147,930 | 16,033,902 | 14,323,951 | ||||||||||
American Funds Asset Allocation (1) |
American Funds Asset Allocation | 195,577 | 2,387,433 | 2,496,210 | ||||||||||
Multi-Strategy |
Multi-Strategy | 4,893,297 | 74,076,199 | 52,152,232 | ||||||||||
Pacific Dynamix — Conservative Growth (1) |
Pacific Dynamix - Conservative Growth | 45,288 | 508,458 | 506,869 | ||||||||||
Pacific Dynamix — Moderate Growth (1) |
Pacific Dynamix - Moderate Growth | 69,914 | 800,035 | 822,948 | ||||||||||
Pacific Dynamix — Growth (1) |
Pacific Dynamix - Growth | 124,497 | 1,387,265 | 1,506,341 | ||||||||||
M Fund, Inc. | ||||||||||||||
I |
Brandes International Equity | 5,682,460 | 91,901,865 | 65,746,067 | ||||||||||
II |
Large-Cap Growth (2) | 1,990,346 | 30,551,533 | 26,352,179 | ||||||||||
III |
Frontier Capital Appreciation | 1,855,324 | 42,283,124 | 37,978,474 | ||||||||||
V |
Business Opportunity Value | 2,431,138 | 25,632,369 | 23,095,814 | ||||||||||
BlackRock Variable Series Funds, Inc. | ||||||||||||||
BlackRock Basic Value V.I. Class III |
BlackRock Basic Value V.I. Class III | 831,947 | 9,284,189 | 8,910,157 | ||||||||||
BlackRock Global Allocation V.I. Class III |
BlackRock Global Allocation V.I. Class III | 2,869,807 | 37,281,616 | 38,512,804 | ||||||||||
Fidelity® Variable Insurance Products Funds | ||||||||||||||
Fidelity VIP Contrafund® Service Class 2 |
Fidelity VIP Contrafund Service Class 2 | 2,317,907 | 60,036,623 | 47,030,339 | ||||||||||
Fidelity VIP Freedom Income Service Class 2 |
Fidelity VIP Freedom Income Service Class 2 | 71,580 | 678,976 | 713,654 | ||||||||||
Fidelity VIP Freedom 2010 Service Class 2 |
Fidelity VIP Freedom 2010 Service Class 2 | 86,065 | 777,872 | 838,270 | ||||||||||
Fidelity VIP Freedom 2015 Service Class 2 |
Fidelity VIP Freedom 2015 Service Class 2 | 144,251 | 1,228,342 | 1,405,006 | ||||||||||
Fidelity VIP Freedom 2020 Service Class 2 |
Fidelity VIP Freedom 2020 Service Class 2 | 140,920 | 1,256,528 | 1,335,924 | ||||||||||
Fidelity VIP Freedom 2025 Service Class 2 |
Fidelity VIP Freedom 2025 Service Class 2 | 259,191 | 2,947,571 | 2,402,697 | ||||||||||
Fidelity VIP Freedom 2030 Service Class 2 |
Fidelity VIP Freedom 2030 Service Class 2 | 294,145 | 2,513,083 | 2,647,304 | ||||||||||
Fidelity VIP Growth Service Class 2 |
Fidelity VIP Growth Service Class 2 | 192,037 | 6,883,820 | 5,713,101 | ||||||||||
Fidelity VIP Mid Cap Service Class 2 |
Fidelity VIP Mid Cap Service Class 2 | 1,135,187 | 32,321,483 | 28,493,194 | ||||||||||
Fidelity VIP Value Strategies Service Class 2 |
Fidelity VIP Value Strategies Service Class 2 | 302,312 | 1,900,686 | 2,348,966 |
See Notes to Financial Statements | See explanation of references on SA-3 |
SA-2
Variable Accounts | Underlying Portfolios/Funds | Shares | Cost | Value | ||||||||||
Janus Aspen Series | ||||||||||||||
Overseas Service Class (3) |
Janus Aspen Overseas Service Class (3) | 803,886 | $ | 32,617,418 | $ | 36,239,197 | ||||||||
INTECH Risk-Managed Core Service Class |
Janus Aspen INTECH Risk-Managed Core Service Class | 61,619 | 488,837 | 591,542 | ||||||||||
Enterprise Service Class (4) |
Janus Aspen Enterprise Service Class (4) | 129,747 | 4,075,538 | 3,879,427 | ||||||||||
Lazard Retirement Series, Inc. | ||||||||||||||
Lazard Retirement U.S. Strategic Equity |
Lazard Retirement U.S. Strategic Equity | 51,712 | 370,805 | 423,521 | ||||||||||
Legg Mason ClearBridge Variable Equity Trust | ||||||||||||||
Legg Mason ClearBridge Variable Aggressive Growth — Class II (5) |
Legg Mason ClearBridge Variable Aggressive Growth - Class II (5) | 50,236 | 608,602 | 652,565 | ||||||||||
Legg Mason ClearBridge Variable Mid Cap Core — Class II (6) |
Legg Mason ClearBridge Variable Mid Cap Core - Class II (6) | 668,628 | 6,822,523 | 7,274,670 | ||||||||||
MFS® Variable Insurance Trust | ||||||||||||||
MFS New Discovery Series Service Class |
MFS New Discovery Series Service Class | 234,524 | 2,611,432 | 3,060,542 | ||||||||||
MFS Utilities Series Service Class |
MFS Utilities Series Service Class | 138,994 | 3,246,073 | 3,148,219 | ||||||||||
Premier VIT | ||||||||||||||
NACM Small Cap Class I |
NACM Small Cap Class I | 68,453 | 1,000,981 | 1,060,344 | ||||||||||
T. Rowe Price Equity Series, Inc. | ||||||||||||||
T. Rowe Price Blue Chip Growth — II |
T. Rowe Price Blue Chip Growth - II | 750,754 | 6,942,610 | 7,132,159 | ||||||||||
T. Rowe Price Equity Income — II |
T. Rowe Price Equity Income - II | 1,611,645 | 31,939,954 | 28,381,067 | ||||||||||
Van Eck Worldwide Insurance Trust | ||||||||||||||
Van Eck Worldwide Hard Assets |
Van Eck Worldwide Hard Assets | 2,311,694 | 73,050,391 | 67,640,180 |
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). | |
(2) | Formerly named Turner Core Growth Portfolio. | |
(3) | Formerly named International Growth Service Class Variable Account and Janus Aspen International Growth Service Class Portfolio. | |
(4) | Formerly named Mid Cap Growth Service Class Variable Account and Janus Aspen Mid Cap Growth Service Class Portfolio. | |
(5) | Formerly named Legg Mason Partners Variable Aggressive Growth — Class II Variable Account and Legg Mason Partners Variable Aggressive Growth — Class II Portfolio. | |
(6) | Formerly named Legg Mason Partners Variable Mid Cap Core — Class II Variable Account and Legg Mason Partners Variable Mid Cap Core — Class II Portfolio. |
SA-3
Variable Accounts | ||||||||||||||||||||||||||||
Diversified | Floating | High Yield | Inflation | Managed | Money | Short Duration | ||||||||||||||||||||||
Bond | Rate Loan | Bond | Managed | Bond | Market | Bond | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 30,027,123 | $ | 14,760,272 | $ | 97,202,400 | $ | 175,218,226 | $ | 452,533,074 | $ | 293,482,920 | $ | 44,837,735 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
7,301 | 1,820 | 714 | — | 259,055 | — | — | |||||||||||||||||||||
Fund shares redeemed |
— | — | — | 120,496 | — | 2,639,447 | 397,905 | |||||||||||||||||||||
Total Assets |
30,034,424 | 14,762,092 | 97,203,114 | 175,338,722 | 452,792,129 | 296,122,367 | 45,235,640 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | — | 120,496 | — | 2,639,447 | 397,905 | |||||||||||||||||||||
Fund shares purchased |
7,290 | 1,820 | 675 | — | 259,015 | — | — | |||||||||||||||||||||
Other |
— | 21 | — | 30 | — | 141 | 11 | |||||||||||||||||||||
Total Liabilities |
7,290 | 1,841 | 675 | 120,526 | 259,015 | 2,639,588 | 397,916 | |||||||||||||||||||||
NET ASSETS |
$ | 30,027,134 | $ | 14,760,251 | $ | 97,202,439 | $ | 175,218,196 | $ | 452,533,114 | $ | 293,482,779 | $ | 44,837,724 | ||||||||||||||
Units Outstanding |
2,677,541 | 1,711,048 | 2,237,443 | 3,815,481 | 8,992,559 | 12,533,277 | 3,846,075 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 11.21 | $ | 8.63 | $ | 43.44 | $ | 45.92 | $ | 50.32 | $ | 23.42 | $ | 11.66 | ||||||||||||||
Cost of Investments |
$ | 30,129,209 | $ | 15,299,882 | $ | 90,271,387 | $ | 178,943,177 | $ | 449,490,452 | $ | 294,148,090 | $ | 45,665,962 | ||||||||||||||
American Funds | American Funds | Diversified | Equity | Focused | ||||||||||||||||||||||||
Growth | Growth-Income | Comstock | Research | Equity | Index | 30 | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 59,372,679 | $ | 59,949,825 | $ | 63,233,337 | $ | 34,983,734 | $ | 31,424,327 | $ | 436,543,982 | $ | 34,755,973 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
27,348 | 20,295 | 18,314 | — | 6,931 | 15,827 | 836,298 | |||||||||||||||||||||
Fund shares redeemed |
— | — | — | 24,377 | — | — | — | |||||||||||||||||||||
Total Assets |
59,400,027 | 59,970,120 | 63,251,651 | 35,008,111 | 31,431,258 | 436,559,809 | 35,592,271 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | — | 24,341 | — | — | — | |||||||||||||||||||||
Fund shares purchased |
27,348 | 20,295 | 18,225 | — | 6,931 | 15,756 | 836,274 | |||||||||||||||||||||
Other |
30 | 2,440 | — | — | 7 | — | — | |||||||||||||||||||||
Total Liabilities |
27,378 | 22,735 | 18,225 | 24,341 | 6,938 | 15,756 | 836,274 | |||||||||||||||||||||
NET ASSETS |
$ | 59,372,649 | $ | 59,947,385 | $ | 63,233,426 | $ | 34,983,770 | $ | 31,424,320 | $ | 436,544,053 | $ | 34,755,997 | ||||||||||||||
Units Outstanding |
5,195,477 | 5,610,441 | 6,250,352 | 2,937,995 | 2,754,697 | 9,693,106 | 2,819,667 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 11.43 | $ | 10.68 | $ | 10.12 | $ | 11.91 | $ | 11.41 | $ | 45.04 | $ | 12.33 | ||||||||||||||
Cost of Investments |
$ | 78,914,586 | $ | 78,178,915 | $ | 78,528,794 | $ | 46,086,204 | $ | 39,493,087 | $ | 465,877,743 | $ | 39,844,425 | ||||||||||||||
Growth | Large-Cap | Large-Cap | Long/Short | Main Street | Mid-Cap | Mid-Cap | ||||||||||||||||||||||
LT | Growth | Value | Large-Cap | Core | Equity | Growth | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 200,271,045 | $ | 51,736,448 | $ | 124,817,305 | $ | 23,800,006 | $ | 109,273,310 | $ | 126,956,712 | $ | 53,288,952 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
— | 5,176 | 94,965 | 8,467 | — | — | 18,692 | |||||||||||||||||||||
Fund shares redeemed |
9,149 | — | — | — | 12,581 | 43,186 | — | |||||||||||||||||||||
Total Assets |
200,280,194 | 51,741,624 | 124,912,270 | 23,808,473 | 109,285,891 | 126,999,898 | 53,307,644 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
9,149 | — | — | — | 12,554 | 42,981 | — | |||||||||||||||||||||
Fund shares purchased |
— | 5,176 | 94,788 | 8,452 | — | — | 18,692 | |||||||||||||||||||||
Other |
44 | 9 | — | — | — | — | 27 | |||||||||||||||||||||
Total Liabilities |
9,193 | 5,185 | 94,788 | 8,452 | 12,554 | 42,981 | 18,719 | |||||||||||||||||||||
NET ASSETS |
$ | 200,271,001 | $ | 51,736,439 | $ | 124,817,482 | $ | 23,800,021 | $ | 109,273,337 | $ | 126,956,917 | $ | 53,288,925 | ||||||||||||||
Units Outstanding |
4,914,745 | 8,196,379 | 8,956,147 | 2,826,468 | 2,500,133 | 6,018,439 | 6,166,014 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 40.75 | $ | 6.31 | $ | 13.94 | $ | 8.42 | $ | 43.71 | $ | 21.09 | $ | 8.64 | ||||||||||||||
Cost of Investments |
$ | 199,467,350 | $ | 64,779,029 | $ | 145,277,127 | $ | 24,547,532 | $ | 123,345,450 | $ | 166,112,376 | $ | 57,941,750 | ||||||||||||||
SA-4
Variable Accounts | ||||||||||||||||||||||||||||
Mid-Cap | Small-Cap | Small-Cap | Small-Cap | Small-Cap | Emerging | International | ||||||||||||||||||||||
Value | Equity | Growth | Index | Value | Markets | Large-Cap | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 17,610,387 | $ | 19,202,912 | $ | 38,860,763 | $ | 176,660,022 | $ | 59,758,062 | $ | 142,859,859 | $ | 147,687,981 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
7,889 | 49,355 | — | 41,725 | 566,771 | 828,376 | 37,415 | |||||||||||||||||||||
Fund shares redeemed |
— | — | 18,529 | — | — | — | — | |||||||||||||||||||||
Total Assets |
17,618,276 | 19,252,267 | 38,879,292 | 176,701,747 | 60,324,833 | 143,688,235 | 147,725,396 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | 18,469 | — | — | — | — | |||||||||||||||||||||
Fund shares purchased |
7,889 | 49,332 | — | 41,725 | 566,766 | 828,376 | 37,415 | |||||||||||||||||||||
Other |
1 | — | — | 63 | — | 81 | 9 | |||||||||||||||||||||
Total Liabilities |
7,890 | 49,332 | 18,469 | 41,788 | 566,766 | 828,457 | 37,424 | |||||||||||||||||||||
NET ASSETS |
$ | 17,610,386 | $ | 19,202,935 | $ | 38,860,823 | $ | 176,659,959 | $ | 59,758,067 | $ | 142,859,778 | $ | 147,687,972 | ||||||||||||||
Units Outstanding |
1,208,072 | 1,373,316 | 3,188,386 | 11,242,905 | 2,953,532 | 4,503,441 | 13,371,427 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 14.58 | $ | 13.98 | $ | 12.19 | $ | 15.71 | $ | 20.23 | $ | 31.72 | $ | 11.05 | ||||||||||||||
Cost of Investments |
$ | 15,039,266 | $ | 18,777,189 | $ | 41,717,987 | $ | 240,463,469 | $ | 68,950,094 | $ | 160,939,175 | $ | 197,031,114 | ||||||||||||||
International | International | Health | Real | American Funds | Multi- | |||||||||||||||||||||||
Small-Cap | Value | Sciences | Estate | Technology | Asset Allocation | Strategy | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 22,136,212 | $ | 164,331,253 | $ | 19,972,720 | $ | 64,880,774 | $ | 14,323,951 | $ | 2,496,210 | $ | 52,152,232 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
17,326 | 13,051 | 13,212 | 225,593 | 14,794 | 957,030 | 14,114 | |||||||||||||||||||||
Total Assets |
22,153,538 | 164,344,304 | 19,985,932 | 65,106,367 | 14,338,745 | 3,453,240 | 52,166,346 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Fund shares purchased |
17,306 | 13,051 | 13,200 | 225,593 | 14,788 | 957,030 | 14,087 | |||||||||||||||||||||
Other |
— | 43 | — | 13 | — | — | — | |||||||||||||||||||||
Total Liabilities |
17,306 | 13,094 | 13,200 | 225,606 | 14,788 | 957,030 | 14,087 | |||||||||||||||||||||
NET ASSETS |
$ | 22,136,232 | $ | 164,331,210 | $ | 19,972,732 | $ | 64,880,761 | $ | 14,323,957 | $ | 2,496,210 | $ | 52,152,259 | ||||||||||||||
Units Outstanding |
3,017,020 | 7,068,121 | 1,430,534 | 2,226,122 | 2,404,956 | 192,292 | 1,477,979 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 7.34 | $ | 23.25 | $ | 13.96 | $ | 29.15 | $ | 5.96 | $ | 12.98 | $ | 35.29 | ||||||||||||||
Cost of Investments |
$ | 27,978,317 | $ | 228,885,811 | $ | 20,512,558 | $ | 92,162,517 | $ | 16,033,902 | $ | 2,387,433 | $ | 74,076,199 | ||||||||||||||
Pacific | Pacific | |||||||||||||||||||||||||||
Dynamix - | Dynamix - | Pacific | ||||||||||||||||||||||||||
Conservative | Moderate | Dynamix - | ||||||||||||||||||||||||||
Growth | Growth | Growth | I | II | III | V | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 506,869 | $ | 822,948 | $ | 1,506,341 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Investments in mutual funds, at value |
— | — | — | 65,746,067 | 26,352,179 | 37,978,474 | 23,095,814 | |||||||||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
— | 188 | — | 171,232 | — | — | — | |||||||||||||||||||||
Fund shares redeemed |
— | — | — | — | 30,474 | 20,084 | 4,383 | |||||||||||||||||||||
Total Assets |
506,869 | 823,136 | 1,506,341 | 65,917,299 | 26,382,653 | 37,998,558 | 23,100,197 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | — | — | 30,474 | 20,084 | 4,371 | |||||||||||||||||||||
Fund shares purchased |
— | 188 | — | 171,216 | — | — | — | |||||||||||||||||||||
Other |
1 | — | — | — | 13 | 6 | — | |||||||||||||||||||||
Total Liabilities |
1 | 188 | — | 171,216 | 30,487 | 20,090 | 4,371 | |||||||||||||||||||||
NET ASSETS |
$ | 506,868 | $ | 822,948 | $ | 1,506,341 | $ | 65,746,083 | $ | 26,352,166 | $ | 37,978,468 | $ | 23,095,826 | ||||||||||||||
Units Outstanding |
44,364 | 68,810 | 121,148 | 2,314,197 | 1,351,335 | 1,157,067 | 1,670,010 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 11.43 | $ | 11.96 | $ | 12.43 | $ | 28.41 | $ | 19.50 | $ | 32.82 | $ | 13.83 | ||||||||||||||
Cost of Investments |
$ | 508,458 | $ | 800,035 | $ | 1,387,265 | $ | 91,901,865 | $ | 30,551,533 | $ | 42,283,124 | $ | 25,632,369 | ||||||||||||||
SA-5
Variable Accounts | ||||||||||||||||||||||||||||
BlackRock | BlackRock | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | ||||||||||||||||||||||
Basic Value | Global Allocation | Contrafund | Freedom Income | Freedom 2010 | Freedom 2015 | Freedom 2020 | ||||||||||||||||||||||
V.I. Class III | V.I. Class III | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in mutual funds, at value |
$ | 8,910,157 | $ | 38,512,804 | $ | 47,030,339 | $ | 713,654 | $ | 838,270 | $ | 1,405,006 | $ | 1,335,924 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
6,551 | 830,481 | — | — | 509 | 10 | 1,073 | |||||||||||||||||||||
Fund shares redeemed |
— | — | 10,507 | 485,828 | — | — | — | |||||||||||||||||||||
Total Assets |
8,916,708 | 39,343,285 | 47,040,846 | 1,199,482 | 838,779 | 1,405,016 | 1,336,997 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | 10,507 | 485,828 | — | — | — | |||||||||||||||||||||
Fund shares purchased |
6,547 | 830,465 | — | — | 509 | 10 | 1,072 | |||||||||||||||||||||
Other |
— | — | 48 | — | 2 | — | — | |||||||||||||||||||||
Total Liabilities |
6,547 | 830,465 | 10,555 | 485,828 | 511 | 10 | 1,072 | |||||||||||||||||||||
NET ASSETS |
$ | 8,910,161 | $ | 38,512,820 | $ | 47,030,291 | $ | 713,654 | $ | 838,268 | $ | 1,405,006 | $ | 1,335,925 | ||||||||||||||
Units Outstanding |
854,477 | 2,669,828 | 4,031,894 | 69,529 | 91,200 | 156,467 | 157,385 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 10.43 | $ | 14.43 | $ | 11.66 | $ | 10.26 | $ | 9.19 | $ | 8.98 | $ | 8.49 | ||||||||||||||
Cost of Investments |
$ | 9,284,189 | $ | 37,281,616 | $ | 60,036,623 | $ | 678,976 | $ | 777,872 | $ | 1,228,342 | $ | 1,256,528 | ||||||||||||||
Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | INTECH Risk- | |||||||||||||||||||||||
Freedom 2025 | Freedom 2030 | Growth | Mid Cap | Value Strategies | Overseas | Managed Core | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class (1) | Service Class | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in mutual funds, at value |
$ | 2,402,697 | $ | 2,647,304 | $ | 5,713,101 | $ | 28,493,194 | $ | 2,348,966 | $ | 36,239,197 | $ | 591,542 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
602 | 1,662 | 1,169 | — | 26 | 942,730 | 90 | |||||||||||||||||||||
Fund shares redeemed |
— | — | — | 22,009 | — | — | — | |||||||||||||||||||||
Total Assets |
2,403,299 | 2,648,966 | 5,714,270 | 28,515,203 | 2,348,992 | 37,181,927 | 591,632 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | — | 21,980 | — | — | — | |||||||||||||||||||||
Fund shares purchased |
602 | 1,660 | 1,163 | — | 25 | 942,730 | 86 | |||||||||||||||||||||
Other |
1 | — | — | — | — | 204 | — | |||||||||||||||||||||
Total Liabilities |
603 | 1,660 | 1,163 | 21,980 | 25 | 942,934 | 86 | |||||||||||||||||||||
NET ASSETS |
$ | 2,402,696 | $ | 2,647,306 | $ | 5,713,107 | $ | 28,493,223 | $ | 2,348,967 | $ | 36,238,993 | $ | 591,546 | ||||||||||||||
Units Outstanding |
287,505 | 334,513 | 589,043 | 2,244,999 | 237,955 | 3,539,855 | 75,317 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 8.36 | $ | 7.91 | $ | 9.70 | $ | 12.69 | $ | 9.87 | $ | 10.24 | $ | 7.85 | ||||||||||||||
Cost of Investments |
$ | 2,947,571 | $ | 2,513,083 | $ | 6,883,820 | $ | 32,321,483 | $ | 1,900,686 | $ | 32,617,418 | $ | 488,837 | ||||||||||||||
Lazard | Legg Mason | Legg Mason | ||||||||||||||||||||||||||
Retirement | ClearBridge Variable | ClearBridge Variable | MFS New | MFS | NACM | |||||||||||||||||||||||
Enterprise | U.S. Strategic | Aggressive | Mid Cap | Discovery Series | Utilities Series | Small Cap | ||||||||||||||||||||||
Service Class (2) | Equity | Growth - Class II (3) | Core - Class II (4) | Service Class | Service Class | Class I | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in mutual funds, at value |
$ | 3,879,427 | $ | 423,521 | $ | 652,565 | $ | 7,274,670 | $ | 3,060,542 | $ | 3,148,219 | $ | 1,060,344 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
306 | — | — | 2,504 | 704,813 | — | 682 | |||||||||||||||||||||
Fund shares redeemed |
— | 20,967 | 12,304 | — | — | 5,276 | — | |||||||||||||||||||||
Total Assets |
3,879,733 | 444,488 | 664,869 | 7,277,174 | 3,765,355 | 3,153,495 | 1,061,026 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | 20,968 | 12,304 | — | — | 5,272 | — | |||||||||||||||||||||
Fund shares purchased |
306 | — | — | 2,504 | 704,812 | — | 681 | |||||||||||||||||||||
Other |
1 | — | 1 | 5 | — | — | — | |||||||||||||||||||||
Total Liabilities |
307 | 20,968 | 12,305 | 2,509 | 704,812 | 5,272 | 681 | |||||||||||||||||||||
NET ASSETS |
$ | 3,879,426 | $ | 423,520 | $ | 652,564 | $ | 7,274,665 | $ | 3,060,543 | $ | 3,148,223 | $ | 1,060,345 | ||||||||||||||
Units Outstanding |
431,880 | 54,644 | 84,216 | 848,497 | 326,023 | 342,118 | 164,837 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 8.98 | $ | 7.75 | $ | 7.75 | $ | 8.57 | $ | 9.39 | $ | 9.20 | $ | 6.43 | ||||||||||||||
Cost of Investments |
$ | 4,075,538 | $ | 370,805 | $ | 608,602 | $ | 6,822,523 | $ | 2,611,432 | $ | 3,246,073 | $ | 1,000,981 | ||||||||||||||
(1) | Formerly named International Growth Service Class Variable Account. | |
(2) | Formerly named Mid Cap Growth Service Class Variable Account. | |
(3) | Formerly named Legg Mason Partners Variable Aggressive Growth - Class II Variable Account. | |
(4) | Formerly named Legg Mason Partners Variable Mid Cap Core - Class II Variable Account. |
SA-6
Variable Accounts | ||||||||||||
T. Rowe Price | T. Rowe Price | Van Eck | ||||||||||
Blue Chip | Equity | Worldwide | ||||||||||
Growth - II | Income - II | Hard Assets | ||||||||||
ASSETS |
||||||||||||
Investments in mutual funds, at value |
$ | 7,132,159 | $ | 28,381,067 | $ | 67,640,180 | ||||||
Receivables: |
||||||||||||
Due from Pacific Life Insurance Company |
26,429 | — | — | |||||||||
Fund shares redeemed |
— | 28,837 | 1,136,947 | |||||||||
Total Assets |
7,158,588 | 28,409,904 | 68,777,127 | |||||||||
LIABILITIES |
||||||||||||
Payables: |
||||||||||||
Due to Pacific Life Insurance Company |
— | 28,837 | 1,136,947 | |||||||||
Fund shares purchased |
26,424 | — | — | |||||||||
Other |
— | 49 | 9 | |||||||||
Total Liabilities |
26,424 | 28,886 | 1,136,956 | |||||||||
NET ASSETS |
$ | 7,132,164 | $ | 28,381,018 | $ | 67,640,171 | ||||||
Units Outstanding |
664,636 | 2,818,542 | 3,070,450 | |||||||||
Accumulation Unit Value |
$ | 10.73 | $ | 10.07 | $ | 22.03 | ||||||
Cost of Investments |
$ | 6,942,610 | $ | 31,939,954 | $ | 73,050,391 | ||||||
SA-7
Variable Accounts | ||||||||||||||||||||||||||||
Diversified | Floating | High Yield | Inflation | Managed | Money | Short Duration | ||||||||||||||||||||||
Bond | Rate Loan | Bond | Managed | Bond | Market | Bond | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 992,232 | $ | 571,152 | $ | 6,969,695 | $ | 6,558,459 | $ | 27,850,176 | $ | 781,732 | $ | 1,309,737 | ||||||||||||||
Net Investment Income |
992,232 | 571,152 | 6,969,695 | 6,558,459 | 27,850,176 | 781,732 | 1,309,737 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of affilliated mutual
fund investments |
(771,661 | ) | (1,151,584 | ) | (8,811,932 | ) | (3,662,402 | ) | (2,333,872 | ) | (456,726 | ) | (693,343 | ) | ||||||||||||||
Capital gain distributions from affiliated mutual
fund investments |
— | — | — | 6,393,311 | 27,663,276 | — | — | |||||||||||||||||||||
Realized Gain (Loss) |
(771,661 | ) | (1,151,584 | ) | (8,811,932 | ) | 2,730,909 | 25,329,404 | (456,726 | ) | (693,343 | ) | ||||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
3,179,298 | 2,908,915 | 31,179,587 | 20,792,740 | 24,683,325 | 192,527 | 2,828,858 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 3,399,869 | $ | 2,328,483 | $ | 29,337,350 | $ | 30,082,108 | $ | 77,862,905 | $ | 517,533 | $ | 3,445,252 | ||||||||||||||
American Funds | American Funds | Diversified | Equity | Focused | ||||||||||||||||||||||||
Growth | Growth-Income | Comstock | Research | Equity | Index | 30 | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 62,454 | $ | 630,644 | $ | 764,332 | $ | 528,067 | $ | 261,168 | $ | 6,588,000 | $ | — | ||||||||||||||
Net Investment Income |
62,454 | 630,644 | 764,332 | 528,067 | 261,168 | 6,588,000 | — | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of affilliated mutual
fund investments |
(14,444,327 | ) | (2,778,376 | ) | (4,128,178 | ) | (4,809,096 | ) | (2,103,000 | ) | (15,162,468 | ) | (5,510,900 | ) | ||||||||||||||
Capital gain distributions from affiliated mutual
fund investments |
11,304,748 | 5,238,869 | — | — | — | — | — | |||||||||||||||||||||
Realized Gain (Loss) |
(3,139,579 | ) | 2,460,493 | (4,128,178 | ) | (4,809,096 | ) | (2,103,000 | ) | (15,162,468 | ) | (5,510,900 | ) | |||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
19,876,830 | 11,020,462 | 16,886,219 | 13,277,228 | 10,419,641 | 100,359,314 | 17,754,662 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 16,799,705 | $ | 14,111,599 | $ | 13,522,373 | $ | 8,996,199 | $ | 8,577,809 | $ | 91,784,846 | $ | 12,243,762 | ||||||||||||||
Growth | Large-Cap | Large-Cap | Long/Short | Main Street | Mid-Cap | Mid-Cap | ||||||||||||||||||||||
LT | Growth | Value | Large-Cap | Core | Equity | Growth | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 1,841,797 | $ | 25,873 | $ | 2,234,783 | $ | 158,003 | $ | 1,473,009 | $ | 1,263,930 | $ | 151,133 | ||||||||||||||
Net Investment Income |
1,841,797 | 25,873 | 2,234,783 | 158,003 | 1,473,009 | 1,263,930 | 151,133 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of affilliated mutual
fund investments |
(7,204,579 | ) | (4,740,362 | ) | (3,537,557 | ) | (486,969 | ) | (3,682,939 | ) | (28,594,483 | ) | (4,259,546 | ) | ||||||||||||||
Capital gain distributions from affiliated mutual
fund investments |
— | — | — | — | — | — | 65,934 | |||||||||||||||||||||
Realized Loss |
(7,204,579 | ) | (4,740,362 | ) | (3,537,557 | ) | (486,969 | ) | (3,682,939 | ) | (28,594,483 | ) | (4,193,612 | ) | ||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
61,395,799 | 19,616,196 | 25,245,277 | 5,257,070 | 27,725,627 | 64,978,090 | 24,581,045 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 56,033,017 | $ | 14,901,707 | $ | 23,942,503 | $ | 4,928,104 | $ | 25,515,697 | $ | 37,647,537 | $ | 20,538,566 | ||||||||||||||
SA-8
Variable Accounts | ||||||||||||||||||||||||||||
Mid-Cap | Small-Cap | Small-Cap | Small-Cap | Small-Cap | Emerging | International | ||||||||||||||||||||||
Value (1) | Equity | Growth | Index | Value | Markets | Large-Cap | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 100,609 | $ | 121,008 | $ | — | $ | 1,814,593 | $ | 1,263,980 | $ | 1,020,962 | $ | 2,016,918 | ||||||||||||||
Net Investment Income |
100,609 | 121,008 | — | 1,814,593 | 1,263,980 | 1,020,962 | 2,016,918 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized gain (loss) on sale of affiliated mutual
fund investments |
105,974 | (1,376,217 | ) | (1,348,546 | ) | (12,509,906 | ) | (6,699,430 | ) | (9,953,697 | ) | (8,442,390 | ) | |||||||||||||||
Capital gain distributions from affiliated mutual
fund investments |
1,285,018 | — | — | 10,037,169 | — | 17,540,046 | — | |||||||||||||||||||||
Realized Gain (Loss) |
1,390,992 | (1,376,217 | ) | (1,348,546 | ) | (2,472,737 | ) | (6,699,430 | ) | 7,586,349 | (8,442,390 | ) | ||||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
2,571,121 | 5,438,301 | 14,153,637 | 40,137,842 | 17,554,875 | 57,446,128 | 43,545,691 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 4,062,722 | $ | 4,183,092 | $ | 12,805,091 | $ | 39,479,698 | $ | 12,119,425 | $ | 66,053,439 | $ | 37,120,219 | ||||||||||||||
International | International | Health | Real | American Funds | Multi- | |||||||||||||||||||||||
Small-Cap | Value | Sciences | Estate | Technology | Asset Allocation (1) | Strategy | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 267,354 | $ | 3,278,408 | $ | 21,055 | $ | 1,075,352 | $ | — | $ | 26,048 | $ | 2,741,743 | ||||||||||||||
Net Investment Income |
267,354 | 3,278,408 | 21,055 | 1,075,352 | — | 26,048 | 2,741,743 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized gain (loss) on sale of affiliated mutual
fund investments |
(1,652,449 | ) | (7,306,310 | ) | (2,633,323 | ) | (19,588,373 | ) | (4,603,086 | ) | 7,194 | (2,989,954 | ) | |||||||||||||||
Capital gain distributions from affiliated mutual |
||||||||||||||||||||||||||||
fund investments |
— | — | — | 500,356 | — | — | — | |||||||||||||||||||||
Realized Gain (Loss) |
(1,652,449 | ) | (7,306,310 | ) | (2,633,323 | ) | (19,088,017 | ) | (4,603,086 | ) | 7,194 | (2,989,954 | ) | |||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
6,235,187 | 41,163,425 | 6,888,159 | 34,959,766 | 9,044,200 | 108,777 | 10,305,855 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 4,850,092 | $ | 37,135,523 | $ | 4,275,891 | $ | 16,947,101 | $ | 4,441,114 | $ | 142,019 | $ | 10,057,644 | ||||||||||||||
Pacific | Pacific | |||||||||||
Dynamix - | Dynamix - | Pacific | ||||||||||
Conservative | Moderate | Dynamix - | ||||||||||
Growth (1) | Growth (1) | Growth (1) | ||||||||||
INVESTMENT INCOME |
||||||||||||
Dividends from affiliated mutual fund investments |
$ | 5,469 | $ | 7,769 | $ | 10,214 | ||||||
Net Investment Income |
5,469 | 7,769 | 10,214 | |||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||
Realized gain on sale of affiliated mutual
fund investments |
146 | 580 | 3,210 | |||||||||
Capital gain distributions from affiliated mutual
fund investments |
4,917 | 5,301 | 30,588 | |||||||||
Realized Gain |
5,063 | 5,881 | 33,798 | |||||||||
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AFFILIATED MUTUAL
FUND INVESTMENTS |
(1,589 | ) | 22,913 | 119,076 | ||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 8,943 | $ | 36,563 | $ | 163,088 | ||||||
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-9
Variable Accounts | ||||||||||||||||||||||||||||
BlackRock | BlackRock | Fidelity VIP | ||||||||||||||||||||||||||
Basic Value | Global Allocation | Contrafund | ||||||||||||||||||||||||||
I | II | III | V | V.I. Class III | V.I. Class III | Service Class 2 | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from mutual fund investments |
$ | 1,421,737 | $ | 150,111 | $ | 14,452 | $ | 171,889 | $ | 144,237 | $ | 618,624 | $ | 467,598 | ||||||||||||||
Net Investment Income |
1,421,737 | 150,111 | 14,452 | 171,889 | 144,237 | 618,624 | 467,598 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of mutual
fund investments |
(12,562,672 | ) | (3,482,162 | ) | (4,554,848 | ) | (3,623,538 | ) | (953,242 | ) | (1,175,267 | ) | (4,464,772 | ) | ||||||||||||||
Capital gain distributions from mutual fund
investments |
— | — | — | — | — | — | 11,381 | |||||||||||||||||||||
Realized Loss |
(12,562,672 | ) | (3,482,162 | ) | (4,554,848 | ) | (3,623,538 | ) | (953,242 | ) | (1,175,267 | ) | (4,453,391 | ) | ||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON MUTUAL FUND INVESTMENTS |
23,998,390 | 10,759,575 | 17,953,263 | 8,216,105 | 2,842,957 | 6,286,794 | 16,234,203 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 12,857,455 | $ | 7,427,524 | $ | 13,412,867 | $ | 4,764,456 | $ | 2,033,952 | $ | 5,730,151 | $ | 12,248,410 | ||||||||||||||
Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | ||||||||||||||||||||||
Freedom Income | Freedom 2010 | Freedom 2015 | Freedom 2020 | Freedom 2025 | Freedom 2030 | Growth | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from mutual fund investments |
$ | 37,701 | $ | 29,477 | $ | 44,393 | $ | 37,506 | $ | 68,106 | $ | 47,358 | $ | 9,865 | ||||||||||||||
Net Investment Income |
37,701 | 29,477 | 44,393 | 37,506 | 68,106 | 47,358 | 9,865 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized gain (loss) on sale of mutual
fund investments |
44,560 | (38,376 | ) | (152,117 | ) | (138,825 | ) | (95,280 | ) | (202,367 | ) | (427,565 | ) | |||||||||||||||
Capital gain distributions from mutual fund
investments |
12,479 | 4,087 | 14,256 | 12,686 | 27,517 | 10,244 | 4,345 | |||||||||||||||||||||
Realized Gain (Loss) |
57,039 | (34,289 | ) | (137,861 | ) | (126,139 | ) | (67,763 | ) | (192,123 | ) | (423,220 | ) | |||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON MUTUAL FUND INVESTMENTS |
52,671 | 133,123 | 369,657 | 381,531 | 545,318 | 461,413 | 1,683,551 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 147,411 | $ | 128,311 | $ | 276,189 | $ | 292,898 | $ | 545,661 | $ | 316,648 | $ | 1,270,196 | ||||||||||||||
Legg Mason | ||||||||||||||||||||||||||||
Lazard | ClearBridge | |||||||||||||||||||||||||||
Fidelity VIP | Fidelity VIP | INTECH Risk- | Retirement | Variable | ||||||||||||||||||||||||
Mid Cap | Value Strategies | Overseas | Managed Core | Enterprise | U.S. Strategic | Aggressive | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class (1) | Service Class | Service Class (2) | Equity | Growth - Class II (3) | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from mutual fund investments |
$ | 109,993 | $ | 7,245 | $ | 115,543 | $ | 5,679 | $ | — | $ | 3,774 | $ | — | ||||||||||||||
Net Investment Income |
109,993 | 7,245 | 115,543 | 5,679 | — | 3,774 | — | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized gain (loss) on sale of mutual
fund investments |
(1,798,781 | ) | (872,995 | ) | (6,216,684 | ) | (40,376 | ) | (435,023 | ) | 30,850 | 11,889 | ||||||||||||||||
Capital gain distributions from mutual fund
investments |
128,555 | — | 807,694 | — | — | — | — | |||||||||||||||||||||
Realized Gain (Loss) |
(1,670,226 | ) | (872,995 | ) | (5,408,990 | ) | (40,376 | ) | (435,023 | ) | 30,850 | 11,889 | ||||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON MUTUAL FUND INVESTMENTS |
9,594,634 | 1,809,143 | 20,081,743 | 142,686 | 1,622,995 | 75,195 | 118,050 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 8,034,401 | $ | 943,393 | $ | 14,788,296 | $ | 107,989 | $ | 1,187,972 | $ | 109,819 | $ | 129,939 | ||||||||||||||
(1) | Formerly named International Growth Service Class Variable Account. | |
(2) | Formerly named Mid Cap Growth Service Class Variable Account. | |
(3) | Formerly named Legg Mason Partners Variable Aggressive Growth — Class II Variable Account. |
SA-10
Variable Accounts | ||||||||||||||||||||||||||||
Legg Mason | ||||||||||||||||||||||||||||
ClearBridge | MFS New | MFS | NACM | T. Rowe Price | T. Rowe Price | Van Eck | ||||||||||||||||||||||
Variable Mid Cap | Discovery Series | Utilities Series | Small Cap | Blue Chip | Equity | Worldwide | ||||||||||||||||||||||
Core - Class II (1) | Service Class | Service Class | Class I | Growth - II | Income - II | Hard Assets | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from mutual fund investments |
$ | 7,745 | $ | — | $ | 111,807 | $ | 475 | $ | — | $ | 384,859 | $ | 133,457 | ||||||||||||||
Net Investment Income |
7,745 | — | 111,807 | 475 | — | 384,859 | 133,457 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of mutual fund investments |
(389,806 | ) | (154,962 | ) | (838,412 | ) | (441,561 | ) | (399,890 | ) | (1,803,412 | ) | (4,279,265 | ) | ||||||||||||||
Capital gain distributions from mutual fund
investments |
— | — | — | — | — | — | 264,653 | |||||||||||||||||||||
Realized Loss |
(389,806 | ) | (154,962 | ) | (838,412 | ) | (441,561 | ) | (399,890 | ) | (1,803,412 | ) | (4,014,612 | ) | ||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON MUTUAL FUND INVESTMENTS |
2,591,525 | 668,173 | 1,410,245 | 659,288 | 2,104,182 | 7,178,937 | 26,695,685 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 2,209,464 | $ | 513,211 | $ | 683,640 | $ | 218,202 | $ | 1,704,292 | $ | 5,760,384 | $ | 22,814,530 | ||||||||||||||
(1) | Formerly named Legg Mason Partners Variable Mid Cap Core — Class II Variable Account. |
SA-11
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Diversified Bond | Floating Rate Loan | High Yield Bond | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 992,232 | $ | 1,015,092 | $ | 571,152 | $ | 616,099 | $ | 6,969,695 | $ | 6,040,263 | ||||||||||||
Realized loss |
(771,661 | ) | (788,475 | ) | (1,151,584 | ) | (366,637 | ) | (8,811,932 | ) | (2,651,121 | ) | ||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
3,179,298 | (2,400,035 | ) | 2,908,915 | (3,061,081 | ) | 31,179,587 | (21,301,693 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
3,399,869 | (2,173,418 | ) | 2,328,483 | (2,811,619 | ) | 29,337,350 | (17,912,551 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
3,541,905 | 3,579,880 | 1,407,556 | 1,102,699 | 5,679,239 | 6,256,735 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
5,806,312 | (2,751,899 | ) | 6,382,569 | 529,816 | 10,255,459 | 9,920,653 | |||||||||||||||||
Policy maintenance charges |
(2,657,949 | ) | (2,348,163 | ) | (1,026,280 | ) | (753,906 | ) | (6,110,001 | ) | (4,715,015 | ) | ||||||||||||
Policy benefits and terminations |
(3,061,952 | ) | (1,007,782 | ) | (1,223,805 | ) | (351,265 | ) | (7,762,251 | ) | (3,526,449 | ) | ||||||||||||
Other |
(380,679 | ) | (355,884 | ) | (137,586 | ) | (135,929 | ) | (420,361 | ) | (616,983 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
3,247,637 | (2,883,848 | ) | 5,402,454 | 391,415 | 1,642,085 | 7,318,941 | |||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
6,647,506 | (5,057,266 | ) | 7,730,937 | (2,420,204 | ) | 30,979,435 | (10,593,610 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
23,379,628 | 28,436,894 | 7,029,314 | 9,449,518 | 66,223,004 | 76,816,614 | ||||||||||||||||||
End of Year |
$ | 30,027,134 | $ | 23,379,628 | $ | 14,760,251 | $ | 7,029,314 | $ | 97,202,439 | $ | 66,223,004 | ||||||||||||
Inflation Managed | Managed Bond | Money Market | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 6,558,459 | $ | 5,126,795 | $ | 27,850,176 | $ | 18,097,426 | $ | 781,732 | $ | 5,398,578 | ||||||||||||
Realized gain (loss) |
2,730,909 | (3,449,176 | ) | 25,329,404 | 2,622,319 | (456,726 | ) | 949,480 | ||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
20,792,740 | (19,447,075 | ) | 24,683,325 | (28,768,289 | ) | 192,527 | (546,119 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
30,082,108 | (17,769,456 | ) | 77,862,905 | (8,048,544 | ) | 517,533 | 5,801,939 | ||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
14,776,195 | 15,804,865 | 25,025,145 | 27,823,537 | 163,752,450 | 196,539,981 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
3,277,088 | 2,169,168 | 17,101,351 | (15,502,681 | ) | (70,658,064 | ) | (56,812,089 | ) | |||||||||||||||
Policy maintenance charges |
(12,920,676 | ) | (12,642,795 | ) | (25,661,067 | ) | (22,993,343 | ) | (32,109,982 | ) | (26,618,019 | ) | ||||||||||||
Policy benefits and terminations |
(12,703,845 | ) | (7,934,766 | ) | (18,023,228 | ) | (13,925,960 | ) | (53,474,950 | ) | (40,327,810 | ) | ||||||||||||
Other |
(1,617,115 | ) | (1,611,484 | ) | (2,492,061 | ) | (2,268,169 | ) | (11,717,543 | ) | (14,263,296 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(9,188,353 | ) | (4,215,012 | ) | (4,049,860 | ) | (26,866,616 | ) | (4,208,089 | ) | 58,518,767 | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
20,893,755 | (21,984,468 | ) | 73,813,045 | (34,915,160 | ) | (3,690,556 | ) | 64,320,706 | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
154,324,441 | 176,308,909 | 378,720,069 | 413,635,229 | 297,173,335 | 232,852,629 | ||||||||||||||||||
End of Year |
$ | 175,218,196 | $ | 154,324,441 | $ | 452,533,114 | $ | 378,720,069 | $ | 293,482,779 | $ | 297,173,335 | ||||||||||||
SA-12
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Short Duration Bond | American Funds Growth | American Funds Growth-Income | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 1,309,737 | $ | 1,784,852 | $ | 62,454 | $ | 369,953 | $ | 630,644 | $ | 856,343 | ||||||||||||
Realized gain (loss) |
(693,343 | ) | (766,496 | ) | (3,139,579 | ) | 7,994,380 | 2,460,493 | 2,089,210 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
2,828,858 | (3,445,533 | ) | 19,876,830 | (42,993,043 | ) | 11,020,462 | (30,484,499 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
3,445,252 | (2,427,177 | ) | 16,799,705 | (34,628,710 | ) | 14,111,599 | (27,538,946 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
5,145,961 | 5,187,897 | 7,756,926 | 9,425,349 | 7,781,559 | 9,148,704 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
2,843,286 | 669,825 | (1,888,831 | ) | 16,318,885 | (204,215 | ) | 4,156,706 | ||||||||||||||||
Policy maintenance charges |
(4,090,981 | ) | (3,774,165 | ) | (4,903,819 | ) | (5,467,406 | ) | (5,227,468 | ) | (5,535,731 | ) | ||||||||||||
Policy benefits and terminations |
(4,067,525 | ) | (2,119,655 | ) | (4,327,635 | ) | (1,894,189 | ) | (2,150,527 | ) | (2,650,891 | ) | ||||||||||||
Other |
(289,246 | ) | (1,470,082 | ) | (372,579 | ) | (677,675 | ) | (287,824 | ) | (735,953 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(458,505 | ) | (1,506,180 | ) | (3,735,938 | ) | 17,704,964 | (88,475 | ) | 4,382,835 | ||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
2,986,747 | (3,933,357 | ) | 13,063,767 | (16,923,746 | ) | 14,023,124 | (23,156,111 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
41,850,977 | 45,784,334 | 46,308,882 | 63,232,628 | 45,924,261 | 69,080,372 | ||||||||||||||||||
End of Year |
$ | 44,837,724 | $ | 41,850,977 | $ | 59,372,649 | $ | 46,308,882 | $ | 59,947,385 | $ | 45,924,261 | ||||||||||||
Comstock | Diversified Research | Equity | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 764,332 | $ | 1,296,903 | $ | 528,067 | $ | 533,677 | $ | 261,168 | $ | 200,702 | ||||||||||||
Realized gain (loss) |
(4,128,178 | ) | 666,453 | (4,809,096 | ) | 9,459,287 | (2,103,000 | ) | 5,718,147 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
16,886,219 | (29,311,087 | ) | 13,277,228 | (32,684,362 | ) | 10,419,641 | (24,834,989 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
13,522,373 | (27,347,731 | ) | 8,996,199 | (22,691,398 | ) | 8,577,809 | (18,916,140 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
7,006,664 | 9,403,221 | 3,877,605 | 5,908,116 | 3,087,712 | 3,793,940 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
6,982,838 | (11,946,830 | ) | (5,612,599 | ) | (13,830,925 | ) | (1,198,589 | ) | (2,434,902 | ) | |||||||||||||
Policy maintenance charges |
(5,057,193 | ) | (5,273,983 | ) | (3,078,453 | ) | (3,993,056 | ) | (2,869,002 | ) | (3,381,274 | ) | ||||||||||||
Policy benefits and terminations |
(4,121,658 | ) | (2,206,146 | ) | (2,036,986 | ) | (3,039,083 | ) | (2,249,101 | ) | (2,003,785 | ) | ||||||||||||
Other |
(444,864 | ) | (660,928 | ) | (439,833 | ) | (278,683 | ) | (104,812 | ) | (244,684 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
4,365,787 | (10,684,666 | ) | (7,290,266 | ) | (15,233,631 | ) | (3,333,792 | ) | (4,270,705 | ) | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
17,888,160 | (38,032,397 | ) | 1,705,933 | (37,925,029 | ) | 5,244,017 | (23,186,845 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
45,345,266 | 83,377,663 | 33,277,837 | 71,202,866 | 26,180,303 | 49,367,148 | ||||||||||||||||||
End of Year |
$ | 63,233,426 | $ | 45,345,266 | $ | 34,983,770 | $ | 33,277,837 | $ | 31,424,320 | $ | 26,180,303 | ||||||||||||
SA-13
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year/Period Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Equity Index | Focused 30 | Growth LT | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 6,588,000 | $ | 9,180,322 | $ | — | $ | 20,780 | $ | 1,841,797 | $ | 1,190,524 | ||||||||||||
Realized gain (loss) |
(15,162,468 | ) | 9,457,365 | (5,510,900 | ) | 5,905,145 | (7,204,579 | ) | 30,516,736 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
100,359,314 | (223,582,824 | ) | 17,754,662 | (36,331,697 | ) | 61,395,799 | (150,262,120 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
91,784,846 | (204,945,137 | ) | 12,243,762 | (30,405,772 | ) | 56,033,017 | (118,554,860 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
36,800,527 | 40,957,916 | 3,062,672 | 4,224,311 | 18,110,819 | 22,715,332 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
9,791,801 | 23,937,289 | (6,094,782 | ) | 9,813,229 | (5,818,999 | ) | (20,859,960 | ) | |||||||||||||||
Policy maintenance charges |
(30,200,045 | ) | (31,517,097 | ) | (2,547,813 | ) | (2,876,282 | ) | (17,405,303 | ) | (19,706,277 | ) | ||||||||||||
Policy benefits and terminations |
(18,342,279 | ) | (30,581,165 | ) | (1,452,603 | ) | (1,104,686 | ) | (12,185,385 | ) | (13,560,387 | ) | ||||||||||||
Other |
(754,599 | ) | (2,311,779 | ) | (239,179 | ) | (494,578 | ) | (870,361 | ) | (1,451,072 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(2,704,595 | ) | 485,164 | (7,271,705 | ) | 9,561,994 | (18,169,229 | ) | (32,862,364 | ) | ||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
89,080,251 | (204,459,973 | ) | 4,972,057 | (20,843,778 | ) | 37,863,788 | (151,417,224 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
347,463,802 | 551,923,775 | 29,783,940 | 50,627,718 | 162,407,213 | 313,824,437 | ||||||||||||||||||
End of Year |
$ | 436,544,053 | $ | 347,463,802 | $ | 34,755,997 | $ | 29,783,940 | $ | 200,271,001 | $ | 162,407,213 | ||||||||||||
Large-Cap Growth | Large-Cap Value | Long/Short Large-Cap (1) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 25,873 | $ | — | $ | 2,234,783 | $ | 2,293,002 | $ | 158,003 | $ | 90,844 | ||||||||||||
Realized gain (loss) |
(4,740,362 | ) | 11,311,285 | (3,537,557 | ) | 5,927,929 | (486,969 | ) | (140,085 | ) | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
19,616,196 | (43,691,736 | ) | 25,245,277 | (61,997,771 | ) | 5,257,070 | (6,004,596 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
14,901,707 | (32,380,451 | ) | 23,942,503 | (53,776,840 | ) | 4,928,104 | (6,053,837 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
6,495,710 | 7,196,367 | 13,109,660 | 14,911,364 | 2,830,247 | 1,503,855 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
5,173,182 | 2,684,526 | 7,688,650 | (3,101,980 | ) | 7,335,435 | 17,581,098 | |||||||||||||||||
Policy maintenance charges |
(4,748,451 | ) | (4,812,736 | ) | (10,679,497 | ) | (11,268,009 | ) | (1,777,402 | ) | (882,768 | ) | ||||||||||||
Policy benefits and terminations |
(2,560,305 | ) | (2,144,106 | ) | (7,281,360 | ) | (5,904,356 | ) | (1,053,442 | ) | (291,246 | ) | ||||||||||||
Other |
(704,673 | ) | (296,021 | ) | (940,339 | ) | (596,463 | ) | (252,261 | ) | (67,762 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
3,655,463 | 2,628,030 | 1,897,114 | (5,959,444 | ) | 7,082,577 | 17,843,177 | |||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
18,557,170 | (29,752,421 | ) | 25,839,617 | (59,736,284 | ) | 12,010,681 | 11,789,340 | ||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year or Period |
33,179,269 | 62,931,690 | 98,977,865 | 158,714,149 | 11,789,340 | — | ||||||||||||||||||
End of Year or Period |
$ | 51,736,439 | $ | 33,179,269 | $ | 124,817,482 | $ | 98,977,865 | $ | 23,800,021 | $ | 11,789,340 | ||||||||||||
(1) | Operations commenced on May 2, 2008. |
SA-14
Variable Accounts | ||||||||||||||||||||||||
Year/Period Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Main Street Core | Mid-Cap Equity (1) | Mid-Cap Growth | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 1,473,009 | $ | 1,909,581 | $ | 1,263,930 | $ | 2,638,122 | $ | 151,133 | $ | 63,080 | ||||||||||||
Realized gain (loss) |
(3,682,939 | ) | 15,923,626 | (28,594,483 | ) | 25,928,219 | (4,193,612 | ) | 9,013,699 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
27,725,627 | (81,505,834 | ) | 64,978,090 | (104,107,889 | ) | 24,581,045 | (39,432,039 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
25,515,697 | (63,672,627 | ) | 37,647,537 | (75,541,548 | ) | 20,538,566 | (30,355,260 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
10,659,735 | 13,932,285 | 14,138,577 | 20,464,919 | 5,648,416 | 6,912,213 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(8,717,416 | ) | (4,279,301 | ) | (24,324,906 | ) | (9,306,488 | ) | 2,465,558 | (7,264,693 | ) | |||||||||||||
Policy maintenance charges |
(9,333,728 | ) | (10,787,952 | ) | (10,786,901 | ) | (13,195,649 | ) | (4,427,782 | ) | (4,515,174 | ) | ||||||||||||
Policy benefits and terminations |
(6,882,456 | ) | (7,415,589 | ) | (7,255,927 | ) | (6,352,108 | ) | (2,654,769 | ) | (1,968,226 | ) | ||||||||||||
Other |
(339,302 | ) | (865,415 | ) | (623,492 | ) | (1,705,303 | ) | (494,058 | ) | (621,102 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(14,613,167 | ) | (9,415,972 | ) | (28,852,649 | ) | (10,094,629 | ) | 537,365 | (7,456,982 | ) | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
10,902,530 | (73,088,599 | ) | 8,794,888 | (85,636,177 | ) | 21,075,931 | (37,812,242 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
98,370,807 | 171,459,406 | 118,162,029 | 203,798,206 | 32,212,994 | 70,025,236 | ||||||||||||||||||
End of Year |
$ | 109,273,337 | $ | 98,370,807 | $ | 126,956,917 | $ | 118,162,029 | $ | 53,288,925 | $ | 32,212,994 | ||||||||||||
Mid-Cap Value (2) | Small-Cap Equity | Small-Cap Growth | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 100,609 | $ | 121,008 | $ | 89,970 | $ | — | $ | — | ||||||||||||||
Realized gain (loss) |
1,390,992 | (1,376,217 | ) | 123,500 | (1,348,546 | ) | 5,598,087 | |||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
2,571,121 | 5,438,301 | (5,221,333 | ) | 14,153,637 | (29,796,598 | ) | |||||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
4,062,722 | 4,183,092 | (5,007,863 | ) | 12,805,091 | (24,198,511 | ) | |||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
1,481,575 | 2,379,786 | 2,234,062 | 3,918,923 | 4,957,731 | |||||||||||||||||||
Transfers between variable and fixed accounts, net |
13,668,271 | 584,203 | 7,599,632 | (1,644,487 | ) | 2,681,215 | ||||||||||||||||||
Policy maintenance charges |
(941,377 | ) | (1,525,901 | ) | (1,253,182 | ) | (3,072,137 | ) | (3,233,360 | ) | ||||||||||||||
Policy benefits and terminations |
(512,079 | ) | (837,562 | ) | (403,834 | ) | (1,730,168 | ) | (1,657,614 | ) | ||||||||||||||
Other |
(148,726 | ) | (77,079 | ) | (86,265 | ) | (136,705 | ) | (415,728 | ) | ||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
13,547,664 | 523,447 | 8,090,413 | (2,664,574 | ) | 2,332,244 | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
17,610,386 | 4,706,539 | 3,082,550 | 10,140,517 | (21,866,267 | ) | ||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year or Period |
— | 14,496,396 | 11,413,846 | 28,720,306 | 50,586,573 | |||||||||||||||||||
End of Year or Period |
$ | 17,610,386 | $ | 19,202,935 | $ | 14,496,396 | $ | 38,860,823 | $ | 28,720,306 | ||||||||||||||
(1) | Formerly named Mid-Cap Value Variable Account. | |
(2) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-15
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Small-Cap Index | Small-Cap Value | Emerging Markets | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 1,814,593 | $ | 4,417,250 | $ | 1,263,980 | $ | 1,523,598 | $ | 1,020,962 | $ | 2,038,432 | ||||||||||||
Realized gain (loss) |
(2,472,737 | ) | 20,470,370 | (6,699,430 | ) | 3,772,423 | 7,586,349 | 38,338,725 | ||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
40,137,842 | (111,194,667 | ) | 17,554,875 | (24,375,256 | ) | 57,446,128 | (118,152,611 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
39,479,698 | (86,307,047 | ) | 12,119,425 | (19,079,235 | ) | 66,053,439 | (77,775,454 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
12,254,501 | 16,673,586 | 5,358,168 | 6,166,199 | 10,348,804 | 12,359,938 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(5,864,381 | ) | (17,021,436 | ) | 864,280 | 6,200,432 | (1,020,506 | ) | (14,532,935 | ) | ||||||||||||||
Policy maintenance charges |
(12,016,850 | ) | (13,945,569 | ) | (3,911,467 | ) | (3,960,864 | ) | (8,400,668 | ) | (8,585,682 | ) | ||||||||||||
Policy benefits and terminations |
(11,054,679 | ) | (11,290,457 | ) | (2,350,041 | ) | (1,268,192 | ) | (5,941,083 | ) | (4,839,981 | ) | ||||||||||||
Other |
(631,116 | ) | (2,175,915 | ) | (348,096 | ) | (943,926 | ) | (556,172 | ) | (2,019,413 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(17,312,525 | ) | (27,759,791 | ) | (387,156 | ) | 6,193,649 | (5,569,625 | ) | (17,618,073 | ) | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
22,167,173 | (114,066,838 | ) | 11,732,269 | (12,885,586 | ) | 60,483,814 | (95,393,527 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
154,492,786 | 268,559,624 | 48,025,798 | 60,911,384 | 82,375,964 | 177,769,491 | ||||||||||||||||||
End of Year |
$ | 176,659,959 | $ | 154,492,786 | $ | 59,758,067 | $ | 48,025,798 | $ | 142,859,778 | $ | 82,375,964 | ||||||||||||
International Large-Cap | International Small-Cap | International Value | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 2,016,918 | $ | 3,519,457 | $ | 267,354 | $ | 464,866 | $ | 3,278,408 | $ | 6,531,012 | ||||||||||||
Realized gain (loss) |
(8,442,390 | ) | 40,172,932 | (1,652,449 | ) | (114,126 | ) | (7,306,310 | ) | 21,617,596 | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
43,545,691 | (111,436,559 | ) | 6,235,187 | (12,206,545 | ) | 41,163,425 | (167,411,529 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
37,120,219 | (67,744,170 | ) | 4,850,092 | (11,855,805 | ) | 37,135,523 | (139,262,921 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
13,516,687 | 17,994,464 | 2,851,103 | 3,606,317 | 16,305,398 | 23,174,580 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(6,138,238 | ) | (1,786,581 | ) | 2,102,596 | 2,184,160 | (14,253,994 | ) | (11,495,377 | ) | ||||||||||||||
Policy maintenance charges |
(11,206,101 | ) | (11,731,363 | ) | (1,752,841 | ) | (1,681,896 | ) | (12,806,387 | ) | (15,900,772 | ) | ||||||||||||
Policy benefits and terminations |
(6,385,888 | ) | (6,793,114 | ) | (908,810 | ) | (706,984 | ) | (10,310,443 | ) | (10,915,568 | ) | ||||||||||||
Other |
(546,098 | ) | (1,275,173 | ) | (116,775 | ) | (216,501 | ) | (1,235,145 | ) | (1,992,023 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(10,759,638 | ) | (3,591,767 | ) | 2,175,273 | 3,185,096 | (22,300,571 | ) | (17,129,160 | ) | ||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
26,360,581 | (71,335,937 | ) | 7,025,365 | (8,670,709 | ) | 14,834,952 | (156,392,081 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
121,327,391 | 192,663,328 | 15,110,867 | 23,781,576 | 149,496,258 | 305,888,339 | ||||||||||||||||||
End of Year |
$ | 147,687,972 | $ | 121,327,391 | $ | 22,136,232 | $ | 15,110,867 | $ | 164,331,210 | $ | 149,496,258 | ||||||||||||
SA-16
Variable Accounts | ||||||||||||||||||||||||
Year/Period Ended | Year Ended | Year Ended | Year Ended | Year/Period Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Health Sciences | Real Estate | Technology | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 21,055 | $ | 269,679 | $ | 1,075,352 | $ | 3,028,938 | $ | — | $ | 16,884 | ||||||||||||
Realized gain (loss) |
(2,633,323 | ) | 2,826,861 | (19,088,017 | ) | 26,102,739 | (4,603,086 | ) | 2,861,783 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
6,888,159 | (10,408,585 | ) | 34,959,766 | (64,005,170 | ) | 9,044,200 | (14,255,499 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
4,275,891 | (7,312,045 | ) | 16,947,101 | (34,873,493 | ) | 4,441,114 | (11,376,832 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
1,664,374 | 2,632,800 | 6,208,810 | 8,108,882 | 1,221,948 | 1,693,850 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(385,754 | ) | 1,592,251 | (4,264,742 | ) | (789,326 | ) | 732,767 | (913,258 | ) | ||||||||||||||
Policy maintenance charges |
(1,438,151 | ) | (1,499,835 | ) | (4,709,410 | ) | (6,016,645 | ) | (1,181,870 | ) | (1,234,957 | ) | ||||||||||||
Policy benefits and terminations |
(927,629 | ) | (1,184,353 | ) | (3,414,908 | ) | (3,229,004 | ) | (803,769 | ) | (680,255 | ) | ||||||||||||
Other |
(564,616 | ) | (184,661 | ) | 77,479 | (820,831 | ) | (164,666 | ) | (107,432 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(1,651,776 | ) | 1,356,202 | (6,102,771 | ) | (2,746,924 | ) | (195,590 | ) | (1,242,052 | ) | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
2,624,115 | (5,955,843 | ) | 10,844,330 | (37,620,417 | ) | 4,245,524 | (12,618,884 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
17,348,617 | 23,304,460 | 54,036,431 | 91,656,848 | 10,078,433 | 22,697,317 | ||||||||||||||||||
End of Year |
19,972,732 | $ | 17,348,617 | $ | 64,880,761 | 54,036,431 | $ | 14,323,957 | $ | 10,078,433 | ||||||||||||||
American Funds | Pacific Dynamix - | |||||||||||||||||||||||
Asset Allocation (1) | Multi-Strategy | Conservative Growth (1) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 26,048 | $ | 2,741,743 | $ | 116,980 | $ | 5,469 | ||||||||||||||||
Realized gain (loss) |
7,194 | (2,989,954 | ) | 5,505,754 | 5,063 | |||||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
108,777 | 10,305,855 | (46,858,982 | ) | (1,589 | ) | ||||||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
142,019 | 10,057,644 | (41,236,248 | ) | 8,943 | |||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
55,784 | 4,542,012 | 5,768,862 | 10,884 | ||||||||||||||||||||
Transfers between variable and fixed accounts, net |
2,347,896 | (2,846,398 | ) | (1,989,868 | ) | 497,852 | ||||||||||||||||||
Policy maintenance charges |
(37,604 | ) | (4,387,596 | ) | (5,442,270 | ) | (10,575 | ) | ||||||||||||||||
Policy benefits and terminations |
(4,157 | ) | (3,349,615 | ) | (6,556,678 | ) | — | |||||||||||||||||
Other |
(7,728 | ) | (47,564 | ) | (1,003,031 | ) | (236 | ) | ||||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
2,354,191 | (6,089,161 | ) | (9,222,985 | ) | 497,925 | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
2,496,210 | 3,968,483 | (50,459,233 | ) | 506,868 | |||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year or Periods |
— | 48,183,776 | 98,643,009 | — | ||||||||||||||||||||
End of Year or Periods |
$ | 2,496,210 | $ | 52,152,259 | $ | 48,183,776 | $ | 506,868 | ||||||||||||||||
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-17
Variable Accounts | ||||||||||||||||||||||||
Year/Period Ended | Year Ended | Year/Period Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Pacific Dynamix - | ||||||||||||||||||||||||
Moderate Growth (1) | Pacific Dynamix - Growth (1) | I | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 7,769 | $ | 10,214 | $ | 1,421,737 | $ | 2,800,210 | ||||||||||||||||
Realized gain (loss) |
5,881 | 33,798 | (12,562,672 | ) | 3,158,077 | |||||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
22,913 | 119,076 | 23,998,390 | (50,432,755 | ) | |||||||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
36,563 | 163,088 | 12,857,455 | (44,474,468 | ) | |||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
9,491 | 40,079 | 5,303,454 | 7,204,220 | ||||||||||||||||||||
Transfers between variable and fixed accounts, net |
781,094 | 1,316,560 | (6,304,378 | ) | (14,182,057 | ) | ||||||||||||||||||
Policy maintenance charges |
(13,316 | ) | (12,490 | ) | (3,858,630 | ) | (4,695,271 | ) | ||||||||||||||||
Policy benefits and terminations |
— | (80 | ) | (1,557,410 | ) | (2,343,352 | ) | |||||||||||||||||
Other |
9,116 | (816 | ) | 48,636 | (914,370 | ) | ||||||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
786,385 | 1,343,253 | (6,368,328 | ) | (14,930,830 | ) | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
822,948 | 1,506,341 | 6,489,127 | (59,405,298 | ) | |||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year or Periods |
— | — | 59,256,956 | 118,662,254 | ||||||||||||||||||||
End of Year or Periods |
$ | 822,948 | $ | 1,506,341 | $ | 65,746,083 | $ | 59,256,956 | ||||||||||||||||
II | III | V | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 150,111 | $ | 6,423 | $ | 14,452 | $ | — | $ | 171,889 | $ | 11,705 | ||||||||||||
Realized gain (loss) |
(3,482,162 | ) | 1,609,528 | (4,554,848 | ) | (118,770 | ) | (3,623,538 | ) | 257,027 | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
10,759,575 | (21,692,255 | ) | 17,953,263 | (21,075,694 | ) | 8,216,105 | (10,240,219 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
7,427,524 | (20,076,304 | ) | 13,412,867 | (21,194,464 | ) | 4,764,456 | (9,971,487 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
2,234,415 | 2,937,932 | 2,622,406 | 3,204,391 | 1,744,698 | 2,268,004 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(3,312,482 | ) | 3,413,263 | (4,756,942 | ) | 1,327,852 | (2,090,101 | ) | 5,905,905 | |||||||||||||||
Policy maintenance charges |
(1,661,761 | ) | (1,844,586 | ) | (2,128,461 | ) | (2,425,879 | ) | (1,494,985 | ) | (1,446,925 | ) | ||||||||||||
Policy benefits and terminations |
(596,524 | ) | (915,263 | ) | (905,680 | ) | (1,362,939 | ) | (294,397 | ) | (841,653 | ) | ||||||||||||
Other |
306,154 | (186,489 | ) | (30,507 | ) | (470,645 | ) | 152,560 | (109,878 | ) | ||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(3,030,198 | ) | 3,404,857 | (5,199,184 | ) | 272,780 | (1,982,225 | ) | 5,775,453 | |||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
4,397,326 | (16,671,447 | ) | 8,213,683 | (20,921,684 | ) | 2,782,231 | (4,196,034 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
21,954,840 | 38,626,287 | 29,764,785 | 50,686,469 | 20,313,595 | 24,509,629 | ||||||||||||||||||
End of Year |
$ | 26,352,166 | $ | 21,954,840 | $ | 37,978,468 | $ | 29,764,785 | $ | 23,095,826 | $ | 20,313,595 | ||||||||||||
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-18
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
BlackRock Basic Value | BlackRock Global Allocation | Fidelity VIP Contrafund | ||||||||||||||||||||||
V.I. Class III | V.I. Class III | Service Class 2 | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 144,237 | $ | 155,920 | $ | 618,624 | $ | 586,794 | $ | 467,598 | $ | 416,087 | ||||||||||||
Realized loss |
(953,242 | ) | (676,868 | ) | (1,175,267 | ) | (1,129,060 | ) | (4,453,391 | ) | (4,795,630 | ) | ||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
2,842,957 | (2,339,917 | ) | 6,286,794 | (5,222,218 | ) | 16,234,203 | (21,904,535 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
2,033,952 | (2,860,865 | ) | 5,730,151 | (5,764,484 | ) | 12,248,410 | (26,284,078 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
624,213 | 901,273 | 3,168,418 | 2,450,149 | 3,868,527 | 5,909,642 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
1,494,042 | 2,849,847 | 11,957,028 | 16,058,303 | (329,664 | ) | 3,361,662 | |||||||||||||||||
Policy maintenance charges |
(454,337 | ) | (371,277 | ) | (2,420,200 | ) | (1,452,600 | ) | (2,681,490 | ) | (2,809,421 | ) | ||||||||||||
Policy benefits and terminations |
(213,956 | ) | (59,916 | ) | (1,140,632 | ) | (545,875 | ) | (1,621,942 | ) | (1,084,930 | ) | ||||||||||||
Other |
19,109 | (73,038 | ) | (1,022,573 | ) | (288,476 | ) | (128,974 | ) | (403,701 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
1,469,071 | 3,246,889 | 10,542,041 | 16,221,501 | (893,543 | ) | 4,973,252 | |||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
3,503,023 | 386,024 | 16,272,192 | 10,457,017 | 11,354,867 | (21,310,826 | ) | |||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
5,407,138 | 5,021,114 | 22,240,628 | 11,783,611 | 35,675,424 | 56,986,250 | ||||||||||||||||||
End of Year |
$ | 8,910,161 | $ | 5,407,138 | $ | 38,512,820 | $ | 22,240,628 | $ | 47,030,291 | $ | 35,675,424 | ||||||||||||
Fidelity VIP Freedom Income | Fidelity VIP Freedom 2010 | Fidelity VIP Freedom 2015 | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 37,701 | $ | 13,081 | $ | 29,477 | $ | 12,833 | $ | 44,393 | $ | 22,985 | ||||||||||||
Realized gain (loss) |
57,039 | (3,289 | ) | (34,289 | ) | (376,555 | ) | (137,861 | ) | (3,862 | ) | |||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
52,671 | (17,454 | ) | 133,123 | (69,266 | ) | 369,657 | (180,024 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
147,411 | (7,662 | ) | 128,311 | (432,988 | ) | 276,189 | (160,901 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
62,581 | 11,749 | 109,808 | 671,541 | 109,859 | 59,498 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
244,735 | 361,834 | 291,057 | 254,390 | 603,033 | 713,026 | ||||||||||||||||||
Policy maintenance charges |
(61,357 | ) | (6,684 | ) | (53,794 | ) | (157,650 | ) | (99,983 | ) | (50,188 | ) | ||||||||||||
Policy benefits and terminations |
(33,463 | ) | (13,723 | ) | (30,564 | ) | (22,687 | ) | (227,657 | ) | (1,057 | ) | ||||||||||||
Other |
159 | (3,384 | ) | (752 | ) | (2,477 | ) | 24,214 | (178,589 | ) | ||||||||||||||
Net Increase in Net Assets Derived from
Policy Transactions |
212,655 | 349,792 | 315,755 | 743,117 | 409,466 | 542,690 | ||||||||||||||||||
NET INCREASE IN NET ASSETS |
360,066 | 342,130 | 444,066 | 310,129 | 685,655 | 381,789 | ||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
353,588 | 11,458 | 394,202 | 84,073 | 719,351 | 337,562 | ||||||||||||||||||
End of Year |
$ | 713,654 | $ | 353,588 | $ | 838,268 | $ | 394,202 | $ | 1,405,006 | $ | 719,351 | ||||||||||||
SA-19
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Fidelity VIP Freedom 2020 | Fidelity VIP Freedom 2025 | Fidelity VIP Freedom 2030 | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 37,506 | $ | 23,331 | $ | 68,106 | $ | 51,958 | $ | 47,358 | $ | 18,092 | ||||||||||||
Realized gain (loss) |
(126,139 | ) | 13,389 | (67,763 | ) | 106,366 | (192,123 | ) | (47,141 | ) | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
381,531 | (299,869 | ) | 545,318 | (998,538 | ) | 461,413 | (318,281 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
292,898 | (263,149 | ) | 545,661 | (840,214 | ) | 316,648 | (347,330 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
265,089 | 169,979 | 178,654 | 127,256 | 232,081 | 157,984 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
231,103 | 837,482 | 210,707 | 121,410 | 1,646,549 | 854,270 | ||||||||||||||||||
Policy maintenance charges |
(117,487 | ) | (51,854 | ) | (166,031 | ) | (148,094 | ) | (115,918 | ) | (47,766 | ) | ||||||||||||
Policy benefits and terminations |
(41,122 | ) | (26,026 | ) | (12,171 | ) | (932 | ) | (75,674 | ) | (110,176 | ) | ||||||||||||
Other |
(55,093 | ) | 278 | (21,972 | ) | (5,505 | ) | 126 | 180 | |||||||||||||||
Net Increase in Net Assets Derived from
Policy Transactions |
282,490 | 929,859 | 189,187 | 94,135 | 1,687,164 | 854,492 | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
575,388 | 666,710 | 734,848 | (746,079 | ) | 2,003,812 | 507,162 | |||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
760,537 | 93,827 | 1,667,848 | 2,413,927 | 643,494 | 136,332 | ||||||||||||||||||
End of Year |
$ | 1,335,925 | $ | 760,537 | $ | 2,402,696 | $ | 1,667,848 | $ | 2,647,306 | $ | 643,494 | ||||||||||||
Fidelity VIP Growth | Fidelity VIP Mid Cap | Fidelity VIP Value Strategies | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 9,865 | $ | 37,476 | $ | 109,993 | $ | 64,703 | $ | 7,245 | $ | 13,128 | ||||||||||||
Realized gain (loss) |
(423,220 | ) | (92,890 | ) | (1,670,226 | ) | 2,882,844 | (872,995 | ) | (639,545 | ) | |||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
1,683,551 | (3,190,823 | ) | 9,594,634 | (15,434,842 | ) | 1,809,143 | (999,345 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
1,270,196 | (3,246,237 | ) | 8,034,401 | (12,487,295 | ) | 943,393 | (1,625,762 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
252,480 | 300,750 | 2,127,858 | 2,715,846 | 298,957 | 355,225 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
459,072 | 3,811,105 | 1,665,265 | (297,312 | ) | 183,413 | (1,209,334 | ) | ||||||||||||||||
Policy maintenance charges |
(233,079 | ) | (247,772 | ) | (1,528,309 | ) | (1,469,291 | ) | (243,348 | ) | (234,638 | ) | ||||||||||||
Policy benefits and terminations |
(152,913 | ) | (31,082 | ) | (1,061,065 | ) | (519,222 | ) | (114,291 | ) | (195,835 | ) | ||||||||||||
Other |
(3,250 | ) | (22,385 | ) | 19,021 | (147,768 | ) | (91,515 | ) | (14,741 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
322,310 | 3,810,616 | 1,222,770 | 282,253 | 33,216 | (1,299,323 | ) | |||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
1,592,506 | 564,379 | 9,257,171 | (12,205,042 | ) | 976,609 | (2,925,085 | ) | ||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
4,120,601 | 3,556,222 | 19,236,052 | 31,441,094 | 1,372,358 | 4,297,443 | ||||||||||||||||||
End of Year |
$ | 5,713,107 | $ | 4,120,601 | $ | 28,493,223 | $ | 19,236,052 | $ | 2,348,967 | $ | 1,372,358 | ||||||||||||
SA-20
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Overseas | INTECH Risk-Managed Core | Enterprise | ||||||||||||||||||||||
Service Class (1) | Service Class | Service Class (2) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 115,543 | $ | 243,316 | $ | 5,679 | $ | 2,757 | $ | — | $ | 2,680 | ||||||||||||
Realized gain (loss) |
(5,408,990 | ) | 523,764 | (40,376 | ) | (444,333 | ) | (435,023 | ) | 44,602 | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
20,081,743 | (16,926,725 | ) | 142,686 | (38,953 | ) | 1,622,995 | (1,859,894 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
14,788,296 | (16,159,645 | ) | 107,989 | (480,529 | ) | 1,187,972 | (1,812,612 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
2,323,931 | 1,560,415 | 81,102 | 51,374 | 278,374 | 327,647 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
3,209,503 | 25,518,734 | 187,436 | 722,167 | (78,400 | ) | 3,502,581 | |||||||||||||||||
Policy maintenance charges |
(1,622,282 | ) | (2,323,884 | ) | (41,289 | ) | (82,856 | ) | (159,890 | ) | (99,061 | ) | ||||||||||||
Policy benefits and terminations |
(846,750 | ) | (328,228 | ) | (1,558 | ) | (71,204 | ) | (96,809 | ) | (17,123 | ) | ||||||||||||
Other |
(43,549 | ) | (210,897 | ) | 6,767 | (45,708 | ) | (8,932 | ) | (58,987 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
3,020,853 | 24,216,140 | 232,458 | 573,773 | (65,657 | ) | 3,655,057 | |||||||||||||||||
NET INCREASE IN NET ASSETS |
17,809,149 | 8,056,495 | 340,447 | 93,244 | 1,122,315 | 1,842,445 | ||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
18,429,844 | 10,373,349 | 251,099 | 157,855 | 2,757,111 | 914,666 | ||||||||||||||||||
End of Year |
$ | 36,238,993 | $ | 18,429,844 | $ | 591,546 | $ | 251,099 | $ | 3,879,426 | $ | 2,757,111 | ||||||||||||
Lazard Retirement | Legg Mason ClearBridge Variable | Legg Mason ClearBridge Variable | ||||||||||||||||||||||
U.S. Strategic Equity | Aggressive Growth - Class II (3) | Mid Cap Core - Class II (4) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 3,774 | $ | 920 | $ | — | $ | — | $ | 7,745 | $ | — | ||||||||||||
Realized gain (loss) |
30,850 | (12,084 | ) | 11,889 | (31,909 | ) | (389,806 | ) | (70,799 | ) | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
75,195 | (18,082 | ) | 118,050 | (71,965 | ) | 2,591,525 | (2,111,950 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
109,819 | (29,246 | ) | 129,939 | (103,874 | ) | 2,209,464 | (2,182,749 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
30,477 | 20,318 | 52,067 | 56,080 | 143,516 | 73,354 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
218,100 | 72,502 | 207,835 | 297,898 | 781,833 | 8,220,995 | ||||||||||||||||||
Policy maintenance charges |
(22,047 | ) | (8,981 | ) | (35,966 | ) | (26,199 | ) | (322,951 | ) | (88,598 | ) | ||||||||||||
Policy benefits and terminations |
(26 | ) | — | (4,310 | ) | — | (1,781,240 | ) | (1,819 | ) | ||||||||||||||
Other |
(184 | ) | 103 | (372 | ) | 362 | 96,354 | 3,734 | ||||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
226,320 | 83,942 | 219,254 | 328,141 | (1,082,488 | ) | 8,207,666 | |||||||||||||||||
NET INCREASE IN NET ASSETS |
336,139 | 54,696 | 349,193 | 224,267 | 1,126,976 | 6,024,917 | ||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
87,381 | 32,685 | 303,371 | 79,104 | 6,147,689 | 122,772 | ||||||||||||||||||
End of Year |
$ | 423,520 | $ | 87,381 | $ | 652,564 | $ | 303,371 | $ | 7,274,665 | $ | 6,147,689 | ||||||||||||
(1) | Formerly named International Growth Service Class Variable Account. | |
(2) | Formerly named Mid Cap Growth Service Class Variable Account. | |
(3) | Formerly named Legg Mason Partners Variable Aggressive Growth - Class II Variable Account. | |
(4) | Formerly named Legg Mason Partners Variable Mid Cap Core - Class II Variable Account. |
SA-21
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
MFS New Discovery Series | MFS Utilities Series | |||||||||||||||||||||||
Service Class | Service Class | NACM Small Cap Class I (1) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | — | $ | — | $ | 111,807 | $ | 59,498 | $ | 475 | $ | — | ||||||||||||
Realized gain (loss) |
(154,962 | ) | (56,894 | ) | (838,412 | ) | (1,080,755 | ) | (441,561 | ) | 86,635 | |||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
668,173 | (216,017 | ) | 1,410,245 | (1,851,470 | ) | 659,288 | (593,869 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
513,211 | (272,911 | ) | 683,640 | (2,872,727 | ) | 218,202 | (507,234 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
302,664 | 63,295 | 321,419 | 398,132 | 73,642 | 115,870 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
1,843,058 | 557,214 | (103,935 | ) | (8,727,545 | ) | 63,452 | 1,136,164 | ||||||||||||||||
Policy maintenance charges |
(88,364 | ) | (24,179 | ) | (213,114 | ) | (302,406 | ) | (48,958 | ) | (32,116 | ) | ||||||||||||
Policy benefits and terminations |
(31,985 | ) | (8,476 | ) | (151,641 | ) | (108,740 | ) | (41,515 | ) | (1,076 | ) | ||||||||||||
Other |
(6,927 | ) | 75 | (82,668 | ) | (28,939 | ) | (1,671 | ) | (54,522 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
2,018,446 | 587,929 | (229,939 | ) | (8,769,498 | ) | 44,950 | 1,164,320 | ||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
2,531,657 | 315,018 | 453,701 | (11,642,225 | ) | 263,152 | 657,086 | |||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
528,886 | 213,868 | 2,694,522 | 14,336,747 | 797,193 | 140,107 | ||||||||||||||||||
End of Year |
$ | 3,060,543 | $ | 528,886 | $ | 3,148,223 | $ | 2,694,522 | $ | 1,060,345 | $ | 797,193 | ||||||||||||
T. Rowe Price | T. Rowe Price | Van Eck | ||||||||||||||||||||||
Blue Chip Growth - II | Equity Income - II | Worldwide Hard Assets | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | — | $ | 4,829 | $ | 384,859 | $ | 567,669 | $ | 133,457 | $ | 171,913 | ||||||||||||
Realized gain (loss) |
(399,890 | ) | (167,354 | ) | (1,803,412 | ) | (2,177,581 | ) | (4,014,612 | ) | 10,407,498 | |||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
2,104,182 | (2,122,224 | ) | 7,178,937 | (9,219,989 | ) | 26,695,685 | (47,039,325 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
1,704,292 | (2,284,749 | ) | 5,760,384 | (10,829,901 | ) | 22,814,530 | (36,459,914 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
724,858 | 678,912 | 2,301,710 | 2,422,784 | 4,677,260 | 5,697,057 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
2,321,884 | 75,136 | 3,919,810 | 516,816 | 3,318,002 | 15,276,266 | ||||||||||||||||||
Policy maintenance charges |
(522,693 | ) | (434,624 | ) | (1,436,505 | ) | (1,428,817 | ) | (3,788,613 | ) | (3,044,375 | ) | ||||||||||||
Policy benefits and terminations |
(309,533 | ) | (203,502 | ) | (764,364 | ) | (677,609 | ) | (1,514,469 | ) | (2,005,527 | ) | ||||||||||||
Other |
(49,024 | ) | (30,490 | ) | 125,593 | (229,598 | ) | 39,696 | (390,953 | ) | ||||||||||||||
Net Increase in Net Assets Derived from
Policy Transactions |
2,165,492 | 85,432 | 4,146,244 | 603,576 | 2,731,876 | 15,532,468 | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
3,869,784 | (2,199,317 | ) | 9,906,628 | (10,226,325 | ) | 25,546,406 | (20,927,446 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
3,262,380 | 5,461,697 | 18,474,390 | 28,700,715 | 42,093,765 | 63,021,211 | ||||||||||||||||||
End of Year |
$ | 7,132,164 | $ | 3,262,380 | $ | 28,381,018 | $ | 18,474,390 | $ | 67,640,171 | $ | 42,093,765 | ||||||||||||
(1) | Formerly named OpCap Small Cap Variable Account. |
SA-22
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
Diversified Bond |
||||||||||||||||||||||||
2009
|
$ | 11.21 | 2,677,541 | $ | 30,027,134 | 0.00 | % | 3.80 | % | 14.13 | % | |||||||||||||
2008
|
9.83 | 2,379,452 | 23,379,628 | 0.00 | % | 3.84 | % | (7.80 | %) | |||||||||||||||
2007
|
10.66 | 2,668,272 | 28,436,894 | 0.00 | % | 5.09 | % | 1.32 | % | |||||||||||||||
05/01/2006 — 12/31/2006
|
10.52 | 997,088 | 10,488,157 | 0.00 | % | 4.65 | % | 5.19 | % | |||||||||||||||
Floating Rate Loan |
||||||||||||||||||||||||
2009
|
$ | 8.63 | 1,711,048 | $ | 14,760,251 | 0.00 | % | 5.08 | % | 24.31 | % | |||||||||||||
2008
|
6.94 | 1,012,929 | 7,029,314 | 0.00 | % | 6.98 | % | (29.28 | %) | |||||||||||||||
05/04/2007 — 12/31/2007
|
9.81 | 962,991 | 9,449,518 | 0.00 | % | 7.28 | % | (1.89 | %) | |||||||||||||||
High Yield Bond |
||||||||||||||||||||||||
2009
|
$ | 43.44 | 2,237,443 | $ | 97,202,439 | 0.00 | % | 7.99 | % | 39.87 | % | |||||||||||||
2008
|
31.06 | 2,132,137 | 66,223,004 | 0.00 | % | 8.71 | % | (22.20 | %) | |||||||||||||||
2007
|
39.92 | 1,924,183 | 76,816,614 | 0.00 | % | 7.58 | % | 2.44 | % | |||||||||||||||
2006
|
38.97 | 1,921,427 | 74,879,252 | 0.00 | % | 7.33 | % | 9.42 | % | |||||||||||||||
2005
|
35.61 | 2,046,323 | 72,878,683 | 0.00 | % | 7.05 | % | 2.37 | % | |||||||||||||||
Inflation Managed |
||||||||||||||||||||||||
2009
|
$ | 45.92 | 3,815,481 | $ | 175,218,196 | 0.00 | % | 4.10 | % | 20.80 | % | |||||||||||||
2008
|
38.02 | 4,059,495 | 154,324,441 | 0.00 | % | 2.85 | % | (9.34 | %) | |||||||||||||||
2007
|
41.93 | 4,204,544 | 176,308,909 | 0.00 | % | 4.27 | % | 10.14 | % | |||||||||||||||
2006
|
38.07 | 4,088,136 | 155,646,544 | 0.00 | % | 3.97 | % | 0.52 | % | |||||||||||||||
2005
|
37.88 | 4,076,452 | 154,399,403 | 0.00 | % | 3.00 | % | 2.54 | % | |||||||||||||||
Managed Bond |
||||||||||||||||||||||||
2009
|
$ | 50.32 | 8,992,559 | $ | 452,533,114 | 0.00 | % | 6.81 | % | 21.01 | % | |||||||||||||
2008
|
41.59 | 9,106,840 | 378,720,069 | 0.00 | % | 4.41 | % | (1.71 | %) | |||||||||||||||
2007
|
42.31 | 9,776,620 | 413,635,229 | 0.00 | % | 4.47 | % | 8.53 | % | |||||||||||||||
2006
|
38.98 | 9,025,168 | 351,828,277 | 0.00 | % | 4.05 | % | 4.81 | % | |||||||||||||||
2005
|
37.19 | 8,493,958 | 315,929,669 | 0.00 | % | 3.40 | % | 2.63 | % | |||||||||||||||
Money Market |
||||||||||||||||||||||||
2009
|
$ | 23.42 | 12,533,277 | $ | 293,482,779 | 0.00 | % | 0.25 | % | 0.17 | % | |||||||||||||
2008
|
23.38 | 12,712,480 | 297,173,335 | 0.00 | % | 2.15 | % | 2.36 | % | |||||||||||||||
2007
|
22.84 | 10,196,175 | 232,852,629 | 0.00 | % | 4.85 | % | 4.99 | % | |||||||||||||||
2006
|
21.75 | 8,657,137 | 188,307,581 | 0.00 | % | 4.64 | % | 4.69 | % | |||||||||||||||
2005
|
20.78 | 9,011,395 | 187,232,550 | 0.00 | % | 2.74 | % | 2.82 | % | |||||||||||||||
Short Duration Bond |
||||||||||||||||||||||||
2009
|
$ | 11.66 | 3,846,075 | $ | 44,837,724 | 0.00 | % | 3.13 | % | 8.66 | % | |||||||||||||
2008
|
10.73 | 3,900,654 | 41,850,977 | 0.00 | % | 3.87 | % | (5.09 | %) | |||||||||||||||
2007
|
11.31 | 4,049,884 | 45,784,334 | 0.00 | % | 4.52 | % | 4.47 | % | |||||||||||||||
2006
|
10.82 | 4,144,613 | 44,852,141 | 0.00 | % | 4.11 | % | 4.27 | % | |||||||||||||||
2005
|
10.38 | 3,819,364 | 39,640,832 | 0.00 | % | 3.05 | % | 1.57 | % | |||||||||||||||
American Funds Growth |
||||||||||||||||||||||||
2009
|
$ | 11.43 | 5,195,477 | $ | 59,372,649 | 0.00 | % | 0.13 | % | 38.86 | % | |||||||||||||
2008
|
8.23 | 5,627,232 | 46,308,882 | 0.00 | % | 0.60 | % | (44.19 | %) | |||||||||||||||
2007
|
14.74 | 4,288,451 | 63,232,628 | 0.00 | % | 0.42 | % | 11.93 | % | |||||||||||||||
2006
|
13.17 | 4,463,397 | 58,796,109 | 0.00 | % | 0.69 | % | 9.81 | % | |||||||||||||||
05/03/2005 — 12/31/2005
|
12.00 | 2,211,749 | 26,532,950 | 0.00 | % | 0.78 | % | 19.96 | % | |||||||||||||||
American Funds Growth-Income |
||||||||||||||||||||||||
2009
|
$ | 10.68 | 5,610,441 | $ | 59,947,385 | 0.00 | % | 1.26 | % | 30.74 | % | |||||||||||||
2008
|
8.17 | 5,619,154 | 45,924,261 | 0.00 | % | 1.41 | % | (38.08 | %) | |||||||||||||||
2007
|
13.20 | 5,233,800 | 69,080,372 | 0.00 | % | 1.31 | % | 4.66 | % | |||||||||||||||
2006
|
12.61 | 4,458,099 | 56,224,609 | 0.00 | % | 1.62 | % | 14.77 | % | |||||||||||||||
05/03/2005 — 12/31/2005
|
10.99 | 1,681,919 | 18,481,536 | 0.00 | % | 1.92 | % | 9.88 | % | |||||||||||||||
Comstock |
||||||||||||||||||||||||
2009
|
$ | 10.12 | 6,250,352 | $ | 63,233,426 | 0.00 | % | 1.52 | % | 28.68 | % | |||||||||||||
2008
|
7.86 | 5,767,472 | 45,345,266 | 0.00 | % | 2.02 | % | (36.79 | %) | |||||||||||||||
2007
|
12.44 | 6,703,119 | 83,377,663 | 0.00 | % | 1.54 | % | (3.01 | %) | |||||||||||||||
2006
|
12.83 | 4,730,546 | 60,669,698 | 0.00 | % | 1.76 | % | 16.33 | % | |||||||||||||||
2005
|
11.02 | 3,673,500 | 40,498,213 | 0.00 | % | 1.39 | % | 4.36 | % | |||||||||||||||
Diversified Research |
||||||||||||||||||||||||
2009
|
$ | 11.91 | 2,937,995 | $ | 34,983,770 | 0.00 | % | 1.66 | % | 32.40 | % | |||||||||||||
2008
|
8.99 | 3,700,234 | 33,277,837 | 0.00 | % | 1.04 | % | (39.07 | %) | |||||||||||||||
2007
|
14.76 | 4,824,065 | 71,202,866 | 0.00 | % | 0.71 | % | 1.19 | % | |||||||||||||||
2006
|
14.59 | 5,271,188 | 76,886,161 | 0.00 | % | 0.67 | % | 11.97 | % | |||||||||||||||
2005
|
13.03 | 5,109,087 | 66,554,596 | 0.00 | % | 0.47 | % | 5.24 | % | |||||||||||||||
Equity |
||||||||||||||||||||||||
2009
|
$ | 11.41 | 2,754,697 | $ | 31,424,320 | 0.00 | % | 0.94 | % | 35.23 | % | |||||||||||||
2008
|
8.44 | 3,103,463 | 26,180,303 | 0.00 | % | 0.51 | % | (41.12 | %) | |||||||||||||||
2007
|
14.33 | 3,445,626 | 49,367,148 | 0.00 | % | 0.22 | % | 6.27 | % | |||||||||||||||
2006
|
13.48 | 3,338,286 | 45,007,199 | 0.00 | % | 0.37 | % | 8.65 | % | |||||||||||||||
2005
|
12.41 | 4,011,507 | 49,777,144 | 0.00 | % | 0.26 | % | 6.53 | % | |||||||||||||||
Equity Index |
||||||||||||||||||||||||
2009
|
$ | 45.04 | 9,693,106 | $ | 436,544,053 | 0.00 | % | 1.79 | % | 26.36 | % | |||||||||||||
2008
|
35.64 | 9,749,024 | 347,463,802 | 0.00 | % | 2.00 | % | (37.35 | %) | |||||||||||||||
2007
|
56.89 | 9,701,628 | 551,923,775 | 0.00 | % | 1.84 | % | 5.23 | % | |||||||||||||||
2006
|
54.06 | 10,173,850 | 550,028,122 | 0.00 | % | 1.77 | % | 15.52 | % | |||||||||||||||
2005
|
46.80 | 10,743,851 | 502,817,844 | 0.00 | % | 1.46 | % | 4.67 | % |
See Notes to Financial Statements | See explanation of references on SA-27 |
SA-23
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
Focused 30 |
||||||||||||||||||||||||
2009
|
$ | 12.33 | 2,819,667 | $ | 34,755,997 | 0.00 | % | 0.00 | % | 50.43 | % | |||||||||||||
2008
|
8.19 | 3,634,894 | 29,783,940 | 0.00 | % | 0.05 | % | (50.14 | %) | |||||||||||||||
2007
|
16.43 | 3,080,715 | 50,627,718 | 0.00 | % | 0.43 | % | 31.84 | % | |||||||||||||||
2006
|
12.46 | 2,287,373 | 28,511,623 | 0.00 | % | 0.07 | % | 23.71 | % | |||||||||||||||
2005
|
10.08 | 1,809,953 | 18,236,050 | 0.00 | % | 1.06 | % | 22.07 | % | |||||||||||||||
Growth LT |
||||||||||||||||||||||||
2009
|
$ | 40.75 | 4,914,745 | $ | 200,271,001 | 0.00 | % | 1.07 | % | 37.28 | % | |||||||||||||
2008
|
29.68 | 5,471,535 | 162,407,213 | 0.00 | % | 0.49 | % | (40.95 | %) | |||||||||||||||
2007
|
50.27 | 6,242,947 | 313,824,437 | 0.00 | % | 0.44 | % | 15.63 | % | |||||||||||||||
2006
|
43.47 | 6,931,734 | 301,351,116 | 0.00 | % | 0.60 | % | 9.72 | % | |||||||||||||||
2005
|
39.62 | 7,403,306 | 293,349,777 | 0.00 | % | 0.25 | % | 7.68 | % | |||||||||||||||
Large-Cap Growth (4) |
||||||||||||||||||||||||
2009
|
$ | 6.31 | 8,196,379 | $ | 51,736,439 | 0.00 | % | 0.06 | % | 40.50 | % | |||||||||||||
2008
|
4.49 | 7,385,240 | 33,179,269 | 0.00 | % | 0.00 | % | (50.47 | %) | |||||||||||||||
2007
|
9.07 | 6,937,338 | 62,931,690 | 0.00 | % | 0.00 | % | 21.63 | % | |||||||||||||||
2006
|
7.46 | 8,055,216 | 60,078,214 | 0.00 | % | 0.21 | % | (3.82 | %) | |||||||||||||||
2005
|
7.75 | 7,040,498 | 54,593,520 | 0.00 | % | 0.34 | % | 2.94 | % | |||||||||||||||
Large-Cap Value |
||||||||||||||||||||||||
2009
|
$ | 13.94 | 8,956,147 | $ | 124,817,482 | 0.00 | % | 2.11 | % | 23.13 | % | |||||||||||||
2008
|
11.32 | 8,744,818 | 98,977,865 | 0.00 | % | 1.76 | % | (34.80 | %) | |||||||||||||||
2007
|
17.36 | 9,143,314 | 158,714,149 | 0.00 | % | 1.18 | % | 3.54 | % | |||||||||||||||
2006
|
16.77 | 9,331,394 | 156,441,283 | 0.00 | % | 1.25 | % | 17.58 | % | |||||||||||||||
2005
|
14.26 | 9,608,665 | 137,007,537 | 0.00 | % | 1.29 | % | 6.16 | % | |||||||||||||||
Long/Short Large-Cap |
||||||||||||||||||||||||
2009
|
$ | 8.42 | 2,826,468 | $ | 23,800,021 | 0.00 | % | 0.92 | % | 27.56 | % | |||||||||||||
05/02/2008 — 12/31/2008
|
6.60 | 1,785,967 | 11,789,340 | 0.00 | % | 0.97 | % | (35.04 | %) | |||||||||||||||
Main Street Core |
||||||||||||||||||||||||
2009
|
$ | 43.71 | 2,500,133 | $ | 109,273,337 | 0.00 | % | 1.51 | % | 29.36 | % | |||||||||||||
2008
|
33.79 | 2,911,427 | 98,370,807 | 0.00 | % | 1.39 | % | (38.87 | %) | |||||||||||||||
2007
|
55.27 | 3,102,111 | 171,459,406 | 0.00 | % | 1.20 | % | 4.40 | % | |||||||||||||||
2006
|
52.94 | 2,987,945 | 158,190,552 | 0.00 | % | 1.24 | % | 15.18 | % | |||||||||||||||
2005
|
45.97 | 3,318,283 | 152,528,923 | 0.00 | % | 1.11 | % | 5.99 | % | |||||||||||||||
Mid-Cap Equity (5) |
||||||||||||||||||||||||
2009
|
$ | 21.09 | 6,018,439 | $ | 126,956,917 | 0.00 | % | 1.12 | % | 39.65 | % | |||||||||||||
2008
|
15.11 | 7,822,686 | 118,162,029 | 0.00 | % | 1.58 | % | (39.00 | %) | |||||||||||||||
2007
|
24.76 | 8,230,390 | 203,798,206 | 0.00 | % | 0.74 | % | (2.15 | %) | |||||||||||||||
2006
|
25.31 | 8,035,634 | 203,350,799 | 0.00 | % | 0.69 | % | 14.97 | % | |||||||||||||||
2005
|
22.01 | 7,960,146 | 175,210,180 | 0.00 | % | 0.54 | % | 8.87 | % | |||||||||||||||
Mid-Cap Growth |
||||||||||||||||||||||||
2009
|
$ | 8.64 | 6,166,014 | $ | 53,288,925 | 0.00 | % | 0.35 | % | 59.33 | % | |||||||||||||
2008
|
5.42 | 5,938,701 | 32,212,994 | 0.00 | % | 0.12 | % | (48.36 | %) | |||||||||||||||
2007
|
10.50 | 6,666,596 | 70,025,236 | 0.00 | % | 0.48 | % | 22.92 | % | |||||||||||||||
2006
|
8.55 | 6,053,274 | 51,728,324 | 0.00 | % | 0.23 | % | 8.93 | % | |||||||||||||||
2005
|
7.84 | 4,677,898 | 36,697,161 | 0.00 | % | 0.00 | % | 17.90 | % | |||||||||||||||
Mid-Cap Value (6) |
||||||||||||||||||||||||
02/13/2009 — 12/31/2009
|
$ | 14.58 | 1,208,072 | $ | 17,610,386 | 0.00 | % | 1.03 | % | 42.90 | % | |||||||||||||
Small-Cap Equity (7) |
||||||||||||||||||||||||
2009
|
$ | 13.98 | 1,373,316 | $ | 19,202,935 | 0.00 | % | 0.79 | % | 30.22 | % | |||||||||||||
2008
|
10.74 | 1,349,982 | 14,496,396 | 0.00 | % | 0.62 | % | (26.11 | %) | |||||||||||||||
2007
|
14.53 | 785,370 | 11,413,846 | 0.00 | % | 0.24 | % | 6.04 | % | |||||||||||||||
2006
|
13.71 | 415,525 | 5,695,033 | 0.00 | % | 0.89 | % | 18.68 | % | |||||||||||||||
05/03/2005 — 12/31/2005
|
11.55 | 208,894 | 2,412,411 | 0.00 | % | 0.86 | % | 15.48 | % | |||||||||||||||
Small-Cap Growth (8) |
||||||||||||||||||||||||
2009
|
$ | 12.19 | 3,188,386 | $ | 38,860,823 | 0.00 | % | 0.00 | % | 47.44 | % | |||||||||||||
2008
|
8.27 | 3,474,237 | 28,720,306 | 0.00 | % | 0.00 | % | (47.11 | %) | |||||||||||||||
2007
|
15.63 | 3,236,389 | 50,586,573 | 0.00 | % | 0.00 | % | 15.10 | % | |||||||||||||||
2006
|
13.58 | 2,986,761 | 40,560,290 | 0.00 | % | 0.26 | % | 5.07 | % | |||||||||||||||
2005
|
12.93 | 3,275,109 | 42,331,400 | 0.00 | % | 0.22 | % | 2.66 | % | |||||||||||||||
Small-Cap Index |
||||||||||||||||||||||||
2009
|
$ | 15.71 | 11,242,905 | $ | 176,659,959 | 0.00 | % | 1.19 | % | 28.19 | % | |||||||||||||
2008
|
12.26 | 12,603,955 | 154,492,786 | 0.00 | % | 2.04 | % | (35.03 | %) | |||||||||||||||
2007
|
18.87 | 14,234,769 | 268,559,624 | 0.00 | % | 1.25 | % | (2.02 | %) | |||||||||||||||
2006
|
19.25 | 15,783,089 | 303,894,564 | 0.00 | % | 1.52 | % | 17.79 | % | |||||||||||||||
2005
|
16.35 | 17,236,081 | 281,759,120 | 0.00 | % | 0.49 | % | 4.38 | % | |||||||||||||||
Small-Cap Value |
||||||||||||||||||||||||
2009
|
$ | 20.23 | 2,953,532 | $ | 59,758,067 | 0.00 | % | 2.59 | % | 27.18 | % | |||||||||||||
2008
|
15.91 | 3,018,819 | 48,025,798 | 0.00 | % | 2.59 | % | (28.23 | %) | |||||||||||||||
2007
|
22.16 | 2,748,103 | 60,911,384 | 0.00 | % | 1.85 | % | 3.14 | % | |||||||||||||||
2006
|
21.49 | 2,994,334 | 64,351,383 | 0.00 | % | 2.51 | % | 19.75 | % | |||||||||||||||
2005
|
17.95 | 2,557,703 | 45,901,085 | 0.00 | % | 1.37 | % | 13.65 | % | |||||||||||||||
Emerging Markets |
||||||||||||||||||||||||
2009
|
$ | 31.72 | 4,503,441 | $ | 142,859,778 | 0.00 | % | 0.95 | % | 84.79 | % | |||||||||||||
2008
|
17.17 | 4,798,685 | 82,375,964 | 0.00 | % | 1.48 | % | (47.68 | %) | |||||||||||||||
2007
|
32.81 | 5,417,715 | 177,769,491 | 0.00 | % | 1.16 | % | 33.09 | % | |||||||||||||||
2006
|
24.65 | 5,128,600 | 126,439,320 | 0.00 | % | 0.78 | % | 24.40 | % | |||||||||||||||
2005
|
19.82 | 4,934,335 | 97,790,451 | 0.00 | % | 1.09 | % | 41.47 | % |
See Notes to Financial Statements | See explanation of references on SA-27 |
SA-24
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
International Large-Cap |
||||||||||||||||||||||||
2009 |
$ | 11.05 | 13,371,427 | $ | 147,687,972 | 0.00 | % | 1.63 | % | 33.61 | % | |||||||||||||
2008 |
8.27 | 14,676,980 | 121,327,391 | 0.00 | % | 2.16 | % | (35.35 | %) | |||||||||||||||
2007 |
12.79 | 15,067,071 | 192,663,328 | 0.00 | % | 1.58 | % | 9.26 | % | |||||||||||||||
2006 |
11.70 | 15,768,095 | 184,533,716 | 0.00 | % | 2.89 | % | 27.00 | % | |||||||||||||||
2005 |
9.21 | 14,566,843 | 134,228,198 | 0.00 | % | 0.87 | % | 12.70 | % | |||||||||||||||
International Small-Cap |
||||||||||||||||||||||||
2009 |
$ | 7.34 | 3,017,020 | $ | 22,136,232 | 0.00 | % | 1.53 | % | 30.28 | % | |||||||||||||
2008 |
5.63 | 2,683,144 | 15,110,867 | 0.00 | % | 2.30 | % | (47.84 | %) | |||||||||||||||
2007 |
10.80 | 2,202,534 | 23,781,576 | 0.00 | % | 1.34 | % | 4.73 | % | |||||||||||||||
05/01/2006 — 12/31/2006 |
10.31 | 1,248,871 | 12,875,311 | 0.00 | % | 0.23 | % | 3.10 | % | |||||||||||||||
International Value |
||||||||||||||||||||||||
2009 |
$ | 23.25 | 7,068,121 | $ | 164,331,210 | 0.00 | % | 2.21 | % | 28.00 | % | |||||||||||||
2008 |
18.16 | 8,230,656 | 149,496,258 | 0.00 | % | 2.77 | % | (47.78 | %) | |||||||||||||||
2007 |
34.78 | 8,793,719 | 305,888,339 | 0.00 | % | 2.01 | % | 6.24 | % | |||||||||||||||
2006 |
32.74 | 8,634,107 | 282,689,209 | 0.00 | % | 1.65 | % | 25.69 | % | |||||||||||||||
2005 |
26.05 | 8,552,145 | 222,779,702 | 0.00 | % | 1.97 | % | 9.43 | % | |||||||||||||||
Health Sciences |
||||||||||||||||||||||||
2009 |
$ | 13.96 | 1,430,534 | $ | 19,972,732 | 0.00 | % | 0.12 | % | 27.23 | % | |||||||||||||
2008 |
10.97 | 1,580,888 | 17,348,617 | 0.00 | % | 1.27 | % | (28.16 | %) | |||||||||||||||
2007 |
15.28 | 1,525,560 | 23,304,460 | 0.00 | % | 0.00 | % | 16.47 | % | |||||||||||||||
2006 |
13.12 | 1,451,105 | 19,032,105 | 0.00 | % | 0.00 | % | 8.11 | % | |||||||||||||||
2005 |
12.13 | 1,323,214 | 16,052,785 | 0.00 | % | 0.00 | % | 15.28 | % | |||||||||||||||
Real Estate |
||||||||||||||||||||||||
2009 |
$ | 29.15 | 2,226,122 | $ | 64,880,761 | 0.00 | % | 2.08 | % | 32.27 | % | |||||||||||||
2008 |
22.03 | 2,452,417 | 54,036,431 | 0.00 | % | 3.75 | % | (39.99 | %) | |||||||||||||||
2007 |
36.71 | 2,496,462 | 91,656,848 | 0.00 | % | 1.02 | % | (16.16 | %) | |||||||||||||||
2006 |
43.79 | 2,826,403 | 123,770,629 | 0.00 | % | 3.08 | % | 38.06 | % | |||||||||||||||
2005 |
31.72 | 2,853,932 | 90,522,273 | 0.00 | % | 0.89 | % | 16.79 | % | |||||||||||||||
Technology |
||||||||||||||||||||||||
2009 |
$ | 5.96 | 2,404,956 | $ | 14,323,957 | 0.00 | % | 0.00 | % | 52.57 | % | |||||||||||||
2008 |
3.90 | 2,581,728 | 10,078,433 | 0.00 | % | 0.10 | % | (51.64 | %) | |||||||||||||||
2007 |
8.07 | 2,811,966 | 22,697,317 | 0.00 | % | 0.05 | % | 23.03 | % | |||||||||||||||
2006 |
6.56 | 2,674,031 | 17,543,154 | 0.00 | % | 0.00 | % | 9.34 | % | |||||||||||||||
2005 |
6.00 | 2,027,444 | 12,164,728 | 0.00 | % | 0.00 | % | 21.71 | % | |||||||||||||||
American Funds Asset Allocation (6) |
||||||||||||||||||||||||
02/26/2009 — 12/31/2009 |
$ | 12.98 | 192,292 | $ | 2,496,210 | 0.00 | % | 4.73 | % | 36.71 | % | |||||||||||||
Multi-Strategy |
||||||||||||||||||||||||
2009 |
$ | 35.29 | 1,477,979 | $ | 52,152,259 | 0.00 | % | 5.65 | % | 23.00 | % | |||||||||||||
2008 |
28.69 | 1,679,534 | 48,183,776 | 0.00 | % | 0.15 | % | (44.98 | %) | |||||||||||||||
2007 |
52.14 | 1,891,715 | 98,643,009 | 0.00 | % | 2.81 | % | 4.34 | % | |||||||||||||||
2006 |
49.97 | 2,113,184 | 105,604,294 | 0.00 | % | 2.53 | % | 11.68 | % | |||||||||||||||
2005 |
44.75 | 2,421,143 | 108,336,551 | 0.00 | % | 2.24 | % | 3.78 | % | |||||||||||||||
Pacific Dynamix — Conservative Growth (6) |
||||||||||||||||||||||||
07/06/2009 — 12/31/2009 |
$ | 11.43 | 44,364 | $ | 506,868 | 0.00 | % | 5.68 | % | 12.29 | % | |||||||||||||
Pacific Dynamix — Moderate Growth (6) |
||||||||||||||||||||||||
05/22/2009 — 12/31/2009 |
$ | 11.96 | 68,810 | $ | 822,948 | 0.00 | % | 4.19 | % | 17.75 | % | |||||||||||||
Pacific Dynamix — Growth (6) |
||||||||||||||||||||||||
05/26/2009 — 12/31/2009 |
$ | 12.43 | 121,148 | $ | 1,506,341 | 0.00 | % | 1.88 | % | 19.49 | % | |||||||||||||
I |
||||||||||||||||||||||||
2009 |
$ | 28.41 | 2,314,197 | $ | 65,746,083 | 0.00 | % | 2.42 | % | 25.28 | % | |||||||||||||
2008 |
22.68 | 2,613,074 | 59,256,956 | 0.00 | % | 3.12 | % | (39.84 | %) | |||||||||||||||
2007 |
37.70 | 3,147,799 | 118,662,254 | 0.00 | % | 2.05 | % | 8.01 | % | |||||||||||||||
2006 |
34.90 | 3,112,831 | 108,644,524 | 0.00 | % | 1.50 | % | 26.78 | % | |||||||||||||||
2005 |
27.53 | 2,849,925 | 78,457,074 | 0.00 | % | 1.57 | % | 10.55 | % | |||||||||||||||
II |
||||||||||||||||||||||||
2009 |
$ | 19.50 | 1,351,335 | $ | 26,352,166 | 0.00 | % | 0.64 | % | 37.40 | % | |||||||||||||
2008 |
14.19 | 1,546,955 | 21,954,840 | 0.00 | % | 0.02 | % | (48.97 | %) | |||||||||||||||
2007 |
27.81 | 1,388,785 | 38,626,287 | 0.00 | % | 0.37 | % | 22.43 | % | |||||||||||||||
2006 |
22.72 | 1,586,739 | 36,046,654 | 0.00 | % | 0.63 | % | 8.52 | % | |||||||||||||||
2005 |
20.93 | 1,419,434 | 29,714,468 | 0.00 | % | 0.45 | % | 13.92 | % | |||||||||||||||
III |
||||||||||||||||||||||||
2009 |
$ | 32.82 | 1,157,067 | $ | 37,978,468 | 0.00 | % | 0.04 | % | 48.61 | % | |||||||||||||
2008 |
22.09 | 1,347,597 | 29,764,785 | 0.00 | % | 0.00 | % | (42.03 | %) | |||||||||||||||
2007 |
38.10 | 1,330,308 | 50,686,469 | 0.00 | % | 0.00 | % | 11.92 | % | |||||||||||||||
2006 |
34.04 | 1,340,167 | 45,625,020 | 0.00 | % | 0.00 | % | 16.35 | % | |||||||||||||||
2005 |
29.26 | 1,366,693 | 39,991,343 | 0.00 | % | 0.00 | % | 15.13 | % | |||||||||||||||
V |
||||||||||||||||||||||||
2009 |
$ | 13.83 | 1,670,010 | $ | 23,095,826 | 0.00 | % | 0.83 | % | 24.58 | % | |||||||||||||
2008 |
11.10 | 1,829,893 | 20,313,595 | 0.00 | % | 0.05 | % | (34.48 | %) | |||||||||||||||
2007 |
16.94 | 1,446,522 | 24,509,629 | 0.00 | % | 0.62 | % | 5.44 | % | |||||||||||||||
2006 |
16.07 | 1,549,298 | 24,896,714 | 0.00 | % | 0.55 | % | 13.89 | % | |||||||||||||||
2005 |
14.11 | 1,282,886 | 18,101,507 | 0.00 | % | 0.76 | % | 7.81 | % |
See Notes to Financial Statements | See explanation of references on SA-27 |
SA-25
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
BlackRock Basic Value V.I. Class III (9) |
||||||||||||||||||||||||
2009 |
$ | 10.43 | 854,477 | $ | 8,910,161 | 0.00 | % | 2.13 | % | 30.87 | % | |||||||||||||
2008 |
7.97 | 678,596 | 5,407,138 | 0.00 | % | 2.78 | % | (36.91 | %) | |||||||||||||||
2007 |
12.63 | 397,583 | 5,021,114 | 0.00 | % | 1.64 | % | 1.53 | % | |||||||||||||||
2006 |
12.44 | 234,578 | 2,917,816 | 0.00 | % | 4.02 | % | 21.59 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.23 | 14,023 | 143,454 | 0.00 | % | 2.48 | % | 2.30 | % | |||||||||||||||
BlackRock Global Allocation V.I. Class III (10) |
||||||||||||||||||||||||
2009 |
$ | 14.43 | 2,669,828 | $ | 38,512,820 | 0.00 | % | 2.18 | % | 20.92 | % | |||||||||||||
2008 |
11.93 | 1,864,286 | 22,240,628 | 0.00 | % | 2.73 | % | (19.67 | %) | |||||||||||||||
2007 |
14.85 | 793,421 | 11,783,611 | 0.00 | % | 4.57 | % | 16.75 | % | |||||||||||||||
2006 |
12.72 | 349,576 | 4,446,773 | 0.00 | % | 3.86 | % | 16.40 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.93 | 265,340 | 2,899,576 | 0.00 | % | 7.00 | % | 9.28 | % | |||||||||||||||
Fidelity VIP Contrafund Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 11.66 | 4,031,894 | $ | 47,030,291 | 0.00 | % | 1.20 | % | 35.47 | % | |||||||||||||
2008 |
8.61 | 4,143,220 | 35,675,424 | 0.00 | % | 0.82 | % | (42.69 | %) | |||||||||||||||
2007 |
15.02 | 3,792,886 | 56,986,250 | 0.00 | % | 0.91 | % | 17.30 | % | |||||||||||||||
2006 |
12.81 | 2,446,046 | 31,329,827 | 0.00 | % | 1.02 | % | 11.43 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
11.49 | 1,902,907 | 21,872,725 | 0.00 | % | 0.00 | % | 14.94 | % | |||||||||||||||
Fidelity VIP Freedom Income Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 10.26 | 69,529 | $ | 713,654 | 0.00 | % | 4.15 | % | 14.64 | % | |||||||||||||
2008 |
8.95 | 39,492 | 353,588 | 0.00 | % | 14.21 | % | (10.70 | %) | |||||||||||||||
10/29/2007 — 12/31/2007 |
10.03 | 1,143 | 11,458 | 0.00 | % | See Note (11) | (0.35 | %) | ||||||||||||||||
Fidelity VIP Freedom 2010 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 9.19 | 91,200 | $ | 838,268 | 0.00 | % | 5.16 | % | 23.95 | % | |||||||||||||
2008 |
7.42 | 53,161 | 394,202 | 0.00 | % | 0.70 | % | (25.17 | %) | |||||||||||||||
12/13/2007 — 12/31/2007 |
9.91 | 8,484 | 84,073 | 0.00 | % | See Note (11) | (0.11 | %) | ||||||||||||||||
Fidelity VIP Freedom 2015 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 8.98 | 156,467 | $ | 1,405,006 | 0.00 | % | 4.00 | % | 25.02 | % | |||||||||||||
2008 |
7.18 | 100,154 | 719,351 | 0.00 | % | 4.61 | % | (27.30 | %) | |||||||||||||||
10/26/2007 — 12/31/2007 |
9.88 | 34,170 | 337,562 | 0.00 | % | See Note (11) | (2.12 | %) | ||||||||||||||||
Fidelity VIP Freedom 2020 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 8.49 | 157,385 | $ | 1,335,925 | 0.00 | % | 3.60 | % | 28.55 | % | |||||||||||||
2008 |
6.60 | 115,177 | 760,537 | 0.00 | % | 4.50 | % | (32.80 | %) | |||||||||||||||
12/03/2007 — 12/31/2007 |
9.83 | 9,549 | 93,827 | 0.00 | % | See Note (11) | (0.02 | %) | ||||||||||||||||
Fidelity VIP Freedom 2025 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 8.36 | 287,505 | $ | 2,402,696 | 0.00 | % | 3.46 | % | 29.79 | % | |||||||||||||
2008 |
6.44 | 259,035 | 1,667,848 | 0.00 | % | 2.48 | % | (34.36 | %) | |||||||||||||||
11/09/2007 — 12/31/2007 |
9.81 | 246,074 | 2,413,927 | 0.00 | % | See Note (11) | 0.26 | % | ||||||||||||||||
Fidelity VIP Freedom 2030 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 7.91 | 334,513 | $ | 2,647,306 | 0.00 | % | 3.66 | % | 31.18 | % | |||||||||||||
2008 |
6.03 | 106,664 | 643,494 | 0.00 | % | 2.93 | % | (38.17 | %) | |||||||||||||||
10/08/2007 — 12/31/2007 |
9.76 | 13,972 | 136,332 | 0.00 | % | See Note (11) | (2.98 | %) | ||||||||||||||||
Fidelity VIP Growth Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 9.70 | 589,043 | $ | 5,713,107 | 0.00 | % | 0.21 | % | 27.97 | % | |||||||||||||
2008 |
7.58 | 543,659 | 4,120,601 | 0.00 | % | 0.69 | % | (47.31 | %) | |||||||||||||||
2007 |
14.38 | 247,233 | 3,556,222 | 0.00 | % | 0.19 | % | 26.66 | % | |||||||||||||||
2006 |
11.36 | 57,966 | 658,290 | 0.00 | % | 0.13 | % | 6.57 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.66 | 25,172 | 268,238 | 0.00 | % | 0.00 | % | 6.56 | % | |||||||||||||||
Fidelity VIP Mid Cap Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 12.69 | 2,244,999 | $ | 28,493,223 | 0.00 | % | 0.47 | % | 39.75 | % | |||||||||||||
2008 |
9.08 | 2,118,100 | 19,236,052 | 0.00 | % | 0.24 | % | (39.61 | %) | |||||||||||||||
2007 |
15.04 | 2,090,850 | 31,441,094 | 0.00 | % | 0.48 | % | 15.34 | % | |||||||||||||||
2006 |
13.04 | 1,357,809 | 17,702,724 | 0.00 | % | 0.18 | % | 12.40 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
11.60 | 1,326,555 | 15,386,821 | 0.00 | % | 0.00 | % | 15.99 | % | |||||||||||||||
Fidelity VIP Value Strategies Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 9.87 | 237,955 | $ | 2,348,967 | 0.00 | % | 0.34 | % | 57.15 | % | |||||||||||||
2008 |
6.28 | 218,478 | 1,372,358 | 0.00 | % | 0.50 | % | (51.28 | %) | |||||||||||||||
2007 |
12.89 | 333,286 | 4,297,443 | 0.00 | % | 0.46 | % | 5.44 | % | |||||||||||||||
2006 |
12.23 | 795,861 | 9,732,388 | 0.00 | % | 0.09 | % | 16.01 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.54 | 31,720 | 334,372 | 0.00 | % | 0.00 | % | 5.41 | % | |||||||||||||||
Overseas Service Class (12) |
||||||||||||||||||||||||
2009 |
$ | 10.24 | 3,539,855 | $ | 36,238,993 | 0.00 | % | 0.44 | % | 79.07 | % | |||||||||||||
2008 |
5.72 | 3,223,717 | 18,429,844 | 0.00 | % | 1.22 | % | (52.23 | %) | |||||||||||||||
05/03/2007 — 12/31/2007 |
11.97 | 866,820 | 10,373,349 | 0.00 | % | 0.69 | % | 16.76 | % | |||||||||||||||
INTECH Risk-Managed Core Service Class |
||||||||||||||||||||||||
2009 |
$ | 7.85 | 75,317 | $ | 591,546 | 0.00 | % | 1.36 | % | 22.55 | % | |||||||||||||
2008 |
6.41 | 39,181 | 251,099 | 0.00 | % | 0.20 | % | (36.24 | %) | |||||||||||||||
06/21/2007 — 12/31/2007 |
10.05 | 15,705 | 157,855 | 0.00 | % | 2.17 | % | 0.66 | % | |||||||||||||||
Enterprise Service Class (13) |
||||||||||||||||||||||||
2009 |
$ | 8.98 | 431,880 | $ | 3,879,426 | 0.00 | % | 0.00 | % | 44.44 | % | |||||||||||||
2008 |
6.22 | 443,354 | 2,757,111 | 0.00 | % | 0.10 | % | (43.86 | %) | |||||||||||||||
05/16/2007 — 12/31/2007 |
11.08 | 82,577 | 914,666 | 0.00 | % | 0.12 | % | 8.83 | % | |||||||||||||||
Lazard Retirement U.S. Strategic Equity |
||||||||||||||||||||||||
2009 |
$ | 7.75 | 54,644 | $ | 423,520 | 0.00 | % | 1.12 | % | 26.84 | % | |||||||||||||
2008 |
6.11 | 14,300 | 87,381 | 0.00 | % | 1.35 | % | (35.28 | %) | |||||||||||||||
05/21/2007 — 12/31/2007 |
9.44 | 3,462 | 32,685 | 0.00 | % | 4.44 | % | (8.17 | %) |
See Notes to Financial Statements | See explanation of references on SA-27 |
SA-26
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
Legg Mason ClearBridge Variable Aggressive
Growth — Class II (14) |
||||||||||||||||||||||||
2009 |
$ | 7.75 | 84,216 | $ | 652,564 | 0.00 | % | 0.00 | % | 34.19 | % | |||||||||||||
2008 |
5.77 | 52,538 | 303,371 | 0.00 | % | 0.00 | % | (40.58 | %) | |||||||||||||||
05/03/2007 — 12/31/2007 |
9.72 | 8,141 | 79,104 | 0.00 | % | 0.00 | % | (4.02 | %) | |||||||||||||||
Legg Mason ClearBridge Variable Mid Cap
Core — Class II (15) |
||||||||||||||||||||||||
2009 |
$ | 8.57 | 848,497 | $ | 7,274,665 | 0.00 | % | 0.11 | % | 35.81 | % | |||||||||||||
2008 |
6.31 | 973,799 | 6,147,689 | 0.00 | % | 0.00 | % | (35.43 | %) | |||||||||||||||
05/21/2007 — 12/31/2007 |
9.78 | 12,558 | 122,772 | 0.00 | % | 0.12 | % | (5.49 | %) | |||||||||||||||
MFS New Discovery Series Service Class |
||||||||||||||||||||||||
2009 |
$ | 9.39 | 326,023 | $ | 3,060,543 | 0.00 | % | 0.00 | % | 62.92 | % | |||||||||||||
2008 |
5.76 | 91,789 | 528,886 | 0.00 | % | 0.00 | % | (39.52 | %) | |||||||||||||||
05/14/2007 — 12/31/2007 |
9.53 | 22,449 | 213,868 | 0.00 | % | 0.00 | % | (4.79 | %) | |||||||||||||||
MFS Utilities Series Service Class |
||||||||||||||||||||||||
2009 |
$ | 9.20 | 342,118 | $ | 3,148,223 | 0.00 | % | 4.53 | % | 32.87 | % | |||||||||||||
2008 |
6.93 | 389,058 | 2,694,522 | 0.00 | % | 0.94 | % | (37.81 | %) | |||||||||||||||
05/11/2007 — 12/31/2007 |
11.14 | 1,287,407 | 14,336,747 | 0.00 | % | 0.00 | % | 9.08 | % | |||||||||||||||
NACM Small Cap Class I (16) |
||||||||||||||||||||||||
2009 |
$ | 6.43 | 164,837 | $ | 1,060,345 | 0.00 | % | 0.05 | % | 15.58 | % | |||||||||||||
2008 |
5.57 | 143,231 | 797,193 | 0.00 | % | 0.00 | % | (41.63 | %) | |||||||||||||||
05/24/2007 — 12/31/2007 |
9.54 | 14,693 | 140,107 | 0.00 | % | 0.00 | % | (6.71 | %) | |||||||||||||||
T. Rowe Price Blue Chip Growth — II |
||||||||||||||||||||||||
2009 |
$ | 10.73 | 664,636 | $ | 7,132,164 | 0.00 | % | 0.00 | % | 41.79 | % | |||||||||||||
2008 |
7.57 | 431,068 | 3,262,380 | 0.00 | % | 0.11 | % | (42.65 | %) | |||||||||||||||
2007 |
13.20 | 413,880 | 5,461,697 | 0.00 | % | 0.07 | % | 12.49 | % | |||||||||||||||
2006 |
11.73 | 199,541 | 2,340,853 | 0.00 | % | 0.32 | % | 9.33 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.73 | 60,700 | 651,326 | 0.00 | % | 0.28 | % | 7.30 | % | |||||||||||||||
T. Rowe Price Equity Income — II |
||||||||||||||||||||||||
2009 |
$ | 10.07 | 2,818,542 | $ | 28,381,018 | 0.00 | % | 1.76 | % | 25.25 | % | |||||||||||||
2008 |
8.04 | 2,297,997 | 18,474,390 | 0.00 | % | 2.22 | % | (36.26 | %) | |||||||||||||||
2007 |
12.61 | 2,275,375 | 28,700,715 | 0.00 | % | 1.49 | % | 3.03 | % | |||||||||||||||
2006 |
12.24 | 2,347,503 | 28,739,750 | 0.00 | % | 1.54 | % | 18.65 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.32 | 767,607 | 7,920,645 | 0.00 | % | 1.94 | % | 3.19 | % | |||||||||||||||
Van Eck Worldwide Hard Assets |
||||||||||||||||||||||||
2009 |
$ | 22.03 | 3,070,450 | $ | 67,640,171 | 0.00 | % | 0.26 | % | 57.54 | % | |||||||||||||
2008 |
13.98 | 3,010,188 | 42,093,765 | 0.00 | % | 0.26 | % | (46.12 | %) | |||||||||||||||
2007 |
25.96 | 2,428,039 | 63,021,211 | 0.00 | % | 0.10 | % | 45.36 | % | |||||||||||||||
2006 |
17.86 | 2,181,931 | 38,961,582 | 0.00 | % | 0.03 | % | 24.49 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
14.34 | 850,416 | 12,197,923 | 0.00 | % | 0.00 | % | 43.43 | % |
(1) | The expense ratios represent annualized policy fees and expenses, if any, of the Separate Account for each period indicated. These ratios include only those expenses, if any, that result in a direct reduction of unit values. Excluded are expenses of the underlying portfolios/funds in which the variable accounts invest and charges made directly to policyholder accounts through the redemption of units (See Note 3 in Notes to Financial Statements). | |
(2) | The investment income ratios represent the dividends, excluding distributions of capital gains, received by the variable accounts from the underlying portfolios/funds, divided by the average daily net assets. These ratios are before the deduction of mortality and expense risk (“M&E”) fees that are assessed against policyholder accounts. The recognition of investment income by the variable accounts is affected by the timing of the declaration of dividends by the underlying portfolios/funds in which the variable accounts invest. The investment income ratios for periods of less than one full year are annualized. | |
(3) | Total returns reflect changes in unit values of the underlying portfolios/funds and do not include deductions at the separate account or policy level for any M&E fees, cost of insurance charges, premium loads, administrative charges, maintenance fees, premium tax charges, surrender charges or other charges that may be incurred under a policy which, if incurred, would have resulted in lower returns. Total returns for periods of less than one full year are not annualized. | |
(4) | Prior to January 1, 2006, Large-Cap Growth Variable Account was named Blue Chip Variable Account. | |
(5) | Prior to May 1, 2008, Mid-Cap Equity Variable Account was named Mid-Cap Value Variable Account. | |
(6) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). | |
(7) | Prior to May 1, 2007, Small-Cap Equity Variable Account was named VN Small-Cap Value Variable Account. | |
(8) | Prior to May 1, 2007, Small-Cap Growth Variable Account was named Fasciano Small Equity Variable Account, and prior to May 1, 2005, the variable account was named Aggressive Equity Variable Account. | |
(9) | Prior to October 1, 2006, BlackRock Basic Value V.I. Class III Variable Account was named Mercury Basic Value V.I. Class III Variable Account, and prior to May 1, 2005, the variable account was named Merrill Lynch Basic Value V.I. Class III Variable Account. | |
(10) | Prior to October 1, 2006, BlackRock Global Allocation V.I. Class III Variable Account was named Mercury Global Allocation V.I. Class III Variable Account, and prior to May 1, 2005, the variable account was named Merrill Lynch Global Allocation V.I. Class III Variable Account. | |
(11) | The annualized investment income ratios for the periods from inception to December 31, 2007 were 20.70%, 43.03%, 17.79%, 24.07%, 13.39%, and 13.07% for the 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, and Fidelity VIP Freedom 2030 Service Class 2 Variable Accounts, respectively. If not annualized, the investment income ratios were 3.63%, 2.24%, 3.27%, 1.91%, 1.94%, and 3.04%, respectively. | |
(12) | Prior to May 1, 2009, Overseas Service Class Variable Account was named International Growth Service Class Variable Account. | |
(13) | Prior to May 1, 2009, Enterprise Service Class Variable Account was named Mid Cap Growth Service Class Variable Account. | |
(14) | Prior to November 2, 2009, Legg Mason ClearBridge Variable Aggressive Growth — Class II Variable Account was named Legg Mason Partners Variable Aggressive Growth — Class II Variable Account. | |
(15) | Prior to November 2, 2009, Legg Mason ClearBridge Variable Mid Cap Core — Class II Variable Account was named Legg Mason Partners Variable Mid Cap Core — Class II Variable Account. | |
(16) | Prior to September 10, 2008, NACM Small Cap Class I Variable Account was named OpCap Small Cap Variable Account. |
SA-27
SA-28
Variable Accounts | Purchases | Sales | ||||||
Diversified Bond |
$ | 9,616,473 | $ | 5,376,616 | ||||
Floating Rate Loan |
8,677,681 | 2,704,060 | ||||||
High Yield Bond |
45,778,213 | 37,166,453 | ||||||
Inflation Managed |
27,579,987 | 23,816,570 | ||||||
Managed Bond |
90,005,940 | 38,542,372 | ||||||
Money Market |
175,575,999 | 179,002,271 | ||||||
Short Duration Bond |
10,771,424 | 9,920,153 | ||||||
American Funds Growth |
23,764,271 | 16,133,034 | ||||||
American Funds Growth-Income |
10,676,702 | 4,895,088 | ||||||
Comstock |
12,042,235 | 6,912,186 | ||||||
Diversified Research |
1,695,811 | 8,458,030 | ||||||
Equity |
1,982,611 | 5,055,222 | ||||||
Equity Index |
38,277,673 | 34,394,333 | ||||||
Focused 30 |
7,040,886 | 14,312,632 | ||||||
Growth LT |
7,011,234 | 23,338,602 | ||||||
Large-Cap Growth |
9,298,479 | 5,617,100 | ||||||
Large-Cap Value |
15,385,070 | 11,253,224 | ||||||
Long/Short Large-Cap |
8,257,418 | 1,016,851 | ||||||
Main Street Core |
3,221,430 | 16,361,604 | ||||||
Mid-Cap Equity |
6,906,923 | 34,495,872 | ||||||
Mid-Cap Growth |
10,366,971 | 9,612,526 | ||||||
Mid-Cap Value (1) |
15,593,597 | 660,304 | ||||||
Small-Cap Equity |
4,098,664 | 3,454,224 | ||||||
Small-Cap Growth |
4,945,393 | 7,610,001 | ||||||
Small-Cap Index |
19,092,844 | 24,553,573 | ||||||
Small-Cap Value |
9,396,342 | 8,519,516 | ||||||
Emerging Markets |
31,528,943 | 18,537,520 | ||||||
International Large-Cap |
8,084,531 | 16,827,221 | ||||||
International Small-Cap |
4,670,906 | 2,228,289 | ||||||
International Value |
10,340,523 | 29,362,634 | ||||||
Health Sciences |
4,638,211 | 6,268,935 | ||||||
Real Estate |
10,251,350 | 14,778,390 | ||||||
Technology |
4,927,915 | 5,123,510 | ||||||
American Funds Asset Allocation (1) |
2,414,307 | 34,069 | ||||||
Multi-Strategy |
4,227,179 | 7,574,610 | ||||||
Pacific Dynamix — Conservative Growth (1) |
513,120 | 4,809 | ||||||
Pacific Dynamix — Moderate Growth (1) |
804,053 | 4,598 | ||||||
Pacific Dynamix — Growth (1) |
1,407,420 | 23,365 | ||||||
I |
7,475,633 | 12,422,223 | ||||||
II |
3,299,605 | 6,179,687 | ||||||
III |
4,076,665 | 9,261,397 | ||||||
V |
5,257,770 | 7,068,125 | ||||||
BlackRock Basic Value V.I. Class III |
2,669,511 | 1,056,203 | ||||||
BlackRock Global Allocation V.I. Class III |
16,366,201 | 5,205,547 | ||||||
Fidelity VIP Contrafund Service Class 2 |
4,381,380 | 4,795,917 | ||||||
Fidelity VIP Freedom Income Service Class 2 |
1,113,984 | 851,149 | ||||||
Fidelity VIP Freedom 2010 Service Class 2 |
516,518 | 167,199 | ||||||
Fidelity VIP Freedom 2015 Service Class 2 |
915,399 | 447,285 | ||||||
Fidelity VIP Freedom 2020 Service Class 2 |
634,795 | 302,115 | ||||||
Fidelity VIP Freedom 2025 Service Class 2 |
456,749 | 171,936 | ||||||
Fidelity VIP Freedom 2030 Service Class 2 |
2,117,896 | 373,132 | ||||||
Fidelity VIP Growth Service Class 2 |
916,137 | 579,623 | ||||||
Fidelity VIP Mid Cap Service Class 2 |
5,026,037 | 3,564,736 | ||||||
Fidelity VIP Value Strategies Service Class 2 |
2,485,326 | 2,444,869 | ||||||
Overseas Service Class |
13,010,418 | 9,066,248 | ||||||
INTECH Risk-Managed Core Service Class |
367,012 | 128,876 | ||||||
Enterprise Service Class |
707,775 | 773,430 | ||||||
Lazard Retirement U.S. Strategic Equity |
594,719 | 364,625 | ||||||
Legg Mason ClearBridge Variable Aggressive Growth — Class II |
729,676 | 510,422 | ||||||
Legg Mason ClearBridge Variable Mid Cap Core — Class II |
1,491,768 | 2,566,508 | ||||||
MFS New Discovery Series Service Class |
2,480,203 | 461,758 | ||||||
MFS Utilities Series Service Class |
1,100,106 | 1,218,240 | ||||||
NACM Small Cap Class I |
435,826 | 390,403 | ||||||
T. Rowe Price Blue Chip Growth — II |
3,004,237 | 838,749 | ||||||
T. Rowe Price Equity Income — II |
7,138,693 | 2,607,559 | ||||||
Van Eck Worldwide Hard Assets |
15,066,264 | 11,936,275 |
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-29
Level 1 — | Quoted prices in active markets for identical holdings | ||
Level 2 — | Significant observable market-based inputs, other than Level 1 quoted prices, or unobservable inputs that are corroborated by market data | ||
Level 3 — | Significant unobservable inputs that are not corroborated by observable market data |
2009 | 2008 | |||||||||||||||||||||||
Units | Units | Net Increase | Units | Units | Net Increase | |||||||||||||||||||
Variable Accounts | Issued | Redeemed | (Decrease) | Issued | Redeemed | (Decrease) | ||||||||||||||||||
Diversified Bond |
2,130,903 | (1,832,814 | ) | 298,089 | 1,306,695 | (1,595,515 | ) | (288,820 | ) | |||||||||||||||
Floating Rate Loan |
1,665,334 | (967,215 | ) | 698,119 | 481,623 | (431,685 | ) | 49,938 | ||||||||||||||||
High Yield Bond |
1,499,249 | (1,393,943 | ) | 105,306 | 1,157,317 | (949,363 | ) | 207,954 | ||||||||||||||||
Inflation Managed |
1,318,602 | (1,562,616 | ) | (244,014 | ) | 1,584,686 | (1,729,735 | ) | (145,049 | ) | ||||||||||||||
Managed Bond |
4,267,229 | (4,381,510 | ) | (114,281 | ) | 3,044,057 | (3,713,837 | ) | (669,780 | ) | ||||||||||||||
Money Market |
19,285,608 | (19,464,811 | ) | (179,203 | ) | 24,615,153 | (22,098,848 | ) | 2,516,305 | |||||||||||||||
Short Duration Bond |
2,160,420 | (2,214,999 | ) | (54,579 | ) | 2,019,386 | (2,168,616 | ) | (149,230 | ) | ||||||||||||||
American Funds Growth |
2,822,591 | (3,254,346 | ) | (431,755 | ) | 2,910,620 | (1,571,839 | ) | 1,338,781 | |||||||||||||||
American Funds Growth-Income |
1,814,939 | (1,823,652 | ) | (8,713 | ) | 2,160,503 | (1,775,149 | ) | 385,354 | |||||||||||||||
Comstock |
2,679,150 | (2,196,270 | ) | 482,880 | 2,304,195 | (3,239,842 | ) | (935,647 | ) | |||||||||||||||
Diversified Research |
1,052,568 | (1,814,807 | ) | (762,239 | ) | 893,004 | (2,016,835 | ) | (1,123,831 | ) | ||||||||||||||
Equity |
557,100 | (905,866 | ) | (348,766 | ) | 673,190 | (1,015,353 | ) | (342,163 | ) | ||||||||||||||
Equity Index |
2,528,819 | (2,584,737 | ) | (55,918 | ) | 2,502,844 | (2,455,448 | ) | 47,396 | |||||||||||||||
Focused 30 |
1,467,955 | (2,283,182 | ) | (815,227 | ) | 2,124,323 | (1,570,144 | ) | 554,179 | |||||||||||||||
Growth LT |
1,043,897 | (1,600,687 | ) | (556,790 | ) | 1,251,089 | (2,022,501 | ) | (771,412 | ) | ||||||||||||||
Large-Cap Growth |
3,713,463 | (2,902,324 | ) | 811,139 | 2,589,103 | (2,141,201 | ) | 447,902 | ||||||||||||||||
Large-Cap Value |
3,529,614 | (3,318,285 | ) | 211,329 | 2,261,371 | (2,659,867 | ) | (398,496 | ) | |||||||||||||||
Long/Short Large-Cap (1) |
1,819,557 | (779,056 | ) | 1,040,501 | 2,043,117 | (257,150 | ) | 1,785,967 | ||||||||||||||||
Main Street Core |
524,576 | (935,870 | ) | (411,294 | ) | 571,356 | (762,040 | ) | (190,684 | ) | ||||||||||||||
Mid-Cap Equity |
1,909,545 | (3,713,792 | ) | (1,804,247 | ) | 2,205,268 | (2,612,972 | ) | (407,704 | ) | ||||||||||||||
Mid-Cap Growth |
3,248,430 | (3,021,117 | ) | 227,313 | 3,337,302 | (4,065,197 | ) | (727,895 | ) | |||||||||||||||
Mid-Cap Value (2) |
1,418,248 | (210,176 | ) | 1,208,072 | ||||||||||||||||||||
Small-Cap Equity |
693,710 | (670,376 | ) | 23,334 | 1,009,291 | (444,679 | ) | 564,612 | ||||||||||||||||
Small-Cap Growth |
1,200,025 | (1,485,876 | ) | (285,851 | ) | 1,264,105 | (1,026,257 | ) | 237,848 | |||||||||||||||
Small-Cap Index |
2,244,408 | (3,605,458 | ) | (1,361,050 | ) | 2,464,066 | (4,094,880 | ) | (1,630,814 | ) | ||||||||||||||
Small-Cap Value |
1,055,966 | (1,121,253 | ) | (65,287 | ) | 1,652,154 | (1,381,438 | ) | 270,716 | |||||||||||||||
Emerging Markets |
1,812,769 | (2,108,013 | ) | (295,244 | ) | 1,756,514 | (2,375,544 | ) | (619,030 | ) | ||||||||||||||
International Large-Cap |
3,677,392 | (4,982,945 | ) | (1,305,553 | ) | 4,865,382 | (5,255,473 | ) | (390,091 | ) | ||||||||||||||
International Small-Cap |
1,526,891 | (1,193,015 | ) | 333,876 | 1,525,277 | (1,044,667 | ) | 480,610 | ||||||||||||||||
International Value |
1,940,055 | (3,102,590 | ) | (1,162,535 | ) | 2,324,560 | (2,887,623 | ) | (563,063 | ) | ||||||||||||||
Health Sciences |
579,929 | (730,283 | ) | (150,354 | ) | 962,924 | (907,596 | ) | 55,328 | |||||||||||||||
Real Estate |
1,006,590 | (1,232,885 | ) | (226,295 | ) | 1,044,465 | (1,088,510 | ) | (44,045 | ) | ||||||||||||||
Technology |
1,602,390 | (1,779,162 | ) | (176,772 | ) | 1,135,106 | (1,365,344 | ) | (230,238 | ) | ||||||||||||||
American Funds Asset Allocation (2) |
197,343 | (5,051 | ) | 192,292 | ||||||||||||||||||||
Multi-Strategy |
299,624 | (501,179 | ) | (201,555 | ) | 220,802 | (432,983 | ) | (212,181 | ) | ||||||||||||||
Pacific Dynamix — Conservative Growth (2) |
45,297 | (933 | ) | 44,364 | ||||||||||||||||||||
Pacific Dynamix — Moderate Growth (2) |
69,952 | (1,142 | ) | 68,810 |
(1) | Operations commenced on May 2, 2008. | |
(2) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-30
2009 | 2008 | |||||||||||||||||||||||
Units | Units | Net Increase | Units | Units | Net Increase | |||||||||||||||||||
Variable Accounts | Issued | Redeemed | (Decrease) | Issued | Redeemed | (Decrease) | ||||||||||||||||||
Pacific Dynamix — Growth (1) |
122,284 | (1,136 | ) | 121,148 | ||||||||||||||||||||
I |
643,061 | (941,938 | ) | (298,877 | ) | 1,011,028 | (1,545,753 | ) | (534,725 | ) | ||||||||||||||
II |
409,207 | (604,827 | ) | (195,620 | ) | 1,111,167 | (952,997 | ) | 158,170 | |||||||||||||||
III |
318,588 | (509,118 | ) | (190,530 | ) | 532,717 | (515,428 | ) | 17,289 | |||||||||||||||
V |
667,082 | (826,965 | ) | (159,883 | ) | 838,800 | (455,429 | ) | 383,371 | |||||||||||||||
BlackRock Basic Value V.I. Class III |
351,399 | (175,518 | ) | 175,881 | 462,548 | (181,535 | ) | 281,013 | ||||||||||||||||
BlackRock Global Allocation V.I. Class III |
1,618,421 | (812,879 | ) | 805,542 | 2,144,248 | (1,073,383 | ) | 1,070,865 | ||||||||||||||||
Fidelity VIP Contrafund Service Class 2 |
928,998 | (1,040,324 | ) | (111,326 | ) | 2,468,269 | (2,117,935 | ) | 350,334 | |||||||||||||||
Fidelity VIP Freedom Income Service Class 2 |
119,795 | (89,758 | ) | 30,037 | 46,235 | (7,886 | ) | 38,349 | ||||||||||||||||
Fidelity VIP Freedom 2010 Service Class 2 |
54,620 | (16,581 | ) | 38,039 | 555,445 | (510,768 | ) | 44,677 | ||||||||||||||||
Fidelity VIP Freedom 2015 Service Class 2 |
121,561 | (65,248 | ) | 56,313 | 94,585 | (28,601 | ) | 65,984 | ||||||||||||||||
Fidelity VIP Freedom 2020 Service Class 2 |
96,388 | (54,180 | ) | 42,208 | 130,446 | (24,818 | ) | 105,628 | ||||||||||||||||
Fidelity VIP Freedom 2025 Service Class 2 |
63,028 | (34,558 | ) | 28,470 | 32,069 | (19,108 | ) | 12,961 | ||||||||||||||||
Fidelity VIP Freedom 2030 Service Class 2 |
286,723 | (58,874 | ) | 227,849 | 128,907 | (36,215 | ) | 92,692 | ||||||||||||||||
Fidelity VIP Growth Service Class 2 |
140,945 | (95,561 | ) | 45,384 | 495,305 | (198,879 | ) | 296,426 | ||||||||||||||||
Fidelity VIP Mid Cap Service Class 2 |
776,649 | (649,750 | ) | 126,899 | 753,724 | (726,474 | ) | 27,250 | ||||||||||||||||
Fidelity VIP Value Strategies Service Class 2 |
384,663 | (365,186 | ) | 19,477 | 122,992 | (237,800 | ) | (114,808 | ) | |||||||||||||||
Overseas Service Class |
1,968,531 | (1,652,393 | ) | 316,138 | 3,529,462 | (1,172,565 | ) | 2,356,897 | ||||||||||||||||
INTECH Risk-Managed Core Service Class |
56,413 | (20,277 | ) | 36,136 | 1,277,339 | (1,253,863 | ) | 23,476 | ||||||||||||||||
Enterprise Service Class |
133,605 | (145,079 | ) | (11,474 | ) | 491,655 | (130,878 | ) | 360,777 | |||||||||||||||
Lazard Retirement U.S. Strategic Equity |
94,195 | (53,851 | ) | 40,344 | 14,427 | (3,589 | ) | 10,838 | ||||||||||||||||
Legg Mason ClearBridge Variable Aggressive Growth — Class II |
109,516 | (77,838 | ) | 31,678 | 71,324 | (26,927 | ) | 44,397 | ||||||||||||||||
Legg Mason ClearBridge Variable Mid Cap Core — Class II |
165,204 | (290,506 | ) | (125,302 | ) | 985,326 | (24,085 | ) | 961,241 | |||||||||||||||
MFS New Discovery Series Service Class |
324,037 | (89,803 | ) | 234,234 | 88,653 | (19,313 | ) | 69,340 | ||||||||||||||||
MFS Utilities Series Service Class |
199,464 | (246,404 | ) | (46,940 | ) | 604,018 | (1,502,367 | ) | (898,349 | ) | ||||||||||||||
NACM Small Cap Class I |
101,461 | (79,855 | ) | 21,606 | 154,201 | (25,663 | ) | 128,538 | ||||||||||||||||
T. Rowe Price Blue Chip Growth — II |
411,361 | (177,793 | ) | 233,568 | 216,185 | (198,997 | ) | 17,188 | ||||||||||||||||
T. Rowe Price Equity Income — II |
1,218,956 | (698,411 | ) | 520,545 | 1,641,735 | (1,619,113 | ) | 22,622 | ||||||||||||||||
Van Eck Worldwide Hard Assets |
1,309,479 | (1,249,217 | ) | 60,262 | 1,877,739 | (1,295,590 | ) | 582,149 |
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-31
Member of Deloitte Touche Tohmatsu |
||||
PL-1 |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
ASSETS |
||||||||
Investments: |
||||||||
Fixed maturity securities available for sale, at estimated fair value |
$ | 26,039 | $ | 21,942 | ||||
Equity securities available for sale, at estimated fair value |
278 | 216 | ||||||
Mortgage loans |
6,577 | 5,622 | ||||||
Policy loans |
6,509 | 6,920 | ||||||
Other investments |
2,007 | 2,052 | ||||||
TOTAL INVESTMENTS |
41,410 | 36,752 | ||||||
Cash and cash equivalents |
1,919 | 3,397 | ||||||
Restricted cash |
221 | 227 | ||||||
Deferred policy acquisition costs |
4,806 | 5,012 | ||||||
Aircraft leasing portfolio, net |
5,304 | 4,999 | ||||||
Other assets |
2,253 | 3,276 | ||||||
Separate account assets |
52,564 | 41,505 | ||||||
TOTAL ASSETS |
$ | 108,477 | $ | 95,168 | ||||
LIABILITIES AND EQUITY |
||||||||
Liabilities: |
||||||||
Policyholder account balances |
$ | 33,984 | $ | 32,670 | ||||
Future policy benefits |
7,403 | 9,841 | ||||||
Short-term debt |
105 | 150 | ||||||
Long-term debt |
5,632 | 4,459 | ||||||
Other liabilities |
1,872 | 1,863 | ||||||
Separate account liabilities |
52,564 | 41,505 | ||||||
TOTAL LIABILITIES |
101,560 | 90,488 | ||||||
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 | 782 | ||||||
Retained earnings |
6,037 | 5,426 | ||||||
Accumulated other comprehensive loss |
(363 | ) | (1,802 | ) | ||||
Total Stockholder’s Equity |
6,686 | 4,436 | ||||||
Noncontrolling interest |
231 | 244 | ||||||
TOTAL EQUITY |
6,917 | 4,680 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 108,477 | $ | 95,168 | ||||
PL-2
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
REVENUES |
||||||||||||
Policy fees and insurance premiums |
$ | 2,275 | $ | 1,997 | $ | 1,780 | ||||||
Net investment income |
1,862 | 1,994 | 2,120 | |||||||||
Net realized investment gain (loss) |
153 | (749 | ) | 69 | ||||||||
Other than temporary impairments, consisting of $641 in total, net of $330 recognized in
other comprehensive income (loss) for the year ended December 31, 2009 |
(311 | ) | (580 | ) | (98 | ) | ||||||
Realized investment gain on interest in PIMCO |
109 | |||||||||||
Investment advisory fees |
208 | 255 | 327 | |||||||||
Aircraft leasing revenue |
578 | 571 | 535 | |||||||||
Other income |
137 | 167 | 147 | |||||||||
TOTAL REVENUES |
4,902 | 3,764 | 4,880 | |||||||||
BENEFITS AND EXPENSES |
||||||||||||
Interest credited to policyholder account balances |
1,253 | 1,234 | 1,266 | |||||||||
Policy benefits paid or provided |
1,226 | 1,206 | 855 | |||||||||
Commission expenses |
691 | 715 | 690 | |||||||||
Operating and other expenses |
1,246 | 1,178 | 1,235 | |||||||||
TOTAL BENEFITS AND EXPENSES |
4,416 | 4,333 | 4,046 | |||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
PROVISION (BENEFIT) FOR INCOME TAXES |
486 | (569 | ) | 834 | ||||||||
Provision (benefit) for income taxes |
44 | (315 | ) | 129 | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS |
442 | (254 | ) | 705 | ||||||||
Discontinued operations, net of taxes |
(20 | ) | (6 | ) | 11 | |||||||
Net income (loss) |
422 | (260 | ) | 716 | ||||||||
Less: net
(income) loss attributable to the noncontrolling interest from continuing operations |
14 | 3 | (38 | ) | ||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY |
$ | 436 | ($257 | ) | $ | 678 | ||||||
PL-3
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, JANUARY 1, 2007 |
$ | 30 | $ | 780 | $ | 5,379 | $ | 445 | $ | 62 | $ | 6,696 | $ | 107 | $ | 6,803 | ||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||||||
Net income |
678 | 678 | 38 | 716 | ||||||||||||||||||||||||||||
Other comprehensive loss, net |
(300 | ) | (16 | ) | (316 | ) | (316 | ) | ||||||||||||||||||||||||
Total comprehensive income |
362 | 400 | ||||||||||||||||||||||||||||||
Cumulative effect of adoption of new
accounting principle, net of tax |
(29 | ) | (29 | ) | (29 | ) | ||||||||||||||||||||||||||
Contributions, net, received by
noncontrolling interest |
69 | 69 | ||||||||||||||||||||||||||||||
Other equity adjustment |
1 | 1 | 1 | |||||||||||||||||||||||||||||
BALANCES, DECEMBER 31, 2007 |
30 | 781 | 6,028 | 145 | 46 | 7,030 | 214 | 7,244 | ||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||
Net loss |
(257 | ) | (257 | ) | (3 | ) | (260 | ) | ||||||||||||||||||||||||
Other comprehensive loss, net |
(1,896 | ) | (97 | ) | (1,993 | ) | (1,993 | ) | ||||||||||||||||||||||||
Total comprehensive loss |
(2,250 | ) | (2,253 | ) | ||||||||||||||||||||||||||||
Dividend to parent |
(345 | ) | (345 | ) | (345 | ) | ||||||||||||||||||||||||||
Contributions, net, received by
noncontrolling interest |
33 | 33 | ||||||||||||||||||||||||||||||
Other equity adjustment |
1 | 1 | 1 | |||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||
REVISED BALANCES,
DECEMBER 31, 2008 |
30 | 782 | 5,601 | (1,921 | ) | (51 | ) | 4,441 | 244 | 4,685 | ||||||||||||||||||||||
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 from parent |
200 | 200 | 200 | |||||||||||||||||||||||||||||
Contributions, net, received by
noncontrolling interest |
8 | 8 | ||||||||||||||||||||||||||||||
BALANCES, DECEMBER 31, 2009 |
$ | 30 | $ | 982 | $ | 6,037 | ($359 | ) | ($4 | ) | $ | 6,686 | $ | 231 | $ | 6,917 | ||||||||||||||||
PL-4
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||||
Net income (loss) excluding discontinued operations |
$ | 442 | ($254 | ) | $ | 705 | ||||||
Adjustments
to reconcile net income (loss) excluding discontinued operations to net cash provided by operating activities: |
||||||||||||
Net accretion on fixed maturity securities |
(142 | ) | (144 | ) | (150 | ) | ||||||
Depreciation and amortization |
281 | 259 | 255 | |||||||||
Deferred income taxes |
451 | (511 | ) | 86 | ||||||||
Net realized investment (gain) loss |
(153 | ) | 749 | (69 | ) | |||||||
Other than temporary impairments |
311 | 580 | 98 | |||||||||
Realized investment gain on interest in PIMCO |
(109 | ) | ||||||||||
Net change in deferred policy acquisition costs |
(202 | ) | (175 | ) | (302 | ) | ||||||
Interest credited to policyholder account balances |
1,253 | 1,234 | 1,266 | |||||||||
Change in future policy benefits and other insurance liabilities |
111 | 1,182 | 666 | |||||||||
Other operating activities, net |
85 | (337 | ) | (33 | ) | |||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE DISCONTINUED OPERATIONS |
2,437 | 2,474 | 2,522 | |||||||||
Net cash used in operating activities of discontinued operations |
(27 | ) | (18 | ) | (71 | ) | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
2,410 | 2,456 | 2,451 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||||
Fixed maturity and equity securities available for sale: |
||||||||||||
Purchases |
(5,507 | ) | (2,730 | ) | (5,885 | ) | ||||||
Sales |
1,463 | 2,084 | 2,041 | |||||||||
Maturities and repayments |
2,542 | 2,136 | 2,718 | |||||||||
Repayments of mortgage loans |
406 | 470 | 439 | |||||||||
Fundings of mortgage loans and real estate |
(1,434 | ) | (1,665 | ) | (1,658 | ) | ||||||
Change in policy loans |
411 | (510 | ) | (342 | ) | |||||||
Sale of interest in PIMCO |
288 | |||||||||||
Change in restricted cash |
6 | 7 | 60 | |||||||||
Purchases of derivative instruments |
(20 | ) | (12 | ) | (17 | ) | ||||||
Terminations of derivative instruments |
20 | 84 | (41 | ) | ||||||||
Proceeds from nonhedging derivative settlements |
64 | 728 | 2 | |||||||||
Payments for nonhedging derivative settlements |
(1,540 | ) | (89 | ) | (43 | ) | ||||||
Change in collateral received or pledged |
(1,226 | ) | 1,056 | 17 | ||||||||
Purchases of and advance payments on aircraft leasing portfolio |
(561 | ) | (694 | ) | (646 | ) | ||||||
Other investing activities, net |
42 | (323 | ) | 67 | ||||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES BEFORE DISCONTINUED OPERATIONS |
(5,334 | ) | 830 | (3,288 | ) | |||||||
Net cash provided by investing activities of discontinued operations |
7 | 76 | ||||||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
(5,334 | ) | 837 | (3,212 | ) | |||||||
PL-5
Years Ended December 31, | ||||||||||||
(Continued) | 2009 | 2008 | 2007 | |||||||||
(In Millions) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||||
Policyholder account balances: |
||||||||||||
Deposits |
$ | 8,003 | $ | 7,320 | $ | 6,876 | ||||||
Withdrawals |
(7,972 | ) | (7,602 | ) | (7,131 | ) | ||||||
Net change in short-term debt |
(45 | ) | 50 | 100 | ||||||||
Issuance of long-term debt |
1,692 | 335 | 1,013 | |||||||||
Payments of long-term debt |
(433 | ) | (381 | ) | (913 | ) | ||||||
Contribution from (dividend to) parent |
200 | (345 | ) | |||||||||
Other financing activities, net |
1 | 33 | 69 | |||||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
1,446 | (590 | ) | 14 | ||||||||
Net change in cash and cash equivalents |
(1,478 | ) | 2,703 | (747 | ) | |||||||
Cash and cash equivalents, beginning of year |
3,397 | 694 | 1,441 | |||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR |
$ | 1,919 | $ | 3,397 | $ | 694 | ||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
||||||||||||
Income taxes paid (received), net |
($143 | ) | ($20 | ) | $ | 67 | ||||||
Interest paid |
$ | 146 | $ | 195 | $ | 272 | ||||||
PL-6
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). | ||
Pacific Life transferred its legal domicile from the State of California to the State of Nebraska effective September 1, 2005. PMHC transferred its state of legal domicile from the State of California to the State of Nebraska, effective June 29, 2007, to reunite PMHC and Pacific Life under one regulatory authority. | ||
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 2007, 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, individual annuities, mutual funds, pension and institutional products, 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 was determined to be 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 significant, 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 | ||
• | Investment impairments | ||
• | 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 and the valuation of deferred income tax assets and liabilities and unrecognized tax benefits | ||
• | Accounting for reinsurance transactions |
PL-7
• | Litigation and other contingencies |
Certain reclassifications have been made to the 2008 and 2007 consolidated financial statements to conform to the 2009 financial statement presentation. The most significant conforming reclassification was retrospectively adjusting the consolidated financial statements and respective notes to reflect the ACG transfer. | ||
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | ||
Effective September 30, 2009, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification) as the single source of authoritative U.S. GAAP. The Codification does not create new accounting and reporting guidance, rather it reorganized then-existing U.S. GAAP pronouncements into approximately 90 Topics within a consistent structure. All guidance in the Codification carries an equal level of authority. After the effective date of the Codification, all nongrandfathered accounting literature not included in the Codification is superseded and deemed nonauthoritative. Adoption of the Codification also changed how the Company references U.S. GAAP in its consolidated financial statements. | ||
In April 2009, the FASB issued additional guidance under the Codification’s Fair Value Measurements and Disclosures Topic. This update relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. The Company early adopted this guidance on March 31, 2009. This update provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. Also included is guidance on identifying circumstances that indicate a transaction is not orderly. The adoption of this guidance resulted in an increase of $436 million to the estimated fair value and a resulting decrease of $436 million to gross unrealized investment loss of residential mortgage-backed securities (RMBS) as of March 31, 2009. As of December 31, 2009, the year to date effect of this adoption was an increase of $214 million to the estimated fair value and a decrease of $214 million to the gross unrealized investment loss of RMBS. See Note 14 for information on the Company’s fair value measurements and expanded disclosures. | ||
In April 2009, the FASB issued additional guidance under the Codification’s Investments – Debt and Equity Securities Topic. For debt securities, this guidance replaces 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 other than temporary impairment (OTTI) shall be recognized in earnings equal to the entire difference between the debt security’s amortized cost basis and its 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 changes 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 to be recognized in earnings and non credit losses are to be recognized in other comprehensive income (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. | ||
Effective January 1, 2009, the FASB issued additional guidance to the Codification’s Consolidation Topic. This guidance improves the relevance, comparability and transparency of the financial information that a company provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. As a result of the adoption of this guidance, which required retrospective application of presentation requirements, total equity as of December 31, 2008 and 2007, increased by $244 million and $214 million, respectively, representing the noncontrolling interest, and other liabilities and total liabilities as of December 31, 2008 and 2007 decreased by $244 million and $214 million, respectively, as a result of reclassifying noncontrolling interest (previously known as minority interest) to equity. | ||
Effective January 1, 2007, the FASB issued additional guidance to the Codification’s Financial Services – Insurance Topic. This guidance governs the accounting for DAC on internal replacements on insurance and investment contracts. This guidance defines an internal replacement as a modification in product benefits, features, rights, or coverages that occur by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. The adoption of this guidance resulted in a reduction to DAC and the Company recorded a cumulative effect adjustment of $29 million, after tax, which was recorded as a reduction to retained earnings during the year ended December 31, 2007. |
PL-8
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, recorded 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 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 recorded equal to the difference between the estimated fair value and net carrying amount of the security. If the OTTI for a debt security is attributable to both credit and other factors, then the OTTI is bifurcated and the non credit related portion is recorded to OCI while the credit portion is recorded as a net realized investment loss. If the OTTI is related to credit factors only, it is recorded as a net realized investment loss. | ||
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 comprised of investment and accounting professionals 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, or interest-rate related, including 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 were 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. The SEC Issues Letter Clarifying Other-Than-Temporary Impairment Guidance for Perpetual Preferred Securities issued on October 15, 2008 states that if an investor holds a perpetual preferred security with an estimated fair value below cost that is not attributable to the credit deterioration of the issuer, then the investor would not be required to recognize an OTTI by asserting that it has the intent and ability to continue holding the security for a sufficient period to allow for an anticipated recovery in market value. | ||
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 amounts due according to the contractual terms of the mortgage loan |
PL-9
agreement. For mortgage loans deemed to be impaired, a write-down is taken for the difference between the carrying amount and the Company’s estimate of the present value of the expected future cash flows discounted at the current market rate and recorded in net realized investment gain (loss). As of December 31, 2009, two loans totaling $8 million were considered impaired, however no valuation allowance was necessary as the fair value of the collateral was greater than the carrying amount of the related loans. The Company had no write-downs during the years ended December 31, 2009, 2008 and 2007. 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 related investments qualifying for tax credits (LIHTC). 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. | ||
Investments in LIHTC are recorded under either the effective interest method, if they meet certain requirements, including a projected positive yield based solely on guaranteed credits, or are recorded under the equity method if these certain requirements are not met. For investments in LIHTC recorded under the effective interest method, the amortization of the original investment and the tax credits are recorded in the provision (benefit) for income taxes. For investments in LIHTC recorded under the equity method, the amortization of the initial investment is included in net investment income, and the related tax credits are recorded in the provision (benefit) for income taxes (Note 18). The amortization recorded in net investment income was $3 million, $5 million and $20 million for the years ended December 31, 2009, 2008 and 2007, respectively. | ||
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. If the derivative is designated as a fair value hedge, the changes in the estimated fair value of the derivative and the hedged item are recognized in net realized investment gain (loss). The change in 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). Estimated fair value exposure is calculated based on the aggregate estimated fair value of all derivative instruments with each counterparty, net of collateral received, in accordance with legally enforceable counterparty master netting agreements (Note 10). | ||
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. 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, interest expense or interest credited to policyholder account balances over its remaining life. | ||
CASH AND CASH EQUIVALENTS | ||
Cash and cash equivalents include all investments with an original maturity of three months or less. The Company entered into a series of Federal National Mortgage Association (FNMA) pass-through dollar roll transactions during the fourth quarter of 2008. The Company purchased FNMA pass through securities and was contractually obligated to resell the same or substantially the same securities within 30 days of purchase. The Company classified these dollar roll transactions as short-term secured loans and reported them as cash and cash equivalents. As of December 31, 2009 and 2008, the loans amounted to zero and $403 million, respectively. The fair values of the securities held in connection with the secured lending were zero and $410 million as of December 31, 2009 and 2008, respectively. | ||
RESTRICTED CASH | ||
Restricted cash primarily consists of security deposits, commitment fees, maintenance reserve payments, supplemental rental payments and rental payments received from certain lessees related to the aircraft leasing business. |
PL-10
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 commonly 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 change the contract, the existing DAC asset remains in place and any acquisition costs associated with the modification are immediately expensed. As of December 31, 2009 and 2008, the carrying value of DAC was $4.8 billion and $5.0 billion, respectively (Note 7). | ||
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 recorded directly to equity through OCI. | ||
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 (Note 7). | ||
The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. The Company offers a sales inducement to the policyholder where the policyholder receives a bonus credit, typically ranging from 0.5% to 8.0% of each deposit. The capitalized sales inducement balance included in the DAC asset was $583 million and $552 million as of December 31, 2009 and 2008, respectively. | ||
AIRCRAFT LEASING PORTFOLIO | ||
Aircraft are recorded at cost, which includes certain acquisition costs, less accumulated depreciation. Major improvements to aircraft are capitalized when incurred. The Company evaluates carrying values of aircraft based upon changes in market and other physical and economic conditions and will record impairment losses to recognize a loss in the value of the aircraft when management believes that, based on estimated future cash flows, the recoverability of the Company’s investment in an aircraft is unlikely (Note 9). The Company had four and two non-earning aircraft in the portfolio as of December 31, 2009 and 2008, respectively. | ||
GOODWILL FROM ACQUISITIONS | ||
Goodwill represents the excess of 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 from acquisitions, included in other assets, totaled $43 million as of December 31, 2009 and 2008. There were no goodwill impairment write-downs from continuing operations during the years ended December 31, 2009, 2008 and 2007. | ||
POLICYHOLDER ACCOUNT BALANCES | ||
Policyholder account balances on UL and investment-type contracts, such as funding agreements, annuity and 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 (Note 11). Interest credited to these contracts primarily ranged from 0.2% to 9.0%. |
PL-11
FUTURE POLICY BENEFITS | ||
Annuity reserves, which primarily consist of group retirement and structured settlement annuities, are equal to the present value of estimated future payments using pricing assumptions, as applicable, for interest rates, mortality, morbidity, retirement age and expenses (Note 11). Interest rates used in establishing such liabilities ranged from 1.6% to 11.3%. |
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 guaranteed living benefits (GLBs) are considered embedded derivatives and are recorded in future policy benefits (Note 11). |
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 directly 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, 2009 and 2008, 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 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 arrangements with this producer group’s reinsurance company. |
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 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. See Note 16. |
REVENUES, BENEFITS AND EXPENSES | ||
Insurance premiums, annuity contracts with life contingencies and traditional life and term insurance contracts, are recognized as revenue when due. Benefits and expenses are matched against such revenues to recognize profits over the lives of the contracts. This matching is accomplished by providing for liabilities for future policy benefits, expenses of contract administration and the amortization of DAC and URR. |
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 |
PL-12
charges that have been earned and assessed against related account values during the period. 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 from Pacific Life Fund Advisors LLC (PLFA), a wholly owned subsidiary of Pacific Life formed in 2007, 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. ACG has four capital leases, which are accounted for under the provisions in the Codification’s Leases Topic. As of December 31, 2009 and 2008, capital leases in the amount of $8 million and $11 million, respectively, are classified in other assets. |
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. Depreciation of investment real estate 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 and its wholly owned, Arizona domiciled life insurance subsidiary, Pacific Life & Annuity Company (PL&A), and Pacific Alliance Reinsurance Company of Vermont (PAR Vermont), a Vermont-based life reinsurance company 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 bases. 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. See Note 21. |
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. |
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. |
PL-13
FAIR VALUE OF FINANCIAL INSTRUMENTS | ||
The estimated fair value of financial instruments, disclosed in Notes 8, 10 and 14, 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 statutory 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 valuing investments and certain assets and accounting for deferred income taxes on a different basis. |
As of December 31, 2009, Pacific Life had one permitted practice approved by the NE DOI that differed from statutory accounting practices adopted by the National Association of Insurance Commissioners (NAIC). This permitted practice relates to the valuation of certain statutory separate account assets that are carried at book value instead of estimated fair value. Pacific Life’s statutory capital and surplus as of December 31, 2009 and 2008 did not reflect unrealized losses of $29 million and $88 million, respectively, with regards to this permitted practice. Pacific Life had a second permitted practice with a financial statement filing date of December 31, 2008 that expired on December 30, 2009. This permitted practice allowed Pacific Life to apply the revised version of Actuarial Guideline 39 (AG 39) for variable annuity reserves that is contained in the final recommendations submitted by the Capital & Surplus Relief Working Group to the Executive Committee of the NAIC. This permitted practice resulted in lowering statutory reserves by $442 million as of December 31, 2008. |
In addition, Pacific Life uses a NE DOI prescribed accounting practice for certain synthetic GIC reserves that differs from statutory accounting practices adopted by the NAIC. As of December 31, 2009 and 2008, this NE DOI prescribed accounting practice resulted in statutory reserves of $20 million and $12 million, respectively, as opposed to statutory reserves of zero and $640 million, respectively, using statutory accounting practices adopted by the NAIC. |
STATUTORY NET INCOME (LOSS) AND SURPLUS | ||
Statutory net income (loss) of Pacific Life was $652 million, ($1,529) million and $362 million for the years ended December 31, 2009, 2008 and 2007, respectively. Statutory capital and surplus of Pacific Life was $5,006 million and $3,136 million as of December 31, 2009 and 2008, 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, 2009 and 2008, Pacific Life, PL&A and PAR Vermont exceeded the minimum risk-based capital requirements. |
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 |
PL-14
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 2009 statutory results, Pacific Life could pay $629 million in dividends in 2010 to Pacific LifeCorp without prior approval from the NE DOI, subject to the notification requirement. |
No dividends were paid during 2009 and 2007. During the year ended December 31, 2008, Pacific Life paid a cash dividend to Pacific LifeCorp of $345 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 2009 statutory results, PL&A could pay $23 million in dividends to Pacific Life in 2010 without prior regulatory approval. No dividends were paid during 2009, 2008 and 2007. |
OTHER | ||
The Company has reinsurance contracts in place with a reinsurer whose financial stability has been deteriorating. In January 2009, the reinsurer’s domiciliary state regulator issued an order of supervision, which requires the regulator’s consent to any transaction outside the normal course of business. The Company will continue to monitor the events surrounding this reinsurer and evaluate its options to deal with any further deterioration of this reinsurer’s financial condition. As of December 31, 2009, statutory reserves ceded to this reinsurer amounted to approximately $162 million. |
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 $285 million and $278 million as of December 31, 2009 and 2008, respectively. Liabilities allocated to the Closed Block, which are primarily included in future policy benefits, amounted to $307 million and $311 million as of December 31, 2009 and 2008, respectively. The net contribution to income from the Closed Block was $4 million, $1 million and $1 million for the years ended December 31, 2009, 2008 and 2007, respectively. |
PL-15
4. | VARIABLE INTEREST ENTITIES |
The following table presents, as of December 31, 2009 and 2008, the total assets and maximum exposure to loss relating to VIEs, which the Company (i) has consolidated because it is the primary beneficiary or (ii) holds a significant variable interest, but has not consolidated because it is not the primary beneficiary: |
Primary Beneficiary | Not Primary Beneficiary | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Total | Exposure to | Total | Exposure to | |||||||||||||
Assets | Loss | Assets | Loss | |||||||||||||
(In Millions) |
||||||||||||||||
Aircraft securitizations |
$ | 2,642 | $ | 218 | (1) | $ | 371 | |||||||||
Private equity funds |
239 | 30 | ||||||||||||||
Asset-backed securities |
1,910 | $ | 103 | |||||||||||||
Total |
$ | 2,881 | $ | 248 | $ | 2,281 | $ | 103 | ||||||||
Aircraft securitizations |
$ | 2,777 | $ | 145 | (1) | $ | 427 | |||||||||
Private equity funds |
236 | 30 | ||||||||||||||
Asset-backed securities |
3,816 | $ | 93 | |||||||||||||
Total |
$ | 3,013 | $ | 175 | $ | 4,243 | $ | 93 | ||||||||
(1) | Excludes contingent purchase obligations (Note 21) totaling $100 million and $50 million as of December 31, 2009 and 2008, respectively. |
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 ACG Trust III acquired 74 of ACG’s aircraft through a private placement note offering in the amount of $1,860 million. ACG receives all of the expected residual return from ACG Trust III. 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). Non-recourse debt consolidated from ACG Trust III was $1,309 million and $1,445 million as of December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, the maximum exposure to loss, based on carrying value, was $130 million and $72 million, respectively. Consolidated assets are reported in aircraft leasing portfolio, net, restricted cash and other assets. Consolidated liabilities are reported in long-term debt and other liabilities. |
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 of ACG Trust II and absorbs any losses in the trust up to ACG’s equity interest. 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). Non-recourse debt consolidated from ACG Trust II was $666 million and $728 million as of December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, the maximum exposure to loss, based on carrying value, was $88 million and $73 million, respectively. Consolidated assets are reported in aircraft leasing portfolio, net, restricted cash and other assets. Consolidated liabilities are reported in long-term debt and other liabilities. |
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. The carrying value is comprised of beneficial interests issued by Aviation Trust. As of December 31, 2009 and 2008, the maximum exposure to loss, based on carrying value, was zero. |
PL-16
PRIVATE EQUITY FUNDS | ||
Private equity funds (the Funds) are three 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 carried interest based upon the performance of the Funds and is a VIE due to the lack of control by the other equity investors. 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 debt consolidated from the Funds was $2 million as of December 31, 2009 and 2008. Consolidated assets are reported in other investments and cash and cash equivalents and consolidated liabilities are reported in long-term debt. |
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 as the Company does not absorb a majority of the expected losses or receive a majority of the expected residual return. 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 $103 million and $93 million at December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, the Company recorded OTTIs of $60 million and $117 million, respectively, related to these securities. |
FUTURE ACCOUNTING CHANGE | ||
Effective January 1, 2010, the Company will change the methodology it employs to determine if an entity is a VIE and, once identified, if a VIE should be included in the consolidated financial statements. The new methodology will place more emphasis on the Company’s ability to direct the activities that most significantly impact the entity’s financial performance. The Company will examine anew all entities previously identified as VIEs. The Company does not expect this change to have a material impact on its consolidated financial statements. |
5. | INTEREST IN PIMCO |
As of December 31, 2007, the Company owned a beneficial economic interest in Pacific Investment Management Company LLC (PIMCO) through Allianz Global Investors of America LLC (interest in PIMCO). PIMCO offers investment products through managed accounts and institutional, retail and offshore mutual funds. The interest in PIMCO was reported at estimated fair value, as determined by a contractual put and call option price, with changes in estimated fair value reported as a component of OCI, net of taxes. |
During the year ended December 31, 2008, the Company exercised a put option and sold all of its remaining interest in PIMCO to Allianz of America, Inc., a subsidiary of Allianz SE, for $288 million. The Company recognized a pre-tax gain of $109 million for the year ended December 31, 2008. |
6. | DISCONTINUED OPERATIONS |
The Company’s broker-dealer operations and group insurance business 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. On June 20, 2007, a transaction closed whereby the Company sold certain of these broker-dealer subsidiaries to an unrelated third-party. Proceeds from the sale included cash of $53 million and a common stock interest in the buyer’s parent of $57 million. A pre-tax gain of $54 million was recognized from this sale during the year ended December 31, 2007. On December 31, 2007, a transaction closed whereby the Company sold another one of its broker-dealer subsidiaries to subsidiary management. The Company incurred a pre-tax loss of $1 million from this transaction during the year ended December 31, 2007. As of December 31, 2007, one broker-dealer |
PL-17
subsidiary remained classified as held for sale. On March 31, 2008, a transaction closed whereby the Company sold this held for sale subsidiary to an unrelated third-party. The Company recognized an insignificant pre-tax gain from this transaction during the year ended December 31, 2008. | ||
Operating results of discontinued operations were as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) |
||||||||||||
Revenues |
$ | 13 | $ | 276 | ||||||||
Benefits and expenses |
$ | 31 | 22 | 300 | ||||||||
Loss from discontinued operations |
(31 | ) | (9 | ) | (24 | ) | ||||||
Benefit from income taxes |
(11 | ) | (3 | ) | (8 | ) | ||||||
Loss from discontinued operations, net of taxes |
(20 | ) | (6 | ) | (16 | ) | ||||||
Net gain on sale of discontinued operations |
53 | |||||||||||
Provision for income taxes |
26 | |||||||||||
Net gain on sale of discontinued operations, net of taxes |
27 | |||||||||||
Discontinued operations, net of taxes |
($20 | ) | ($6 | ) | $ | 11 | ||||||
Assets and liabilities from discontinued operations are included in other assets and other liabilities, respectively. Assets related to discontinued operations were zero and $6 million as of December 31, 2009 and 2008, respectively. Liabilities related to discontinued operations were zero and $13 million as of December 31, 2009 and 2008, respectively. |
7. | DEFERRED POLICY ACQUISITION COSTS |
Components of DAC are as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) |
||||||||||||
Balance, January 1 |
$ | 5,012 | $ | 4,481 | $ | 4,248 | ||||||
Cumulative pre-tax effect of adoption of new
accounting principle (Note 1) |
7 | (45 | ) | |||||||||
Additions: |
||||||||||||
Capitalized during the year |
777 | 752 | 852 | |||||||||
Amortization: |
||||||||||||
Allocated to commission expenses |
(446 | ) | (444 | ) | (432 | ) | ||||||
Allocated to operating expenses |
(129 | ) | (133 | ) | (118 | ) | ||||||
Total amortization |
(575 | ) | (577 | ) | (550 | ) | ||||||
Allocated to OCI |
(415 | ) | 356 | (24 | ) | |||||||
Balance, December 31 |
$ | 4,806 | $ | 5,012 | $ | 4,481 | ||||||
During the years ended December 31, 2009, 2008 and 2007, the Company revised certain assumptions to develop EGPs for its products subject to DAC amortization (Note 1). This resulted in increases in DAC amortization expense of $23 million and $20 million for the years ended December 31, 2009 and 2008, respectively, and a decrease in DAC amortization expense of $12 million for the year ended December 31, 2007. The revised EGPs also resulted in an immaterial decrease in URR amortization for the year ended December 31, 2009, increased URR amortization of $2 million for the year ended December 31, 2008, and decreased URR amortization of $15 million for the year ended December 31, 2007. |
PL-18
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 represents amortized cost adjusted for credit related OTTIs and changes in the estimated fair value of fixed maturity securities attributable to the hedged risk in a fair value hedge. See Note 14 for information on the Company’s fair value measurement and disclosure. |
Net | ||||||||||||||||
Carrying | Gross Unrealized | Estimated | ||||||||||||||
Amount | Gains | Losses | Fair Value | |||||||||||||
(In Millions) |
||||||||||||||||
U.S. Treasury securities and obligations of
U.S. government authorities and agencies |
$ | 105 | $ | 10 | $ | 115 | ||||||||||
Obligations of states and political subdivisions |
633 | 12 | $ | 46 | 599 | |||||||||||
Foreign governments |
389 | 42 | 431 | |||||||||||||
Corporate securities |
17,256 | 905 | 308 | 17,853 | ||||||||||||
RMBS |
6,133 | 105 | 1,078 | 5,160 | ||||||||||||
Commercial mortgage-backed securities |
1,160 | 42 | 23 | 1,179 | ||||||||||||
Collateralized debt obligations |
118 | 27 | 33 | 112 | ||||||||||||
Other asset-backed securities |
562 | 45 | 17 | 590 | ||||||||||||
Total fixed maturity securities |
$ | 26,356 | $ | 1,188 | $ | 1,505 | $ | 26,039 | ||||||||
Perpetual preferred securities |
$ | 324 | $ | 6 | $ | 55 | $ | 275 | ||||||||
Other equity securities |
1 | 2 | 3 | |||||||||||||
Total equity securities |
$ | 325 | $ | 8 | $ | 55 | $ | 278 | ||||||||
Net | ||||||||||||||||
Carrying | Gross Unrealized | Estimated | ||||||||||||||
Amount | Gains | Losses | Fair Value | |||||||||||||
(In Millions) |
||||||||||||||||
U.S. Treasury securities and obligations of
U.S. government authorities and agencies |
$ | 98 | $ | 19 | $ | 117 | ||||||||||
Obligations of states and political subdivisions |
512 | 5 | $ | 148 | 369 | |||||||||||
Foreign governments |
211 | 41 | 7 | 245 | ||||||||||||
Corporate securities |
15,828 | 307 | 1,618 | 14,517 | ||||||||||||
RMBS |
6,133 | 105 | 1,306 | 4,932 | ||||||||||||
Commercial mortgage-backed securities |
1,191 | 15 | 106 | 1,100 | ||||||||||||
Collateralized debt obligations |
126 | 2 | 124 | |||||||||||||
Other asset-backed securities |
615 | 32 | 109 | 538 | ||||||||||||
Total fixed maturity securities |
$ | 24,714 | $ | 524 | $ | 3,296 | $ | 21,942 | ||||||||
Perpetual preferred securities |
$ | 385 | $ | 3 | $ | 174 | $ | 214 | ||||||||
Other equity securities |
2 | 2 | ||||||||||||||
Total equity securities |
$ | 387 | $ | 3 | $ | 174 | $ | 216 | ||||||||
PL-19
The Company has investments in perpetual preferred securities that are issued primarily by European and U.S. banks. The net carrying amount and estimated fair value of the available for sale perpetual preferred securities was $451 million and $391 million, respectively, as of December 31, 2009. Included in these amounts are perpetual preferred securities carried in trusts with a net carrying amount and estimated fair value of $127 million and $116 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, 2009, 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 |
$ | 1,825 | $ | 68 | $ | 25 | $ | 1,868 | ||||||||
Due after one year through five years |
5,235 | 288 | 54 | 5,469 | ||||||||||||
Due after five years through ten years |
7,210 | 366 | 135 | 7,441 | ||||||||||||
Due after ten years |
4,113 | 247 | 140 | 4,220 | ||||||||||||
18,383 | 969 | 354 | 18,998 | |||||||||||||
Mortgage-backed and asset-backed securities |
7,973 | 219 | 1,151 | 7,041 | ||||||||||||
Total |
$ | 26,356 | $ | 1,188 | $ | 1,505 | $ | 26,039 | ||||||||
PL-20
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 securities. |
Total | ||||||||||||
Gross | ||||||||||||
Estimated | Unrealized | |||||||||||
Number | Fair Value | Losses | ||||||||||
(In Millions) | ||||||||||||
Obligations of states and political subdivisions |
27 | $ | 383 | $ | 46 | |||||||
Corporate securities |
442 | 4,539 | 308 | |||||||||
RMBS |
307 | 3,844 | 1,078 | |||||||||
Commercial mortgage-backed securities |
19 | 339 | 23 | |||||||||
Collateralized debt obligations |
6 | 61 | 33 | |||||||||
Other asset-backed securities |
24 | 205 | 17 | |||||||||
Total fixed maturity securities |
825 | 9,371 | 1,505 | |||||||||
Perpetual preferred securities |
18 | 195 | 55 | |||||||||
Other securities |
31 | 97 | 26 | |||||||||
Total other securities |
49 | 292 | 81 | |||||||||
Total |
874 | $ | 9,663 | $ | 1,586 | |||||||
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) | |||||||||||||||||||||||
Obligations of states and political
subdivisions |
11 | $ | 116 | $ | 6 | 16 | $ | 267 | $ | 40 | ||||||||||||||
Corporate securities |
182 | 1,766 | 50 | 260 | 2,773 | 258 | ||||||||||||||||||
RMBS |
53 | 498 | 94 | 254 | 3,346 | 984 | ||||||||||||||||||
Commercial mortgage-backed securities |
6 | 100 | 5 | 13 | 239 | 18 | ||||||||||||||||||
Collateralized debt obligations |
5 | 59 | 32 | 1 | 2 | 1 | ||||||||||||||||||
Other asset-backed securities |
24 | 205 | 17 | |||||||||||||||||||||
Total fixed maturity securities |
257 | 2,539 | 187 | 568 | 6,832 | 1,318 | ||||||||||||||||||
Perpetual preferred securities |
18 | 195 | 55 | |||||||||||||||||||||
Other securities |
16 | 54 | 9 | 15 | 43 | 17 | ||||||||||||||||||
Total other securities |
16 | 54 | 9 | 33 | 238 | 72 | ||||||||||||||||||
Total |
273 | $ | 2,593 | $ | 196 | 601 | $ | 7,070 | $ | 1,390 | ||||||||||||||
PL-21
Total | ||||||||||||
Gross | ||||||||||||
Estimated | Unrealized | |||||||||||
Number | Fair Value | Losses | ||||||||||
(In Millions) | ||||||||||||
Obligations of states and political subdivisions |
32 | $ | 276 | $ | 148 | |||||||
Foreign governments |
5 | 66 | 7 | |||||||||
Corporate securities |
956 | 9,674 | 1,618 | |||||||||
RMBS |
342 | 3,693 | 1,306 | |||||||||
Commercial mortgage-backed securities |
45 | 796 | 106 | |||||||||
Collateralized debt obligations |
5 | 2 | 2 | |||||||||
Other asset-backed securities |
43 | 326 | 109 | |||||||||
Total fixed maturity securities |
1,428 | 14,833 | 3,296 | |||||||||
Perpetual preferred securities |
30 | 197 | 174 | |||||||||
Other securities |
24 | 95 | 28 | |||||||||
Total other securities |
54 | 292 | 202 | |||||||||
Total |
1,482 | $ | 15,125 | $ | 3,498 | |||||||
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) | |||||||||||||||||||||||
Obligations of states and political
subdivisions |
29 | $ | 254 | $ | 144 | 3 | $ | 22 | $ | 4 | ||||||||||||||
Foreign governments |
5 | 66 | 7 | |||||||||||||||||||||
Corporate securities |
655 | 6,692 | 805 | 301 | 2,982 | 813 | ||||||||||||||||||
RMBS |
145 | 2,229 | 699 | 197 | 1,464 | 607 | ||||||||||||||||||
Commercial mortgage-backed securities |
31 | 569 | 74 | 14 | 227 | 32 | ||||||||||||||||||
Collateralized debt obligations |
4 | 1 | 2 | 1 | 1 | |||||||||||||||||||
Other asset-backed securities |
25 | 203 | 47 | 18 | 123 | 62 | ||||||||||||||||||
Total fixed maturity securities |
894 | 10,014 | 1,778 | 534 | 4,819 | 1,518 | ||||||||||||||||||
Perpetual preferred securities |
7 | 29 | 16 | 23 | 168 | 158 | ||||||||||||||||||
Other securities |
18 | 89 | 27 | 6 | 6 | 1 | ||||||||||||||||||
Total other securities |
25 | 118 | 43 | 29 | 174 | 159 | ||||||||||||||||||
Total |
919 | $ | 10,132 | $ | 1,821 | 563 | $ | 4,993 | $ | 1,677 | ||||||||||||||
The Company has evaluated fixed maturity and other securities with gross unrealized losses and determined that the unrealized losses are temporary and that 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. | ||
Prime mortgages are loans made to borrowers with strong credit histories, whereas sub-prime mortgage lending is the origination of residential mortgage loans to customers 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 |
PL-22
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. |
The table below illustrates the breakdown of non-agency RMBS and commercial mortgage-backed securities (CMBS) by investment rating from independent rating agencies and vintage year of the underlying collateral as of December 31, 2009. |
Net | Rating as % of | Vintage Breakdown | ||||||||||||||||||||||||||||||||||
Carrying | Estimated | Net Carrying | 2004 and | |||||||||||||||||||||||||||||||||
Rating | Amount | Fair Value | Amount | Prior | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||||||||||||||
($ In Millions) | ||||||||||||||||||||||||||||||||||||
Prime RMBS: |
||||||||||||||||||||||||||||||||||||
AAA |
$ | 960 | $ | 878 | 29 | % | 21 | % | 7 | % | 1 | % | ||||||||||||||||||||||||
AA |
320 | 279 | 9 | % | 4 | % | 2 | % | 3 | % | ||||||||||||||||||||||||||
A |
252 | 208 | 8 | % | 1 | % | 2 | % | 3 | % | 2 | % | ||||||||||||||||||||||||
BAA |
525 | 402 | 16 | % | 2 | % | 7 | % | 6 | % | 1 | % | ||||||||||||||||||||||||
BA and below |
1,264 | 893 | 38 | % | 8 | % | 18 | % | 12 | % | ||||||||||||||||||||||||||
Total |
$ | 3,321 | $ | 2,660 | 100 | % | 28 | % | 26 | % | 31 | % | 15 | % | 0 | % | 0 | % | ||||||||||||||||||
Alt-A RMBS: |
||||||||||||||||||||||||||||||||||||
AAA |
$ | 58 | $ | 52 | 6 | % | 6 | % | ||||||||||||||||||||||||||||
AA |
13 | 16 | 1 | % | 1 | % | ||||||||||||||||||||||||||||||
A |
13 | 9 | 1 | % | 1 | % | ||||||||||||||||||||||||||||||
BAA |
24 | 23 | 3 | % | 1 | % | 2 | % | ||||||||||||||||||||||||||||
BA and below |
843 | 556 | 89 | % | 10 | % | 27 | % | 52 | % | ||||||||||||||||||||||||||
Total |
$ | 951 | $ | 656 | 100 | % | 8 | % | 11 | % | 29 | % | 52 | % | 0 | % | 0 | % | ||||||||||||||||||
Sub-prime RMBS: |
||||||||||||||||||||||||||||||||||||
AAA |
$ | 230 | $ | 179 | 52 | % | 52 | % | ||||||||||||||||||||||||||||
AA |
97 | 73 | 22 | % | 22 | % | ||||||||||||||||||||||||||||||
A |
21 | 13 | 5 | % | 5 | % | ||||||||||||||||||||||||||||||
BAA |
42 | 32 | 9 | % | 9 | % | ||||||||||||||||||||||||||||||
BA and below |
53 | 37 | 12 | % | 1 | % | 9 | % | 1 | % | 1 | % | ||||||||||||||||||||||||
Total |
$ | 443 | $ | 334 | 100 | % | 80 | % | 18 | % | 1 | % | 1 | % | 0 | % | 0 | % | ||||||||||||||||||
CMBS: |
||||||||||||||||||||||||||||||||||||
AAA |
$ | 1,017 | $ | 1,054 | 88 | % | 65 | % | 3 | % | 15 | % | 1 | % | 4 | % | ||||||||||||||||||||
AA |
66 | 61 | 6 | % | 4 | % | 2 | % | ||||||||||||||||||||||||||||
A |
37 | 32 | 3 | % | 3 | % | ||||||||||||||||||||||||||||||
BAA |
28 | 22 | 2 | % | 2 | % | ||||||||||||||||||||||||||||||
BA |
12 | 10 | 1 | % | 1 | % | ||||||||||||||||||||||||||||||
Total |
$ | 1,160 | $ | 1,179 | 100 | % | 73 | % | 3 | % | 0 | % | 17 | % | 1 | % | 6 | % | ||||||||||||||||||
As of December 31, 2009, the Company has received advances of $1.5 billion from the Federal Home Loan Bank (FHLB) of Topeka and has issued funding agreements to the FHLB of Topeka. Funding agreements are used as an alternative source of funds for the Company’s spread lending business and the funding agreement liabilities are included in general account policyholder account balances. Assets with an estimated fair value of $1.8 billion as of December 31, 2009 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, 2009, the Company holds $76 million of FHLB of Topeka stock. | ||
PL&A is a member of FHLB of San Francisco. As of December 31, 2009, no assets are pledged as collateral. As of December 31, 2009, the Company holds $25 million of FHLB of San Francisco stock. |
PL-23
The Company had a securities lending program administered by one of the largest U.S. financial institutions specializing in securities lending and short-term fixed-income asset management. This securities lending program was terminated in February 2009. Securities loaned were zero as of December 31, 2008. | ||
Major categories of investment income and related investment expense are summarized as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Fixed maturity securities |
$ | 1,448 | $ | 1,467 | $ | 1,492 | ||||||
Equity securities |
20 | 23 | 26 | |||||||||
Mortgage loans |
297 | 289 | 248 | |||||||||
Real estate |
92 | 86 | 68 | |||||||||
Policy loans |
229 | 223 | 209 | |||||||||
Partnerships and joint ventures |
(78 | ) | 21 | 170 | ||||||||
Other |
12 | 21 | 44 | |||||||||
Gross investment income |
2,020 | 2,130 | 2,257 | |||||||||
Investment expense |
158 | 136 | 137 | |||||||||
Net investment income |
$ | 1,862 | $ | 1,994 | $ | 2,120 | ||||||
The components of net realized investment gain (loss) are as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Fixed maturity securities: |
||||||||||||
Gross gains on sales |
$ | 35 | $ | 100 | $ | 117 | ||||||
Gross losses on sales |
(18 | ) | (37 | ) | (23 | ) | ||||||
Other |
12 | 4 | 20 | |||||||||
Total fixed maturity securities |
29 | 67 | 114 | |||||||||
Equity securities: |
||||||||||||
Gross gains on sales |
5 | |||||||||||
Gross losses on sales |
(11 | ) | ||||||||||
Other |
2 | 1 | ||||||||||
Total equity securities |
(9 | ) | 1 | 5 | ||||||||
Trading securities |
20 | (22 | ) | (1 | ) | |||||||
Variable annuity GLB embedded derivatives |
2,211 | (2,775 | ) | (222 | ) | |||||||
Variable annuity GLB policy fees |
147 | 108 | 78 | |||||||||
Variable annuity derivatives — interest rate swaps |
(104 | ) | 402 | |||||||||
Variable annuity derivatives — total return swaps |
(1,542 | ) | 646 | 13 | ||||||||
Equity put options |
(672 | ) | 853 | 31 | ||||||||
Synthetic GIC policy fees |
25 | 15 | ||||||||||
Other derivatives |
45 | (62 | ) | (11 | ) | |||||||
Other |
3 | 18 | 62 | |||||||||
Total |
$ | 153 | ($749 | ) | $ | 69 | ||||||
PL-24
As a result of the significant disruption in the housing, financial and credit markets, the OTTI charges recorded during the year ended December 31, 2009 were primarily related to the Company’s exposure to RMBS, certain structured securities and direct exposure to corporate securities. The table below summarizes the OTTIs by security type (In Millions): |
Recorded in | Included in | |||||||||||
Earnings | OCI | Total | ||||||||||
Year ended
December 31, 2009: |
||||||||||||
Corporate securities |
$ | 63 | (1) | $ | 2 | $ | 65 | |||||
RMBS |
116 | 315 | 431 | |||||||||
Collateralized debt obligations |
66 | 13 | 79 | |||||||||
Perpetual preferred securities |
26 | 26 | ||||||||||
Other investments |
40 | 40 | ||||||||||
Total OTTIs |
$ | 311 | $ | 330 | $ | 641 | ||||||
Year ended
December 31, 2008: |
||||||||||||
Corporate securities |
$ | 70 | ||||||||||
RMBS |
227 | |||||||||||
Collateralized debt obligations |
156 | |||||||||||
Other asset-backed securities |
1 | |||||||||||
Perpetual preferred securities |
68 | |||||||||||
Other equity securities |
58 | |||||||||||
Total OTTIs |
$ | 580 | ||||||||||
(1) | Included are $29 million of OTTI recorded in earnings on perpetual preferred securities carried in trusts. |
In accordance with additional guidance under the Codification’s Investments – Debt and Equity Securities Topic effective January 1, 2009, the Company began recording the credit loss portion of OTTI adjustments in earnings and the portion related to other factors in OCI. The table below details the amount of OTTIs attributable to credit losses recorded in earnings for which a portion was recognized in OCI (In Millions): |
Cumulative credit loss, January 1, 2009 |
$ | 88 | ||
Additions for credit impairments recognized on: |
||||
Securities not previously other than temporarily impaired |
48 | |||
Securities previously other than temporarily impaired |
106 | |||
Total additions |
154 | |||
Reductions for credit impairments previously recognized on: |
||||
Securities that matured or were sold |
(40 | ) | ||
Securities due to an increase in expected cash flows and time value of cash flows |
(2 | ) | ||
Total subtractions |
(42 | ) | ||
Cumulative credit loss, December 31, 2009 |
$ | 200 | ||
PL-25
The table below presents separately the gross unrealized losses on investments for which OTTI has been recorded in earnings in current or prior periods and the gross unrealized losses on temporarily impaired investments for which no OTTI has been recorded. |
Gross Unrealized Losses | ||||||||||||
OTTI | Non-OTTI | |||||||||||
Investments | Investments | Total | ||||||||||
(In Millions) | ||||||||||||
Obligations of states and political subdivisions |
$ | 46 | $ | 46 | ||||||||
Corporate securities |
$ | 2 | 306 | 308 | ||||||||
RMBS |
328 | 750 | 1,078 | |||||||||
CMBS |
23 | 23 | ||||||||||
Collateralized debt obligations |
32 | 1 | 33 | |||||||||
Other asset-backed securities |
17 | 17 | ||||||||||
Total fixed maturity securities |
$ | 362 | $ | 1,143 | $ | 1,505 | ||||||
Perpetual preferred securities |
$ | 55 | $ | 55 | ||||||||
Total equity securities |
$ | 55 | $ | 55 | ||||||||
The change in unrealized gain (loss) on investments in available for sale and trading securities is as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Available for sale securities: |
||||||||||||
Fixed maturity |
$ | 2,455 | ($3,269 | ) | ($211 | ) | ||||||
Equity |
124 | (143 | ) | (49 | ) | |||||||
Total available for sale securities |
$ | 2,579 | ($3,412 | ) | ($260 | ) | ||||||
Trading securities |
$ | 26 | ($19 | ) | ($2 | ) | ||||||
Trading securities totaled $206 million and $114 million as of December 31, 2009 and 2008, respectively. The cumulative unrealized gains (losses) on trading securities held as of December 31, 2009 and 2008 were $7 million and ($19) million, respectively. | ||
As of December 31, 2009 and 2008, fixed maturity securities of $12 million were on deposit with state insurance departments to satisfy regulatory requirements. | ||
Mortgage loans totaled $6,577 million and $5,622 million as of December 31, 2009 and 2008, respectively. Mortgage loans are collateralized by commercial real estate properties primarily located throughout the U.S. As of December 31, 2009, $1,122 million, $963 million, $785 million, $554 million and $369 million were located in California, Washington, Florida, Texas and Maryland, respectively. As of December 31, 2009, $543 million was located in Canada. There were no defaults during the years ended December 31, 2009, 2008, and 2007. The Company did not have any mortgage loans with accrued interest more than 180 days past due as of December 31, 2009 or 2008. As of December 31, 2009, mortgage loan investments with one commercial sponsor exceeded 10% of stockholder’s equity. The carrying value of these investments was $725 million as of December 31, 2009. | ||
Investments in real estate totaled $574 million and $459 million as of December 31, 2009 and 2008, respectively. There were no real estate write-downs during the years ended December 31, 2009, 2008 and 2007. |
PL-26
9. | AIRCRAFT LEASING PORTFOLIO, NET | |
Aircraft leasing portfolio, net, consisted of the following: |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Aircraft consolidated from VIEs |
$ | 3,081 | $ | 3,099 | ||||
Other aircraft |
3,217 | 2,667 | ||||||
6,298 | 5,766 | |||||||
Accumulated depreciation |
994 | 767 | ||||||
Aircraft leasing portfolio, net |
$ | 5,304 | $ | 4,999 | ||||
As of December 31, 2009, domestic and foreign future minimum rentals scheduled to be received under the noncancelable portion of operating leases are as follows (In Millions): |
2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||||||||||||||
Domestic |
$ | 23 | $ | 19 | $ | 15 | $ | 13 | $ | 13 | $ | 28 | ||||||||||||
Foreign |
526 | 448 | 369 | 274 | 214 | 390 | ||||||||||||||||||
Total operating leases |
$ | 549 | $ | 467 | $ | 384 | $ | 287 | $ | 227 | $ | 418 | ||||||||||||
As of December 31, 2009 and 2008, aircraft with a carrying amount of $4,954 million and $4,366 million, respectively, were assigned as collateral to secure debt (Notes 4 and 13). | ||
There were no impairments recorded during the years ended December 31, 2009, 2008 and 2007. | ||
During the years ended December 31, 2009, 2008 and 2007, ACG recognized pre-tax gains on the sale of aircraft of zero, zero and $18 million, respectively, which are included in other income. | ||
In December 2007, ACG sold its entire ownership interest in an unconsolidated affiliate. The transaction resulted in a pre-tax gain of $17 million, which is included in net realized investment gain (loss) for the year ended December 31, 2007. | ||
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, foreign exchange forward contracts, caps, floors 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 companies to recognize all derivative instruments as either assets or liabilities at fair value in the consolidated statements of financial condition. In accordance with accounting for derivatives and hedging activities, 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. | ||
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 |
PL-27
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 investment purchases and liability issuances are considered probable to occur and are generally completed within 22 years of the inception of the hedge. |
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. | ||
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. | ||
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. | ||
When a 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, and the ineffective portion of changes in the estimated fair value of the derivative is recorded in net realized investment gain (loss). For the years ended December 31, 2009, 2008 and 2007, the Company had net losses of zero, zero and $21 million, respectively, reclassified from accumulated other comprehensive income (AOCI) to earnings resulting from the discontinuance of cash flow hedges due to forecasted transactions that were no longer probable of occurring. Over the next twelve months, the Company anticipates that $24 million of deferred losses on derivative instruments in AOCI will be reclassified to earnings. For the years ended December 31, 2009, 2008 and 2007, all of the Company’s hedged forecasted transactions were determined to be probable of occurring. | ||
The Company had the following outstanding derivatives designated as cash flow hedges: |
Notional Amount | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Foreign currency interest rate swaps |
$ | 5,099 | $ | 6,488 | ||||
Forward starting interest rate swaps |
1,060 | 1,535 | ||||||
Interest rate swaps |
3,910 | 4,384 |
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 on 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. |
PL-28
DERIVATIVES DESIGNATED AS FAIR VALUE HEDGES |
Interest rate swap agreements are used to convert a fixed rate asset or liability to a floating 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. |
When a derivative is designated as a fair value hedge, the changes in the estimated fair value of the derivative and the hedged item are recognized in net realized investment gain (loss). The change in 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 the years ended December 31, 2009, 2008 and 2007, hedge ineffectiveness related to designated fair value hedges reflected in net realized investment gain (loss) was $5 million, ($1) million and zero, respectively. No component of the hedging instrument’s estimated fair value is excluded from the determination of effectiveness. |
The Company had the following outstanding derivatives designated as fair value hedges: |
Notional Amount | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Foreign currency interest rate swaps |
$ | 13 | $ | 18 | ||||
Interest rate swaps |
1,658 | 1,264 |
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 changes in the estimated fair value of the derivatives not designated as hedging instruments and the periodic cash flows are recognized in net realized investment gain (loss). |
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 in other assets or other liabilities as either a reinsurance recoverable or reinsurance payable. |
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 of the S&P 500 in the form of a payment or receipt, depending on whether the return relative to the index on trade date is positive or negative, respectively. Payments are recognized in realized investment loss and receipts are recognized in realized investment gain. The Company has used interest rate swaps to hedge fluctuations in the valuation of GLBs as a result of changes in risk free rates. These agreements involved 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. |
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 offers equity indexed universal life insurance products, which credits the total return of the S&P 500 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 indexed account capped at 12%, or a five year indexed account. |
PL-29
The Company utilizes one year European style S&P 500 call options to hedge the annual exposure of the indexed life insurance product’s index growth rate for the one year indexed account. The Company also purchases five year European style S&P 500 Asian call options to hedge the five year exposure of the indexed life insurance product’s index growth rate for the five year indexed account. |
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. |
The Company uses credit default swaps in combination with cash instruments to reproduce the investment characteristics of certain investments. Credit default swaps involve the receipt or payment of fixed amounts at specific intervals in exchange for the assumption of or protection from potential credit events associated with the underlying security. The Company writes credit default swaps for which a payment is delivered if the underlying security of the derivative defaults. The maximum potential amounts of future payments under credit default swaps were $50 million and $95 million as of December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, the fair value of credit derivatives sold by the Company was ($17) million and ($38) million, respectively. The terms for these instruments range from five to seven years. |
The Company had the following outstanding derivatives not designated as hedging instruments: |
Notional Amount | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Variable annuity GLB embedded derivatives |
$ | 36,408 | $ | 33,455 | ||||
Variable annuity derivatives — interest rate swaps |
2,150 | |||||||
Variable annuity derivatives — total return swaps |
4,456 | 2,437 | ||||||
Variable annuity GLB reinsurance contracts |
14,878 | 13,274 | ||||||
Equity put options |
5,267 | 5,173 | ||||||
Synthetic GICs |
23,993 | 23,856 | ||||||
Interest rate swaps |
178 | 535 | ||||||
Foreign currency interest rate swaps |
398 | 460 | ||||||
Other |
1,021 | 849 |
CONSOLIDATED FINANCIAL STATEMENT IMPACT |
Derivative instruments are recorded in the Company’s consolidated statements of financial condition at 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-30
The following table summarizes the gross asset or liability derivative 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, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In Millions) | (In Millions) | |||||||||||||||
Derivatives designated as hedging instruments: |
||||||||||||||||
Foreign currency interest rate swaps |
$ | 177 | $ | 308 | (1) | $ | 230 | $ | 87 | (1) | ||||||
69 | 146 | (5) | 154 | 423 | (5) | |||||||||||
Forward starting interest rate swap agreements |
34 | 88 | (1) | 23 | (1) | |||||||||||
8 | 232 | (5) | 45 | (5) | ||||||||||||
Interest rate swaps |
32 | 32 | (1) | 106 | 124 | (1) | ||||||||||
13 | 72 | (5) | 152 | 337 | (5) | |||||||||||
Total derivatives designated as hedging instruments |
333 | 878 | 642 | 1,039 | ||||||||||||
Derivatives not designated as hedging instruments: |
||||||||||||||||
Variable annuity derivatives — interest rate swaps |
232 | (1) | ||||||||||||||
140 | (5) | |||||||||||||||
Variable annuity derivatives — total return swaps |
6 | (1) | 60 | 33 | (1) | |||||||||||
55 | (5) | 4 | 53 | (5) | ||||||||||||
Equity put options |
329 | 350 | (1) | 16 | (1) | |||||||||||
41 | 587 | (5) | 14 | (5) | ||||||||||||
Foreign currency interest rate swaps |
21 | 1 | (1) | |||||||||||||
15 | (5) | 13 | (5) | |||||||||||||
Interest rate swaps |
9 | 18 | (1) | 2 | 3 | (1) | ||||||||||
1 | 11 | (5) | 39 | (5) | ||||||||||||
Other |
18 | 2 | (1) | 23 | 1 | (1) | ||||||||||
26 | 11 | (5) | 38 | (5) | ||||||||||||
Embedded derivatives: |
||||||||||||||||
Variable annuity GLB embedded derivatives
(including reinsurance contracts) |
52 | 429 | (2) | 754 | 3,342 | (3) | ||||||||||
Synthetic GICs |
3 | (3) | ||||||||||||||
Other |
44 | 8 | (4) | |||||||||||||
Total derivatives not designated as hedging instruments |
503 | 1,851 | 917 | 3,533 | ||||||||||||
Total derivatives |
$ | 836 | $ | 2,729 | $ | 1,559 | $ | 4,572 | ||||||||
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 |
PL-31
Net cash collateral received from counterparties was $237 million and $1,392 million as of December 31, 2009 and 2008, 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. Net cash collateral pledged to counterparties was $137 million and $66 million as of December 31, 2009 and 2008, 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 exposure to the counterparty is positive, the amount is reflected in other investments, whereas, if the net estimated fair value exposure to the counterparty is negative, the estimated fair value is included in future policy benefits or other liabilities, depending on the nature of the derivative. |
As of December 31, 2009 and 2008, the Company had also accepted collateral consisting of various securities with an estimated fair value of $14 million and $147 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, 2009 and 2008, zero and $15 million, respectively, of the collateral had been repledged. As of December 31, 2009 and 2008, the Company provided collateral in the form of various securities of zero and $17 million, respectively, which are included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. |
The following table summarizes amounts recorded 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 and the hedged items, and amounts realized on terminations. The net of the amounts presented for each year represent the ineffective portion of the hedge. The amounts presented do not include the periodic net coupon settlements of the derivatives or the coupon income (expense) related to the hedged item. |
Gain (Loss) | Gain (Loss) | |||||||||||||||||||||||
Recognized in | Recognized in | |||||||||||||||||||||||
Income on Derivatives | Income on Hedged Items | |||||||||||||||||||||||
Years Ended | Years Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
(In Millions) | (In Millions) | |||||||||||||||||||||||
Derivatives in fair value hedges: |
||||||||||||||||||||||||
Foreign currency interest
rate swaps |
($1 | ) | ($1 | ) | $ | 1 | $ | 2 | ||||||||||||||||
Interest rate swaps |
$ | 97 | (135 | ) | (56 | ) | ($93 | ) | 134 | 56 | ||||||||||||||
Total |
$ | 97 | ($136 | ) | ($57 | ) | ($93 | ) | $ | 135 | $ | 58 | ||||||||||||
PL-32
The following table summarizes amounts recorded in the consolidated financial statements for derivatives designated as cash flow hedges. Gain 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 coupon settlements of the derivatives. |
Gain (Loss) | Gain (Loss) | Gain (Loss) | ||||||||||||||||||||||||||||||||||
Recognized in | Reclassified from | Recognized in Income | ||||||||||||||||||||||||||||||||||
OCI on Derivatives | AOCI into Income | on Derivatives | ||||||||||||||||||||||||||||||||||
(Effective Portion) | (Effective Portion) | (Ineffective Portion) | ||||||||||||||||||||||||||||||||||
Years Ended | Years Ended | Years Ended | ||||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||
(In Millions) | (In Millions) | (In Millions) | ||||||||||||||||||||||||||||||||||
Derivatives in cash flow hedges: |
||||||||||||||||||||||||||||||||||||
Foreign currency interest rate swaps |
$ | 42 | $ | 66 | ($97 | ) | ($104 | ) | ($368 | ) | ($3 | ) (1) | $ | 1 | (1) | |||||||||||||||||||||
9 | 14 | 18 | (3) | |||||||||||||||||||||||||||||||||
Forward starting interest rate swaps |
(254 | ) | 336 | 33 | 4 | (1) | ($1 | ) | $ | 3 | (2 | ) (1) | ||||||||||||||||||||||||
(1 | ) (2) | |||||||||||||||||||||||||||||||||||
(11 | ) | (1 | ) | (1 | ) (3) | |||||||||||||||||||||||||||||||
Interest rate swaps |
66 | (146 | ) | (83 | ) | 9 | (1 | ) (1) | 9 | (7 | ) | (1) | ||||||||||||||||||||||||
2 | 3 | (2) | ||||||||||||||||||||||||||||||||||
(18 | ) | (3 | ) (3) | |||||||||||||||||||||||||||||||||
Futures |
1 | 3 | 4 | (2) | ||||||||||||||||||||||||||||||||
(1 | ) | (1 | ) (3) | |||||||||||||||||||||||||||||||||
Total |
($146 | ) | $ | 256 | ($147 | ) | ($114 | ) | ($347 | ) | $ | 15 | $ | 8 | ($4 | ) | ($1 | ) | ||||||||||||||||||
Location on the consolidated statements of operations: |
(1) | Net realized investment gain (loss) | |
(2) | Net investment income | |
(3) | Interest credited to policyholder account balances |
PL-33
The following table summarizes amounts recorded in the consolidated financial statements 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 coupon settlements of ($1,476) million, $639 million and ($41) million for the years ended December 31, 2009, 2008 and 2007, respectively, which are recorded in net realized investment gain (loss). |
Amount of Gain (Loss) | ||||||||||||
Recognized in | ||||||||||||
Income on Derivatives | ||||||||||||
Years Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Derivatives not designated as hedging instruments: |
||||||||||||
Variable annuity derivatives — interest rate swaps |
($168 | ) | $ | 386 | (1) | |||||||
Variable annuity derivatives — total return swaps |
(102 | ) | (55 | ) | $ | 28 | (1) | |||||
Equity put options |
(580 | ) | 927 | 55 | (1) | |||||||
Foreign currency interest rate swaps |
(8 | ) | 12 | (2 | ) (1) | |||||||
(1 | ) | (1 | ) | (2) | ||||||||
Interest rate swaps |
(8 | ) | 2 | (1) | ||||||||
(1 | ) | (9 | ) | (2) | ||||||||
Other |
44 | (56 | ) | (1) | ||||||||
Embedded derivatives: |
||||||||||||
Variable annuity GLB embedded derivatives (including
reinsurance contracts) |
2,211 | (2,775 | ) | (222 | ) (1) | |||||||
Other embedded derivatives |
(14 | ) | 13 | 1 | (1) | |||||||
Total |
$ | 1,381 | ($1,566 | ) | ($138 | ) | ||||||
Location on the consolidated statements of operations: |
(1) | Net realized investment gain (loss) | |
(2) | Interest credited to policyholder account balances |
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, 2009 was $126 million. The maximum exposure to any single counterparty was $41 million at December 31, 2009. |
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 Pacific Life’s insurer financial strength ratings assigned by certain independent rating agencies. If Pacific Life’s insurer financial strength rating falls below a specified level, as defined within each counterparty master agreement or, in most cases, if one of the rating agencies ceases to provide an insurer financial strength rating, the counterparty can terminate the master agreement with payment due based on the estimated fair value of the underlying derivatives. As of December 31, 2009, Pacific Life’s insurer financial strength ratings were above the specified level. |
If Pacific Life’s insurer financial strength rating were to fall below the next investment grade from its current standing, the counterparties to the derivative instruments could request immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit risk related contingent features that are in a liability position on December 31, 2009, is $232 million for which the Company has posted collateral of $137 million in the normal course of business. If certain of Pacific Life’s insurer financial strength ratings were to fall one notch as of December 31, 2009, the Company would have been required to post an additional $14 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 |
PL-34
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. For the year ended December 31, 2009, the Company has incurred losses of $4 million, included in net realized investment gain (loss), on derivative instruments due to counterparty default related to the bankruptcy of Lehman Brothers Special Finance. These losses were a result of the termination of all remaining open positions with Lehman counterparties. |
11. | POLICYHOLDER LIABILITIES |
POLICYHOLDER ACCOUNT BALANCES | ||
The detail of the liability for policyholder account balances is as follows: |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Universal life |
$ | 19,298 | $ | 18,729 | ||||
Annuity and deposit liabilities |
7,109 | 4,515 | ||||||
Funding agreements |
5,240 | 7,890 | ||||||
GICs |
2,337 | 1,536 | ||||||
Total |
$ | 33,984 | $ | 32,670 | ||||
FUTURE POLICY BENEFITS |
The detail of the liability for future policy benefits is as follows: |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Annuity reserves |
$ | 4,960 | $ | 4,455 | ||||
Variable annuity GLB embedded derivatives |
754 | 3,342 | ||||||
URR |
734 | 925 | ||||||
Life insurance |
365 | 360 | ||||||
Closed Block liabilities |
306 | 311 | ||||||
Policy benefits payable |
260 | 433 | ||||||
Other |
24 | 15 | ||||||
Total |
$ | 7,403 | $ | 9,841 | ||||
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 guaranteed minimum death benefit (GMDB) and GLB features. For a discussion of certain GLBs accounted for as embedded derivatives, see Note 9. |
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 |
PL-35
December 31, | ||||||||
2009 | 2008 | |||||||
($ In Millions) | ||||||||
Return of net deposits |
||||||||
Separate account value |
$ | 46,884 | $ | 36,672 | ||||
Net amount at risk (1) |
4,017 | 11,557 | ||||||
Average attained age of contract holders |
61 years | 61 years | ||||||
Anniversary contract value |
||||||||
Separate account value |
$ | 16,483 | $ | 13,465 | ||||
Net amount at risk (1) |
2,541 | 5,750 | ||||||
Average attained age of contract holders |
63 years | 62 years | ||||||
Minimum return |
||||||||
Separate account value |
$ | 1,241 | $ | 1,107 | ||||
Net amount at risk (1) |
620 | 898 | ||||||
Average attained age of contract holders |
65 years | 64 years |
(1) | Represents the amount of death benefit in excess of the current account balance as of December 31. |
December 31, | ||||||||
2009 | 2008 | |||||||
($ In Millions) | ||||||||
Separate account value |
$ | 2,675 | $ | 2,230 | ||||
Average attained age of contract holders |
58 years | 57 years |
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
GMDB | GMIB | |||||||||||||||
(In Millions) | (In Millions) | |||||||||||||||
Balance, beginning of year |
$ | 119 | $ | 48 | $ | 62 | $ | 24 | ||||||||
Changes in reserves |
(11 | ) | 119 | (23 | ) | 38 | ||||||||||
Benefits paid |
(108 | ) | (48 | ) | (1 | ) | ||||||||||
Balance, end of year |
$ | 0 | $ | 119 | $ | 38 | $ | 62 | ||||||||
PL-36
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Asset type |
||||||||
Domestic equity |
$ | 25,760 | $ | 17,927 | ||||
International equity |
6,728 | 5,476 | ||||||
Bonds |
13,775 | 12,182 | ||||||
Money market |
621 | 1,087 | ||||||
Total separate account value |
$ | 46,884 | $ | 36,672 | ||||
13. | DEBT |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Short-term debt: |
||||||||
Credit facility recourse only to ACG |
$ | 105 | $ | 150 | ||||
Total short-term debt |
$ | 105 | $ | 150 | ||||
Long-term debt: |
||||||||
Surplus notes |
$ | 1,150 | $ | 150 | ||||
Fair value adjustment for derivatives and
hedging activities |
(13 | ) | 55 | |||||
Non-recourse long-term debt: |
||||||||
Debt recourse only to ACG |
1,636 | 1,271 | ||||||
ACG non-recourse debt |
761 | 687 | ||||||
Other non-recourse debt |
121 | 121 | ||||||
ACG VIE debt (Note 4) |
1,975 | 2,173 | ||||||
Other VIE debt (Note 4) |
2 | 2 | ||||||
Total long-term debt |
$ | 5,632 | $ | 4,459 | ||||
PL-37
PL-38
14. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
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 on inactive markets; and model-derived valuations for which all significant inputs are observable market data. Level 2 instruments include most corporate debt securities and U.S. government and agency mortgage-backed 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 highly 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-39
Gross | ||||||||||||||||||||||||
Derivatives | Netting | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | Adjustments (1) | Total | |||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||
U.S. Treasury securities and
obligations of
U.S. government authorities and agencies |
$ | 109 | $ | 6 | $ | 115 | ||||||||||||||||||
Obligations of states and political subdivisions |
565 | 34 | 599 | |||||||||||||||||||||
Foreign governments |
323 | 108 | 431 | |||||||||||||||||||||
Corporate securities |
15,566 | 2,287 | 17,853 | |||||||||||||||||||||
RMBS |
1,510 | 3,650 | 5,160 | |||||||||||||||||||||
CMBS |
852 | 327 | 1,179 | |||||||||||||||||||||
Collateralized debt obligations |
8 | 104 | 112 | |||||||||||||||||||||
Other asset-backed securities |
355 | 235 | 590 | |||||||||||||||||||||
Total fixed maturity securities |
19,288 | 6,751 | 26,039 | |||||||||||||||||||||
Perpetual preferred securities |
205 | 70 | 275 | |||||||||||||||||||||
Other equity securities |
$ | 3 | 3 | |||||||||||||||||||||
Total equity securities |
3 | 205 | 70 | 278 | ||||||||||||||||||||
Trading securities (2) |
92 | 85 | 29 | 206 | ||||||||||||||||||||
Cash equivalents |
1,714 | 1,714 | ||||||||||||||||||||||
Other investments |
163 | 163 | ||||||||||||||||||||||
Derivatives |
369 | 467 | $ | 836 | ($595 | ) | 241 | |||||||||||||||||
Separate account assets (3) |
52,305 | 116 | 101 | 52,522 | ||||||||||||||||||||
Total |
$ | 54,114 | $ | 20,063 | $ | 7,581 | $ | 836 | ($595 | ) | $ | 81,163 | ||||||||||||
Liabilities: |
||||||||||||||||||||||||
Derivatives |
$ | 645 | $ | 914 | $ | 1,559 | ($595 | ) | $ | 964 | ||||||||||||||
Total |
$ | 645 | $ | 914 | $ | 1,559 | ($595 | ) | $ | 964 | ||||||||||||||
PL-40
Gross | ||||||||||||||||||||||||
Derivatives | Netting | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | Adjustments (1) | Total | |||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||
U.S. Treasury securities and
obligations of
U.S. government authorities and agencies |
$ | 117 | $ | 117 | ||||||||||||||||||||
Obligations of states and political
subdivisions |
369 | 369 | ||||||||||||||||||||||
Foreign governments |
223 | $ | 22 | 245 | ||||||||||||||||||||
Corporate securities |
12,274 | 2,243 | 14,517 | |||||||||||||||||||||
RMBS |
1,577 | 3,355 | 4,932 | |||||||||||||||||||||
CMBS |
899 | 201 | 1,100 | |||||||||||||||||||||
Collateralized debt obligations |
20 | 104 | 124 | |||||||||||||||||||||
Other asset-backed securities |
328 | 210 | 538 | |||||||||||||||||||||
Total fixed maturity securities |
15,807 | 6,135 | 21,942 | |||||||||||||||||||||
Perpetual preferred securities |
202 | 12 | 214 | |||||||||||||||||||||
Other equity securities |
2 | 2 | ||||||||||||||||||||||
Total equity securities |
204 | 12 | 216 | |||||||||||||||||||||
Trading securities (2) |
17 | 97 | 114 | |||||||||||||||||||||
Cash equivalents |
$ | 2,597 | 2,597 | |||||||||||||||||||||
Other investments |
150 | 150 | ||||||||||||||||||||||
Derivatives |
1,294 | 1,435 | $ | 2,729 | ($656 | ) | 2,073 | |||||||||||||||||
Separate account assets (3) |
41,145 | 275 | 61 | 41,481 | ||||||||||||||||||||
Total |
$ | 43,742 | $ | 17,597 | $ | 7,890 | $ | 2,729 | ($656 | ) | $ | 68,573 | ||||||||||||
Liabilities: |
||||||||||||||||||||||||
Derivatives |
$ | 1,095 | $ | 3,477 | $ | 4,572 | ($656 | ) | $ | 3,916 | ||||||||||||||
Total |
$ | 1,095 | $ | 3,477 | $ | 4,572 | ($656 | ) | $ | 3,916 | ||||||||||||||
(1) | Netting adjustments represent the impact of offsetting asset and liability positions held with the same counterparty as permitted by guidance for offsetting in the Codification’s Derivatives and Hedging Topic. | |
(2) | Trading securities are presented in other investments in the consolidated statements of financial condition. | |
(3) | Separate account assets are measured at 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 fair value of separate account assets as prescribed by guidance 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 table above differ from the amounts presented in the consolidated statements of financial condition because cash and receivables for securities are not subject to the guidance under the Codification’s Fair Value Measurements and Disclosures Topic. |
PL-41
PL-42
• | 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 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. |
PL-43
• | 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). |
Purchases, | ||||||||||||||||||||||||||||
Total Gains or Losses | Transfers | Sales, | Unrealized | |||||||||||||||||||||||||
In and/or | Issuances, | Gains | ||||||||||||||||||||||||||
January 1, | Included in | Included in | Out of | and | December 31, | (Losses) | ||||||||||||||||||||||
2009 | Earnings | OCI | Level 3 | Settlements | 2009 | Still Held (1) | ||||||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies |
$ | 6 | $ | 6 | ||||||||||||||||||||||||
Obligations of states and
political subdivisions |
($3 | ) | 7 | $ | 30 | 34 | ||||||||||||||||||||||
Foreign governments |
$ | 22 | $ | 2 | 5 | 71 | 8 | 108 | ||||||||||||||||||||
Corporate securities |
2,243 | (28 | ) | 644 | (974 | ) | 402 | 2,287 | ($5 | ) | ||||||||||||||||||
RMBS |
3,355 | (115 | ) | 437 | 427 | (454 | ) | 3,650 | ||||||||||||||||||||
CMBS |
201 | 1 | 26 | 60 | 39 | 327 | ||||||||||||||||||||||
Collateralized debt obligations |
104 | (67 | ) | 71 | (4 | ) | 104 | |||||||||||||||||||||
Other asset-backed securities |
210 | 2 | 10 | 42 | (29 | ) | 235 | |||||||||||||||||||||
Total fixed maturity securities |
6,135 | (205 | ) | 1,190 | (361 | ) | (8 | ) | 6,751 | (5 | ) | |||||||||||||||||
Perpetual preferred securities |
12 | (17 | ) | 12 | (5 | ) | 68 | 70 | ||||||||||||||||||||
Other equity securities |
1 | 4 | (28 | ) | 23 | |||||||||||||||||||||||
Total equity securities |
12 | (16 | ) | 16 | (33 | ) | 91 | 70 | ||||||||||||||||||||
Trading securities |
97 | (51 | ) | (17 | ) | 29 | 2 | |||||||||||||||||||||
Other investments |
150 | 24 | (11 | ) | 163 | |||||||||||||||||||||||
Derivatives, net |
(2,042 | ) | 1,504 | 1 | 90 | (447 | ) | 1,597 | ||||||||||||||||||||
Separate account assets (2) |
61 | 6 | 20 | 14 | 101 | 12 | ||||||||||||||||||||||
Total |
$ | 4,413 | $ | 1,289 | $ | 1,231 | ($425 | ) | $ | 159 | $ | 6,667 | $ | 1,606 | ||||||||||||||
PL-44
Purchases, | ||||||||||||||||||||||||||||
Transfers | Sales, | Unrealized | ||||||||||||||||||||||||||
Total Gains or Losses | In and/or | Issuances, | Gains | |||||||||||||||||||||||||
January 1, | Included in | Included in | Out of | and | December 31, | (Losses) | ||||||||||||||||||||||
2008 | Earnings | OCI | Level 3 | Settlements | 2008 | Still Held (1) | ||||||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||
Foreign governments |
$ | 32 | ($7 | ) | ($3 | ) | $ | 22 | ||||||||||||||||||||
Corporate securities |
1,505 | $ | 2 | (329 | ) | $ | 733 | 332 | 2,243 | ($16 | ) | |||||||||||||||||
RMBS |
431 | (1 | ) | (168 | ) | 3,025 | 68 | 3,355 | ||||||||||||||||||||
CMBS |
434 | (40 | ) | (141 | ) | (52 | ) | 201 | ||||||||||||||||||||
Collateralized debt obligations |
230 | (90 | ) | (35 | ) | (1 | ) | 104 | ||||||||||||||||||||
Other asset-backed securities |
242 | (4 | ) | (16 | ) | (11 | ) | (1 | ) | 210 | ||||||||||||||||||
Total fixed maturity securities |
2,874 | (93 | ) | (595 | ) | 3,606 | 343 | 6,135 | (16 | ) | ||||||||||||||||||
Perpetual preferred securities |
46 | (33 | ) | (1 | ) | 12 | ||||||||||||||||||||||
Other equity securities |
4 | (4 | ) | |||||||||||||||||||||||||
Total equity securities |
50 | (37 | ) | (1 | ) | 12 | ||||||||||||||||||||||
Trading securities |
47 | (12 | ) | 10 | 52 | 97 | (11 | ) | ||||||||||||||||||||
Other investments |
460 | 105 | (133 | ) | (282 | ) | 150 | |||||||||||||||||||||
Derivatives, net |
(103 | ) | (1,945 | ) | 2 | 4 | (2,042 | ) | (1,822 | ) | ||||||||||||||||||
Separate account assets(2) |
11 | (5 | ) | 46 | 9 | 61 | (25 | ) | ||||||||||||||||||||
Total |
$ | 3,339 | ($1,987 | ) | ($726 | ) | $ | 3,662 | $ | 125 | $ | 4,413 | ($1,874 | ) | ||||||||||||||
(1) | Represents the net amount of total gains or losses for the period, recorded in earnings, attributable to the change in unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held as of December 31, 2009 and 2008. | |
(2) | The realized/unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income (loss) for the Company. |
PL-45
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, 2009 | December 31, 2008 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(In Millions) | ||||||||||||||||
Assets: |
||||||||||||||||
Mortgage loans |
$ | 6,577 | $ | 6,660 | $ | 5,622 | $ | 5,645 | ||||||||
Policy loans |
6,509 | 6,509 | 6,920 | 6,920 | ||||||||||||
Other invested assets |
196 | 185 | 305 | 334 | ||||||||||||
Restricted cash |
221 | 221 | 227 | 227 | ||||||||||||
Liabilities: |
||||||||||||||||
Funding agreements and GICs (1) |
7,572 | 8,093 | 9,419 | 10,136 | ||||||||||||
Annuity and deposit liabilities |
7,109 | 7,109 | 4,515 | 4,515 | ||||||||||||
Short-term debt |
105 | 105 | 150 | 150 | ||||||||||||
Long-term debt |
5,632 | 5,806 | 4,459 | 4,373 |
(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, 2009 and 2008: | ||
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 | ||
The carrying amounts of policy loans are a reasonable estimate of their fair values because interest rates are generally variable and based on current market rates. | ||
OTHER INVESTED ASSETS | ||
Included in other invested assets are private equity investments in which the estimated fair value of private equity investments is based on the ownership percentage of the underlying equity of the investments. | ||
RESTRICTED CASH | ||
The carrying values approximate fair values due to the short-term maturities of these instruments. | ||
FUNDING AGREEMENTS AND GICs | ||
The fair value of funding agreements and GICs is estimated using the rates currently offered for deposits of similar remaining maturities. | ||
ANNUITY AND DEPOSIT LIABILITIES | ||
The estimated fair value of annuity and deposit liabilities approximates carrying value and primarily includes policyholder deposits and accumulated credited interest. The estimated fair value of deposit liabilities with no defined maturities is the amount payable on demand. |
PL-46
DEBT | ||
The carrying amount of short-term debt is a reasonable estimate of its fair value because the interest rates are variable and based on current market rates. 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. | ||
15. | OTHER COMPREHENSIVE INCOME (LOSS) | |
The Company displays comprehensive income (loss) and its components on the consolidated statements of equity. The disclosure of the gross components of other comprehensive income (loss) and related taxes are as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Unrealized gain (loss) on derivatives and securities available
for sale, net: |
||||||||||||
Gross holding gain (loss): |
||||||||||||
Securities available for sale |
$ | 2,601 | ($3,870 | ) | ($239 | ) | ||||||
Derivatives |
(146 | ) | 256 | (147 | ) | |||||||
Income tax (expense) benefit |
(861 | ) | 1,269 | 135 | ||||||||
Reclassification adjustment — realized (gain) loss: |
||||||||||||
Sale of securities available for sale |
251 | 458 | (21 | ) | ||||||||
Derivatives |
25 | (4 | ) | (15 | ) | |||||||
Income tax expense (benefit) |
(98 | ) | (159 | ) | 12 | |||||||
Allocation of holding (gain) loss to DAC |
(415 | ) | 356 | (24 | ) | |||||||
Allocation of holding (gain) loss to future policy benefits |
85 | (119 | ) | (15 | ) | |||||||
Income tax expense (benefit) |
113 | (83 | ) | 14 | ||||||||
Cumulative effect of adoption of new accounting principle |
(263 | ) | ||||||||||
Income tax expense |
93 | |||||||||||
Unrealized gain (loss) on derivatives and securities available for sale, net |
1,385 | (1,896 | ) | (300 | ) | |||||||
Other, net: |
||||||||||||
Holding gain (loss) on interest in PIMCO and other security |
22 | (24 | ) | 5 | ||||||||
Income tax (expense) benefit |
(8 | ) | 9 | (1 | ) | |||||||
Reclassification of realized gain on sale of interest in PIMCO |
(109 | ) | ||||||||||
Income tax on realized gain |
42 | |||||||||||
Net unrealized gain (loss) on interest in PIMCO and other
security |
14 | (82 | ) | 4 | ||||||||
Cumulative effect of adoption of new accounting principle,
net of tax |
(20 | ) | ||||||||||
Other, net of tax |
33 | (15 | ) | |||||||||
Other, net |
47 | (97 | ) | (16 | ) | |||||||
Total other comprehensive income (loss), net |
$ | 1,432 | ($1,993 | ) | ($316 | ) | ||||||
PL-47
16. | 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. U.S. GAAP benefit reserves for such riders are based on guidance in the Codification’s Financial Services – Insurance Topic for accounting and reporting of certain non traditional long-duration contracts and separate accounts. Substantially all the U.S. GAAP benefit reserves relating to NLGRs issued after June 30, 2005 are 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. Funded reserves and irrevocable letters of credit (LOC) held in trust accounts with Pacific Life as beneficiary provide security for statutory reserve credits taken by Pacific Life. Pacific LifeCorp guarantees the obligations of PAR Bermuda and PAR Vermont under the LOC agreement. | ||
The Company entered into treaties to reinsure a portion of new variable annuity business under modified coinsurance arrangements and certain variable annuity living and death benefit riders under coinsurance agreements. Effective January 1, 2008, the quota share on these variable annuity reinsurance treaties was increased from a total of 39% to 45%. Additionally, effective January 1, 2008, the Company recaptured a portion of the variable annuity business ceded during 2007. Effective January 1, 2009, all but one reinsurance treaty terminated for new business, reducing the quota share to 15%. The final treaty terminated for new business issued after March 31, 2009. Variable annuity business ceded prior to these dates continues to be reinsured. | ||
Reinsurance receivables and payables generally include amounts related to claims, reserves and reserve related items. Reinsurance receivables were $404 million and $839 million as of December 31, 2009 and 2008, respectively. Reinsurance payables were $37 million and $38 million as of December 31, 2009 and 2008, respectively. | ||
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 components of insurance premiums presented in the consolidated statements of operations are as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Direct premiums |
$ | 666 | $ | 410 | $ | 271 | ||||||
Reinsurance
ceded (1) |
(323 | ) | (291 | ) | (274 | ) | ||||||
Reinsurance assumed |
60 | (2) | 53 | 53 | ||||||||
Insurance premiums |
$ | 403 | $ | 172 | $ | 50 | ||||||
(1) | Included are $21 million, $13 million and $12 million of reinsurance ceded to PAR Bermuda for the years ended December 31, 2009, 2008 and 2007, respectively. | |
(2) | Included are $4 million of assumed premiums from Pacific Life Re, a wholly owned subsidiary of Pacific LifeCorp. |
PL-48
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. Certain subsidiaries did not participate in this plan. The full-benefit vesting period for all participants was five years. Pacific Life’s funding policy was to contribute amounts to the plan sufficient to meet the minimum funding requirements set forth in ERISA, plus such additional amounts as was determined appropriate. All such contributions were made to a tax-exempt trust. | ||
The Company amended the ERP to terminate effective December 31, 2007. In anticipation of the final settlement of the defined benefit pension plan, the plan’s investment strategy was revised and the mutual fund investments were sold, transferred to a separate account group annuity contract managed by the Company and invested primarily in fixed income investments to better match the expected duration of the liabilities. | ||
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 $5 million in 2008 and recognized the final settlement costs for the ERP totaling $72 million in 2009. | ||
Pacific Life also maintains supplemental employee retirement plans (SERPs) for certain eligible employees. As of December 31, 2009 and 2008, the projected benefit obligation was $37 million and $32 million, respectively. The fair value of plan assets as of December 31, 2009 and 2008 was zero. The net periodic benefit expense of the SERPs was $4 million, $5 million and $6 million for the years ended December 31, 2009, 2008 and 2007, respectively. | ||
The following table sets forth the benefit obligations, plan assets and funded status of the defined benefit plans: |
December 31, 2009 | December 31, 2008 | |||||||||||||||
ERP | SERP | ERP | SERP | |||||||||||||
(In Millions) | (In Millions) | |||||||||||||||
Defined benefit plans: |
||||||||||||||||
Benefit obligation, end of year |
$ | 37 | $ | 198 | $ | 32 | ||||||||||
Fair value of plan assets, end of year |
$ | 26 | 242 | |||||||||||||
Over (under) funded status, end of year |
$ | 26 | ($37 | ) | $ | 44 | ($32 | ) | ||||||||
The Company incurred a net pension expense of $79 million, $8 million and $9 million for the years ended December 31, 2009, 2008 and 2007, respectively, as detailed in the following table: |
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||||||
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 |
$ | 12 | 2 | $ | 12 | 2 | $ | 14 | 2 | |||||||||||||||
Expected return on plan assets |
(12 | ) | (14 | ) | (16 | ) | ||||||||||||||||||
Settlement costs |
72 | 5 | 4 | |||||||||||||||||||||
Amortization of net obligations and prior
service cost |
3 | 1 | 2 | 1 | ||||||||||||||||||||
Net periodic pension expense |
$ | 75 | $ | 4 | $ | 3 | $ | 5 | $ | 4 | $ | 5 | ||||||||||||
PL-49
Significant plan assumptions: |
December 31, 2009 | December 31, 2008 | |||||||||||||||
ERP | SERP | ERP | SERP | |||||||||||||
Weighted-average
assumptions used to
determine benefit
obligations: |
||||||||||||||||
Discount rate |
6.35 | % | 6.30 | % | 6.35 | % | 6.30 | % | ||||||||
Salary rate |
N/A | 4.50 | % | N/A | 4.50 | % |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Weighted-average assumptions used
to determine
the ERP’s net periodic benefit
expense: |
||||||||||||
Discount rate |
6.30 | % | 6.25 | % | 5.75 | % | ||||||
Expected long-term return on plan assets |
N/A | 5.25 | % | 6.13 | % |
The salary rate used to determine the net periodic benefit expense for the SERP was 4.5% for the years ended December 31, 2009, 2008 and 2007. | ||
Pacific Life expects to contribute $3 million to the SERP in 2010. The expected benefit payments are as follows for the years ending December 31 (In Millions): |
2010 | 2011 | 2012 | 2013 | 2014 | 2015-2019 | |||||
$3
|
$3 | $3 | $3 | $3 | $15 |
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 amounted to $26 million, $29 million and $25 million for the years ended December 31, 2009, 2008 and 2007, 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, 2009, 2008 and 2007 was $1 million. As of December 31, 2009 and 2008, the accumulated benefit obligation was $19 million and $18 million, respectively. The fair value of the plan assets as of December 31, 2009 and 2008 was zero. | ||
The discount rate used in determining the accumulated postretirement benefit obligation was 5.50% and 6.35% for 2009 and 2008, respectively. |
PL-50
Benefit payments for the year ended December 31, 2009 amounted to $3 million. The expected benefit payments are as follows for the years ending December 31 (In Millions): |
2010 | 2011 | 2012 | 2013 | 2014 | 2015-2019 | |||||
$3 | $4 | $4 | $4 | $4 | $24 |
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 annually. 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 (benefit) for income taxes is as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Current |
($407 | ) | $ | 196 | $ | 43 | ||||||
Deferred |
451 | (511 | ) | 86 | ||||||||
Provision (benefit) for income taxes from continuing operations |
44 | (315 | ) | 129 | ||||||||
Provision (benefit) for income taxes on discontinued operations |
(11 | ) | (3 | ) | 18 | |||||||
Total |
$ | 33 | ($318 | ) | $ | 147 | ||||||
A reconciliation of the provision (benefit) for income taxes from continuing operations based on the Federal corporate statutory tax rate of 35% to the provision (benefit) for income taxes from continuing operations reflected in the consolidated financial statements is as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Provision (benefit) for income taxes at the statutory rate |
$ | 170 | ($199 | ) | $ | 292 | ||||||
Separate account dividends received deduction |
(93 | ) | (107 | ) | (103 | ) | ||||||
Low income housing and foreign tax credits |
(19 | ) | (31 | ) | (33 | ) | ||||||
Other |
(14 | ) | 22 | (27 | ) | |||||||
Provision (benefit) for income taxes from continuing operations |
$ | 44 | ($315 | ) | $ | 129 | ||||||
Upon adoption of new guidance to the Codification’s Income Taxes Topic relating to the accounting for uncertainty in income taxes on January 1, 2007, the Company had unrecognized tax benefits of $32 million, which relate entirely to an uncertain tax position regarding refund claims for the impact of short-term capital gains on computing separate account Dividends Received Deductions (DRD). |
During the year ended December 31, 2008, the Company’s tax contingency related to the accounting for uncertainty in income taxes increased by $402 million for a tax position for which there was uncertainty about the timing, but not the deductibility, of certain tax deductions. Since the benefits of the tax position were not being claimed on an original return and the Company did not receive cash, interest or penalties were not accrued. Due to the nature of deferred tax accounting, the tax position does not have an impact on the annual effective tax rate. |
PL-51
The $434 million tax contingency related to the accounting for uncertainty in income taxes was decreased by $420 million as a result of events that occurred during the year ended December 31, 2009. The Company effectively settled $18 million of the gross uncertain tax position related to DRD, which resulted in the realization of $9 million of tax benefits. The Company also resolved the uncertain tax accounting position on certain tax deductions resulting in a $402 million decrease. The provision for income taxes from continuing operations has also been reduced by $10 million for additional interest income resulting from favorable tax settlements. |
A reconciliation of the changes in the unrecognized tax benefits is as follows (In Millions): |
Balance at January 1, 2007 |
$ | 32 | ||
Additions and deletions
|
||||
Balance at December 31, 2007 |
32 | |||
Additions and deletions |
402 | |||
Balance at December 31, 2008 |
434 | |||
Additions and deletions |
(420 | ) | ||
Balance at December 31, 2009 |
$ | 14 | ||
Depending on the outcome of Internal Revenue Service (IRS) audits, approximately $7 million of the unrecognized DRD tax benefits may be realized during the next twelve months. All realized tax benefits and related interest are recorded as a discrete item that will impact the effective tax rate in the accounting period in which the uncertain tax position is ultimately settled. |
During the years ended December 31, 2009, 2008 and 2007, the Company paid an immaterial amount of interest and penalties to state tax authorities. |
PL-52
The net deferred tax (liability) asset, included in other liabilities and other assets as of December 31, 2009 and 2008, respectively, is comprised of the following tax effected temporary differences: |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Deferred tax assets: |
||||||||
Policyholder reserves |
$ | 724 | $ | 1,274 | ||||
Investment valuation |
283 | 271 | ||||||
Tax net operating loss carryforward |
249 | 168 | ||||||
Tax credit carryforward |
214 | 122 | ||||||
Deferred compensation |
45 | 42 | ||||||
Maintenance reserves |
38 | 46 | ||||||
Dividends to policyholders |
8 | 8 | ||||||
Other |
25 | 27 | ||||||
Total deferred tax assets |
1,586 | 1,958 | ||||||
Deferred tax liabilities: |
||||||||
DAC |
(1,313 | ) | (1,222 | ) | ||||
Depreciation |
(563 | ) | (458 | ) | ||||
Reinsurance |
(77 | ) | (74 | ) | ||||
Hedging |
(44 | ) | (14 | ) | ||||
Partnership income |
(28 | ) | (65 | ) | ||||
Retirement benefits |
(18 | ) | ||||||
Other |
(41 | ) | (43 | ) | ||||
Total deferred tax liabilities |
(2,066 | ) | (1,894 | ) | ||||
Net deferred tax asset (liability) from continuing operations |
(480 | ) | 64 | |||||
Unrealized loss on derivatives and securities available for sale |
101 | 947 | ||||||
Unrealized loss on interest in PIMCO and other security |
8 | |||||||
Deferred taxes on cumulative changes in accounting principles |
120 | 27 | ||||||
Minimum pension liability and other adjustments |
(10 | ) | 8 | |||||
Net deferred tax asset (liability) |
($269 | ) | $ | 1,054 | ||||
The tax net operating loss carryforwards relate to Federal tax losses incurred in 1998 through 2008 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 2008 with a ten-year carryforward. |
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 and 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 IRS and is audited periodically by some state taxing authorities. The IRS has completed audits of the Company’s tax returns through the tax years ended December 31, 2005 and has commenced audits for tax years 2006, 2007 and 2008. The State of California recently concluded audits for tax years 2003 and 2004 without a material assessment. The Company does not expect the Federal and state audits to result in any material assessments. |
PL-53
19. | SEGMENT INFORMATION | |
The Company has four operating segments: Life Insurance, Investment Management, Annuities & Mutual Funds and Aircraft Leasing. 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 Investment Management segment provides investment and insurance products to institutional investors, pension fund sponsors and structured settlement annuitants, primarily through its home office marketing team and other intermediaries. The segment’s principal products include GICs, synthetic GICs, funding agreement-backed notes issued to institutional investors via medium-term note programs or to the FHLB of Topeka, as well as structured settlement annuities issued in conjunction with personal injury awards and group retirement annuities sold to pension plans. | ||
The Annuities & Mutual Funds segment’s principle products include variable and fixed annuities, and mutual funds, and are offered through multiple distribution sources. Distribution channels include independent planners, financial institutions and national/regional wirehouses. | ||
The Aircraft Leasing segment (Note 9) offers aircraft leasing to the airline industry throughout the world and provides brokerage and asset management services to other third-parties. | ||
The Corporate and Other segment primarily includes investment income, expenses and assets not attributable to the operating segments, and the operations of certain subsidiaries that do not qualify as operating segments. The Corporate and Other segment also includes the interest in PIMCO 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). | ||
The operating segments, excluding Aircraft Leasing, 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 substantially all of its revenues and net income from customers located in the U.S. As of December 31, 2009 and 2008, the Company had foreign investments with an estimated fair value of $7.2 billion and $5.8 billion, respectively. Aircraft leased to foreign customers were $5.0 billion and $4.8 billion as of December 31, 2009 and 2008, respectively. Revenues derived from any customer did not exceed 10% of consolidated total revenues for the years ended December 31, 2009, 2008 and 2007. |
PL-54
The following is segment information as of and for the year ended December 31, 2009: |
Annuities | ||||||||||||||||||||||||
Life | Investment | & Mutual | Aircraft | Corporate | ||||||||||||||||||||
Insurance | Management | Funds | Leasing | and Other | Total | |||||||||||||||||||
REVENUES | (In Millions) | |||||||||||||||||||||||
Policy fees and insurance premiums |
$ | 1,063 | $ | 628 | $ | 581 | $ | 3 | $ | 2,275 | ||||||||||||||
Net investment income |
892 | 759 | 278 | $ | 1 | (68 | ) | 1,862 | ||||||||||||||||
Net realized investment gain (loss) |
55 | 313 | 7 | (222 | ) | 153 | ||||||||||||||||||
OTTIs |
(63 | ) | (176 | ) | (16 | ) | (56 | ) | (311 | ) | ||||||||||||||
Investment advisory fees |
18 | 190 | 208 | |||||||||||||||||||||
Aircraft leasing revenue |
578 | 578 | ||||||||||||||||||||||
Other income |
10 | 112 | 13 | 2 | 137 | |||||||||||||||||||
Total revenues |
1,920 | 1,266 | 1,458 | 599 | (341 | ) | 4,902 | |||||||||||||||||
BENEFITS AND EXPENSES |
||||||||||||||||||||||||
Interest credited |
681 | 379 | 193 | 1,253 | ||||||||||||||||||||
Policy benefits |
363 | 903 | (40 | ) | 1,226 | |||||||||||||||||||
Commission expenses |
353 | 18 | 320 | 691 | ||||||||||||||||||||
Operating expenses |
290 | 26 | 273 | 59 | 134 | 782 | ||||||||||||||||||
Depreciation of aircraft |
227 | 227 | ||||||||||||||||||||||
Interest expense |
182 | 55 | 237 | |||||||||||||||||||||
Total benefits and expenses |
1,687 | 1,326 | 746 | 468 | 189 | 4,416 | ||||||||||||||||||
Income (loss) from continuing operations before
provision (benefit) for income taxes |
233 | (60 | ) | 712 | 131 | (530 | ) | 486 | ||||||||||||||||
Provision (benefit) for income taxes |
66 | (24 | ) | 151 | 39 | (188 | ) | 44 | ||||||||||||||||
Income (loss) from continuing operations |
167 | (36 | ) | 561 | 92 | (342 | ) | 442 | ||||||||||||||||
Discontinued operations, net of taxes |
(20 | ) | (20 | ) | ||||||||||||||||||||
Net income (loss) |
167 | (36 | ) | 561 | 92 | (362 | ) | 422 | ||||||||||||||||
Less: net (income) loss attributable to the
noncontrolling
interest from continuing operations |
(9 | ) | 23 | 14 | ||||||||||||||||||||
Net income (loss) attributable to the Company |
$ | 167 | ($36 | ) | $ | 561 | $ | 83 | ($339 | ) | $ | 436 | ||||||||||||
Total assets |
$ | 28,589 | $ | 13,256 | $ | 57,903 | $ | 6,091 | $ | 2,638 | $ | 108,477 | ||||||||||||
DAC |
1,865 | 59 | 2,882 | 4,806 | ||||||||||||||||||||
Separate account assets |
5,590 | 67 | 46,907 | 52,564 | ||||||||||||||||||||
Policyholder and contract liabilities |
21,133 | 12,526 | 7,728 | 41,387 | ||||||||||||||||||||
Separate account liabilities |
5,590 | 67 | 46,907 | 52,564 |
PL-55
The following is segment information as of and for the year ended December 31, 2008: |
Annuities | ||||||||||||||||||||||||
Life | Investment | & Mutual | Aircraft | Corporate | ||||||||||||||||||||
Insurance | Management | Funds | Leasing | and Other | Total | |||||||||||||||||||
REVENUES | (In Millions) | |||||||||||||||||||||||
Policy fees and insurance premiums |
$ | 943 | $ | 363 | $ | 691 | $ | 1,997 | ||||||||||||||||
Net investment income |
855 | 876 | 178 | $ | 85 | 1,994 | ||||||||||||||||||
Net realized investment gain (loss) |
24 | 51 | (768 | ) | (56 | ) | (749 | ) | ||||||||||||||||
OTTIs |
(69 | ) | (398 | ) | (30 | ) | ($3 | ) | (80 | ) | (580 | ) | ||||||||||||
Realized investment gain on interest in PIMCO |
109 | 109 | ||||||||||||||||||||||
Investment advisory fees |
22 | 233 | 255 | |||||||||||||||||||||
Aircraft leasing revenue |
571 | 571 | ||||||||||||||||||||||
Other income |
11 | 117 | 38 | 1 | 167 | |||||||||||||||||||
Total revenues |
1,786 | 892 | 421 | 606 | 59 | 3,764 | ||||||||||||||||||
BENEFITS AND EXPENSES |
||||||||||||||||||||||||
Interest credited |
661 | 440 | 133 | 1,234 | ||||||||||||||||||||
Policy benefits |
372 | 684 | 150 | 1,206 | ||||||||||||||||||||
Commission expenses |
268 | 18 | 429 | 715 | ||||||||||||||||||||
Operating expenses |
263 | 34 | 317 | 40 | 78 | 732 | ||||||||||||||||||
Depreciation of aircraft |
208 | 208 | ||||||||||||||||||||||
Interest expense |
221 | 17 | 238 | |||||||||||||||||||||
Total benefits and expenses |
1,564 | 1,176 | 1,029 | 469 | 95 | 4,333 | ||||||||||||||||||
Income (loss) from continuing operations before
provision (benefit) for income taxes |
222 | (284 | ) | (608 | ) | 137 | (36 | ) | (569 | ) | ||||||||||||||
Provision (benefit) for income taxes |
61 | (103 | ) | (329 | ) | 48 | 8 | (315 | ) | |||||||||||||||
Income (loss) from continuing operations |
161 | (181 | ) | (279 | ) | 89 | (44 | ) | (254 | ) | ||||||||||||||
Discontinued operations, net of taxes |
(6 | ) | (6 | ) | ||||||||||||||||||||
Net income (loss) |
161 | (181 | ) | (279 | ) | 89 | (50 | ) | (260 | ) | ||||||||||||||
Less: net (income) loss attributable to the
noncontrolling
interest from continuing operations |
(8 | ) | 11 | 3 | ||||||||||||||||||||
Net income (loss) attributable to the Company |
$ | 161 | ($181 | ) | ($279 | ) | $ | 81 | ($39 | ) | ($257 | ) | ||||||||||||
Total assets |
$ | 26,695 | $ | 15,155 | $ | 45,285 | $ | 5,400 | $ | 2,633 | $ | 95,168 | ||||||||||||
DAC |
2,118 | 64 | 2,830 | 5,012 | ||||||||||||||||||||
Separate account assets |
4,525 | 284 | 36,696 | 41,505 | ||||||||||||||||||||
Policyholder and contract liabilities |
20,786 | 14,099 | 7,626 | 42,511 | ||||||||||||||||||||
Separate account liabilities |
4,525 | 284 | 36,696 | 41,505 |
PL-56
The following is segment information for the year ended December 31, 2007: |
Annuities | ||||||||||||||||||||||||
Life | Investment | & Mutual | Aircraft | Corporate | ||||||||||||||||||||
Insurance | Management | Funds | Leasing | and Other | Total | |||||||||||||||||||
REVENUES | (In Millions) | |||||||||||||||||||||||
Policy fees and insurance premiums |
$ | 777 | $ | 224 | $ | 779 | $ | 1,780 | ||||||||||||||||
Net investment income |
803 | 905 | 186 | $ | 9 | $ | 217 | 2,120 | ||||||||||||||||
Net realized investment gain (loss) |
4 | 115 | (99 | ) | 17 | 32 | 69 | |||||||||||||||||
OTTIs |
(3 | ) | (95 | ) | (98 | ) | ||||||||||||||||||
Investment advisory fees |
29 | 298 | 327 | |||||||||||||||||||||
Aircraft leasing revenue |
535 | 535 | ||||||||||||||||||||||
Other income |
9 | 84 | 50 | 4 | 147 | |||||||||||||||||||
Total revenues |
1,619 | 1,149 | 1,248 | 611 | 253 | 4,880 | ||||||||||||||||||
BENEFITS AND EXPENSES |
||||||||||||||||||||||||
Interest credited |
618 | 504 | 144 | 1,266 | ||||||||||||||||||||
Policy benefits |
308 | 535 | 12 | 855 | ||||||||||||||||||||
Commission expenses |
209 | 11 | 470 | 690 | ||||||||||||||||||||
Operating expenses |
252 | 34 | 346 | 49 | 88 | 769 | ||||||||||||||||||
Depreciation of aircraft |
189 | 189 | ||||||||||||||||||||||
Interest expense |
261 | 16 | 277 | |||||||||||||||||||||
Total benefits and expenses |
1,387 | 1,084 | 972 | 499 | 104 | 4,046 | ||||||||||||||||||
Income from continuing operations before
provision (benefit) for income taxes |
232 | 65 | 276 | 112 | 149 | 834 | ||||||||||||||||||
Provision (benefit) for income taxes |
58 | 12 | (6 | ) | 32 | 33 | 129 | |||||||||||||||||
Income from continuing operations |
174 | 53 | 282 | 80 | 116 | 705 | ||||||||||||||||||
Discontinued operations, net of taxes |
11 | 11 | ||||||||||||||||||||||
Net income |
174 | 53 | 282 | 80 | 127 | 716 | ||||||||||||||||||
Less: net income attributable to the noncontrolling
interest from continuing operations |
(2 | ) | (36 | ) | (38 | ) | ||||||||||||||||||
Net income attributable to the Company |
$ | 174 | $ | 53 | $ | 282 | $ | 78 | $ | 91 | $ | 678 | ||||||||||||
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. Prior to May 1, 2007, Pacific Life served in this capacity. 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 $244 million, $287 million and $337 million for the years ended December 31, 2009, 2008 and 2007, 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 $9 million, $7 million and $7 million for the years ended December 31, 2009, 2008 and 2007, respectively. | ||
In addition, effective May 1, 2007, a service plan adopted by the Pacific Select Fund went into effect whereby the fund pays PSD, as distributor of the fund, a service fee in connection with services rendered or procured to or for shareholders of the fund or their variable contract owners. These services may include, but are not limited to, payment of compensation to broker-dealers, including |
PL-57
PSD itself, and other financial institutions and organizations, which assist in providing any of the services. For the years ended December 31, 2009 and 2008, PSD received $86 million and $100 million, respectively, in service fees from the Pacific Select Fund, which are recorded in other income. For the period May 1, 2007 through December 31, 2007, PSD received $74 million in service fees from the Pacific Select Fund, which are also recorded in other income. The service fees were allocated to the operating segments, primarily the Annuities & Mutual Funds segment (Note 19). | ||
As discussed in Note 16, NLGR benefits are reinsured with PAR Bermuda and PAR Vermont. | ||
ACG has derivative swap contracts with Pacific LifeCorp as the counterparty. The notional amounts total $2.0 billion and $1.8 billion as of December 31, 2009 and 2008, respectively. The estimated fair values of the derivatives were net liabilities of $48 million and $106 million as of December 31, 2009 and 2008, respectively. | ||
21. | COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS | ||
The Company has outstanding commitments to make investments primarily in mortgage loans, limited partnerships and other investments, as follows (In Millions): |
Years Ending December 31: | ||||
2010 |
$ | 1,005 | ||
2011 through 2014 |
494 | |||
2015 and thereafter |
91 | |||
Total |
$ | 1,590 | ||
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 $8 million, $10 million and $13 million for the years ended December 31, 2009, 2008 and 2007, 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 $15 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: | ||||
2010 |
$ | 8 | ||
2011 through 2014 |
20 | |||
2015 and thereafter |
2 | |||
Total |
$ | 30 | ||
As of December 31, 2009, ACG has commitments with major aircraft manufacturers to purchase aircraft at an estimated delivery price of $6,370 million with delivery from 2010 through 2017. Such purchase commitments may be funded: |
• | up to $635 million in less than one year, | ||
• | an additional $2,325 million in one to three years, | ||
• | an additional $2,116 million in three to five years, and | ||
• | an additional $1,021 million thereafter. |
As of December 31, 2009, deposits related to these agreements totaled $273 million and are included in other assets. | ||
In connection with an acquisition in 2005, ACG assumed residual value support agreements with expiration dates ranging from 2011 to 2015. The gross remaining residual value exposure under these agreements was $99 million as of December 31, 2009 and 2008. As of December 31, 2009, the Company has estimated that it has no measurable liability under the remaining residual value guarantee agreements. |
PL-58
In connection with the reinsurance of NLGR benefits from Pacific Life to PAR Bermuda and PAR Vermont (Note 16), 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, 2009, a $340 million letter of credit had been issued from this facility for PAR Bermuda. In addition, a letter of credit issued for PAR Vermont totaled $52 million as of December 31, 2009. Pacific LifeCorp guarantees the obligations of PAR Bermuda and PAR Vermont under the letter of credit agreement. | ||
CONTINGENCIES — LITIGATION | ||
During the year ended December 31, 2007, Pacific Life settled a national class action lawsuit, Cooper v. Pacific Life, for a combination of cash distributions and contract credits to owners of qualified annuity contracts who purchased their contracts between August 19, 1998, and April 30, 2002, or paid premium payments during that time period. Pacific Life strongly disagreed with the claims in the lawsuit. The settlement is not considered an admission or concession with respect to any claims made in the lawsuit and did not have a material adverse effect on the Company’s consolidated financial position. Initial distributions were made to eligible class members in the first quarter of 2008 with subsequent annual distributions for four years thereafter. | ||
The Company is a respondent in a number of other 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 | ||
On August 16, 2007, the IRS issued Revenue Ruling 2007-54, which provided the IRS’ interpretation of tax law regarding the computation of the DRD. On September 25, 2007, the IRS issued 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. | ||
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. 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. | ||
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. |
PL-59
In relation to the ACG Trust II securitization (Note 4), Pacific Life is contingently obligated to purchase certain notes from ACG Trust II to cover shortfalls in amounts due to the holders of the notes, up to certain levels as specified under the related agreements. As of December 31, 2009, the maximum potential amount of this future investment commitment was $100 million. | ||
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, Pacific Life 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. | ||
22. | SUBSEQUENT EVENTS | |
The Company has evaluated events subsequent to December 31, 2009 and through March 4, 2010, the date the consolidated financial statements were available to be issued. The Company has not evaluated subsequent events after that date for presentation in these consolidated financial statements. | ||
As of January 1, 2010, the Board of Directors of Pacific LifeCorp and Pacific Life authorized a cash capital contribution to ACG in the amount of $350 million, which could be made up to March 31, 2010. | ||
Effective January 1, 2010, the Investment Management segment’s products were moved into other segments of the Company. Structured settlement and group retirement annuities were moved to the Annuities & Mutual Fund segment and the other institutional investment products became part of the Corporate and Other segment. |
PL-60
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Financial Statements of Pacific Select Exec Separate Account
|
SA-1 | |||
Financial Statements of Pacific Life Insurance Company
|
PL-1 |
i
1
2
• | the guideline single premium or | |
• | the sum of the guideline level annual premiums. |
3
• | You can set up this service at any time while your Policy is In Force. | |
• | You need to complete a request form to enroll in the service. You may enroll by telephone or electronically if we have your completed telephone and electronic authorization on file. | |
• | You must have at least $5,000 in a Variable Investment Option to start the service. | |
• | We’ll automatically transfer Accumulated Value from one Variable Investment Option to one or more of the other Variable Investment Options you’ve selected. | |
• | We’ll process transfers as of the end of the Business Day on your Policy’s monthly, quarterly, semi-annual or annual anniversary, depending on the interval you’ve chosen. We will not make the first transfer until after the Free Look Transfer Date in states that require us to return your premiums if you exercise your Free Look Right. | |
• | We will not charge you for the dollar cost averaging service or for transfers made under this service, even if we decide to charge you in the future for transfers outside of the service, except if we have to by law. | |
• | We have the right to discontinue, modify or suspend the service at any time. | |
• | We’ll keep making transfers at the intervals you’ve chosen until one of the following happens: |
• | the total amount you’ve asked us to transfer has been transferred | |
• | there is no more Accumulated Value in the Investment Option you’re transferring from | |
• | your Policy enters the grace period and is in danger of lapsing | |
• | we receive your Written Request to cancel the service | |
• | we discontinue the service. |
4
• | You can set up this service at any time while your Policy is In Force. | |
• | You enroll in the service by sending us a Written Request or a completed Automatic Rebalancing Form. You may enroll by telephone or electronically if we have your completed telephone and electronic authorization on file. | |
• | Unless you choose a different start date, your first rebalancing will take place at the end of the Business Day we receive your request. Subsequent rebalancing will take place at the end of the Business Day on your Policy’s quarterly, semi-annual or annual anniversary, depending on the interval you chose. | |
• | We will not make the first transfer until after the Free Look Transfer Date, if your Policy was issued in a state that requires us to return your premiums if you exercise your Free Look Right. | |
• | If you cancel this service, you must wait 30 days to begin it again. | |
• | We do not charge for the portfolio rebalancing service, and we do not currently charge for transfers made under this service. |
• | We can discontinue, suspend or change the service at any time. |
• | You enroll in the service when you apply for your Policy and include specific details on your application. | |
• | You choose a regular amount to be transferred every month for 12 months. | |
• | Transfers under the first year transfer service take place on your Policy’s Monthly Payment Date, starting on the first Monthly Payment Date following the Free Look Transfer Date. | |
• | If you sign up for this service, we’ll waive the usual transfer limit for the Fixed Account during the first 12 Policy months from the date your initial premium is applied to your Policy. | |
• | If we make the last transfer during the second Policy Year, we will not count it toward the usual one transfer per year limit for the Fixed Account. | |
• | If the Accumulated Value in the Fixed Account is less than the amount to be transferred, we’ll transfer the balance and then cancel the service. | |
• | If there is Accumulated Value remaining in the Fixed Account at the end of the service, the transfer limitations for the Fixed Account will apply. | |
• | We do not charge for the first year transfer service, and we do not currently charge for transfers made under this service. |
• | You can set up the income stream from your Policy on either a monthly or annual basis. Each scheduled income payment must be at least $500 if you choose to receive monthly payments, or $1,000 if you choose annual payments. | |
• | You may choose to receive either a fixed amount of income or an amount based on a fixed duration. Depending upon your objectives, you may wish to reduce your Face Amount or change your Policy’s Death Benefit Option in order to maximize your income. |
5
• | You choose the scheduled income payment date. You may elect to have your income payments sent either by check or by electronic deposit to a bank account. The effective date of the withdrawal or loan will be the Business Day before any income payment date. | |
• | If the scheduled income payment date falls on a weekend or holiday, the actual income payment date will be the Business Day before the scheduled income payment date. | |
• | The withdrawal or loan will be taken from your Policy’s Investment Options in proportion to the Accumulated Value in each Investment Option. |
• | If the AIO program start date is six months or more from your next Policy Anniversary, the income period will end on the next Policy Anniversary. In this case, the first income period will last at least six months, but not more than one year. | |
• | If the AIO program start date is less than six months from your next Policy Anniversary, the income period will extend to the following Policy Anniversary. In this case, the first income period will last at least one year, but no more than 18 months. |
6
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9
• | 100% of premiums paid up to the first target premium | |
• | 18% of premiums paid up to the second target premium. | |
• | 7% of premiums paid under targets 3-10 | |
• | 3% of premiums paid in excess of the 10th target premium |
10
11
• | other variable life separate accounts, mutual funds, or investment products tracked by research firms, rating services, companies, publications, or persons who rank separate accounts or investment products on overall performance or other criteria | |
• | the Consumer Price Index, to assess the real rate of return from buying a Policy by taking inflation into consideration | |
• | various indices that are unmanaged. |
12
YIELD = 2[( |
a − b cd |
+ 1)6 − 1] |
where:
|
a | = | net investment income earned during the period by the underlying portfolio of the Variable Account, | |||
b | = | expenses accrued for the period (net of reimbursements), | ||||
c | = | the average daily number of accumulation units outstanding during the period that were entitled to receive dividends, and | ||||
d | = | the unit value of the accumulation units on the last day of the period. |
YIELD = 2[( |
a − b cd |
+ 1)6 − 1] |
where:
|
a | = | dividends and interest earned during the period, | |||
b | = | expenses accrued for the period (net of reimbursements), | ||||
c | = | the average daily number of shares outstanding during the period that were entitled to receive dividends, and | ||||
d | = | the maximum offering price per share on the last day of the period. |
13
14
SA-1
Variable Accounts | Underlying Portfolios/Funds | Shares | Cost | Value | ||||||||||
Pacific Select Fund (Affiliated Mutual Fund) | ||||||||||||||
Diversified Bond |
Diversified Bond | 3,146,440 | $ | 30,129,209 | $ | 30,027,123 | ||||||||
Floating Rate Loan |
Floating Rate Loan | 2,015,375 | 15,299,882 | 14,760,272 | ||||||||||
High Yield Bond |
High Yield Bond | 16,035,594 | 90,271,387 | 97,202,400 | ||||||||||
Inflation Managed |
Inflation Managed | 15,835,742 | 178,943,177 | 175,218,226 | ||||||||||
Managed Bond |
Managed Bond | 40,821,136 | 449,490,452 | 452,533,074 | ||||||||||
Money Market |
Money Market | 29,082,539 | 294,148,090 | 293,482,920 | ||||||||||
Short Duration Bond |
Short Duration Bond | 4,833,417 | 45,665,962 | 44,837,735 | ||||||||||
American Funds® Growth |
American Funds Growth | 8,342,271 | 78,914,586 | 59,372,679 | ||||||||||
American Funds Growth-Income |
American Funds Growth-Income | 7,129,022 | 78,178,915 | 59,949,825 | ||||||||||
Comstock |
Comstock | 8,373,656 | 78,528,794 | 63,233,337 | ||||||||||
Diversified Research |
Diversified Research | 3,947,482 | 46,086,204 | 34,983,734 | ||||||||||
Equity |
Equity | 2,089,629 | 39,493,087 | 31,424,327 | ||||||||||
Equity Index |
Equity Index | 17,902,602 | 465,877,743 | 436,543,982 | ||||||||||
Focused 30 |
Focused 30 | 3,069,640 | 39,844,425 | 34,755,973 | ||||||||||
Growth LT |
Growth LT | 11,099,111 | 199,467,350 | 200,271,045 | ||||||||||
Large-Cap Growth |
Large-Cap Growth | 10,004,453 | 64,779,029 | 51,736,448 | ||||||||||
Large-Cap Value |
Large-Cap Value | 11,884,556 | 145,277,127 | 124,817,305 | ||||||||||
Long/Short Large-Cap |
Long/Short Large-Cap | 2,867,330 | 24,547,532 | 23,800,006 | ||||||||||
Main Street® Core |
Main Street Core | 6,491,277 | 123,345,450 | 109,273,310 | ||||||||||
Mid-Cap Equity |
Mid-Cap Equity | 10,556,775 | 166,112,376 | 126,956,712 | ||||||||||
Mid-Cap Growth |
Mid-Cap Growth | 7,074,008 | 57,941,750 | 53,288,952 | ||||||||||
Mid-Cap Value (1) |
Mid-Cap Value | 1,476,566 | 15,039,266 | 17,610,387 | ||||||||||
Small-Cap Equity |
Small-Cap Equity | 1,607,493 | 18,777,189 | 19,202,912 | ||||||||||
Small-Cap Growth |
Small-Cap Growth | 4,128,609 | 41,717,987 | 38,860,763 | ||||||||||
Small-Cap Index |
Small-Cap Index | 19,131,003 | 240,463,469 | 176,660,022 | ||||||||||
Small-Cap Value |
Small-Cap Value | 5,360,974 | 68,950,094 | 59,758,062 | ||||||||||
Emerging Markets |
Emerging Markets | 10,504,007 | 160,939,175 | 142,859,859 | ||||||||||
International Large-Cap |
International Large-Cap | 24,312,820 | 197,031,114 | 147,687,981 | ||||||||||
International Small-Cap |
International Small-Cap | 3,187,898 | 27,978,317 | 22,136,212 | ||||||||||
International Value |
International Value | 15,011,598 | 228,885,811 | 164,331,253 | ||||||||||
Health Sciences |
Health Sciences | 2,129,555 | 20,512,558 | 19,972,720 | ||||||||||
Real Estate |
Real Estate | 5,740,667 | 92,162,517 | 64,880,774 | ||||||||||
Technology |
Technology | 3,147,930 | 16,033,902 | 14,323,951 | ||||||||||
American Funds Asset Allocation (1) |
American Funds Asset Allocation | 195,577 | 2,387,433 | 2,496,210 | ||||||||||
Multi-Strategy |
Multi-Strategy | 4,893,297 | 74,076,199 | 52,152,232 | ||||||||||
Pacific Dynamix — Conservative Growth (1) |
Pacific Dynamix - Conservative Growth | 45,288 | 508,458 | 506,869 | ||||||||||
Pacific Dynamix — Moderate Growth (1) |
Pacific Dynamix - Moderate Growth | 69,914 | 800,035 | 822,948 | ||||||||||
Pacific Dynamix — Growth (1) |
Pacific Dynamix - Growth | 124,497 | 1,387,265 | 1,506,341 | ||||||||||
M Fund, Inc. | ||||||||||||||
I |
Brandes International Equity | 5,682,460 | 91,901,865 | 65,746,067 | ||||||||||
II |
Large-Cap Growth (2) | 1,990,346 | 30,551,533 | 26,352,179 | ||||||||||
III |
Frontier Capital Appreciation | 1,855,324 | 42,283,124 | 37,978,474 | ||||||||||
V |
Business Opportunity Value | 2,431,138 | 25,632,369 | 23,095,814 | ||||||||||
BlackRock Variable Series Funds, Inc. | ||||||||||||||
BlackRock Basic Value V.I. Class III |
BlackRock Basic Value V.I. Class III | 831,947 | 9,284,189 | 8,910,157 | ||||||||||
BlackRock Global Allocation V.I. Class III |
BlackRock Global Allocation V.I. Class III | 2,869,807 | 37,281,616 | 38,512,804 | ||||||||||
Fidelity® Variable Insurance Products Funds | ||||||||||||||
Fidelity VIP Contrafund® Service Class 2 |
Fidelity VIP Contrafund Service Class 2 | 2,317,907 | 60,036,623 | 47,030,339 | ||||||||||
Fidelity VIP Freedom Income Service Class 2 |
Fidelity VIP Freedom Income Service Class 2 | 71,580 | 678,976 | 713,654 | ||||||||||
Fidelity VIP Freedom 2010 Service Class 2 |
Fidelity VIP Freedom 2010 Service Class 2 | 86,065 | 777,872 | 838,270 | ||||||||||
Fidelity VIP Freedom 2015 Service Class 2 |
Fidelity VIP Freedom 2015 Service Class 2 | 144,251 | 1,228,342 | 1,405,006 | ||||||||||
Fidelity VIP Freedom 2020 Service Class 2 |
Fidelity VIP Freedom 2020 Service Class 2 | 140,920 | 1,256,528 | 1,335,924 | ||||||||||
Fidelity VIP Freedom 2025 Service Class 2 |
Fidelity VIP Freedom 2025 Service Class 2 | 259,191 | 2,947,571 | 2,402,697 | ||||||||||
Fidelity VIP Freedom 2030 Service Class 2 |
Fidelity VIP Freedom 2030 Service Class 2 | 294,145 | 2,513,083 | 2,647,304 | ||||||||||
Fidelity VIP Growth Service Class 2 |
Fidelity VIP Growth Service Class 2 | 192,037 | 6,883,820 | 5,713,101 | ||||||||||
Fidelity VIP Mid Cap Service Class 2 |
Fidelity VIP Mid Cap Service Class 2 | 1,135,187 | 32,321,483 | 28,493,194 | ||||||||||
Fidelity VIP Value Strategies Service Class 2 |
Fidelity VIP Value Strategies Service Class 2 | 302,312 | 1,900,686 | 2,348,966 |
See Notes to Financial Statements | See explanation of references on SA-3 |
SA-2
Variable Accounts | Underlying Portfolios/Funds | Shares | Cost | Value | ||||||||||
Janus Aspen Series | ||||||||||||||
Overseas Service Class (3) |
Janus Aspen Overseas Service Class (3) | 803,886 | $ | 32,617,418 | $ | 36,239,197 | ||||||||
INTECH Risk-Managed Core Service Class |
Janus Aspen INTECH Risk-Managed Core Service Class | 61,619 | 488,837 | 591,542 | ||||||||||
Enterprise Service Class (4) |
Janus Aspen Enterprise Service Class (4) | 129,747 | 4,075,538 | 3,879,427 | ||||||||||
Lazard Retirement Series, Inc. | ||||||||||||||
Lazard Retirement U.S. Strategic Equity |
Lazard Retirement U.S. Strategic Equity | 51,712 | 370,805 | 423,521 | ||||||||||
Legg Mason ClearBridge Variable Equity Trust | ||||||||||||||
Legg Mason ClearBridge Variable Aggressive Growth — Class II (5) |
Legg Mason ClearBridge Variable Aggressive Growth - Class II (5) | 50,236 | 608,602 | 652,565 | ||||||||||
Legg Mason ClearBridge Variable Mid Cap Core — Class II (6) |
Legg Mason ClearBridge Variable Mid Cap Core - Class II (6) | 668,628 | 6,822,523 | 7,274,670 | ||||||||||
MFS® Variable Insurance Trust | ||||||||||||||
MFS New Discovery Series Service Class |
MFS New Discovery Series Service Class | 234,524 | 2,611,432 | 3,060,542 | ||||||||||
MFS Utilities Series Service Class |
MFS Utilities Series Service Class | 138,994 | 3,246,073 | 3,148,219 | ||||||||||
Premier VIT | ||||||||||||||
NACM Small Cap Class I |
NACM Small Cap Class I | 68,453 | 1,000,981 | 1,060,344 | ||||||||||
T. Rowe Price Equity Series, Inc. | ||||||||||||||
T. Rowe Price Blue Chip Growth — II |
T. Rowe Price Blue Chip Growth - II | 750,754 | 6,942,610 | 7,132,159 | ||||||||||
T. Rowe Price Equity Income — II |
T. Rowe Price Equity Income - II | 1,611,645 | 31,939,954 | 28,381,067 | ||||||||||
Van Eck Worldwide Insurance Trust | ||||||||||||||
Van Eck Worldwide Hard Assets |
Van Eck Worldwide Hard Assets | 2,311,694 | 73,050,391 | 67,640,180 |
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). | |
(2) | Formerly named Turner Core Growth Portfolio. | |
(3) | Formerly named International Growth Service Class Variable Account and Janus Aspen International Growth Service Class Portfolio. | |
(4) | Formerly named Mid Cap Growth Service Class Variable Account and Janus Aspen Mid Cap Growth Service Class Portfolio. | |
(5) | Formerly named Legg Mason Partners Variable Aggressive Growth — Class II Variable Account and Legg Mason Partners Variable Aggressive Growth — Class II Portfolio. | |
(6) | Formerly named Legg Mason Partners Variable Mid Cap Core — Class II Variable Account and Legg Mason Partners Variable Mid Cap Core — Class II Portfolio. |
SA-3
Variable Accounts | ||||||||||||||||||||||||||||
Diversified | Floating | High Yield | Inflation | Managed | Money | Short Duration | ||||||||||||||||||||||
Bond | Rate Loan | Bond | Managed | Bond | Market | Bond | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 30,027,123 | $ | 14,760,272 | $ | 97,202,400 | $ | 175,218,226 | $ | 452,533,074 | $ | 293,482,920 | $ | 44,837,735 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
7,301 | 1,820 | 714 | — | 259,055 | — | — | |||||||||||||||||||||
Fund shares redeemed |
— | — | — | 120,496 | — | 2,639,447 | 397,905 | |||||||||||||||||||||
Total Assets |
30,034,424 | 14,762,092 | 97,203,114 | 175,338,722 | 452,792,129 | 296,122,367 | 45,235,640 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | — | 120,496 | — | 2,639,447 | 397,905 | |||||||||||||||||||||
Fund shares purchased |
7,290 | 1,820 | 675 | — | 259,015 | — | — | |||||||||||||||||||||
Other |
— | 21 | — | 30 | — | 141 | 11 | |||||||||||||||||||||
Total Liabilities |
7,290 | 1,841 | 675 | 120,526 | 259,015 | 2,639,588 | 397,916 | |||||||||||||||||||||
NET ASSETS |
$ | 30,027,134 | $ | 14,760,251 | $ | 97,202,439 | $ | 175,218,196 | $ | 452,533,114 | $ | 293,482,779 | $ | 44,837,724 | ||||||||||||||
Units Outstanding |
2,677,541 | 1,711,048 | 2,237,443 | 3,815,481 | 8,992,559 | 12,533,277 | 3,846,075 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 11.21 | $ | 8.63 | $ | 43.44 | $ | 45.92 | $ | 50.32 | $ | 23.42 | $ | 11.66 | ||||||||||||||
Cost of Investments |
$ | 30,129,209 | $ | 15,299,882 | $ | 90,271,387 | $ | 178,943,177 | $ | 449,490,452 | $ | 294,148,090 | $ | 45,665,962 | ||||||||||||||
American Funds | American Funds | Diversified | Equity | Focused | ||||||||||||||||||||||||
Growth | Growth-Income | Comstock | Research | Equity | Index | 30 | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 59,372,679 | $ | 59,949,825 | $ | 63,233,337 | $ | 34,983,734 | $ | 31,424,327 | $ | 436,543,982 | $ | 34,755,973 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
27,348 | 20,295 | 18,314 | — | 6,931 | 15,827 | 836,298 | |||||||||||||||||||||
Fund shares redeemed |
— | — | — | 24,377 | — | — | — | |||||||||||||||||||||
Total Assets |
59,400,027 | 59,970,120 | 63,251,651 | 35,008,111 | 31,431,258 | 436,559,809 | 35,592,271 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | — | 24,341 | — | — | — | |||||||||||||||||||||
Fund shares purchased |
27,348 | 20,295 | 18,225 | — | 6,931 | 15,756 | 836,274 | |||||||||||||||||||||
Other |
30 | 2,440 | — | — | 7 | — | — | |||||||||||||||||||||
Total Liabilities |
27,378 | 22,735 | 18,225 | 24,341 | 6,938 | 15,756 | 836,274 | |||||||||||||||||||||
NET ASSETS |
$ | 59,372,649 | $ | 59,947,385 | $ | 63,233,426 | $ | 34,983,770 | $ | 31,424,320 | $ | 436,544,053 | $ | 34,755,997 | ||||||||||||||
Units Outstanding |
5,195,477 | 5,610,441 | 6,250,352 | 2,937,995 | 2,754,697 | 9,693,106 | 2,819,667 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 11.43 | $ | 10.68 | $ | 10.12 | $ | 11.91 | $ | 11.41 | $ | 45.04 | $ | 12.33 | ||||||||||||||
Cost of Investments |
$ | 78,914,586 | $ | 78,178,915 | $ | 78,528,794 | $ | 46,086,204 | $ | 39,493,087 | $ | 465,877,743 | $ | 39,844,425 | ||||||||||||||
Growth | Large-Cap | Large-Cap | Long/Short | Main Street | Mid-Cap | Mid-Cap | ||||||||||||||||||||||
LT | Growth | Value | Large-Cap | Core | Equity | Growth | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 200,271,045 | $ | 51,736,448 | $ | 124,817,305 | $ | 23,800,006 | $ | 109,273,310 | $ | 126,956,712 | $ | 53,288,952 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
— | 5,176 | 94,965 | 8,467 | — | — | 18,692 | |||||||||||||||||||||
Fund shares redeemed |
9,149 | — | — | — | 12,581 | 43,186 | — | |||||||||||||||||||||
Total Assets |
200,280,194 | 51,741,624 | 124,912,270 | 23,808,473 | 109,285,891 | 126,999,898 | 53,307,644 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
9,149 | — | — | — | 12,554 | 42,981 | — | |||||||||||||||||||||
Fund shares purchased |
— | 5,176 | 94,788 | 8,452 | — | — | 18,692 | |||||||||||||||||||||
Other |
44 | 9 | — | — | — | — | 27 | |||||||||||||||||||||
Total Liabilities |
9,193 | 5,185 | 94,788 | 8,452 | 12,554 | 42,981 | 18,719 | |||||||||||||||||||||
NET ASSETS |
$ | 200,271,001 | $ | 51,736,439 | $ | 124,817,482 | $ | 23,800,021 | $ | 109,273,337 | $ | 126,956,917 | $ | 53,288,925 | ||||||||||||||
Units Outstanding |
4,914,745 | 8,196,379 | 8,956,147 | 2,826,468 | 2,500,133 | 6,018,439 | 6,166,014 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 40.75 | $ | 6.31 | $ | 13.94 | $ | 8.42 | $ | 43.71 | $ | 21.09 | $ | 8.64 | ||||||||||||||
Cost of Investments |
$ | 199,467,350 | $ | 64,779,029 | $ | 145,277,127 | $ | 24,547,532 | $ | 123,345,450 | $ | 166,112,376 | $ | 57,941,750 | ||||||||||||||
SA-4
Variable Accounts | ||||||||||||||||||||||||||||
Mid-Cap | Small-Cap | Small-Cap | Small-Cap | Small-Cap | Emerging | International | ||||||||||||||||||||||
Value | Equity | Growth | Index | Value | Markets | Large-Cap | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 17,610,387 | $ | 19,202,912 | $ | 38,860,763 | $ | 176,660,022 | $ | 59,758,062 | $ | 142,859,859 | $ | 147,687,981 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
7,889 | 49,355 | — | 41,725 | 566,771 | 828,376 | 37,415 | |||||||||||||||||||||
Fund shares redeemed |
— | — | 18,529 | — | — | — | — | |||||||||||||||||||||
Total Assets |
17,618,276 | 19,252,267 | 38,879,292 | 176,701,747 | 60,324,833 | 143,688,235 | 147,725,396 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | 18,469 | — | — | — | — | |||||||||||||||||||||
Fund shares purchased |
7,889 | 49,332 | — | 41,725 | 566,766 | 828,376 | 37,415 | |||||||||||||||||||||
Other |
1 | — | — | 63 | — | 81 | 9 | |||||||||||||||||||||
Total Liabilities |
7,890 | 49,332 | 18,469 | 41,788 | 566,766 | 828,457 | 37,424 | |||||||||||||||||||||
NET ASSETS |
$ | 17,610,386 | $ | 19,202,935 | $ | 38,860,823 | $ | 176,659,959 | $ | 59,758,067 | $ | 142,859,778 | $ | 147,687,972 | ||||||||||||||
Units Outstanding |
1,208,072 | 1,373,316 | 3,188,386 | 11,242,905 | 2,953,532 | 4,503,441 | 13,371,427 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 14.58 | $ | 13.98 | $ | 12.19 | $ | 15.71 | $ | 20.23 | $ | 31.72 | $ | 11.05 | ||||||||||||||
Cost of Investments |
$ | 15,039,266 | $ | 18,777,189 | $ | 41,717,987 | $ | 240,463,469 | $ | 68,950,094 | $ | 160,939,175 | $ | 197,031,114 | ||||||||||||||
International | International | Health | Real | American Funds | Multi- | |||||||||||||||||||||||
Small-Cap | Value | Sciences | Estate | Technology | Asset Allocation | Strategy | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 22,136,212 | $ | 164,331,253 | $ | 19,972,720 | $ | 64,880,774 | $ | 14,323,951 | $ | 2,496,210 | $ | 52,152,232 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
17,326 | 13,051 | 13,212 | 225,593 | 14,794 | 957,030 | 14,114 | |||||||||||||||||||||
Total Assets |
22,153,538 | 164,344,304 | 19,985,932 | 65,106,367 | 14,338,745 | 3,453,240 | 52,166,346 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Fund shares purchased |
17,306 | 13,051 | 13,200 | 225,593 | 14,788 | 957,030 | 14,087 | |||||||||||||||||||||
Other |
— | 43 | — | 13 | — | — | — | |||||||||||||||||||||
Total Liabilities |
17,306 | 13,094 | 13,200 | 225,606 | 14,788 | 957,030 | 14,087 | |||||||||||||||||||||
NET ASSETS |
$ | 22,136,232 | $ | 164,331,210 | $ | 19,972,732 | $ | 64,880,761 | $ | 14,323,957 | $ | 2,496,210 | $ | 52,152,259 | ||||||||||||||
Units Outstanding |
3,017,020 | 7,068,121 | 1,430,534 | 2,226,122 | 2,404,956 | 192,292 | 1,477,979 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 7.34 | $ | 23.25 | $ | 13.96 | $ | 29.15 | $ | 5.96 | $ | 12.98 | $ | 35.29 | ||||||||||||||
Cost of Investments |
$ | 27,978,317 | $ | 228,885,811 | $ | 20,512,558 | $ | 92,162,517 | $ | 16,033,902 | $ | 2,387,433 | $ | 74,076,199 | ||||||||||||||
Pacific | Pacific | |||||||||||||||||||||||||||
Dynamix - | Dynamix - | Pacific | ||||||||||||||||||||||||||
Conservative | Moderate | Dynamix - | ||||||||||||||||||||||||||
Growth | Growth | Growth | I | II | III | V | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in affiliated mutual funds, at value |
$ | 506,869 | $ | 822,948 | $ | 1,506,341 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Investments in mutual funds, at value |
— | — | — | 65,746,067 | 26,352,179 | 37,978,474 | 23,095,814 | |||||||||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
— | 188 | — | 171,232 | — | — | — | |||||||||||||||||||||
Fund shares redeemed |
— | — | — | — | 30,474 | 20,084 | 4,383 | |||||||||||||||||||||
Total Assets |
506,869 | 823,136 | 1,506,341 | 65,917,299 | 26,382,653 | 37,998,558 | 23,100,197 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | — | — | 30,474 | 20,084 | 4,371 | |||||||||||||||||||||
Fund shares purchased |
— | 188 | — | 171,216 | — | — | — | |||||||||||||||||||||
Other |
1 | — | — | — | 13 | 6 | — | |||||||||||||||||||||
Total Liabilities |
1 | 188 | — | 171,216 | 30,487 | 20,090 | 4,371 | |||||||||||||||||||||
NET ASSETS |
$ | 506,868 | $ | 822,948 | $ | 1,506,341 | $ | 65,746,083 | $ | 26,352,166 | $ | 37,978,468 | $ | 23,095,826 | ||||||||||||||
Units Outstanding |
44,364 | 68,810 | 121,148 | 2,314,197 | 1,351,335 | 1,157,067 | 1,670,010 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 11.43 | $ | 11.96 | $ | 12.43 | $ | 28.41 | $ | 19.50 | $ | 32.82 | $ | 13.83 | ||||||||||||||
Cost of Investments |
$ | 508,458 | $ | 800,035 | $ | 1,387,265 | $ | 91,901,865 | $ | 30,551,533 | $ | 42,283,124 | $ | 25,632,369 | ||||||||||||||
SA-5
Variable Accounts | ||||||||||||||||||||||||||||
BlackRock | BlackRock | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | ||||||||||||||||||||||
Basic Value | Global Allocation | Contrafund | Freedom Income | Freedom 2010 | Freedom 2015 | Freedom 2020 | ||||||||||||||||||||||
V.I. Class III | V.I. Class III | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in mutual funds, at value |
$ | 8,910,157 | $ | 38,512,804 | $ | 47,030,339 | $ | 713,654 | $ | 838,270 | $ | 1,405,006 | $ | 1,335,924 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
6,551 | 830,481 | — | — | 509 | 10 | 1,073 | |||||||||||||||||||||
Fund shares redeemed |
— | — | 10,507 | 485,828 | — | — | — | |||||||||||||||||||||
Total Assets |
8,916,708 | 39,343,285 | 47,040,846 | 1,199,482 | 838,779 | 1,405,016 | 1,336,997 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | 10,507 | 485,828 | — | — | — | |||||||||||||||||||||
Fund shares purchased |
6,547 | 830,465 | — | — | 509 | 10 | 1,072 | |||||||||||||||||||||
Other |
— | — | 48 | — | 2 | — | — | |||||||||||||||||||||
Total Liabilities |
6,547 | 830,465 | 10,555 | 485,828 | 511 | 10 | 1,072 | |||||||||||||||||||||
NET ASSETS |
$ | 8,910,161 | $ | 38,512,820 | $ | 47,030,291 | $ | 713,654 | $ | 838,268 | $ | 1,405,006 | $ | 1,335,925 | ||||||||||||||
Units Outstanding |
854,477 | 2,669,828 | 4,031,894 | 69,529 | 91,200 | 156,467 | 157,385 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 10.43 | $ | 14.43 | $ | 11.66 | $ | 10.26 | $ | 9.19 | $ | 8.98 | $ | 8.49 | ||||||||||||||
Cost of Investments |
$ | 9,284,189 | $ | 37,281,616 | $ | 60,036,623 | $ | 678,976 | $ | 777,872 | $ | 1,228,342 | $ | 1,256,528 | ||||||||||||||
Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | INTECH Risk- | |||||||||||||||||||||||
Freedom 2025 | Freedom 2030 | Growth | Mid Cap | Value Strategies | Overseas | Managed Core | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class (1) | Service Class | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in mutual funds, at value |
$ | 2,402,697 | $ | 2,647,304 | $ | 5,713,101 | $ | 28,493,194 | $ | 2,348,966 | $ | 36,239,197 | $ | 591,542 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
602 | 1,662 | 1,169 | — | 26 | 942,730 | 90 | |||||||||||||||||||||
Fund shares redeemed |
— | — | — | 22,009 | — | — | — | |||||||||||||||||||||
Total Assets |
2,403,299 | 2,648,966 | 5,714,270 | 28,515,203 | 2,348,992 | 37,181,927 | 591,632 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | — | — | 21,980 | — | — | — | |||||||||||||||||||||
Fund shares purchased |
602 | 1,660 | 1,163 | — | 25 | 942,730 | 86 | |||||||||||||||||||||
Other |
1 | — | — | — | — | 204 | — | |||||||||||||||||||||
Total Liabilities |
603 | 1,660 | 1,163 | 21,980 | 25 | 942,934 | 86 | |||||||||||||||||||||
NET ASSETS |
$ | 2,402,696 | $ | 2,647,306 | $ | 5,713,107 | $ | 28,493,223 | $ | 2,348,967 | $ | 36,238,993 | $ | 591,546 | ||||||||||||||
Units Outstanding |
287,505 | 334,513 | 589,043 | 2,244,999 | 237,955 | 3,539,855 | 75,317 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 8.36 | $ | 7.91 | $ | 9.70 | $ | 12.69 | $ | 9.87 | $ | 10.24 | $ | 7.85 | ||||||||||||||
Cost of Investments |
$ | 2,947,571 | $ | 2,513,083 | $ | 6,883,820 | $ | 32,321,483 | $ | 1,900,686 | $ | 32,617,418 | $ | 488,837 | ||||||||||||||
Lazard | Legg Mason | Legg Mason | ||||||||||||||||||||||||||
Retirement | ClearBridge Variable | ClearBridge Variable | MFS New | MFS | NACM | |||||||||||||||||||||||
Enterprise | U.S. Strategic | Aggressive | Mid Cap | Discovery Series | Utilities Series | Small Cap | ||||||||||||||||||||||
Service Class (2) | Equity | Growth - Class II (3) | Core - Class II (4) | Service Class | Service Class | Class I | ||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||||||
Investments in mutual funds, at value |
$ | 3,879,427 | $ | 423,521 | $ | 652,565 | $ | 7,274,670 | $ | 3,060,542 | $ | 3,148,219 | $ | 1,060,344 | ||||||||||||||
Receivables: |
||||||||||||||||||||||||||||
Due from Pacific Life Insurance Company |
306 | — | — | 2,504 | 704,813 | — | 682 | |||||||||||||||||||||
Fund shares redeemed |
— | 20,967 | 12,304 | — | — | 5,276 | — | |||||||||||||||||||||
Total Assets |
3,879,733 | 444,488 | 664,869 | 7,277,174 | 3,765,355 | 3,153,495 | 1,061,026 | |||||||||||||||||||||
LIABILITIES |
||||||||||||||||||||||||||||
Payables: |
||||||||||||||||||||||||||||
Due to Pacific Life Insurance Company |
— | 20,968 | 12,304 | — | — | 5,272 | — | |||||||||||||||||||||
Fund shares purchased |
306 | — | — | 2,504 | 704,812 | — | 681 | |||||||||||||||||||||
Other |
1 | — | 1 | 5 | — | — | — | |||||||||||||||||||||
Total Liabilities |
307 | 20,968 | 12,305 | 2,509 | 704,812 | 5,272 | 681 | |||||||||||||||||||||
NET ASSETS |
$ | 3,879,426 | $ | 423,520 | $ | 652,564 | $ | 7,274,665 | $ | 3,060,543 | $ | 3,148,223 | $ | 1,060,345 | ||||||||||||||
Units Outstanding |
431,880 | 54,644 | 84,216 | 848,497 | 326,023 | 342,118 | 164,837 | |||||||||||||||||||||
Accumulation Unit Value |
$ | 8.98 | $ | 7.75 | $ | 7.75 | $ | 8.57 | $ | 9.39 | $ | 9.20 | $ | 6.43 | ||||||||||||||
Cost of Investments |
$ | 4,075,538 | $ | 370,805 | $ | 608,602 | $ | 6,822,523 | $ | 2,611,432 | $ | 3,246,073 | $ | 1,000,981 | ||||||||||||||
(1) | Formerly named International Growth Service Class Variable Account. | |
(2) | Formerly named Mid Cap Growth Service Class Variable Account. | |
(3) | Formerly named Legg Mason Partners Variable Aggressive Growth - Class II Variable Account. | |
(4) | Formerly named Legg Mason Partners Variable Mid Cap Core - Class II Variable Account. |
SA-6
Variable Accounts | ||||||||||||
T. Rowe Price | T. Rowe Price | Van Eck | ||||||||||
Blue Chip | Equity | Worldwide | ||||||||||
Growth - II | Income - II | Hard Assets | ||||||||||
ASSETS |
||||||||||||
Investments in mutual funds, at value |
$ | 7,132,159 | $ | 28,381,067 | $ | 67,640,180 | ||||||
Receivables: |
||||||||||||
Due from Pacific Life Insurance Company |
26,429 | — | — | |||||||||
Fund shares redeemed |
— | 28,837 | 1,136,947 | |||||||||
Total Assets |
7,158,588 | 28,409,904 | 68,777,127 | |||||||||
LIABILITIES |
||||||||||||
Payables: |
||||||||||||
Due to Pacific Life Insurance Company |
— | 28,837 | 1,136,947 | |||||||||
Fund shares purchased |
26,424 | — | — | |||||||||
Other |
— | 49 | 9 | |||||||||
Total Liabilities |
26,424 | 28,886 | 1,136,956 | |||||||||
NET ASSETS |
$ | 7,132,164 | $ | 28,381,018 | $ | 67,640,171 | ||||||
Units Outstanding |
664,636 | 2,818,542 | 3,070,450 | |||||||||
Accumulation Unit Value |
$ | 10.73 | $ | 10.07 | $ | 22.03 | ||||||
Cost of Investments |
$ | 6,942,610 | $ | 31,939,954 | $ | 73,050,391 | ||||||
SA-7
Variable Accounts | ||||||||||||||||||||||||||||
Diversified | Floating | High Yield | Inflation | Managed | Money | Short Duration | ||||||||||||||||||||||
Bond | Rate Loan | Bond | Managed | Bond | Market | Bond | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 992,232 | $ | 571,152 | $ | 6,969,695 | $ | 6,558,459 | $ | 27,850,176 | $ | 781,732 | $ | 1,309,737 | ||||||||||||||
Net Investment Income |
992,232 | 571,152 | 6,969,695 | 6,558,459 | 27,850,176 | 781,732 | 1,309,737 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of affilliated mutual
fund investments |
(771,661 | ) | (1,151,584 | ) | (8,811,932 | ) | (3,662,402 | ) | (2,333,872 | ) | (456,726 | ) | (693,343 | ) | ||||||||||||||
Capital gain distributions from affiliated mutual
fund investments |
— | — | — | 6,393,311 | 27,663,276 | — | — | |||||||||||||||||||||
Realized Gain (Loss) |
(771,661 | ) | (1,151,584 | ) | (8,811,932 | ) | 2,730,909 | 25,329,404 | (456,726 | ) | (693,343 | ) | ||||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
3,179,298 | 2,908,915 | 31,179,587 | 20,792,740 | 24,683,325 | 192,527 | 2,828,858 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 3,399,869 | $ | 2,328,483 | $ | 29,337,350 | $ | 30,082,108 | $ | 77,862,905 | $ | 517,533 | $ | 3,445,252 | ||||||||||||||
American Funds | American Funds | Diversified | Equity | Focused | ||||||||||||||||||||||||
Growth | Growth-Income | Comstock | Research | Equity | Index | 30 | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 62,454 | $ | 630,644 | $ | 764,332 | $ | 528,067 | $ | 261,168 | $ | 6,588,000 | $ | — | ||||||||||||||
Net Investment Income |
62,454 | 630,644 | 764,332 | 528,067 | 261,168 | 6,588,000 | — | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of affilliated mutual
fund investments |
(14,444,327 | ) | (2,778,376 | ) | (4,128,178 | ) | (4,809,096 | ) | (2,103,000 | ) | (15,162,468 | ) | (5,510,900 | ) | ||||||||||||||
Capital gain distributions from affiliated mutual
fund investments |
11,304,748 | 5,238,869 | — | — | — | — | — | |||||||||||||||||||||
Realized Gain (Loss) |
(3,139,579 | ) | 2,460,493 | (4,128,178 | ) | (4,809,096 | ) | (2,103,000 | ) | (15,162,468 | ) | (5,510,900 | ) | |||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
19,876,830 | 11,020,462 | 16,886,219 | 13,277,228 | 10,419,641 | 100,359,314 | 17,754,662 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 16,799,705 | $ | 14,111,599 | $ | 13,522,373 | $ | 8,996,199 | $ | 8,577,809 | $ | 91,784,846 | $ | 12,243,762 | ||||||||||||||
Growth | Large-Cap | Large-Cap | Long/Short | Main Street | Mid-Cap | Mid-Cap | ||||||||||||||||||||||
LT | Growth | Value | Large-Cap | Core | Equity | Growth | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 1,841,797 | $ | 25,873 | $ | 2,234,783 | $ | 158,003 | $ | 1,473,009 | $ | 1,263,930 | $ | 151,133 | ||||||||||||||
Net Investment Income |
1,841,797 | 25,873 | 2,234,783 | 158,003 | 1,473,009 | 1,263,930 | 151,133 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of affilliated mutual
fund investments |
(7,204,579 | ) | (4,740,362 | ) | (3,537,557 | ) | (486,969 | ) | (3,682,939 | ) | (28,594,483 | ) | (4,259,546 | ) | ||||||||||||||
Capital gain distributions from affiliated mutual
fund investments |
— | — | — | — | — | — | 65,934 | |||||||||||||||||||||
Realized Loss |
(7,204,579 | ) | (4,740,362 | ) | (3,537,557 | ) | (486,969 | ) | (3,682,939 | ) | (28,594,483 | ) | (4,193,612 | ) | ||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
61,395,799 | 19,616,196 | 25,245,277 | 5,257,070 | 27,725,627 | 64,978,090 | 24,581,045 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 56,033,017 | $ | 14,901,707 | $ | 23,942,503 | $ | 4,928,104 | $ | 25,515,697 | $ | 37,647,537 | $ | 20,538,566 | ||||||||||||||
SA-8
Variable Accounts | ||||||||||||||||||||||||||||
Mid-Cap | Small-Cap | Small-Cap | Small-Cap | Small-Cap | Emerging | International | ||||||||||||||||||||||
Value (1) | Equity | Growth | Index | Value | Markets | Large-Cap | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 100,609 | $ | 121,008 | $ | — | $ | 1,814,593 | $ | 1,263,980 | $ | 1,020,962 | $ | 2,016,918 | ||||||||||||||
Net Investment Income |
100,609 | 121,008 | — | 1,814,593 | 1,263,980 | 1,020,962 | 2,016,918 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized gain (loss) on sale of affiliated mutual
fund investments |
105,974 | (1,376,217 | ) | (1,348,546 | ) | (12,509,906 | ) | (6,699,430 | ) | (9,953,697 | ) | (8,442,390 | ) | |||||||||||||||
Capital gain distributions from affiliated mutual
fund investments |
1,285,018 | — | — | 10,037,169 | — | 17,540,046 | — | |||||||||||||||||||||
Realized Gain (Loss) |
1,390,992 | (1,376,217 | ) | (1,348,546 | ) | (2,472,737 | ) | (6,699,430 | ) | 7,586,349 | (8,442,390 | ) | ||||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
2,571,121 | 5,438,301 | 14,153,637 | 40,137,842 | 17,554,875 | 57,446,128 | 43,545,691 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 4,062,722 | $ | 4,183,092 | $ | 12,805,091 | $ | 39,479,698 | $ | 12,119,425 | $ | 66,053,439 | $ | 37,120,219 | ||||||||||||||
International | International | Health | Real | American Funds | Multi- | |||||||||||||||||||||||
Small-Cap | Value | Sciences | Estate | Technology | Asset Allocation (1) | Strategy | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from affiliated mutual fund investments |
$ | 267,354 | $ | 3,278,408 | $ | 21,055 | $ | 1,075,352 | $ | — | $ | 26,048 | $ | 2,741,743 | ||||||||||||||
Net Investment Income |
267,354 | 3,278,408 | 21,055 | 1,075,352 | — | 26,048 | 2,741,743 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized gain (loss) on sale of affiliated mutual
fund investments |
(1,652,449 | ) | (7,306,310 | ) | (2,633,323 | ) | (19,588,373 | ) | (4,603,086 | ) | 7,194 | (2,989,954 | ) | |||||||||||||||
Capital gain distributions from affiliated mutual |
||||||||||||||||||||||||||||
fund investments |
— | — | — | 500,356 | — | — | — | |||||||||||||||||||||
Realized Gain (Loss) |
(1,652,449 | ) | (7,306,310 | ) | (2,633,323 | ) | (19,088,017 | ) | (4,603,086 | ) | 7,194 | (2,989,954 | ) | |||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON AFFILIATED MUTUAL FUND INVESTMENTS |
6,235,187 | 41,163,425 | 6,888,159 | 34,959,766 | 9,044,200 | 108,777 | 10,305,855 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 4,850,092 | $ | 37,135,523 | $ | 4,275,891 | $ | 16,947,101 | $ | 4,441,114 | $ | 142,019 | $ | 10,057,644 | ||||||||||||||
Pacific | Pacific | |||||||||||
Dynamix - | Dynamix - | Pacific | ||||||||||
Conservative | Moderate | Dynamix - | ||||||||||
Growth (1) | Growth (1) | Growth (1) | ||||||||||
INVESTMENT INCOME |
||||||||||||
Dividends from affiliated mutual fund investments |
$ | 5,469 | $ | 7,769 | $ | 10,214 | ||||||
Net Investment Income |
5,469 | 7,769 | 10,214 | |||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||
Realized gain on sale of affiliated mutual
fund investments |
146 | 580 | 3,210 | |||||||||
Capital gain distributions from affiliated mutual
fund investments |
4,917 | 5,301 | 30,588 | |||||||||
Realized Gain |
5,063 | 5,881 | 33,798 | |||||||||
CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON AFFILIATED MUTUAL
FUND INVESTMENTS |
(1,589 | ) | 22,913 | 119,076 | ||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 8,943 | $ | 36,563 | $ | 163,088 | ||||||
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-9
Variable Accounts | ||||||||||||||||||||||||||||
BlackRock | BlackRock | Fidelity VIP | ||||||||||||||||||||||||||
Basic Value | Global Allocation | Contrafund | ||||||||||||||||||||||||||
I | II | III | V | V.I. Class III | V.I. Class III | Service Class 2 | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from mutual fund investments |
$ | 1,421,737 | $ | 150,111 | $ | 14,452 | $ | 171,889 | $ | 144,237 | $ | 618,624 | $ | 467,598 | ||||||||||||||
Net Investment Income |
1,421,737 | 150,111 | 14,452 | 171,889 | 144,237 | 618,624 | 467,598 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of mutual
fund investments |
(12,562,672 | ) | (3,482,162 | ) | (4,554,848 | ) | (3,623,538 | ) | (953,242 | ) | (1,175,267 | ) | (4,464,772 | ) | ||||||||||||||
Capital gain distributions from mutual fund
investments |
— | — | — | — | — | — | 11,381 | |||||||||||||||||||||
Realized Loss |
(12,562,672 | ) | (3,482,162 | ) | (4,554,848 | ) | (3,623,538 | ) | (953,242 | ) | (1,175,267 | ) | (4,453,391 | ) | ||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON MUTUAL FUND INVESTMENTS |
23,998,390 | 10,759,575 | 17,953,263 | 8,216,105 | 2,842,957 | 6,286,794 | 16,234,203 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 12,857,455 | $ | 7,427,524 | $ | 13,412,867 | $ | 4,764,456 | $ | 2,033,952 | $ | 5,730,151 | $ | 12,248,410 | ||||||||||||||
Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | Fidelity VIP | ||||||||||||||||||||||
Freedom Income | Freedom 2010 | Freedom 2015 | Freedom 2020 | Freedom 2025 | Freedom 2030 | Growth | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from mutual fund investments |
$ | 37,701 | $ | 29,477 | $ | 44,393 | $ | 37,506 | $ | 68,106 | $ | 47,358 | $ | 9,865 | ||||||||||||||
Net Investment Income |
37,701 | 29,477 | 44,393 | 37,506 | 68,106 | 47,358 | 9,865 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized gain (loss) on sale of mutual
fund investments |
44,560 | (38,376 | ) | (152,117 | ) | (138,825 | ) | (95,280 | ) | (202,367 | ) | (427,565 | ) | |||||||||||||||
Capital gain distributions from mutual fund
investments |
12,479 | 4,087 | 14,256 | 12,686 | 27,517 | 10,244 | 4,345 | |||||||||||||||||||||
Realized Gain (Loss) |
57,039 | (34,289 | ) | (137,861 | ) | (126,139 | ) | (67,763 | ) | (192,123 | ) | (423,220 | ) | |||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON MUTUAL FUND INVESTMENTS |
52,671 | 133,123 | 369,657 | 381,531 | 545,318 | 461,413 | 1,683,551 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 147,411 | $ | 128,311 | $ | 276,189 | $ | 292,898 | $ | 545,661 | $ | 316,648 | $ | 1,270,196 | ||||||||||||||
Legg Mason | ||||||||||||||||||||||||||||
Lazard | ClearBridge | |||||||||||||||||||||||||||
Fidelity VIP | Fidelity VIP | INTECH Risk- | Retirement | Variable | ||||||||||||||||||||||||
Mid Cap | Value Strategies | Overseas | Managed Core | Enterprise | U.S. Strategic | Aggressive | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class (1) | Service Class | Service Class (2) | Equity | Growth - Class II (3) | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from mutual fund investments |
$ | 109,993 | $ | 7,245 | $ | 115,543 | $ | 5,679 | $ | — | $ | 3,774 | $ | — | ||||||||||||||
Net Investment Income |
109,993 | 7,245 | 115,543 | 5,679 | — | 3,774 | — | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized gain (loss) on sale of mutual
fund investments |
(1,798,781 | ) | (872,995 | ) | (6,216,684 | ) | (40,376 | ) | (435,023 | ) | 30,850 | 11,889 | ||||||||||||||||
Capital gain distributions from mutual fund
investments |
128,555 | — | 807,694 | — | — | — | — | |||||||||||||||||||||
Realized Gain (Loss) |
(1,670,226 | ) | (872,995 | ) | (5,408,990 | ) | (40,376 | ) | (435,023 | ) | 30,850 | 11,889 | ||||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON MUTUAL FUND INVESTMENTS |
9,594,634 | 1,809,143 | 20,081,743 | 142,686 | 1,622,995 | 75,195 | 118,050 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 8,034,401 | $ | 943,393 | $ | 14,788,296 | $ | 107,989 | $ | 1,187,972 | $ | 109,819 | $ | 129,939 | ||||||||||||||
(1) | Formerly named International Growth Service Class Variable Account. | |
(2) | Formerly named Mid Cap Growth Service Class Variable Account. | |
(3) | Formerly named Legg Mason Partners Variable Aggressive Growth — Class II Variable Account. |
SA-10
Variable Accounts | ||||||||||||||||||||||||||||
Legg Mason | ||||||||||||||||||||||||||||
ClearBridge | MFS New | MFS | NACM | T. Rowe Price | T. Rowe Price | Van Eck | ||||||||||||||||||||||
Variable Mid Cap | Discovery Series | Utilities Series | Small Cap | Blue Chip | Equity | Worldwide | ||||||||||||||||||||||
Core - Class II (1) | Service Class | Service Class | Class I | Growth - II | Income - II | Hard Assets | ||||||||||||||||||||||
INVESTMENT INCOME |
||||||||||||||||||||||||||||
Dividends from mutual fund investments |
$ | 7,745 | $ | — | $ | 111,807 | $ | 475 | $ | — | $ | 384,859 | $ | 133,457 | ||||||||||||||
Net Investment Income |
7,745 | — | 111,807 | 475 | — | 384,859 | 133,457 | |||||||||||||||||||||
REALIZED GAIN (LOSS) ON INVESTMENTS |
||||||||||||||||||||||||||||
Realized loss on sale of mutual fund investments |
(389,806 | ) | (154,962 | ) | (838,412 | ) | (441,561 | ) | (399,890 | ) | (1,803,412 | ) | (4,279,265 | ) | ||||||||||||||
Capital gain distributions from mutual fund
investments |
— | — | — | — | — | — | 264,653 | |||||||||||||||||||||
Realized Loss |
(389,806 | ) | (154,962 | ) | (838,412 | ) | (441,561 | ) | (399,890 | ) | (1,803,412 | ) | (4,014,612 | ) | ||||||||||||||
CHANGE IN UNREALIZED APPRECIATION
ON MUTUAL FUND INVESTMENTS |
2,591,525 | 668,173 | 1,410,245 | 659,288 | 2,104,182 | 7,178,937 | 26,695,685 | |||||||||||||||||||||
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS |
$ | 2,209,464 | $ | 513,211 | $ | 683,640 | $ | 218,202 | $ | 1,704,292 | $ | 5,760,384 | $ | 22,814,530 | ||||||||||||||
(1) | Formerly named Legg Mason Partners Variable Mid Cap Core — Class II Variable Account. |
SA-11
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Diversified Bond | Floating Rate Loan | High Yield Bond | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 992,232 | $ | 1,015,092 | $ | 571,152 | $ | 616,099 | $ | 6,969,695 | $ | 6,040,263 | ||||||||||||
Realized loss |
(771,661 | ) | (788,475 | ) | (1,151,584 | ) | (366,637 | ) | (8,811,932 | ) | (2,651,121 | ) | ||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
3,179,298 | (2,400,035 | ) | 2,908,915 | (3,061,081 | ) | 31,179,587 | (21,301,693 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
3,399,869 | (2,173,418 | ) | 2,328,483 | (2,811,619 | ) | 29,337,350 | (17,912,551 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
3,541,905 | 3,579,880 | 1,407,556 | 1,102,699 | 5,679,239 | 6,256,735 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
5,806,312 | (2,751,899 | ) | 6,382,569 | 529,816 | 10,255,459 | 9,920,653 | |||||||||||||||||
Policy maintenance charges |
(2,657,949 | ) | (2,348,163 | ) | (1,026,280 | ) | (753,906 | ) | (6,110,001 | ) | (4,715,015 | ) | ||||||||||||
Policy benefits and terminations |
(3,061,952 | ) | (1,007,782 | ) | (1,223,805 | ) | (351,265 | ) | (7,762,251 | ) | (3,526,449 | ) | ||||||||||||
Other |
(380,679 | ) | (355,884 | ) | (137,586 | ) | (135,929 | ) | (420,361 | ) | (616,983 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
3,247,637 | (2,883,848 | ) | 5,402,454 | 391,415 | 1,642,085 | 7,318,941 | |||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
6,647,506 | (5,057,266 | ) | 7,730,937 | (2,420,204 | ) | 30,979,435 | (10,593,610 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
23,379,628 | 28,436,894 | 7,029,314 | 9,449,518 | 66,223,004 | 76,816,614 | ||||||||||||||||||
End of Year |
$ | 30,027,134 | $ | 23,379,628 | $ | 14,760,251 | $ | 7,029,314 | $ | 97,202,439 | $ | 66,223,004 | ||||||||||||
Inflation Managed | Managed Bond | Money Market | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 6,558,459 | $ | 5,126,795 | $ | 27,850,176 | $ | 18,097,426 | $ | 781,732 | $ | 5,398,578 | ||||||||||||
Realized gain (loss) |
2,730,909 | (3,449,176 | ) | 25,329,404 | 2,622,319 | (456,726 | ) | 949,480 | ||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
20,792,740 | (19,447,075 | ) | 24,683,325 | (28,768,289 | ) | 192,527 | (546,119 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
30,082,108 | (17,769,456 | ) | 77,862,905 | (8,048,544 | ) | 517,533 | 5,801,939 | ||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
14,776,195 | 15,804,865 | 25,025,145 | 27,823,537 | 163,752,450 | 196,539,981 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
3,277,088 | 2,169,168 | 17,101,351 | (15,502,681 | ) | (70,658,064 | ) | (56,812,089 | ) | |||||||||||||||
Policy maintenance charges |
(12,920,676 | ) | (12,642,795 | ) | (25,661,067 | ) | (22,993,343 | ) | (32,109,982 | ) | (26,618,019 | ) | ||||||||||||
Policy benefits and terminations |
(12,703,845 | ) | (7,934,766 | ) | (18,023,228 | ) | (13,925,960 | ) | (53,474,950 | ) | (40,327,810 | ) | ||||||||||||
Other |
(1,617,115 | ) | (1,611,484 | ) | (2,492,061 | ) | (2,268,169 | ) | (11,717,543 | ) | (14,263,296 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(9,188,353 | ) | (4,215,012 | ) | (4,049,860 | ) | (26,866,616 | ) | (4,208,089 | ) | 58,518,767 | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
20,893,755 | (21,984,468 | ) | 73,813,045 | (34,915,160 | ) | (3,690,556 | ) | 64,320,706 | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
154,324,441 | 176,308,909 | 378,720,069 | 413,635,229 | 297,173,335 | 232,852,629 | ||||||||||||||||||
End of Year |
$ | 175,218,196 | $ | 154,324,441 | $ | 452,533,114 | $ | 378,720,069 | $ | 293,482,779 | $ | 297,173,335 | ||||||||||||
SA-12
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Short Duration Bond | American Funds Growth | American Funds Growth-Income | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 1,309,737 | $ | 1,784,852 | $ | 62,454 | $ | 369,953 | $ | 630,644 | $ | 856,343 | ||||||||||||
Realized gain (loss) |
(693,343 | ) | (766,496 | ) | (3,139,579 | ) | 7,994,380 | 2,460,493 | 2,089,210 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
2,828,858 | (3,445,533 | ) | 19,876,830 | (42,993,043 | ) | 11,020,462 | (30,484,499 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
3,445,252 | (2,427,177 | ) | 16,799,705 | (34,628,710 | ) | 14,111,599 | (27,538,946 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
5,145,961 | 5,187,897 | 7,756,926 | 9,425,349 | 7,781,559 | 9,148,704 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
2,843,286 | 669,825 | (1,888,831 | ) | 16,318,885 | (204,215 | ) | 4,156,706 | ||||||||||||||||
Policy maintenance charges |
(4,090,981 | ) | (3,774,165 | ) | (4,903,819 | ) | (5,467,406 | ) | (5,227,468 | ) | (5,535,731 | ) | ||||||||||||
Policy benefits and terminations |
(4,067,525 | ) | (2,119,655 | ) | (4,327,635 | ) | (1,894,189 | ) | (2,150,527 | ) | (2,650,891 | ) | ||||||||||||
Other |
(289,246 | ) | (1,470,082 | ) | (372,579 | ) | (677,675 | ) | (287,824 | ) | (735,953 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(458,505 | ) | (1,506,180 | ) | (3,735,938 | ) | 17,704,964 | (88,475 | ) | 4,382,835 | ||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
2,986,747 | (3,933,357 | ) | 13,063,767 | (16,923,746 | ) | 14,023,124 | (23,156,111 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
41,850,977 | 45,784,334 | 46,308,882 | 63,232,628 | 45,924,261 | 69,080,372 | ||||||||||||||||||
End of Year |
$ | 44,837,724 | $ | 41,850,977 | $ | 59,372,649 | $ | 46,308,882 | $ | 59,947,385 | $ | 45,924,261 | ||||||||||||
Comstock | Diversified Research | Equity | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 764,332 | $ | 1,296,903 | $ | 528,067 | $ | 533,677 | $ | 261,168 | $ | 200,702 | ||||||||||||
Realized gain (loss) |
(4,128,178 | ) | 666,453 | (4,809,096 | ) | 9,459,287 | (2,103,000 | ) | 5,718,147 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
16,886,219 | (29,311,087 | ) | 13,277,228 | (32,684,362 | ) | 10,419,641 | (24,834,989 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
13,522,373 | (27,347,731 | ) | 8,996,199 | (22,691,398 | ) | 8,577,809 | (18,916,140 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
7,006,664 | 9,403,221 | 3,877,605 | 5,908,116 | 3,087,712 | 3,793,940 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
6,982,838 | (11,946,830 | ) | (5,612,599 | ) | (13,830,925 | ) | (1,198,589 | ) | (2,434,902 | ) | |||||||||||||
Policy maintenance charges |
(5,057,193 | ) | (5,273,983 | ) | (3,078,453 | ) | (3,993,056 | ) | (2,869,002 | ) | (3,381,274 | ) | ||||||||||||
Policy benefits and terminations |
(4,121,658 | ) | (2,206,146 | ) | (2,036,986 | ) | (3,039,083 | ) | (2,249,101 | ) | (2,003,785 | ) | ||||||||||||
Other |
(444,864 | ) | (660,928 | ) | (439,833 | ) | (278,683 | ) | (104,812 | ) | (244,684 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
4,365,787 | (10,684,666 | ) | (7,290,266 | ) | (15,233,631 | ) | (3,333,792 | ) | (4,270,705 | ) | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
17,888,160 | (38,032,397 | ) | 1,705,933 | (37,925,029 | ) | 5,244,017 | (23,186,845 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
45,345,266 | 83,377,663 | 33,277,837 | 71,202,866 | 26,180,303 | 49,367,148 | ||||||||||||||||||
End of Year |
$ | 63,233,426 | $ | 45,345,266 | $ | 34,983,770 | $ | 33,277,837 | $ | 31,424,320 | $ | 26,180,303 | ||||||||||||
SA-13
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year/Period Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Equity Index | Focused 30 | Growth LT | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 6,588,000 | $ | 9,180,322 | $ | — | $ | 20,780 | $ | 1,841,797 | $ | 1,190,524 | ||||||||||||
Realized gain (loss) |
(15,162,468 | ) | 9,457,365 | (5,510,900 | ) | 5,905,145 | (7,204,579 | ) | 30,516,736 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
100,359,314 | (223,582,824 | ) | 17,754,662 | (36,331,697 | ) | 61,395,799 | (150,262,120 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
91,784,846 | (204,945,137 | ) | 12,243,762 | (30,405,772 | ) | 56,033,017 | (118,554,860 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
36,800,527 | 40,957,916 | 3,062,672 | 4,224,311 | 18,110,819 | 22,715,332 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
9,791,801 | 23,937,289 | (6,094,782 | ) | 9,813,229 | (5,818,999 | ) | (20,859,960 | ) | |||||||||||||||
Policy maintenance charges |
(30,200,045 | ) | (31,517,097 | ) | (2,547,813 | ) | (2,876,282 | ) | (17,405,303 | ) | (19,706,277 | ) | ||||||||||||
Policy benefits and terminations |
(18,342,279 | ) | (30,581,165 | ) | (1,452,603 | ) | (1,104,686 | ) | (12,185,385 | ) | (13,560,387 | ) | ||||||||||||
Other |
(754,599 | ) | (2,311,779 | ) | (239,179 | ) | (494,578 | ) | (870,361 | ) | (1,451,072 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(2,704,595 | ) | 485,164 | (7,271,705 | ) | 9,561,994 | (18,169,229 | ) | (32,862,364 | ) | ||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
89,080,251 | (204,459,973 | ) | 4,972,057 | (20,843,778 | ) | 37,863,788 | (151,417,224 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
347,463,802 | 551,923,775 | 29,783,940 | 50,627,718 | 162,407,213 | 313,824,437 | ||||||||||||||||||
End of Year |
$ | 436,544,053 | $ | 347,463,802 | $ | 34,755,997 | $ | 29,783,940 | $ | 200,271,001 | $ | 162,407,213 | ||||||||||||
Large-Cap Growth | Large-Cap Value | Long/Short Large-Cap (1) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 25,873 | $ | — | $ | 2,234,783 | $ | 2,293,002 | $ | 158,003 | $ | 90,844 | ||||||||||||
Realized gain (loss) |
(4,740,362 | ) | 11,311,285 | (3,537,557 | ) | 5,927,929 | (486,969 | ) | (140,085 | ) | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
19,616,196 | (43,691,736 | ) | 25,245,277 | (61,997,771 | ) | 5,257,070 | (6,004,596 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
14,901,707 | (32,380,451 | ) | 23,942,503 | (53,776,840 | ) | 4,928,104 | (6,053,837 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
6,495,710 | 7,196,367 | 13,109,660 | 14,911,364 | 2,830,247 | 1,503,855 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
5,173,182 | 2,684,526 | 7,688,650 | (3,101,980 | ) | 7,335,435 | 17,581,098 | |||||||||||||||||
Policy maintenance charges |
(4,748,451 | ) | (4,812,736 | ) | (10,679,497 | ) | (11,268,009 | ) | (1,777,402 | ) | (882,768 | ) | ||||||||||||
Policy benefits and terminations |
(2,560,305 | ) | (2,144,106 | ) | (7,281,360 | ) | (5,904,356 | ) | (1,053,442 | ) | (291,246 | ) | ||||||||||||
Other |
(704,673 | ) | (296,021 | ) | (940,339 | ) | (596,463 | ) | (252,261 | ) | (67,762 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
3,655,463 | 2,628,030 | 1,897,114 | (5,959,444 | ) | 7,082,577 | 17,843,177 | |||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
18,557,170 | (29,752,421 | ) | 25,839,617 | (59,736,284 | ) | 12,010,681 | 11,789,340 | ||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year or Period |
33,179,269 | 62,931,690 | 98,977,865 | 158,714,149 | 11,789,340 | — | ||||||||||||||||||
End of Year or Period |
$ | 51,736,439 | $ | 33,179,269 | $ | 124,817,482 | $ | 98,977,865 | $ | 23,800,021 | $ | 11,789,340 | ||||||||||||
(1) | Operations commenced on May 2, 2008. |
SA-14
Variable Accounts | ||||||||||||||||||||||||
Year/Period Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Main Street Core | Mid-Cap Equity (1) | Mid-Cap Growth | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 1,473,009 | $ | 1,909,581 | $ | 1,263,930 | $ | 2,638,122 | $ | 151,133 | $ | 63,080 | ||||||||||||
Realized gain (loss) |
(3,682,939 | ) | 15,923,626 | (28,594,483 | ) | 25,928,219 | (4,193,612 | ) | 9,013,699 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
27,725,627 | (81,505,834 | ) | 64,978,090 | (104,107,889 | ) | 24,581,045 | (39,432,039 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
25,515,697 | (63,672,627 | ) | 37,647,537 | (75,541,548 | ) | 20,538,566 | (30,355,260 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
10,659,735 | 13,932,285 | 14,138,577 | 20,464,919 | 5,648,416 | 6,912,213 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(8,717,416 | ) | (4,279,301 | ) | (24,324,906 | ) | (9,306,488 | ) | 2,465,558 | (7,264,693 | ) | |||||||||||||
Policy maintenance charges |
(9,333,728 | ) | (10,787,952 | ) | (10,786,901 | ) | (13,195,649 | ) | (4,427,782 | ) | (4,515,174 | ) | ||||||||||||
Policy benefits and terminations |
(6,882,456 | ) | (7,415,589 | ) | (7,255,927 | ) | (6,352,108 | ) | (2,654,769 | ) | (1,968,226 | ) | ||||||||||||
Other |
(339,302 | ) | (865,415 | ) | (623,492 | ) | (1,705,303 | ) | (494,058 | ) | (621,102 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(14,613,167 | ) | (9,415,972 | ) | (28,852,649 | ) | (10,094,629 | ) | 537,365 | (7,456,982 | ) | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
10,902,530 | (73,088,599 | ) | 8,794,888 | (85,636,177 | ) | 21,075,931 | (37,812,242 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
98,370,807 | 171,459,406 | 118,162,029 | 203,798,206 | 32,212,994 | 70,025,236 | ||||||||||||||||||
End of Year |
$ | 109,273,337 | $ | 98,370,807 | $ | 126,956,917 | $ | 118,162,029 | $ | 53,288,925 | $ | 32,212,994 | ||||||||||||
Mid-Cap Value (2) | Small-Cap Equity | Small-Cap Growth | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 100,609 | $ | 121,008 | $ | 89,970 | $ | — | $ | — | ||||||||||||||
Realized gain (loss) |
1,390,992 | (1,376,217 | ) | 123,500 | (1,348,546 | ) | 5,598,087 | |||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
2,571,121 | 5,438,301 | (5,221,333 | ) | 14,153,637 | (29,796,598 | ) | |||||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
4,062,722 | 4,183,092 | (5,007,863 | ) | 12,805,091 | (24,198,511 | ) | |||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
1,481,575 | 2,379,786 | 2,234,062 | 3,918,923 | 4,957,731 | |||||||||||||||||||
Transfers between variable and fixed accounts, net |
13,668,271 | 584,203 | 7,599,632 | (1,644,487 | ) | 2,681,215 | ||||||||||||||||||
Policy maintenance charges |
(941,377 | ) | (1,525,901 | ) | (1,253,182 | ) | (3,072,137 | ) | (3,233,360 | ) | ||||||||||||||
Policy benefits and terminations |
(512,079 | ) | (837,562 | ) | (403,834 | ) | (1,730,168 | ) | (1,657,614 | ) | ||||||||||||||
Other |
(148,726 | ) | (77,079 | ) | (86,265 | ) | (136,705 | ) | (415,728 | ) | ||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
13,547,664 | 523,447 | 8,090,413 | (2,664,574 | ) | 2,332,244 | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
17,610,386 | 4,706,539 | 3,082,550 | 10,140,517 | (21,866,267 | ) | ||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year or Period |
— | 14,496,396 | 11,413,846 | 28,720,306 | 50,586,573 | |||||||||||||||||||
End of Year or Period |
$ | 17,610,386 | $ | 19,202,935 | $ | 14,496,396 | $ | 38,860,823 | $ | 28,720,306 | ||||||||||||||
(1) | Formerly named Mid-Cap Value Variable Account. | |
(2) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-15
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Small-Cap Index | Small-Cap Value | Emerging Markets | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 1,814,593 | $ | 4,417,250 | $ | 1,263,980 | $ | 1,523,598 | $ | 1,020,962 | $ | 2,038,432 | ||||||||||||
Realized gain (loss) |
(2,472,737 | ) | 20,470,370 | (6,699,430 | ) | 3,772,423 | 7,586,349 | 38,338,725 | ||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
40,137,842 | (111,194,667 | ) | 17,554,875 | (24,375,256 | ) | 57,446,128 | (118,152,611 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
39,479,698 | (86,307,047 | ) | 12,119,425 | (19,079,235 | ) | 66,053,439 | (77,775,454 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
12,254,501 | 16,673,586 | 5,358,168 | 6,166,199 | 10,348,804 | 12,359,938 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(5,864,381 | ) | (17,021,436 | ) | 864,280 | 6,200,432 | (1,020,506 | ) | (14,532,935 | ) | ||||||||||||||
Policy maintenance charges |
(12,016,850 | ) | (13,945,569 | ) | (3,911,467 | ) | (3,960,864 | ) | (8,400,668 | ) | (8,585,682 | ) | ||||||||||||
Policy benefits and terminations |
(11,054,679 | ) | (11,290,457 | ) | (2,350,041 | ) | (1,268,192 | ) | (5,941,083 | ) | (4,839,981 | ) | ||||||||||||
Other |
(631,116 | ) | (2,175,915 | ) | (348,096 | ) | (943,926 | ) | (556,172 | ) | (2,019,413 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(17,312,525 | ) | (27,759,791 | ) | (387,156 | ) | 6,193,649 | (5,569,625 | ) | (17,618,073 | ) | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
22,167,173 | (114,066,838 | ) | 11,732,269 | (12,885,586 | ) | 60,483,814 | (95,393,527 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
154,492,786 | 268,559,624 | 48,025,798 | 60,911,384 | 82,375,964 | 177,769,491 | ||||||||||||||||||
End of Year |
$ | 176,659,959 | $ | 154,492,786 | $ | 59,758,067 | $ | 48,025,798 | $ | 142,859,778 | $ | 82,375,964 | ||||||||||||
International Large-Cap | International Small-Cap | International Value | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 2,016,918 | $ | 3,519,457 | $ | 267,354 | $ | 464,866 | $ | 3,278,408 | $ | 6,531,012 | ||||||||||||
Realized gain (loss) |
(8,442,390 | ) | 40,172,932 | (1,652,449 | ) | (114,126 | ) | (7,306,310 | ) | 21,617,596 | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
43,545,691 | (111,436,559 | ) | 6,235,187 | (12,206,545 | ) | 41,163,425 | (167,411,529 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
37,120,219 | (67,744,170 | ) | 4,850,092 | (11,855,805 | ) | 37,135,523 | (139,262,921 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
13,516,687 | 17,994,464 | 2,851,103 | 3,606,317 | 16,305,398 | 23,174,580 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(6,138,238 | ) | (1,786,581 | ) | 2,102,596 | 2,184,160 | (14,253,994 | ) | (11,495,377 | ) | ||||||||||||||
Policy maintenance charges |
(11,206,101 | ) | (11,731,363 | ) | (1,752,841 | ) | (1,681,896 | ) | (12,806,387 | ) | (15,900,772 | ) | ||||||||||||
Policy benefits and terminations |
(6,385,888 | ) | (6,793,114 | ) | (908,810 | ) | (706,984 | ) | (10,310,443 | ) | (10,915,568 | ) | ||||||||||||
Other |
(546,098 | ) | (1,275,173 | ) | (116,775 | ) | (216,501 | ) | (1,235,145 | ) | (1,992,023 | ) | ||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(10,759,638 | ) | (3,591,767 | ) | 2,175,273 | 3,185,096 | (22,300,571 | ) | (17,129,160 | ) | ||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
26,360,581 | (71,335,937 | ) | 7,025,365 | (8,670,709 | ) | 14,834,952 | (156,392,081 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
121,327,391 | 192,663,328 | 15,110,867 | 23,781,576 | 149,496,258 | 305,888,339 | ||||||||||||||||||
End of Year |
$ | 147,687,972 | $ | 121,327,391 | $ | 22,136,232 | $ | 15,110,867 | $ | 164,331,210 | $ | 149,496,258 | ||||||||||||
SA-16
Variable Accounts | ||||||||||||||||||||||||
Year/Period Ended | Year Ended | Year Ended | Year Ended | Year/Period Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Health Sciences | Real Estate | Technology | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 21,055 | $ | 269,679 | $ | 1,075,352 | $ | 3,028,938 | $ | — | $ | 16,884 | ||||||||||||
Realized gain (loss) |
(2,633,323 | ) | 2,826,861 | (19,088,017 | ) | 26,102,739 | (4,603,086 | ) | 2,861,783 | |||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
6,888,159 | (10,408,585 | ) | 34,959,766 | (64,005,170 | ) | 9,044,200 | (14,255,499 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
4,275,891 | (7,312,045 | ) | 16,947,101 | (34,873,493 | ) | 4,441,114 | (11,376,832 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
1,664,374 | 2,632,800 | 6,208,810 | 8,108,882 | 1,221,948 | 1,693,850 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(385,754 | ) | 1,592,251 | (4,264,742 | ) | (789,326 | ) | 732,767 | (913,258 | ) | ||||||||||||||
Policy maintenance charges |
(1,438,151 | ) | (1,499,835 | ) | (4,709,410 | ) | (6,016,645 | ) | (1,181,870 | ) | (1,234,957 | ) | ||||||||||||
Policy benefits and terminations |
(927,629 | ) | (1,184,353 | ) | (3,414,908 | ) | (3,229,004 | ) | (803,769 | ) | (680,255 | ) | ||||||||||||
Other |
(564,616 | ) | (184,661 | ) | 77,479 | (820,831 | ) | (164,666 | ) | (107,432 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(1,651,776 | ) | 1,356,202 | (6,102,771 | ) | (2,746,924 | ) | (195,590 | ) | (1,242,052 | ) | |||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
2,624,115 | (5,955,843 | ) | 10,844,330 | (37,620,417 | ) | 4,245,524 | (12,618,884 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
17,348,617 | 23,304,460 | 54,036,431 | 91,656,848 | 10,078,433 | 22,697,317 | ||||||||||||||||||
End of Year |
19,972,732 | $ | 17,348,617 | $ | 64,880,761 | 54,036,431 | $ | 14,323,957 | $ | 10,078,433 | ||||||||||||||
American Funds | Pacific Dynamix - | |||||||||||||||||||||||
Asset Allocation (1) | Multi-Strategy | Conservative Growth (1) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 26,048 | $ | 2,741,743 | $ | 116,980 | $ | 5,469 | ||||||||||||||||
Realized gain (loss) |
7,194 | (2,989,954 | ) | 5,505,754 | 5,063 | |||||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
108,777 | 10,305,855 | (46,858,982 | ) | (1,589 | ) | ||||||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
142,019 | 10,057,644 | (41,236,248 | ) | 8,943 | |||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
55,784 | 4,542,012 | 5,768,862 | 10,884 | ||||||||||||||||||||
Transfers between variable and fixed accounts, net |
2,347,896 | (2,846,398 | ) | (1,989,868 | ) | 497,852 | ||||||||||||||||||
Policy maintenance charges |
(37,604 | ) | (4,387,596 | ) | (5,442,270 | ) | (10,575 | ) | ||||||||||||||||
Policy benefits and terminations |
(4,157 | ) | (3,349,615 | ) | (6,556,678 | ) | — | |||||||||||||||||
Other |
(7,728 | ) | (47,564 | ) | (1,003,031 | ) | (236 | ) | ||||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
2,354,191 | (6,089,161 | ) | (9,222,985 | ) | 497,925 | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
2,496,210 | 3,968,483 | (50,459,233 | ) | 506,868 | |||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year or Periods |
— | 48,183,776 | 98,643,009 | — | ||||||||||||||||||||
End of Year or Periods |
$ | 2,496,210 | $ | 52,152,259 | $ | 48,183,776 | $ | 506,868 | ||||||||||||||||
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-17
Variable Accounts | ||||||||||||||||||||||||
Year/Period Ended | Year Ended | Year/Period Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Pacific Dynamix - | ||||||||||||||||||||||||
Moderate Growth (1) | Pacific Dynamix - Growth (1) | I | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 7,769 | $ | 10,214 | $ | 1,421,737 | $ | 2,800,210 | ||||||||||||||||
Realized gain (loss) |
5,881 | 33,798 | (12,562,672 | ) | 3,158,077 | |||||||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
22,913 | 119,076 | 23,998,390 | (50,432,755 | ) | |||||||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
36,563 | 163,088 | 12,857,455 | (44,474,468 | ) | |||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
9,491 | 40,079 | 5,303,454 | 7,204,220 | ||||||||||||||||||||
Transfers between variable and fixed accounts, net |
781,094 | 1,316,560 | (6,304,378 | ) | (14,182,057 | ) | ||||||||||||||||||
Policy maintenance charges |
(13,316 | ) | (12,490 | ) | (3,858,630 | ) | (4,695,271 | ) | ||||||||||||||||
Policy benefits and terminations |
— | (80 | ) | (1,557,410 | ) | (2,343,352 | ) | |||||||||||||||||
Other |
9,116 | (816 | ) | 48,636 | (914,370 | ) | ||||||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
786,385 | 1,343,253 | (6,368,328 | ) | (14,930,830 | ) | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
822,948 | 1,506,341 | 6,489,127 | (59,405,298 | ) | |||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year or Periods |
— | — | 59,256,956 | 118,662,254 | ||||||||||||||||||||
End of Year or Periods |
$ | 822,948 | $ | 1,506,341 | $ | 65,746,083 | $ | 59,256,956 | ||||||||||||||||
II | III | V | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 150,111 | $ | 6,423 | $ | 14,452 | $ | — | $ | 171,889 | $ | 11,705 | ||||||||||||
Realized gain (loss) |
(3,482,162 | ) | 1,609,528 | (4,554,848 | ) | (118,770 | ) | (3,623,538 | ) | 257,027 | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
10,759,575 | (21,692,255 | ) | 17,953,263 | (21,075,694 | ) | 8,216,105 | (10,240,219 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
7,427,524 | (20,076,304 | ) | 13,412,867 | (21,194,464 | ) | 4,764,456 | (9,971,487 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
2,234,415 | 2,937,932 | 2,622,406 | 3,204,391 | 1,744,698 | 2,268,004 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
(3,312,482 | ) | 3,413,263 | (4,756,942 | ) | 1,327,852 | (2,090,101 | ) | 5,905,905 | |||||||||||||||
Policy maintenance charges |
(1,661,761 | ) | (1,844,586 | ) | (2,128,461 | ) | (2,425,879 | ) | (1,494,985 | ) | (1,446,925 | ) | ||||||||||||
Policy benefits and terminations |
(596,524 | ) | (915,263 | ) | (905,680 | ) | (1,362,939 | ) | (294,397 | ) | (841,653 | ) | ||||||||||||
Other |
306,154 | (186,489 | ) | (30,507 | ) | (470,645 | ) | 152,560 | (109,878 | ) | ||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
(3,030,198 | ) | 3,404,857 | (5,199,184 | ) | 272,780 | (1,982,225 | ) | 5,775,453 | |||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
4,397,326 | (16,671,447 | ) | 8,213,683 | (20,921,684 | ) | 2,782,231 | (4,196,034 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
21,954,840 | 38,626,287 | 29,764,785 | 50,686,469 | 20,313,595 | 24,509,629 | ||||||||||||||||||
End of Year |
$ | 26,352,166 | $ | 21,954,840 | $ | 37,978,468 | $ | 29,764,785 | $ | 23,095,826 | $ | 20,313,595 | ||||||||||||
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-18
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
BlackRock Basic Value | BlackRock Global Allocation | Fidelity VIP Contrafund | ||||||||||||||||||||||
V.I. Class III | V.I. Class III | Service Class 2 | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 144,237 | $ | 155,920 | $ | 618,624 | $ | 586,794 | $ | 467,598 | $ | 416,087 | ||||||||||||
Realized loss |
(953,242 | ) | (676,868 | ) | (1,175,267 | ) | (1,129,060 | ) | (4,453,391 | ) | (4,795,630 | ) | ||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
2,842,957 | (2,339,917 | ) | 6,286,794 | (5,222,218 | ) | 16,234,203 | (21,904,535 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
2,033,952 | (2,860,865 | ) | 5,730,151 | (5,764,484 | ) | 12,248,410 | (26,284,078 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
624,213 | 901,273 | 3,168,418 | 2,450,149 | 3,868,527 | 5,909,642 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
1,494,042 | 2,849,847 | 11,957,028 | 16,058,303 | (329,664 | ) | 3,361,662 | |||||||||||||||||
Policy maintenance charges |
(454,337 | ) | (371,277 | ) | (2,420,200 | ) | (1,452,600 | ) | (2,681,490 | ) | (2,809,421 | ) | ||||||||||||
Policy benefits and terminations |
(213,956 | ) | (59,916 | ) | (1,140,632 | ) | (545,875 | ) | (1,621,942 | ) | (1,084,930 | ) | ||||||||||||
Other |
19,109 | (73,038 | ) | (1,022,573 | ) | (288,476 | ) | (128,974 | ) | (403,701 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
1,469,071 | 3,246,889 | 10,542,041 | 16,221,501 | (893,543 | ) | 4,973,252 | |||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
3,503,023 | 386,024 | 16,272,192 | 10,457,017 | 11,354,867 | (21,310,826 | ) | |||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
5,407,138 | 5,021,114 | 22,240,628 | 11,783,611 | 35,675,424 | 56,986,250 | ||||||||||||||||||
End of Year |
$ | 8,910,161 | $ | 5,407,138 | $ | 38,512,820 | $ | 22,240,628 | $ | 47,030,291 | $ | 35,675,424 | ||||||||||||
Fidelity VIP Freedom Income | Fidelity VIP Freedom 2010 | Fidelity VIP Freedom 2015 | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 37,701 | $ | 13,081 | $ | 29,477 | $ | 12,833 | $ | 44,393 | $ | 22,985 | ||||||||||||
Realized gain (loss) |
57,039 | (3,289 | ) | (34,289 | ) | (376,555 | ) | (137,861 | ) | (3,862 | ) | |||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
52,671 | (17,454 | ) | 133,123 | (69,266 | ) | 369,657 | (180,024 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
147,411 | (7,662 | ) | 128,311 | (432,988 | ) | 276,189 | (160,901 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
62,581 | 11,749 | 109,808 | 671,541 | 109,859 | 59,498 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
244,735 | 361,834 | 291,057 | 254,390 | 603,033 | 713,026 | ||||||||||||||||||
Policy maintenance charges |
(61,357 | ) | (6,684 | ) | (53,794 | ) | (157,650 | ) | (99,983 | ) | (50,188 | ) | ||||||||||||
Policy benefits and terminations |
(33,463 | ) | (13,723 | ) | (30,564 | ) | (22,687 | ) | (227,657 | ) | (1,057 | ) | ||||||||||||
Other |
159 | (3,384 | ) | (752 | ) | (2,477 | ) | 24,214 | (178,589 | ) | ||||||||||||||
Net Increase in Net Assets Derived from
Policy Transactions |
212,655 | 349,792 | 315,755 | 743,117 | 409,466 | 542,690 | ||||||||||||||||||
NET INCREASE IN NET ASSETS |
360,066 | 342,130 | 444,066 | 310,129 | 685,655 | 381,789 | ||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
353,588 | 11,458 | 394,202 | 84,073 | 719,351 | 337,562 | ||||||||||||||||||
End of Year |
$ | 713,654 | $ | 353,588 | $ | 838,268 | $ | 394,202 | $ | 1,405,006 | $ | 719,351 | ||||||||||||
SA-19
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Fidelity VIP Freedom 2020 | Fidelity VIP Freedom 2025 | Fidelity VIP Freedom 2030 | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 37,506 | $ | 23,331 | $ | 68,106 | $ | 51,958 | $ | 47,358 | $ | 18,092 | ||||||||||||
Realized gain (loss) |
(126,139 | ) | 13,389 | (67,763 | ) | 106,366 | (192,123 | ) | (47,141 | ) | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
381,531 | (299,869 | ) | 545,318 | (998,538 | ) | 461,413 | (318,281 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
292,898 | (263,149 | ) | 545,661 | (840,214 | ) | 316,648 | (347,330 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
265,089 | 169,979 | 178,654 | 127,256 | 232,081 | 157,984 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
231,103 | 837,482 | 210,707 | 121,410 | 1,646,549 | 854,270 | ||||||||||||||||||
Policy maintenance charges |
(117,487 | ) | (51,854 | ) | (166,031 | ) | (148,094 | ) | (115,918 | ) | (47,766 | ) | ||||||||||||
Policy benefits and terminations |
(41,122 | ) | (26,026 | ) | (12,171 | ) | (932 | ) | (75,674 | ) | (110,176 | ) | ||||||||||||
Other |
(55,093 | ) | 278 | (21,972 | ) | (5,505 | ) | 126 | 180 | |||||||||||||||
Net Increase in Net Assets Derived from
Policy Transactions |
282,490 | 929,859 | 189,187 | 94,135 | 1,687,164 | 854,492 | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
575,388 | 666,710 | 734,848 | (746,079 | ) | 2,003,812 | 507,162 | |||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
760,537 | 93,827 | 1,667,848 | 2,413,927 | 643,494 | 136,332 | ||||||||||||||||||
End of Year |
$ | 1,335,925 | $ | 760,537 | $ | 2,402,696 | $ | 1,667,848 | $ | 2,647,306 | $ | 643,494 | ||||||||||||
Fidelity VIP Growth | Fidelity VIP Mid Cap | Fidelity VIP Value Strategies | ||||||||||||||||||||||
Service Class 2 | Service Class 2 | Service Class 2 | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 9,865 | $ | 37,476 | $ | 109,993 | $ | 64,703 | $ | 7,245 | $ | 13,128 | ||||||||||||
Realized gain (loss) |
(423,220 | ) | (92,890 | ) | (1,670,226 | ) | 2,882,844 | (872,995 | ) | (639,545 | ) | |||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
1,683,551 | (3,190,823 | ) | 9,594,634 | (15,434,842 | ) | 1,809,143 | (999,345 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
1,270,196 | (3,246,237 | ) | 8,034,401 | (12,487,295 | ) | 943,393 | (1,625,762 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
252,480 | 300,750 | 2,127,858 | 2,715,846 | 298,957 | 355,225 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
459,072 | 3,811,105 | 1,665,265 | (297,312 | ) | 183,413 | (1,209,334 | ) | ||||||||||||||||
Policy maintenance charges |
(233,079 | ) | (247,772 | ) | (1,528,309 | ) | (1,469,291 | ) | (243,348 | ) | (234,638 | ) | ||||||||||||
Policy benefits and terminations |
(152,913 | ) | (31,082 | ) | (1,061,065 | ) | (519,222 | ) | (114,291 | ) | (195,835 | ) | ||||||||||||
Other |
(3,250 | ) | (22,385 | ) | 19,021 | (147,768 | ) | (91,515 | ) | (14,741 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
322,310 | 3,810,616 | 1,222,770 | 282,253 | 33,216 | (1,299,323 | ) | |||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
1,592,506 | 564,379 | 9,257,171 | (12,205,042 | ) | 976,609 | (2,925,085 | ) | ||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
4,120,601 | 3,556,222 | 19,236,052 | 31,441,094 | 1,372,358 | 4,297,443 | ||||||||||||||||||
End of Year |
$ | 5,713,107 | $ | 4,120,601 | $ | 28,493,223 | $ | 19,236,052 | $ | 2,348,967 | $ | 1,372,358 | ||||||||||||
SA-20
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Overseas | INTECH Risk-Managed Core | Enterprise | ||||||||||||||||||||||
Service Class (1) | Service Class | Service Class (2) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 115,543 | $ | 243,316 | $ | 5,679 | $ | 2,757 | $ | — | $ | 2,680 | ||||||||||||
Realized gain (loss) |
(5,408,990 | ) | 523,764 | (40,376 | ) | (444,333 | ) | (435,023 | ) | 44,602 | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
20,081,743 | (16,926,725 | ) | 142,686 | (38,953 | ) | 1,622,995 | (1,859,894 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
14,788,296 | (16,159,645 | ) | 107,989 | (480,529 | ) | 1,187,972 | (1,812,612 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
2,323,931 | 1,560,415 | 81,102 | 51,374 | 278,374 | 327,647 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
3,209,503 | 25,518,734 | 187,436 | 722,167 | (78,400 | ) | 3,502,581 | |||||||||||||||||
Policy maintenance charges |
(1,622,282 | ) | (2,323,884 | ) | (41,289 | ) | (82,856 | ) | (159,890 | ) | (99,061 | ) | ||||||||||||
Policy benefits and terminations |
(846,750 | ) | (328,228 | ) | (1,558 | ) | (71,204 | ) | (96,809 | ) | (17,123 | ) | ||||||||||||
Other |
(43,549 | ) | (210,897 | ) | 6,767 | (45,708 | ) | (8,932 | ) | (58,987 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
3,020,853 | 24,216,140 | 232,458 | 573,773 | (65,657 | ) | 3,655,057 | |||||||||||||||||
NET INCREASE IN NET ASSETS |
17,809,149 | 8,056,495 | 340,447 | 93,244 | 1,122,315 | 1,842,445 | ||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
18,429,844 | 10,373,349 | 251,099 | 157,855 | 2,757,111 | 914,666 | ||||||||||||||||||
End of Year |
$ | 36,238,993 | $ | 18,429,844 | $ | 591,546 | $ | 251,099 | $ | 3,879,426 | $ | 2,757,111 | ||||||||||||
Lazard Retirement | Legg Mason ClearBridge Variable | Legg Mason ClearBridge Variable | ||||||||||||||||||||||
U.S. Strategic Equity | Aggressive Growth - Class II (3) | Mid Cap Core - Class II (4) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | 3,774 | $ | 920 | $ | — | $ | — | $ | 7,745 | $ | — | ||||||||||||
Realized gain (loss) |
30,850 | (12,084 | ) | 11,889 | (31,909 | ) | (389,806 | ) | (70,799 | ) | ||||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
75,195 | (18,082 | ) | 118,050 | (71,965 | ) | 2,591,525 | (2,111,950 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
109,819 | (29,246 | ) | 129,939 | (103,874 | ) | 2,209,464 | (2,182,749 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
30,477 | 20,318 | 52,067 | 56,080 | 143,516 | 73,354 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
218,100 | 72,502 | 207,835 | 297,898 | 781,833 | 8,220,995 | ||||||||||||||||||
Policy maintenance charges |
(22,047 | ) | (8,981 | ) | (35,966 | ) | (26,199 | ) | (322,951 | ) | (88,598 | ) | ||||||||||||
Policy benefits and terminations |
(26 | ) | — | (4,310 | ) | — | (1,781,240 | ) | (1,819 | ) | ||||||||||||||
Other |
(184 | ) | 103 | (372 | ) | 362 | 96,354 | 3,734 | ||||||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
226,320 | 83,942 | 219,254 | 328,141 | (1,082,488 | ) | 8,207,666 | |||||||||||||||||
NET INCREASE IN NET ASSETS |
336,139 | 54,696 | 349,193 | 224,267 | 1,126,976 | 6,024,917 | ||||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
87,381 | 32,685 | 303,371 | 79,104 | 6,147,689 | 122,772 | ||||||||||||||||||
End of Year |
$ | 423,520 | $ | 87,381 | $ | 652,564 | $ | 303,371 | $ | 7,274,665 | $ | 6,147,689 | ||||||||||||
(1) | Formerly named International Growth Service Class Variable Account. | |
(2) | Formerly named Mid Cap Growth Service Class Variable Account. | |
(3) | Formerly named Legg Mason Partners Variable Aggressive Growth - Class II Variable Account. | |
(4) | Formerly named Legg Mason Partners Variable Mid Cap Core - Class II Variable Account. |
SA-21
Variable Accounts | ||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
MFS New Discovery Series | MFS Utilities Series | |||||||||||||||||||||||
Service Class | Service Class | NACM Small Cap Class I (1) | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | — | $ | — | $ | 111,807 | $ | 59,498 | $ | 475 | $ | — | ||||||||||||
Realized gain (loss) |
(154,962 | ) | (56,894 | ) | (838,412 | ) | (1,080,755 | ) | (441,561 | ) | 86,635 | |||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
668,173 | (216,017 | ) | 1,410,245 | (1,851,470 | ) | 659,288 | (593,869 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
513,211 | (272,911 | ) | 683,640 | (2,872,727 | ) | 218,202 | (507,234 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
302,664 | 63,295 | 321,419 | 398,132 | 73,642 | 115,870 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
1,843,058 | 557,214 | (103,935 | ) | (8,727,545 | ) | 63,452 | 1,136,164 | ||||||||||||||||
Policy maintenance charges |
(88,364 | ) | (24,179 | ) | (213,114 | ) | (302,406 | ) | (48,958 | ) | (32,116 | ) | ||||||||||||
Policy benefits and terminations |
(31,985 | ) | (8,476 | ) | (151,641 | ) | (108,740 | ) | (41,515 | ) | (1,076 | ) | ||||||||||||
Other |
(6,927 | ) | 75 | (82,668 | ) | (28,939 | ) | (1,671 | ) | (54,522 | ) | |||||||||||||
Net Increase (Decrease) in Net Assets Derived from
Policy Transactions |
2,018,446 | 587,929 | (229,939 | ) | (8,769,498 | ) | 44,950 | 1,164,320 | ||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
2,531,657 | 315,018 | 453,701 | (11,642,225 | ) | 263,152 | 657,086 | |||||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
528,886 | 213,868 | 2,694,522 | 14,336,747 | 797,193 | 140,107 | ||||||||||||||||||
End of Year |
$ | 3,060,543 | $ | 528,886 | $ | 3,148,223 | $ | 2,694,522 | $ | 1,060,345 | $ | 797,193 | ||||||||||||
T. Rowe Price | T. Rowe Price | Van Eck | ||||||||||||||||||||||
Blue Chip Growth - II | Equity Income - II | Worldwide Hard Assets | ||||||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS |
||||||||||||||||||||||||
Net investment income |
$ | — | $ | 4,829 | $ | 384,859 | $ | 567,669 | $ | 133,457 | $ | 171,913 | ||||||||||||
Realized gain (loss) |
(399,890 | ) | (167,354 | ) | (1,803,412 | ) | (2,177,581 | ) | (4,014,612 | ) | 10,407,498 | |||||||||||||
Change in unrealized appreciation (depreciation)
on investments |
2,104,182 | (2,122,224 | ) | 7,178,937 | (9,219,989 | ) | 26,695,685 | (47,039,325 | ) | |||||||||||||||
Net Increase (Decrease) in Net Assets Resulting
from Operations |
1,704,292 | (2,284,749 | ) | 5,760,384 | (10,829,901 | ) | 22,814,530 | (36,459,914 | ) | |||||||||||||||
INCREASE (DECREASE) IN NET ASSETS
FROM POLICY TRANSACTIONS |
||||||||||||||||||||||||
Payments received from policyholders |
724,858 | 678,912 | 2,301,710 | 2,422,784 | 4,677,260 | 5,697,057 | ||||||||||||||||||
Transfers between variable and fixed accounts, net |
2,321,884 | 75,136 | 3,919,810 | 516,816 | 3,318,002 | 15,276,266 | ||||||||||||||||||
Policy maintenance charges |
(522,693 | ) | (434,624 | ) | (1,436,505 | ) | (1,428,817 | ) | (3,788,613 | ) | (3,044,375 | ) | ||||||||||||
Policy benefits and terminations |
(309,533 | ) | (203,502 | ) | (764,364 | ) | (677,609 | ) | (1,514,469 | ) | (2,005,527 | ) | ||||||||||||
Other |
(49,024 | ) | (30,490 | ) | 125,593 | (229,598 | ) | 39,696 | (390,953 | ) | ||||||||||||||
Net Increase in Net Assets Derived from
Policy Transactions |
2,165,492 | 85,432 | 4,146,244 | 603,576 | 2,731,876 | 15,532,468 | ||||||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS |
3,869,784 | (2,199,317 | ) | 9,906,628 | (10,226,325 | ) | 25,546,406 | (20,927,446 | ) | |||||||||||||||
NET ASSETS |
||||||||||||||||||||||||
Beginning of Year |
3,262,380 | 5,461,697 | 18,474,390 | 28,700,715 | 42,093,765 | 63,021,211 | ||||||||||||||||||
End of Year |
$ | 7,132,164 | $ | 3,262,380 | $ | 28,381,018 | $ | 18,474,390 | $ | 67,640,171 | $ | 42,093,765 | ||||||||||||
(1) | Formerly named OpCap Small Cap Variable Account. |
SA-22
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
Diversified Bond |
||||||||||||||||||||||||
2009
|
$ | 11.21 | 2,677,541 | $ | 30,027,134 | 0.00 | % | 3.80 | % | 14.13 | % | |||||||||||||
2008
|
9.83 | 2,379,452 | 23,379,628 | 0.00 | % | 3.84 | % | (7.80 | %) | |||||||||||||||
2007
|
10.66 | 2,668,272 | 28,436,894 | 0.00 | % | 5.09 | % | 1.32 | % | |||||||||||||||
05/01/2006 — 12/31/2006
|
10.52 | 997,088 | 10,488,157 | 0.00 | % | 4.65 | % | 5.19 | % | |||||||||||||||
Floating Rate Loan |
||||||||||||||||||||||||
2009
|
$ | 8.63 | 1,711,048 | $ | 14,760,251 | 0.00 | % | 5.08 | % | 24.31 | % | |||||||||||||
2008
|
6.94 | 1,012,929 | 7,029,314 | 0.00 | % | 6.98 | % | (29.28 | %) | |||||||||||||||
05/04/2007 — 12/31/2007
|
9.81 | 962,991 | 9,449,518 | 0.00 | % | 7.28 | % | (1.89 | %) | |||||||||||||||
High Yield Bond |
||||||||||||||||||||||||
2009
|
$ | 43.44 | 2,237,443 | $ | 97,202,439 | 0.00 | % | 7.99 | % | 39.87 | % | |||||||||||||
2008
|
31.06 | 2,132,137 | 66,223,004 | 0.00 | % | 8.71 | % | (22.20 | %) | |||||||||||||||
2007
|
39.92 | 1,924,183 | 76,816,614 | 0.00 | % | 7.58 | % | 2.44 | % | |||||||||||||||
2006
|
38.97 | 1,921,427 | 74,879,252 | 0.00 | % | 7.33 | % | 9.42 | % | |||||||||||||||
2005
|
35.61 | 2,046,323 | 72,878,683 | 0.00 | % | 7.05 | % | 2.37 | % | |||||||||||||||
Inflation Managed |
||||||||||||||||||||||||
2009
|
$ | 45.92 | 3,815,481 | $ | 175,218,196 | 0.00 | % | 4.10 | % | 20.80 | % | |||||||||||||
2008
|
38.02 | 4,059,495 | 154,324,441 | 0.00 | % | 2.85 | % | (9.34 | %) | |||||||||||||||
2007
|
41.93 | 4,204,544 | 176,308,909 | 0.00 | % | 4.27 | % | 10.14 | % | |||||||||||||||
2006
|
38.07 | 4,088,136 | 155,646,544 | 0.00 | % | 3.97 | % | 0.52 | % | |||||||||||||||
2005
|
37.88 | 4,076,452 | 154,399,403 | 0.00 | % | 3.00 | % | 2.54 | % | |||||||||||||||
Managed Bond |
||||||||||||||||||||||||
2009
|
$ | 50.32 | 8,992,559 | $ | 452,533,114 | 0.00 | % | 6.81 | % | 21.01 | % | |||||||||||||
2008
|
41.59 | 9,106,840 | 378,720,069 | 0.00 | % | 4.41 | % | (1.71 | %) | |||||||||||||||
2007
|
42.31 | 9,776,620 | 413,635,229 | 0.00 | % | 4.47 | % | 8.53 | % | |||||||||||||||
2006
|
38.98 | 9,025,168 | 351,828,277 | 0.00 | % | 4.05 | % | 4.81 | % | |||||||||||||||
2005
|
37.19 | 8,493,958 | 315,929,669 | 0.00 | % | 3.40 | % | 2.63 | % | |||||||||||||||
Money Market |
||||||||||||||||||||||||
2009
|
$ | 23.42 | 12,533,277 | $ | 293,482,779 | 0.00 | % | 0.25 | % | 0.17 | % | |||||||||||||
2008
|
23.38 | 12,712,480 | 297,173,335 | 0.00 | % | 2.15 | % | 2.36 | % | |||||||||||||||
2007
|
22.84 | 10,196,175 | 232,852,629 | 0.00 | % | 4.85 | % | 4.99 | % | |||||||||||||||
2006
|
21.75 | 8,657,137 | 188,307,581 | 0.00 | % | 4.64 | % | 4.69 | % | |||||||||||||||
2005
|
20.78 | 9,011,395 | 187,232,550 | 0.00 | % | 2.74 | % | 2.82 | % | |||||||||||||||
Short Duration Bond |
||||||||||||||||||||||||
2009
|
$ | 11.66 | 3,846,075 | $ | 44,837,724 | 0.00 | % | 3.13 | % | 8.66 | % | |||||||||||||
2008
|
10.73 | 3,900,654 | 41,850,977 | 0.00 | % | 3.87 | % | (5.09 | %) | |||||||||||||||
2007
|
11.31 | 4,049,884 | 45,784,334 | 0.00 | % | 4.52 | % | 4.47 | % | |||||||||||||||
2006
|
10.82 | 4,144,613 | 44,852,141 | 0.00 | % | 4.11 | % | 4.27 | % | |||||||||||||||
2005
|
10.38 | 3,819,364 | 39,640,832 | 0.00 | % | 3.05 | % | 1.57 | % | |||||||||||||||
American Funds Growth |
||||||||||||||||||||||||
2009
|
$ | 11.43 | 5,195,477 | $ | 59,372,649 | 0.00 | % | 0.13 | % | 38.86 | % | |||||||||||||
2008
|
8.23 | 5,627,232 | 46,308,882 | 0.00 | % | 0.60 | % | (44.19 | %) | |||||||||||||||
2007
|
14.74 | 4,288,451 | 63,232,628 | 0.00 | % | 0.42 | % | 11.93 | % | |||||||||||||||
2006
|
13.17 | 4,463,397 | 58,796,109 | 0.00 | % | 0.69 | % | 9.81 | % | |||||||||||||||
05/03/2005 — 12/31/2005
|
12.00 | 2,211,749 | 26,532,950 | 0.00 | % | 0.78 | % | 19.96 | % | |||||||||||||||
American Funds Growth-Income |
||||||||||||||||||||||||
2009
|
$ | 10.68 | 5,610,441 | $ | 59,947,385 | 0.00 | % | 1.26 | % | 30.74 | % | |||||||||||||
2008
|
8.17 | 5,619,154 | 45,924,261 | 0.00 | % | 1.41 | % | (38.08 | %) | |||||||||||||||
2007
|
13.20 | 5,233,800 | 69,080,372 | 0.00 | % | 1.31 | % | 4.66 | % | |||||||||||||||
2006
|
12.61 | 4,458,099 | 56,224,609 | 0.00 | % | 1.62 | % | 14.77 | % | |||||||||||||||
05/03/2005 — 12/31/2005
|
10.99 | 1,681,919 | 18,481,536 | 0.00 | % | 1.92 | % | 9.88 | % | |||||||||||||||
Comstock |
||||||||||||||||||||||||
2009
|
$ | 10.12 | 6,250,352 | $ | 63,233,426 | 0.00 | % | 1.52 | % | 28.68 | % | |||||||||||||
2008
|
7.86 | 5,767,472 | 45,345,266 | 0.00 | % | 2.02 | % | (36.79 | %) | |||||||||||||||
2007
|
12.44 | 6,703,119 | 83,377,663 | 0.00 | % | 1.54 | % | (3.01 | %) | |||||||||||||||
2006
|
12.83 | 4,730,546 | 60,669,698 | 0.00 | % | 1.76 | % | 16.33 | % | |||||||||||||||
2005
|
11.02 | 3,673,500 | 40,498,213 | 0.00 | % | 1.39 | % | 4.36 | % | |||||||||||||||
Diversified Research |
||||||||||||||||||||||||
2009
|
$ | 11.91 | 2,937,995 | $ | 34,983,770 | 0.00 | % | 1.66 | % | 32.40 | % | |||||||||||||
2008
|
8.99 | 3,700,234 | 33,277,837 | 0.00 | % | 1.04 | % | (39.07 | %) | |||||||||||||||
2007
|
14.76 | 4,824,065 | 71,202,866 | 0.00 | % | 0.71 | % | 1.19 | % | |||||||||||||||
2006
|
14.59 | 5,271,188 | 76,886,161 | 0.00 | % | 0.67 | % | 11.97 | % | |||||||||||||||
2005
|
13.03 | 5,109,087 | 66,554,596 | 0.00 | % | 0.47 | % | 5.24 | % | |||||||||||||||
Equity |
||||||||||||||||||||||||
2009
|
$ | 11.41 | 2,754,697 | $ | 31,424,320 | 0.00 | % | 0.94 | % | 35.23 | % | |||||||||||||
2008
|
8.44 | 3,103,463 | 26,180,303 | 0.00 | % | 0.51 | % | (41.12 | %) | |||||||||||||||
2007
|
14.33 | 3,445,626 | 49,367,148 | 0.00 | % | 0.22 | % | 6.27 | % | |||||||||||||||
2006
|
13.48 | 3,338,286 | 45,007,199 | 0.00 | % | 0.37 | % | 8.65 | % | |||||||||||||||
2005
|
12.41 | 4,011,507 | 49,777,144 | 0.00 | % | 0.26 | % | 6.53 | % | |||||||||||||||
Equity Index |
||||||||||||||||||||||||
2009
|
$ | 45.04 | 9,693,106 | $ | 436,544,053 | 0.00 | % | 1.79 | % | 26.36 | % | |||||||||||||
2008
|
35.64 | 9,749,024 | 347,463,802 | 0.00 | % | 2.00 | % | (37.35 | %) | |||||||||||||||
2007
|
56.89 | 9,701,628 | 551,923,775 | 0.00 | % | 1.84 | % | 5.23 | % | |||||||||||||||
2006
|
54.06 | 10,173,850 | 550,028,122 | 0.00 | % | 1.77 | % | 15.52 | % | |||||||||||||||
2005
|
46.80 | 10,743,851 | 502,817,844 | 0.00 | % | 1.46 | % | 4.67 | % |
See Notes to Financial Statements | See explanation of references on SA-27 |
SA-23
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
Focused 30 |
||||||||||||||||||||||||
2009
|
$ | 12.33 | 2,819,667 | $ | 34,755,997 | 0.00 | % | 0.00 | % | 50.43 | % | |||||||||||||
2008
|
8.19 | 3,634,894 | 29,783,940 | 0.00 | % | 0.05 | % | (50.14 | %) | |||||||||||||||
2007
|
16.43 | 3,080,715 | 50,627,718 | 0.00 | % | 0.43 | % | 31.84 | % | |||||||||||||||
2006
|
12.46 | 2,287,373 | 28,511,623 | 0.00 | % | 0.07 | % | 23.71 | % | |||||||||||||||
2005
|
10.08 | 1,809,953 | 18,236,050 | 0.00 | % | 1.06 | % | 22.07 | % | |||||||||||||||
Growth LT |
||||||||||||||||||||||||
2009
|
$ | 40.75 | 4,914,745 | $ | 200,271,001 | 0.00 | % | 1.07 | % | 37.28 | % | |||||||||||||
2008
|
29.68 | 5,471,535 | 162,407,213 | 0.00 | % | 0.49 | % | (40.95 | %) | |||||||||||||||
2007
|
50.27 | 6,242,947 | 313,824,437 | 0.00 | % | 0.44 | % | 15.63 | % | |||||||||||||||
2006
|
43.47 | 6,931,734 | 301,351,116 | 0.00 | % | 0.60 | % | 9.72 | % | |||||||||||||||
2005
|
39.62 | 7,403,306 | 293,349,777 | 0.00 | % | 0.25 | % | 7.68 | % | |||||||||||||||
Large-Cap Growth (4) |
||||||||||||||||||||||||
2009
|
$ | 6.31 | 8,196,379 | $ | 51,736,439 | 0.00 | % | 0.06 | % | 40.50 | % | |||||||||||||
2008
|
4.49 | 7,385,240 | 33,179,269 | 0.00 | % | 0.00 | % | (50.47 | %) | |||||||||||||||
2007
|
9.07 | 6,937,338 | 62,931,690 | 0.00 | % | 0.00 | % | 21.63 | % | |||||||||||||||
2006
|
7.46 | 8,055,216 | 60,078,214 | 0.00 | % | 0.21 | % | (3.82 | %) | |||||||||||||||
2005
|
7.75 | 7,040,498 | 54,593,520 | 0.00 | % | 0.34 | % | 2.94 | % | |||||||||||||||
Large-Cap Value |
||||||||||||||||||||||||
2009
|
$ | 13.94 | 8,956,147 | $ | 124,817,482 | 0.00 | % | 2.11 | % | 23.13 | % | |||||||||||||
2008
|
11.32 | 8,744,818 | 98,977,865 | 0.00 | % | 1.76 | % | (34.80 | %) | |||||||||||||||
2007
|
17.36 | 9,143,314 | 158,714,149 | 0.00 | % | 1.18 | % | 3.54 | % | |||||||||||||||
2006
|
16.77 | 9,331,394 | 156,441,283 | 0.00 | % | 1.25 | % | 17.58 | % | |||||||||||||||
2005
|
14.26 | 9,608,665 | 137,007,537 | 0.00 | % | 1.29 | % | 6.16 | % | |||||||||||||||
Long/Short Large-Cap |
||||||||||||||||||||||||
2009
|
$ | 8.42 | 2,826,468 | $ | 23,800,021 | 0.00 | % | 0.92 | % | 27.56 | % | |||||||||||||
05/02/2008 — 12/31/2008
|
6.60 | 1,785,967 | 11,789,340 | 0.00 | % | 0.97 | % | (35.04 | %) | |||||||||||||||
Main Street Core |
||||||||||||||||||||||||
2009
|
$ | 43.71 | 2,500,133 | $ | 109,273,337 | 0.00 | % | 1.51 | % | 29.36 | % | |||||||||||||
2008
|
33.79 | 2,911,427 | 98,370,807 | 0.00 | % | 1.39 | % | (38.87 | %) | |||||||||||||||
2007
|
55.27 | 3,102,111 | 171,459,406 | 0.00 | % | 1.20 | % | 4.40 | % | |||||||||||||||
2006
|
52.94 | 2,987,945 | 158,190,552 | 0.00 | % | 1.24 | % | 15.18 | % | |||||||||||||||
2005
|
45.97 | 3,318,283 | 152,528,923 | 0.00 | % | 1.11 | % | 5.99 | % | |||||||||||||||
Mid-Cap Equity (5) |
||||||||||||||||||||||||
2009
|
$ | 21.09 | 6,018,439 | $ | 126,956,917 | 0.00 | % | 1.12 | % | 39.65 | % | |||||||||||||
2008
|
15.11 | 7,822,686 | 118,162,029 | 0.00 | % | 1.58 | % | (39.00 | %) | |||||||||||||||
2007
|
24.76 | 8,230,390 | 203,798,206 | 0.00 | % | 0.74 | % | (2.15 | %) | |||||||||||||||
2006
|
25.31 | 8,035,634 | 203,350,799 | 0.00 | % | 0.69 | % | 14.97 | % | |||||||||||||||
2005
|
22.01 | 7,960,146 | 175,210,180 | 0.00 | % | 0.54 | % | 8.87 | % | |||||||||||||||
Mid-Cap Growth |
||||||||||||||||||||||||
2009
|
$ | 8.64 | 6,166,014 | $ | 53,288,925 | 0.00 | % | 0.35 | % | 59.33 | % | |||||||||||||
2008
|
5.42 | 5,938,701 | 32,212,994 | 0.00 | % | 0.12 | % | (48.36 | %) | |||||||||||||||
2007
|
10.50 | 6,666,596 | 70,025,236 | 0.00 | % | 0.48 | % | 22.92 | % | |||||||||||||||
2006
|
8.55 | 6,053,274 | 51,728,324 | 0.00 | % | 0.23 | % | 8.93 | % | |||||||||||||||
2005
|
7.84 | 4,677,898 | 36,697,161 | 0.00 | % | 0.00 | % | 17.90 | % | |||||||||||||||
Mid-Cap Value (6) |
||||||||||||||||||||||||
02/13/2009 — 12/31/2009
|
$ | 14.58 | 1,208,072 | $ | 17,610,386 | 0.00 | % | 1.03 | % | 42.90 | % | |||||||||||||
Small-Cap Equity (7) |
||||||||||||||||||||||||
2009
|
$ | 13.98 | 1,373,316 | $ | 19,202,935 | 0.00 | % | 0.79 | % | 30.22 | % | |||||||||||||
2008
|
10.74 | 1,349,982 | 14,496,396 | 0.00 | % | 0.62 | % | (26.11 | %) | |||||||||||||||
2007
|
14.53 | 785,370 | 11,413,846 | 0.00 | % | 0.24 | % | 6.04 | % | |||||||||||||||
2006
|
13.71 | 415,525 | 5,695,033 | 0.00 | % | 0.89 | % | 18.68 | % | |||||||||||||||
05/03/2005 — 12/31/2005
|
11.55 | 208,894 | 2,412,411 | 0.00 | % | 0.86 | % | 15.48 | % | |||||||||||||||
Small-Cap Growth (8) |
||||||||||||||||||||||||
2009
|
$ | 12.19 | 3,188,386 | $ | 38,860,823 | 0.00 | % | 0.00 | % | 47.44 | % | |||||||||||||
2008
|
8.27 | 3,474,237 | 28,720,306 | 0.00 | % | 0.00 | % | (47.11 | %) | |||||||||||||||
2007
|
15.63 | 3,236,389 | 50,586,573 | 0.00 | % | 0.00 | % | 15.10 | % | |||||||||||||||
2006
|
13.58 | 2,986,761 | 40,560,290 | 0.00 | % | 0.26 | % | 5.07 | % | |||||||||||||||
2005
|
12.93 | 3,275,109 | 42,331,400 | 0.00 | % | 0.22 | % | 2.66 | % | |||||||||||||||
Small-Cap Index |
||||||||||||||||||||||||
2009
|
$ | 15.71 | 11,242,905 | $ | 176,659,959 | 0.00 | % | 1.19 | % | 28.19 | % | |||||||||||||
2008
|
12.26 | 12,603,955 | 154,492,786 | 0.00 | % | 2.04 | % | (35.03 | %) | |||||||||||||||
2007
|
18.87 | 14,234,769 | 268,559,624 | 0.00 | % | 1.25 | % | (2.02 | %) | |||||||||||||||
2006
|
19.25 | 15,783,089 | 303,894,564 | 0.00 | % | 1.52 | % | 17.79 | % | |||||||||||||||
2005
|
16.35 | 17,236,081 | 281,759,120 | 0.00 | % | 0.49 | % | 4.38 | % | |||||||||||||||
Small-Cap Value |
||||||||||||||||||||||||
2009
|
$ | 20.23 | 2,953,532 | $ | 59,758,067 | 0.00 | % | 2.59 | % | 27.18 | % | |||||||||||||
2008
|
15.91 | 3,018,819 | 48,025,798 | 0.00 | % | 2.59 | % | (28.23 | %) | |||||||||||||||
2007
|
22.16 | 2,748,103 | 60,911,384 | 0.00 | % | 1.85 | % | 3.14 | % | |||||||||||||||
2006
|
21.49 | 2,994,334 | 64,351,383 | 0.00 | % | 2.51 | % | 19.75 | % | |||||||||||||||
2005
|
17.95 | 2,557,703 | 45,901,085 | 0.00 | % | 1.37 | % | 13.65 | % | |||||||||||||||
Emerging Markets |
||||||||||||||||||||||||
2009
|
$ | 31.72 | 4,503,441 | $ | 142,859,778 | 0.00 | % | 0.95 | % | 84.79 | % | |||||||||||||
2008
|
17.17 | 4,798,685 | 82,375,964 | 0.00 | % | 1.48 | % | (47.68 | %) | |||||||||||||||
2007
|
32.81 | 5,417,715 | 177,769,491 | 0.00 | % | 1.16 | % | 33.09 | % | |||||||||||||||
2006
|
24.65 | 5,128,600 | 126,439,320 | 0.00 | % | 0.78 | % | 24.40 | % | |||||||||||||||
2005
|
19.82 | 4,934,335 | 97,790,451 | 0.00 | % | 1.09 | % | 41.47 | % |
See Notes to Financial Statements | See explanation of references on SA-27 |
SA-24
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
International Large-Cap |
||||||||||||||||||||||||
2009 |
$ | 11.05 | 13,371,427 | $ | 147,687,972 | 0.00 | % | 1.63 | % | 33.61 | % | |||||||||||||
2008 |
8.27 | 14,676,980 | 121,327,391 | 0.00 | % | 2.16 | % | (35.35 | %) | |||||||||||||||
2007 |
12.79 | 15,067,071 | 192,663,328 | 0.00 | % | 1.58 | % | 9.26 | % | |||||||||||||||
2006 |
11.70 | 15,768,095 | 184,533,716 | 0.00 | % | 2.89 | % | 27.00 | % | |||||||||||||||
2005 |
9.21 | 14,566,843 | 134,228,198 | 0.00 | % | 0.87 | % | 12.70 | % | |||||||||||||||
International Small-Cap |
||||||||||||||||||||||||
2009 |
$ | 7.34 | 3,017,020 | $ | 22,136,232 | 0.00 | % | 1.53 | % | 30.28 | % | |||||||||||||
2008 |
5.63 | 2,683,144 | 15,110,867 | 0.00 | % | 2.30 | % | (47.84 | %) | |||||||||||||||
2007 |
10.80 | 2,202,534 | 23,781,576 | 0.00 | % | 1.34 | % | 4.73 | % | |||||||||||||||
05/01/2006 — 12/31/2006 |
10.31 | 1,248,871 | 12,875,311 | 0.00 | % | 0.23 | % | 3.10 | % | |||||||||||||||
International Value |
||||||||||||||||||||||||
2009 |
$ | 23.25 | 7,068,121 | $ | 164,331,210 | 0.00 | % | 2.21 | % | 28.00 | % | |||||||||||||
2008 |
18.16 | 8,230,656 | 149,496,258 | 0.00 | % | 2.77 | % | (47.78 | %) | |||||||||||||||
2007 |
34.78 | 8,793,719 | 305,888,339 | 0.00 | % | 2.01 | % | 6.24 | % | |||||||||||||||
2006 |
32.74 | 8,634,107 | 282,689,209 | 0.00 | % | 1.65 | % | 25.69 | % | |||||||||||||||
2005 |
26.05 | 8,552,145 | 222,779,702 | 0.00 | % | 1.97 | % | 9.43 | % | |||||||||||||||
Health Sciences |
||||||||||||||||||||||||
2009 |
$ | 13.96 | 1,430,534 | $ | 19,972,732 | 0.00 | % | 0.12 | % | 27.23 | % | |||||||||||||
2008 |
10.97 | 1,580,888 | 17,348,617 | 0.00 | % | 1.27 | % | (28.16 | %) | |||||||||||||||
2007 |
15.28 | 1,525,560 | 23,304,460 | 0.00 | % | 0.00 | % | 16.47 | % | |||||||||||||||
2006 |
13.12 | 1,451,105 | 19,032,105 | 0.00 | % | 0.00 | % | 8.11 | % | |||||||||||||||
2005 |
12.13 | 1,323,214 | 16,052,785 | 0.00 | % | 0.00 | % | 15.28 | % | |||||||||||||||
Real Estate |
||||||||||||||||||||||||
2009 |
$ | 29.15 | 2,226,122 | $ | 64,880,761 | 0.00 | % | 2.08 | % | 32.27 | % | |||||||||||||
2008 |
22.03 | 2,452,417 | 54,036,431 | 0.00 | % | 3.75 | % | (39.99 | %) | |||||||||||||||
2007 |
36.71 | 2,496,462 | 91,656,848 | 0.00 | % | 1.02 | % | (16.16 | %) | |||||||||||||||
2006 |
43.79 | 2,826,403 | 123,770,629 | 0.00 | % | 3.08 | % | 38.06 | % | |||||||||||||||
2005 |
31.72 | 2,853,932 | 90,522,273 | 0.00 | % | 0.89 | % | 16.79 | % | |||||||||||||||
Technology |
||||||||||||||||||||||||
2009 |
$ | 5.96 | 2,404,956 | $ | 14,323,957 | 0.00 | % | 0.00 | % | 52.57 | % | |||||||||||||
2008 |
3.90 | 2,581,728 | 10,078,433 | 0.00 | % | 0.10 | % | (51.64 | %) | |||||||||||||||
2007 |
8.07 | 2,811,966 | 22,697,317 | 0.00 | % | 0.05 | % | 23.03 | % | |||||||||||||||
2006 |
6.56 | 2,674,031 | 17,543,154 | 0.00 | % | 0.00 | % | 9.34 | % | |||||||||||||||
2005 |
6.00 | 2,027,444 | 12,164,728 | 0.00 | % | 0.00 | % | 21.71 | % | |||||||||||||||
American Funds Asset Allocation (6) |
||||||||||||||||||||||||
02/26/2009 — 12/31/2009 |
$ | 12.98 | 192,292 | $ | 2,496,210 | 0.00 | % | 4.73 | % | 36.71 | % | |||||||||||||
Multi-Strategy |
||||||||||||||||||||||||
2009 |
$ | 35.29 | 1,477,979 | $ | 52,152,259 | 0.00 | % | 5.65 | % | 23.00 | % | |||||||||||||
2008 |
28.69 | 1,679,534 | 48,183,776 | 0.00 | % | 0.15 | % | (44.98 | %) | |||||||||||||||
2007 |
52.14 | 1,891,715 | 98,643,009 | 0.00 | % | 2.81 | % | 4.34 | % | |||||||||||||||
2006 |
49.97 | 2,113,184 | 105,604,294 | 0.00 | % | 2.53 | % | 11.68 | % | |||||||||||||||
2005 |
44.75 | 2,421,143 | 108,336,551 | 0.00 | % | 2.24 | % | 3.78 | % | |||||||||||||||
Pacific Dynamix — Conservative Growth (6) |
||||||||||||||||||||||||
07/06/2009 — 12/31/2009 |
$ | 11.43 | 44,364 | $ | 506,868 | 0.00 | % | 5.68 | % | 12.29 | % | |||||||||||||
Pacific Dynamix — Moderate Growth (6) |
||||||||||||||||||||||||
05/22/2009 — 12/31/2009 |
$ | 11.96 | 68,810 | $ | 822,948 | 0.00 | % | 4.19 | % | 17.75 | % | |||||||||||||
Pacific Dynamix — Growth (6) |
||||||||||||||||||||||||
05/26/2009 — 12/31/2009 |
$ | 12.43 | 121,148 | $ | 1,506,341 | 0.00 | % | 1.88 | % | 19.49 | % | |||||||||||||
I |
||||||||||||||||||||||||
2009 |
$ | 28.41 | 2,314,197 | $ | 65,746,083 | 0.00 | % | 2.42 | % | 25.28 | % | |||||||||||||
2008 |
22.68 | 2,613,074 | 59,256,956 | 0.00 | % | 3.12 | % | (39.84 | %) | |||||||||||||||
2007 |
37.70 | 3,147,799 | 118,662,254 | 0.00 | % | 2.05 | % | 8.01 | % | |||||||||||||||
2006 |
34.90 | 3,112,831 | 108,644,524 | 0.00 | % | 1.50 | % | 26.78 | % | |||||||||||||||
2005 |
27.53 | 2,849,925 | 78,457,074 | 0.00 | % | 1.57 | % | 10.55 | % | |||||||||||||||
II |
||||||||||||||||||||||||
2009 |
$ | 19.50 | 1,351,335 | $ | 26,352,166 | 0.00 | % | 0.64 | % | 37.40 | % | |||||||||||||
2008 |
14.19 | 1,546,955 | 21,954,840 | 0.00 | % | 0.02 | % | (48.97 | %) | |||||||||||||||
2007 |
27.81 | 1,388,785 | 38,626,287 | 0.00 | % | 0.37 | % | 22.43 | % | |||||||||||||||
2006 |
22.72 | 1,586,739 | 36,046,654 | 0.00 | % | 0.63 | % | 8.52 | % | |||||||||||||||
2005 |
20.93 | 1,419,434 | 29,714,468 | 0.00 | % | 0.45 | % | 13.92 | % | |||||||||||||||
III |
||||||||||||||||||||||||
2009 |
$ | 32.82 | 1,157,067 | $ | 37,978,468 | 0.00 | % | 0.04 | % | 48.61 | % | |||||||||||||
2008 |
22.09 | 1,347,597 | 29,764,785 | 0.00 | % | 0.00 | % | (42.03 | %) | |||||||||||||||
2007 |
38.10 | 1,330,308 | 50,686,469 | 0.00 | % | 0.00 | % | 11.92 | % | |||||||||||||||
2006 |
34.04 | 1,340,167 | 45,625,020 | 0.00 | % | 0.00 | % | 16.35 | % | |||||||||||||||
2005 |
29.26 | 1,366,693 | 39,991,343 | 0.00 | % | 0.00 | % | 15.13 | % | |||||||||||||||
V |
||||||||||||||||||||||||
2009 |
$ | 13.83 | 1,670,010 | $ | 23,095,826 | 0.00 | % | 0.83 | % | 24.58 | % | |||||||||||||
2008 |
11.10 | 1,829,893 | 20,313,595 | 0.00 | % | 0.05 | % | (34.48 | %) | |||||||||||||||
2007 |
16.94 | 1,446,522 | 24,509,629 | 0.00 | % | 0.62 | % | 5.44 | % | |||||||||||||||
2006 |
16.07 | 1,549,298 | 24,896,714 | 0.00 | % | 0.55 | % | 13.89 | % | |||||||||||||||
2005 |
14.11 | 1,282,886 | 18,101,507 | 0.00 | % | 0.76 | % | 7.81 | % |
See Notes to Financial Statements | See explanation of references on SA-27 |
SA-25
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
BlackRock Basic Value V.I. Class III (9) |
||||||||||||||||||||||||
2009 |
$ | 10.43 | 854,477 | $ | 8,910,161 | 0.00 | % | 2.13 | % | 30.87 | % | |||||||||||||
2008 |
7.97 | 678,596 | 5,407,138 | 0.00 | % | 2.78 | % | (36.91 | %) | |||||||||||||||
2007 |
12.63 | 397,583 | 5,021,114 | 0.00 | % | 1.64 | % | 1.53 | % | |||||||||||||||
2006 |
12.44 | 234,578 | 2,917,816 | 0.00 | % | 4.02 | % | 21.59 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.23 | 14,023 | 143,454 | 0.00 | % | 2.48 | % | 2.30 | % | |||||||||||||||
BlackRock Global Allocation V.I. Class III (10) |
||||||||||||||||||||||||
2009 |
$ | 14.43 | 2,669,828 | $ | 38,512,820 | 0.00 | % | 2.18 | % | 20.92 | % | |||||||||||||
2008 |
11.93 | 1,864,286 | 22,240,628 | 0.00 | % | 2.73 | % | (19.67 | %) | |||||||||||||||
2007 |
14.85 | 793,421 | 11,783,611 | 0.00 | % | 4.57 | % | 16.75 | % | |||||||||||||||
2006 |
12.72 | 349,576 | 4,446,773 | 0.00 | % | 3.86 | % | 16.40 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.93 | 265,340 | 2,899,576 | 0.00 | % | 7.00 | % | 9.28 | % | |||||||||||||||
Fidelity VIP Contrafund Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 11.66 | 4,031,894 | $ | 47,030,291 | 0.00 | % | 1.20 | % | 35.47 | % | |||||||||||||
2008 |
8.61 | 4,143,220 | 35,675,424 | 0.00 | % | 0.82 | % | (42.69 | %) | |||||||||||||||
2007 |
15.02 | 3,792,886 | 56,986,250 | 0.00 | % | 0.91 | % | 17.30 | % | |||||||||||||||
2006 |
12.81 | 2,446,046 | 31,329,827 | 0.00 | % | 1.02 | % | 11.43 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
11.49 | 1,902,907 | 21,872,725 | 0.00 | % | 0.00 | % | 14.94 | % | |||||||||||||||
Fidelity VIP Freedom Income Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 10.26 | 69,529 | $ | 713,654 | 0.00 | % | 4.15 | % | 14.64 | % | |||||||||||||
2008 |
8.95 | 39,492 | 353,588 | 0.00 | % | 14.21 | % | (10.70 | %) | |||||||||||||||
10/29/2007 — 12/31/2007 |
10.03 | 1,143 | 11,458 | 0.00 | % | See Note (11) | (0.35 | %) | ||||||||||||||||
Fidelity VIP Freedom 2010 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 9.19 | 91,200 | $ | 838,268 | 0.00 | % | 5.16 | % | 23.95 | % | |||||||||||||
2008 |
7.42 | 53,161 | 394,202 | 0.00 | % | 0.70 | % | (25.17 | %) | |||||||||||||||
12/13/2007 — 12/31/2007 |
9.91 | 8,484 | 84,073 | 0.00 | % | See Note (11) | (0.11 | %) | ||||||||||||||||
Fidelity VIP Freedom 2015 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 8.98 | 156,467 | $ | 1,405,006 | 0.00 | % | 4.00 | % | 25.02 | % | |||||||||||||
2008 |
7.18 | 100,154 | 719,351 | 0.00 | % | 4.61 | % | (27.30 | %) | |||||||||||||||
10/26/2007 — 12/31/2007 |
9.88 | 34,170 | 337,562 | 0.00 | % | See Note (11) | (2.12 | %) | ||||||||||||||||
Fidelity VIP Freedom 2020 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 8.49 | 157,385 | $ | 1,335,925 | 0.00 | % | 3.60 | % | 28.55 | % | |||||||||||||
2008 |
6.60 | 115,177 | 760,537 | 0.00 | % | 4.50 | % | (32.80 | %) | |||||||||||||||
12/03/2007 — 12/31/2007 |
9.83 | 9,549 | 93,827 | 0.00 | % | See Note (11) | (0.02 | %) | ||||||||||||||||
Fidelity VIP Freedom 2025 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 8.36 | 287,505 | $ | 2,402,696 | 0.00 | % | 3.46 | % | 29.79 | % | |||||||||||||
2008 |
6.44 | 259,035 | 1,667,848 | 0.00 | % | 2.48 | % | (34.36 | %) | |||||||||||||||
11/09/2007 — 12/31/2007 |
9.81 | 246,074 | 2,413,927 | 0.00 | % | See Note (11) | 0.26 | % | ||||||||||||||||
Fidelity VIP Freedom 2030 Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 7.91 | 334,513 | $ | 2,647,306 | 0.00 | % | 3.66 | % | 31.18 | % | |||||||||||||
2008 |
6.03 | 106,664 | 643,494 | 0.00 | % | 2.93 | % | (38.17 | %) | |||||||||||||||
10/08/2007 — 12/31/2007 |
9.76 | 13,972 | 136,332 | 0.00 | % | See Note (11) | (2.98 | %) | ||||||||||||||||
Fidelity VIP Growth Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 9.70 | 589,043 | $ | 5,713,107 | 0.00 | % | 0.21 | % | 27.97 | % | |||||||||||||
2008 |
7.58 | 543,659 | 4,120,601 | 0.00 | % | 0.69 | % | (47.31 | %) | |||||||||||||||
2007 |
14.38 | 247,233 | 3,556,222 | 0.00 | % | 0.19 | % | 26.66 | % | |||||||||||||||
2006 |
11.36 | 57,966 | 658,290 | 0.00 | % | 0.13 | % | 6.57 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.66 | 25,172 | 268,238 | 0.00 | % | 0.00 | % | 6.56 | % | |||||||||||||||
Fidelity VIP Mid Cap Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 12.69 | 2,244,999 | $ | 28,493,223 | 0.00 | % | 0.47 | % | 39.75 | % | |||||||||||||
2008 |
9.08 | 2,118,100 | 19,236,052 | 0.00 | % | 0.24 | % | (39.61 | %) | |||||||||||||||
2007 |
15.04 | 2,090,850 | 31,441,094 | 0.00 | % | 0.48 | % | 15.34 | % | |||||||||||||||
2006 |
13.04 | 1,357,809 | 17,702,724 | 0.00 | % | 0.18 | % | 12.40 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
11.60 | 1,326,555 | 15,386,821 | 0.00 | % | 0.00 | % | 15.99 | % | |||||||||||||||
Fidelity VIP Value Strategies Service Class 2 |
||||||||||||||||||||||||
2009 |
$ | 9.87 | 237,955 | $ | 2,348,967 | 0.00 | % | 0.34 | % | 57.15 | % | |||||||||||||
2008 |
6.28 | 218,478 | 1,372,358 | 0.00 | % | 0.50 | % | (51.28 | %) | |||||||||||||||
2007 |
12.89 | 333,286 | 4,297,443 | 0.00 | % | 0.46 | % | 5.44 | % | |||||||||||||||
2006 |
12.23 | 795,861 | 9,732,388 | 0.00 | % | 0.09 | % | 16.01 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.54 | 31,720 | 334,372 | 0.00 | % | 0.00 | % | 5.41 | % | |||||||||||||||
Overseas Service Class (12) |
||||||||||||||||||||||||
2009 |
$ | 10.24 | 3,539,855 | $ | 36,238,993 | 0.00 | % | 0.44 | % | 79.07 | % | |||||||||||||
2008 |
5.72 | 3,223,717 | 18,429,844 | 0.00 | % | 1.22 | % | (52.23 | %) | |||||||||||||||
05/03/2007 — 12/31/2007 |
11.97 | 866,820 | 10,373,349 | 0.00 | % | 0.69 | % | 16.76 | % | |||||||||||||||
INTECH Risk-Managed Core Service Class |
||||||||||||||||||||||||
2009 |
$ | 7.85 | 75,317 | $ | 591,546 | 0.00 | % | 1.36 | % | 22.55 | % | |||||||||||||
2008 |
6.41 | 39,181 | 251,099 | 0.00 | % | 0.20 | % | (36.24 | %) | |||||||||||||||
06/21/2007 — 12/31/2007 |
10.05 | 15,705 | 157,855 | 0.00 | % | 2.17 | % | 0.66 | % | |||||||||||||||
Enterprise Service Class (13) |
||||||||||||||||||||||||
2009 |
$ | 8.98 | 431,880 | $ | 3,879,426 | 0.00 | % | 0.00 | % | 44.44 | % | |||||||||||||
2008 |
6.22 | 443,354 | 2,757,111 | 0.00 | % | 0.10 | % | (43.86 | %) | |||||||||||||||
05/16/2007 — 12/31/2007 |
11.08 | 82,577 | 914,666 | 0.00 | % | 0.12 | % | 8.83 | % | |||||||||||||||
Lazard Retirement U.S. Strategic Equity |
||||||||||||||||||||||||
2009 |
$ | 7.75 | 54,644 | $ | 423,520 | 0.00 | % | 1.12 | % | 26.84 | % | |||||||||||||
2008 |
6.11 | 14,300 | 87,381 | 0.00 | % | 1.35 | % | (35.28 | %) | |||||||||||||||
05/21/2007 — 12/31/2007 |
9.44 | 3,462 | 32,685 | 0.00 | % | 4.44 | % | (8.17 | %) |
See Notes to Financial Statements | See explanation of references on SA-27 |
SA-26
At the End of Each Year or Period | ||||||||||||||||||||||||
Variable Accounts | Total Units | Total Net | Expense | Investment | Total | |||||||||||||||||||
For Each Year or Period Ended | AUV | Outstanding | Assets | Ratio (1) | Income Ratio (2) | Return (3) | ||||||||||||||||||
Legg Mason ClearBridge Variable Aggressive
Growth — Class II (14) |
||||||||||||||||||||||||
2009 |
$ | 7.75 | 84,216 | $ | 652,564 | 0.00 | % | 0.00 | % | 34.19 | % | |||||||||||||
2008 |
5.77 | 52,538 | 303,371 | 0.00 | % | 0.00 | % | (40.58 | %) | |||||||||||||||
05/03/2007 — 12/31/2007 |
9.72 | 8,141 | 79,104 | 0.00 | % | 0.00 | % | (4.02 | %) | |||||||||||||||
Legg Mason ClearBridge Variable Mid Cap
Core — Class II (15) |
||||||||||||||||||||||||
2009 |
$ | 8.57 | 848,497 | $ | 7,274,665 | 0.00 | % | 0.11 | % | 35.81 | % | |||||||||||||
2008 |
6.31 | 973,799 | 6,147,689 | 0.00 | % | 0.00 | % | (35.43 | %) | |||||||||||||||
05/21/2007 — 12/31/2007 |
9.78 | 12,558 | 122,772 | 0.00 | % | 0.12 | % | (5.49 | %) | |||||||||||||||
MFS New Discovery Series Service Class |
||||||||||||||||||||||||
2009 |
$ | 9.39 | 326,023 | $ | 3,060,543 | 0.00 | % | 0.00 | % | 62.92 | % | |||||||||||||
2008 |
5.76 | 91,789 | 528,886 | 0.00 | % | 0.00 | % | (39.52 | %) | |||||||||||||||
05/14/2007 — 12/31/2007 |
9.53 | 22,449 | 213,868 | 0.00 | % | 0.00 | % | (4.79 | %) | |||||||||||||||
MFS Utilities Series Service Class |
||||||||||||||||||||||||
2009 |
$ | 9.20 | 342,118 | $ | 3,148,223 | 0.00 | % | 4.53 | % | 32.87 | % | |||||||||||||
2008 |
6.93 | 389,058 | 2,694,522 | 0.00 | % | 0.94 | % | (37.81 | %) | |||||||||||||||
05/11/2007 — 12/31/2007 |
11.14 | 1,287,407 | 14,336,747 | 0.00 | % | 0.00 | % | 9.08 | % | |||||||||||||||
NACM Small Cap Class I (16) |
||||||||||||||||||||||||
2009 |
$ | 6.43 | 164,837 | $ | 1,060,345 | 0.00 | % | 0.05 | % | 15.58 | % | |||||||||||||
2008 |
5.57 | 143,231 | 797,193 | 0.00 | % | 0.00 | % | (41.63 | %) | |||||||||||||||
05/24/2007 — 12/31/2007 |
9.54 | 14,693 | 140,107 | 0.00 | % | 0.00 | % | (6.71 | %) | |||||||||||||||
T. Rowe Price Blue Chip Growth — II |
||||||||||||||||||||||||
2009 |
$ | 10.73 | 664,636 | $ | 7,132,164 | 0.00 | % | 0.00 | % | 41.79 | % | |||||||||||||
2008 |
7.57 | 431,068 | 3,262,380 | 0.00 | % | 0.11 | % | (42.65 | %) | |||||||||||||||
2007 |
13.20 | 413,880 | 5,461,697 | 0.00 | % | 0.07 | % | 12.49 | % | |||||||||||||||
2006 |
11.73 | 199,541 | 2,340,853 | 0.00 | % | 0.32 | % | 9.33 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.73 | 60,700 | 651,326 | 0.00 | % | 0.28 | % | 7.30 | % | |||||||||||||||
T. Rowe Price Equity Income — II |
||||||||||||||||||||||||
2009 |
$ | 10.07 | 2,818,542 | $ | 28,381,018 | 0.00 | % | 1.76 | % | 25.25 | % | |||||||||||||
2008 |
8.04 | 2,297,997 | 18,474,390 | 0.00 | % | 2.22 | % | (36.26 | %) | |||||||||||||||
2007 |
12.61 | 2,275,375 | 28,700,715 | 0.00 | % | 1.49 | % | 3.03 | % | |||||||||||||||
2006 |
12.24 | 2,347,503 | 28,739,750 | 0.00 | % | 1.54 | % | 18.65 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
10.32 | 767,607 | 7,920,645 | 0.00 | % | 1.94 | % | 3.19 | % | |||||||||||||||
Van Eck Worldwide Hard Assets |
||||||||||||||||||||||||
2009 |
$ | 22.03 | 3,070,450 | $ | 67,640,171 | 0.00 | % | 0.26 | % | 57.54 | % | |||||||||||||
2008 |
13.98 | 3,010,188 | 42,093,765 | 0.00 | % | 0.26 | % | (46.12 | %) | |||||||||||||||
2007 |
25.96 | 2,428,039 | 63,021,211 | 0.00 | % | 0.10 | % | 45.36 | % | |||||||||||||||
2006 |
17.86 | 2,181,931 | 38,961,582 | 0.00 | % | 0.03 | % | 24.49 | % | |||||||||||||||
02/15/2005 — 12/31/2005 |
14.34 | 850,416 | 12,197,923 | 0.00 | % | 0.00 | % | 43.43 | % |
(1) | The expense ratios represent annualized policy fees and expenses, if any, of the Separate Account for each period indicated. These ratios include only those expenses, if any, that result in a direct reduction of unit values. Excluded are expenses of the underlying portfolios/funds in which the variable accounts invest and charges made directly to policyholder accounts through the redemption of units (See Note 3 in Notes to Financial Statements). | |
(2) | The investment income ratios represent the dividends, excluding distributions of capital gains, received by the variable accounts from the underlying portfolios/funds, divided by the average daily net assets. These ratios are before the deduction of mortality and expense risk (“M&E”) fees that are assessed against policyholder accounts. The recognition of investment income by the variable accounts is affected by the timing of the declaration of dividends by the underlying portfolios/funds in which the variable accounts invest. The investment income ratios for periods of less than one full year are annualized. | |
(3) | Total returns reflect changes in unit values of the underlying portfolios/funds and do not include deductions at the separate account or policy level for any M&E fees, cost of insurance charges, premium loads, administrative charges, maintenance fees, premium tax charges, surrender charges or other charges that may be incurred under a policy which, if incurred, would have resulted in lower returns. Total returns for periods of less than one full year are not annualized. | |
(4) | Prior to January 1, 2006, Large-Cap Growth Variable Account was named Blue Chip Variable Account. | |
(5) | Prior to May 1, 2008, Mid-Cap Equity Variable Account was named Mid-Cap Value Variable Account. | |
(6) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). | |
(7) | Prior to May 1, 2007, Small-Cap Equity Variable Account was named VN Small-Cap Value Variable Account. | |
(8) | Prior to May 1, 2007, Small-Cap Growth Variable Account was named Fasciano Small Equity Variable Account, and prior to May 1, 2005, the variable account was named Aggressive Equity Variable Account. | |
(9) | Prior to October 1, 2006, BlackRock Basic Value V.I. Class III Variable Account was named Mercury Basic Value V.I. Class III Variable Account, and prior to May 1, 2005, the variable account was named Merrill Lynch Basic Value V.I. Class III Variable Account. | |
(10) | Prior to October 1, 2006, BlackRock Global Allocation V.I. Class III Variable Account was named Mercury Global Allocation V.I. Class III Variable Account, and prior to May 1, 2005, the variable account was named Merrill Lynch Global Allocation V.I. Class III Variable Account. | |
(11) | The annualized investment income ratios for the periods from inception to December 31, 2007 were 20.70%, 43.03%, 17.79%, 24.07%, 13.39%, and 13.07% for the 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, and Fidelity VIP Freedom 2030 Service Class 2 Variable Accounts, respectively. If not annualized, the investment income ratios were 3.63%, 2.24%, 3.27%, 1.91%, 1.94%, and 3.04%, respectively. | |
(12) | Prior to May 1, 2009, Overseas Service Class Variable Account was named International Growth Service Class Variable Account. | |
(13) | Prior to May 1, 2009, Enterprise Service Class Variable Account was named Mid Cap Growth Service Class Variable Account. | |
(14) | Prior to November 2, 2009, Legg Mason ClearBridge Variable Aggressive Growth — Class II Variable Account was named Legg Mason Partners Variable Aggressive Growth — Class II Variable Account. | |
(15) | Prior to November 2, 2009, Legg Mason ClearBridge Variable Mid Cap Core — Class II Variable Account was named Legg Mason Partners Variable Mid Cap Core — Class II Variable Account. | |
(16) | Prior to September 10, 2008, NACM Small Cap Class I Variable Account was named OpCap Small Cap Variable Account. |
SA-27
SA-28
Variable Accounts | Purchases | Sales | ||||||
Diversified Bond |
$ | 9,616,473 | $ | 5,376,616 | ||||
Floating Rate Loan |
8,677,681 | 2,704,060 | ||||||
High Yield Bond |
45,778,213 | 37,166,453 | ||||||
Inflation Managed |
27,579,987 | 23,816,570 | ||||||
Managed Bond |
90,005,940 | 38,542,372 | ||||||
Money Market |
175,575,999 | 179,002,271 | ||||||
Short Duration Bond |
10,771,424 | 9,920,153 | ||||||
American Funds Growth |
23,764,271 | 16,133,034 | ||||||
American Funds Growth-Income |
10,676,702 | 4,895,088 | ||||||
Comstock |
12,042,235 | 6,912,186 | ||||||
Diversified Research |
1,695,811 | 8,458,030 | ||||||
Equity |
1,982,611 | 5,055,222 | ||||||
Equity Index |
38,277,673 | 34,394,333 | ||||||
Focused 30 |
7,040,886 | 14,312,632 | ||||||
Growth LT |
7,011,234 | 23,338,602 | ||||||
Large-Cap Growth |
9,298,479 | 5,617,100 | ||||||
Large-Cap Value |
15,385,070 | 11,253,224 | ||||||
Long/Short Large-Cap |
8,257,418 | 1,016,851 | ||||||
Main Street Core |
3,221,430 | 16,361,604 | ||||||
Mid-Cap Equity |
6,906,923 | 34,495,872 | ||||||
Mid-Cap Growth |
10,366,971 | 9,612,526 | ||||||
Mid-Cap Value (1) |
15,593,597 | 660,304 | ||||||
Small-Cap Equity |
4,098,664 | 3,454,224 | ||||||
Small-Cap Growth |
4,945,393 | 7,610,001 | ||||||
Small-Cap Index |
19,092,844 | 24,553,573 | ||||||
Small-Cap Value |
9,396,342 | 8,519,516 | ||||||
Emerging Markets |
31,528,943 | 18,537,520 | ||||||
International Large-Cap |
8,084,531 | 16,827,221 | ||||||
International Small-Cap |
4,670,906 | 2,228,289 | ||||||
International Value |
10,340,523 | 29,362,634 | ||||||
Health Sciences |
4,638,211 | 6,268,935 | ||||||
Real Estate |
10,251,350 | 14,778,390 | ||||||
Technology |
4,927,915 | 5,123,510 | ||||||
American Funds Asset Allocation (1) |
2,414,307 | 34,069 | ||||||
Multi-Strategy |
4,227,179 | 7,574,610 | ||||||
Pacific Dynamix — Conservative Growth (1) |
513,120 | 4,809 | ||||||
Pacific Dynamix — Moderate Growth (1) |
804,053 | 4,598 | ||||||
Pacific Dynamix — Growth (1) |
1,407,420 | 23,365 | ||||||
I |
7,475,633 | 12,422,223 | ||||||
II |
3,299,605 | 6,179,687 | ||||||
III |
4,076,665 | 9,261,397 | ||||||
V |
5,257,770 | 7,068,125 | ||||||
BlackRock Basic Value V.I. Class III |
2,669,511 | 1,056,203 | ||||||
BlackRock Global Allocation V.I. Class III |
16,366,201 | 5,205,547 | ||||||
Fidelity VIP Contrafund Service Class 2 |
4,381,380 | 4,795,917 | ||||||
Fidelity VIP Freedom Income Service Class 2 |
1,113,984 | 851,149 | ||||||
Fidelity VIP Freedom 2010 Service Class 2 |
516,518 | 167,199 | ||||||
Fidelity VIP Freedom 2015 Service Class 2 |
915,399 | 447,285 | ||||||
Fidelity VIP Freedom 2020 Service Class 2 |
634,795 | 302,115 | ||||||
Fidelity VIP Freedom 2025 Service Class 2 |
456,749 | 171,936 | ||||||
Fidelity VIP Freedom 2030 Service Class 2 |
2,117,896 | 373,132 | ||||||
Fidelity VIP Growth Service Class 2 |
916,137 | 579,623 | ||||||
Fidelity VIP Mid Cap Service Class 2 |
5,026,037 | 3,564,736 | ||||||
Fidelity VIP Value Strategies Service Class 2 |
2,485,326 | 2,444,869 | ||||||
Overseas Service Class |
13,010,418 | 9,066,248 | ||||||
INTECH Risk-Managed Core Service Class |
367,012 | 128,876 | ||||||
Enterprise Service Class |
707,775 | 773,430 | ||||||
Lazard Retirement U.S. Strategic Equity |
594,719 | 364,625 | ||||||
Legg Mason ClearBridge Variable Aggressive Growth — Class II |
729,676 | 510,422 | ||||||
Legg Mason ClearBridge Variable Mid Cap Core — Class II |
1,491,768 | 2,566,508 | ||||||
MFS New Discovery Series Service Class |
2,480,203 | 461,758 | ||||||
MFS Utilities Series Service Class |
1,100,106 | 1,218,240 | ||||||
NACM Small Cap Class I |
435,826 | 390,403 | ||||||
T. Rowe Price Blue Chip Growth — II |
3,004,237 | 838,749 | ||||||
T. Rowe Price Equity Income — II |
7,138,693 | 2,607,559 | ||||||
Van Eck Worldwide Hard Assets |
15,066,264 | 11,936,275 |
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-29
Level 1 — | Quoted prices in active markets for identical holdings | ||
Level 2 — | Significant observable market-based inputs, other than Level 1 quoted prices, or unobservable inputs that are corroborated by market data | ||
Level 3 — | Significant unobservable inputs that are not corroborated by observable market data |
2009 | 2008 | |||||||||||||||||||||||
Units | Units | Net Increase | Units | Units | Net Increase | |||||||||||||||||||
Variable Accounts | Issued | Redeemed | (Decrease) | Issued | Redeemed | (Decrease) | ||||||||||||||||||
Diversified Bond |
2,130,903 | (1,832,814 | ) | 298,089 | 1,306,695 | (1,595,515 | ) | (288,820 | ) | |||||||||||||||
Floating Rate Loan |
1,665,334 | (967,215 | ) | 698,119 | 481,623 | (431,685 | ) | 49,938 | ||||||||||||||||
High Yield Bond |
1,499,249 | (1,393,943 | ) | 105,306 | 1,157,317 | (949,363 | ) | 207,954 | ||||||||||||||||
Inflation Managed |
1,318,602 | (1,562,616 | ) | (244,014 | ) | 1,584,686 | (1,729,735 | ) | (145,049 | ) | ||||||||||||||
Managed Bond |
4,267,229 | (4,381,510 | ) | (114,281 | ) | 3,044,057 | (3,713,837 | ) | (669,780 | ) | ||||||||||||||
Money Market |
19,285,608 | (19,464,811 | ) | (179,203 | ) | 24,615,153 | (22,098,848 | ) | 2,516,305 | |||||||||||||||
Short Duration Bond |
2,160,420 | (2,214,999 | ) | (54,579 | ) | 2,019,386 | (2,168,616 | ) | (149,230 | ) | ||||||||||||||
American Funds Growth |
2,822,591 | (3,254,346 | ) | (431,755 | ) | 2,910,620 | (1,571,839 | ) | 1,338,781 | |||||||||||||||
American Funds Growth-Income |
1,814,939 | (1,823,652 | ) | (8,713 | ) | 2,160,503 | (1,775,149 | ) | 385,354 | |||||||||||||||
Comstock |
2,679,150 | (2,196,270 | ) | 482,880 | 2,304,195 | (3,239,842 | ) | (935,647 | ) | |||||||||||||||
Diversified Research |
1,052,568 | (1,814,807 | ) | (762,239 | ) | 893,004 | (2,016,835 | ) | (1,123,831 | ) | ||||||||||||||
Equity |
557,100 | (905,866 | ) | (348,766 | ) | 673,190 | (1,015,353 | ) | (342,163 | ) | ||||||||||||||
Equity Index |
2,528,819 | (2,584,737 | ) | (55,918 | ) | 2,502,844 | (2,455,448 | ) | 47,396 | |||||||||||||||
Focused 30 |
1,467,955 | (2,283,182 | ) | (815,227 | ) | 2,124,323 | (1,570,144 | ) | 554,179 | |||||||||||||||
Growth LT |
1,043,897 | (1,600,687 | ) | (556,790 | ) | 1,251,089 | (2,022,501 | ) | (771,412 | ) | ||||||||||||||
Large-Cap Growth |
3,713,463 | (2,902,324 | ) | 811,139 | 2,589,103 | (2,141,201 | ) | 447,902 | ||||||||||||||||
Large-Cap Value |
3,529,614 | (3,318,285 | ) | 211,329 | 2,261,371 | (2,659,867 | ) | (398,496 | ) | |||||||||||||||
Long/Short Large-Cap (1) |
1,819,557 | (779,056 | ) | 1,040,501 | 2,043,117 | (257,150 | ) | 1,785,967 | ||||||||||||||||
Main Street Core |
524,576 | (935,870 | ) | (411,294 | ) | 571,356 | (762,040 | ) | (190,684 | ) | ||||||||||||||
Mid-Cap Equity |
1,909,545 | (3,713,792 | ) | (1,804,247 | ) | 2,205,268 | (2,612,972 | ) | (407,704 | ) | ||||||||||||||
Mid-Cap Growth |
3,248,430 | (3,021,117 | ) | 227,313 | 3,337,302 | (4,065,197 | ) | (727,895 | ) | |||||||||||||||
Mid-Cap Value (2) |
1,418,248 | (210,176 | ) | 1,208,072 | ||||||||||||||||||||
Small-Cap Equity |
693,710 | (670,376 | ) | 23,334 | 1,009,291 | (444,679 | ) | 564,612 | ||||||||||||||||
Small-Cap Growth |
1,200,025 | (1,485,876 | ) | (285,851 | ) | 1,264,105 | (1,026,257 | ) | 237,848 | |||||||||||||||
Small-Cap Index |
2,244,408 | (3,605,458 | ) | (1,361,050 | ) | 2,464,066 | (4,094,880 | ) | (1,630,814 | ) | ||||||||||||||
Small-Cap Value |
1,055,966 | (1,121,253 | ) | (65,287 | ) | 1,652,154 | (1,381,438 | ) | 270,716 | |||||||||||||||
Emerging Markets |
1,812,769 | (2,108,013 | ) | (295,244 | ) | 1,756,514 | (2,375,544 | ) | (619,030 | ) | ||||||||||||||
International Large-Cap |
3,677,392 | (4,982,945 | ) | (1,305,553 | ) | 4,865,382 | (5,255,473 | ) | (390,091 | ) | ||||||||||||||
International Small-Cap |
1,526,891 | (1,193,015 | ) | 333,876 | 1,525,277 | (1,044,667 | ) | 480,610 | ||||||||||||||||
International Value |
1,940,055 | (3,102,590 | ) | (1,162,535 | ) | 2,324,560 | (2,887,623 | ) | (563,063 | ) | ||||||||||||||
Health Sciences |
579,929 | (730,283 | ) | (150,354 | ) | 962,924 | (907,596 | ) | 55,328 | |||||||||||||||
Real Estate |
1,006,590 | (1,232,885 | ) | (226,295 | ) | 1,044,465 | (1,088,510 | ) | (44,045 | ) | ||||||||||||||
Technology |
1,602,390 | (1,779,162 | ) | (176,772 | ) | 1,135,106 | (1,365,344 | ) | (230,238 | ) | ||||||||||||||
American Funds Asset Allocation (2) |
197,343 | (5,051 | ) | 192,292 | ||||||||||||||||||||
Multi-Strategy |
299,624 | (501,179 | ) | (201,555 | ) | 220,802 | (432,983 | ) | (212,181 | ) | ||||||||||||||
Pacific Dynamix — Conservative Growth (2) |
45,297 | (933 | ) | 44,364 | ||||||||||||||||||||
Pacific Dynamix — Moderate Growth (2) |
69,952 | (1,142 | ) | 68,810 |
(1) | Operations commenced on May 2, 2008. | |
(2) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-30
2009 | 2008 | |||||||||||||||||||||||
Units | Units | Net Increase | Units | Units | Net Increase | |||||||||||||||||||
Variable Accounts | Issued | Redeemed | (Decrease) | Issued | Redeemed | (Decrease) | ||||||||||||||||||
Pacific Dynamix — Growth (1) |
122,284 | (1,136 | ) | 121,148 | ||||||||||||||||||||
I |
643,061 | (941,938 | ) | (298,877 | ) | 1,011,028 | (1,545,753 | ) | (534,725 | ) | ||||||||||||||
II |
409,207 | (604,827 | ) | (195,620 | ) | 1,111,167 | (952,997 | ) | 158,170 | |||||||||||||||
III |
318,588 | (509,118 | ) | (190,530 | ) | 532,717 | (515,428 | ) | 17,289 | |||||||||||||||
V |
667,082 | (826,965 | ) | (159,883 | ) | 838,800 | (455,429 | ) | 383,371 | |||||||||||||||
BlackRock Basic Value V.I. Class III |
351,399 | (175,518 | ) | 175,881 | 462,548 | (181,535 | ) | 281,013 | ||||||||||||||||
BlackRock Global Allocation V.I. Class III |
1,618,421 | (812,879 | ) | 805,542 | 2,144,248 | (1,073,383 | ) | 1,070,865 | ||||||||||||||||
Fidelity VIP Contrafund Service Class 2 |
928,998 | (1,040,324 | ) | (111,326 | ) | 2,468,269 | (2,117,935 | ) | 350,334 | |||||||||||||||
Fidelity VIP Freedom Income Service Class 2 |
119,795 | (89,758 | ) | 30,037 | 46,235 | (7,886 | ) | 38,349 | ||||||||||||||||
Fidelity VIP Freedom 2010 Service Class 2 |
54,620 | (16,581 | ) | 38,039 | 555,445 | (510,768 | ) | 44,677 | ||||||||||||||||
Fidelity VIP Freedom 2015 Service Class 2 |
121,561 | (65,248 | ) | 56,313 | 94,585 | (28,601 | ) | 65,984 | ||||||||||||||||
Fidelity VIP Freedom 2020 Service Class 2 |
96,388 | (54,180 | ) | 42,208 | 130,446 | (24,818 | ) | 105,628 | ||||||||||||||||
Fidelity VIP Freedom 2025 Service Class 2 |
63,028 | (34,558 | ) | 28,470 | 32,069 | (19,108 | ) | 12,961 | ||||||||||||||||
Fidelity VIP Freedom 2030 Service Class 2 |
286,723 | (58,874 | ) | 227,849 | 128,907 | (36,215 | ) | 92,692 | ||||||||||||||||
Fidelity VIP Growth Service Class 2 |
140,945 | (95,561 | ) | 45,384 | 495,305 | (198,879 | ) | 296,426 | ||||||||||||||||
Fidelity VIP Mid Cap Service Class 2 |
776,649 | (649,750 | ) | 126,899 | 753,724 | (726,474 | ) | 27,250 | ||||||||||||||||
Fidelity VIP Value Strategies Service Class 2 |
384,663 | (365,186 | ) | 19,477 | 122,992 | (237,800 | ) | (114,808 | ) | |||||||||||||||
Overseas Service Class |
1,968,531 | (1,652,393 | ) | 316,138 | 3,529,462 | (1,172,565 | ) | 2,356,897 | ||||||||||||||||
INTECH Risk-Managed Core Service Class |
56,413 | (20,277 | ) | 36,136 | 1,277,339 | (1,253,863 | ) | 23,476 | ||||||||||||||||
Enterprise Service Class |
133,605 | (145,079 | ) | (11,474 | ) | 491,655 | (130,878 | ) | 360,777 | |||||||||||||||
Lazard Retirement U.S. Strategic Equity |
94,195 | (53,851 | ) | 40,344 | 14,427 | (3,589 | ) | 10,838 | ||||||||||||||||
Legg Mason ClearBridge Variable Aggressive Growth — Class II |
109,516 | (77,838 | ) | 31,678 | 71,324 | (26,927 | ) | 44,397 | ||||||||||||||||
Legg Mason ClearBridge Variable Mid Cap Core — Class II |
165,204 | (290,506 | ) | (125,302 | ) | 985,326 | (24,085 | ) | 961,241 | |||||||||||||||
MFS New Discovery Series Service Class |
324,037 | (89,803 | ) | 234,234 | 88,653 | (19,313 | ) | 69,340 | ||||||||||||||||
MFS Utilities Series Service Class |
199,464 | (246,404 | ) | (46,940 | ) | 604,018 | (1,502,367 | ) | (898,349 | ) | ||||||||||||||
NACM Small Cap Class I |
101,461 | (79,855 | ) | 21,606 | 154,201 | (25,663 | ) | 128,538 | ||||||||||||||||
T. Rowe Price Blue Chip Growth — II |
411,361 | (177,793 | ) | 233,568 | 216,185 | (198,997 | ) | 17,188 | ||||||||||||||||
T. Rowe Price Equity Income — II |
1,218,956 | (698,411 | ) | 520,545 | 1,641,735 | (1,619,113 | ) | 22,622 | ||||||||||||||||
Van Eck Worldwide Hard Assets |
1,309,479 | (1,249,217 | ) | 60,262 | 1,877,739 | (1,295,590 | ) | 582,149 |
(1) | Operations commenced during 2009 (See Note 1 in Notes to Financial Statements). |
SA-31
Member of Deloitte Touche Tohmatsu |
||||
PL-1 |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
ASSETS |
||||||||
Investments: |
||||||||
Fixed maturity securities available for sale, at estimated fair value |
$ | 26,039 | $ | 21,942 | ||||
Equity securities available for sale, at estimated fair value |
278 | 216 | ||||||
Mortgage loans |
6,577 | 5,622 | ||||||
Policy loans |
6,509 | 6,920 | ||||||
Other investments |
2,007 | 2,052 | ||||||
TOTAL INVESTMENTS |
41,410 | 36,752 | ||||||
Cash and cash equivalents |
1,919 | 3,397 | ||||||
Restricted cash |
221 | 227 | ||||||
Deferred policy acquisition costs |
4,806 | 5,012 | ||||||
Aircraft leasing portfolio, net |
5,304 | 4,999 | ||||||
Other assets |
2,253 | 3,276 | ||||||
Separate account assets |
52,564 | 41,505 | ||||||
TOTAL ASSETS |
$ | 108,477 | $ | 95,168 | ||||
LIABILITIES AND EQUITY |
||||||||
Liabilities: |
||||||||
Policyholder account balances |
$ | 33,984 | $ | 32,670 | ||||
Future policy benefits |
7,403 | 9,841 | ||||||
Short-term debt |
105 | 150 | ||||||
Long-term debt |
5,632 | 4,459 | ||||||
Other liabilities |
1,872 | 1,863 | ||||||
Separate account liabilities |
52,564 | 41,505 | ||||||
TOTAL LIABILITIES |
101,560 | 90,488 | ||||||
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 | 782 | ||||||
Retained earnings |
6,037 | 5,426 | ||||||
Accumulated other comprehensive loss |
(363 | ) | (1,802 | ) | ||||
Total Stockholder’s Equity |
6,686 | 4,436 | ||||||
Noncontrolling interest |
231 | 244 | ||||||
TOTAL EQUITY |
6,917 | 4,680 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 108,477 | $ | 95,168 | ||||
PL-2
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
REVENUES |
||||||||||||
Policy fees and insurance premiums |
$ | 2,275 | $ | 1,997 | $ | 1,780 | ||||||
Net investment income |
1,862 | 1,994 | 2,120 | |||||||||
Net realized investment gain (loss) |
153 | (749 | ) | 69 | ||||||||
Other than temporary impairments, consisting of $641 in total, net of $330 recognized in
other comprehensive income (loss) for the year ended December 31, 2009 |
(311 | ) | (580 | ) | (98 | ) | ||||||
Realized investment gain on interest in PIMCO |
109 | |||||||||||
Investment advisory fees |
208 | 255 | 327 | |||||||||
Aircraft leasing revenue |
578 | 571 | 535 | |||||||||
Other income |
137 | 167 | 147 | |||||||||
TOTAL REVENUES |
4,902 | 3,764 | 4,880 | |||||||||
BENEFITS AND EXPENSES |
||||||||||||
Interest credited to policyholder account balances |
1,253 | 1,234 | 1,266 | |||||||||
Policy benefits paid or provided |
1,226 | 1,206 | 855 | |||||||||
Commission expenses |
691 | 715 | 690 | |||||||||
Operating and other expenses |
1,246 | 1,178 | 1,235 | |||||||||
TOTAL BENEFITS AND EXPENSES |
4,416 | 4,333 | 4,046 | |||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
PROVISION (BENEFIT) FOR INCOME TAXES |
486 | (569 | ) | 834 | ||||||||
Provision (benefit) for income taxes |
44 | (315 | ) | 129 | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS |
442 | (254 | ) | 705 | ||||||||
Discontinued operations, net of taxes |
(20 | ) | (6 | ) | 11 | |||||||
Net income (loss) |
422 | (260 | ) | 716 | ||||||||
Less: net
(income) loss attributable to the noncontrolling interest from continuing operations |
14 | 3 | (38 | ) | ||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY |
$ | 436 | ($257 | ) | $ | 678 | ||||||
PL-3
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, JANUARY 1, 2007 |
$ | 30 | $ | 780 | $ | 5,379 | $ | 445 | $ | 62 | $ | 6,696 | $ | 107 | $ | 6,803 | ||||||||||||||||
Comprehensive income (loss): |
||||||||||||||||||||||||||||||||
Net income |
678 | 678 | 38 | 716 | ||||||||||||||||||||||||||||
Other comprehensive loss, net |
(300 | ) | (16 | ) | (316 | ) | (316 | ) | ||||||||||||||||||||||||
Total comprehensive income |
362 | 400 | ||||||||||||||||||||||||||||||
Cumulative effect of adoption of new
accounting principle, net of tax |
(29 | ) | (29 | ) | (29 | ) | ||||||||||||||||||||||||||
Contributions, net, received by
noncontrolling interest |
69 | 69 | ||||||||||||||||||||||||||||||
Other equity adjustment |
1 | 1 | 1 | |||||||||||||||||||||||||||||
BALANCES, DECEMBER 31, 2007 |
30 | 781 | 6,028 | 145 | 46 | 7,030 | 214 | 7,244 | ||||||||||||||||||||||||
Comprehensive loss: |
||||||||||||||||||||||||||||||||
Net loss |
(257 | ) | (257 | ) | (3 | ) | (260 | ) | ||||||||||||||||||||||||
Other comprehensive loss, net |
(1,896 | ) | (97 | ) | (1,993 | ) | (1,993 | ) | ||||||||||||||||||||||||
Total comprehensive loss |
(2,250 | ) | (2,253 | ) | ||||||||||||||||||||||||||||
Dividend to parent |
(345 | ) | (345 | ) | (345 | ) | ||||||||||||||||||||||||||
Contributions, net, received by
noncontrolling interest |
33 | 33 | ||||||||||||||||||||||||||||||
Other equity adjustment |
1 | 1 | 1 | |||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||
REVISED BALANCES,
DECEMBER 31, 2008 |
30 | 782 | 5,601 | (1,921 | ) | (51 | ) | 4,441 | 244 | 4,685 | ||||||||||||||||||||||
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 from parent |
200 | 200 | 200 | |||||||||||||||||||||||||||||
Contributions, net, received by
noncontrolling interest |
8 | 8 | ||||||||||||||||||||||||||||||
BALANCES, DECEMBER 31, 2009 |
$ | 30 | $ | 982 | $ | 6,037 | ($359 | ) | ($4 | ) | $ | 6,686 | $ | 231 | $ | 6,917 | ||||||||||||||||
PL-4
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||||
Net income (loss) excluding discontinued operations |
$ | 442 | ($254 | ) | $ | 705 | ||||||
Adjustments
to reconcile net income (loss) excluding discontinued operations to net cash provided by operating activities: |
||||||||||||
Net accretion on fixed maturity securities |
(142 | ) | (144 | ) | (150 | ) | ||||||
Depreciation and amortization |
281 | 259 | 255 | |||||||||
Deferred income taxes |
451 | (511 | ) | 86 | ||||||||
Net realized investment (gain) loss |
(153 | ) | 749 | (69 | ) | |||||||
Other than temporary impairments |
311 | 580 | 98 | |||||||||
Realized investment gain on interest in PIMCO |
(109 | ) | ||||||||||
Net change in deferred policy acquisition costs |
(202 | ) | (175 | ) | (302 | ) | ||||||
Interest credited to policyholder account balances |
1,253 | 1,234 | 1,266 | |||||||||
Change in future policy benefits and other insurance liabilities |
111 | 1,182 | 666 | |||||||||
Other operating activities, net |
85 | (337 | ) | (33 | ) | |||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES BEFORE DISCONTINUED OPERATIONS |
2,437 | 2,474 | 2,522 | |||||||||
Net cash used in operating activities of discontinued operations |
(27 | ) | (18 | ) | (71 | ) | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
2,410 | 2,456 | 2,451 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||||||
Fixed maturity and equity securities available for sale: |
||||||||||||
Purchases |
(5,507 | ) | (2,730 | ) | (5,885 | ) | ||||||
Sales |
1,463 | 2,084 | 2,041 | |||||||||
Maturities and repayments |
2,542 | 2,136 | 2,718 | |||||||||
Repayments of mortgage loans |
406 | 470 | 439 | |||||||||
Fundings of mortgage loans and real estate |
(1,434 | ) | (1,665 | ) | (1,658 | ) | ||||||
Change in policy loans |
411 | (510 | ) | (342 | ) | |||||||
Sale of interest in PIMCO |
288 | |||||||||||
Change in restricted cash |
6 | 7 | 60 | |||||||||
Purchases of derivative instruments |
(20 | ) | (12 | ) | (17 | ) | ||||||
Terminations of derivative instruments |
20 | 84 | (41 | ) | ||||||||
Proceeds from nonhedging derivative settlements |
64 | 728 | 2 | |||||||||
Payments for nonhedging derivative settlements |
(1,540 | ) | (89 | ) | (43 | ) | ||||||
Change in collateral received or pledged |
(1,226 | ) | 1,056 | 17 | ||||||||
Purchases of and advance payments on aircraft leasing portfolio |
(561 | ) | (694 | ) | (646 | ) | ||||||
Other investing activities, net |
42 | (323 | ) | 67 | ||||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES BEFORE DISCONTINUED OPERATIONS |
(5,334 | ) | 830 | (3,288 | ) | |||||||
Net cash provided by investing activities of discontinued operations |
7 | 76 | ||||||||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
(5,334 | ) | 837 | (3,212 | ) | |||||||
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Years Ended December 31, | ||||||||||||
(Continued) | 2009 | 2008 | 2007 | |||||||||
(In Millions) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||||||
Policyholder account balances: |
||||||||||||
Deposits |
$ | 8,003 | $ | 7,320 | $ | 6,876 | ||||||
Withdrawals |
(7,972 | ) | (7,602 | ) | (7,131 | ) | ||||||
Net change in short-term debt |
(45 | ) | 50 | 100 | ||||||||
Issuance of long-term debt |
1,692 | 335 | 1,013 | |||||||||
Payments of long-term debt |
(433 | ) | (381 | ) | (913 | ) | ||||||
Contribution from (dividend to) parent |
200 | (345 | ) | |||||||||
Other financing activities, net |
1 | 33 | 69 | |||||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
1,446 | (590 | ) | 14 | ||||||||
Net change in cash and cash equivalents |
(1,478 | ) | 2,703 | (747 | ) | |||||||
Cash and cash equivalents, beginning of year |
3,397 | 694 | 1,441 | |||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR |
$ | 1,919 | $ | 3,397 | $ | 694 | ||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
||||||||||||
Income taxes paid (received), net |
($143 | ) | ($20 | ) | $ | 67 | ||||||
Interest paid |
$ | 146 | $ | 195 | $ | 272 | ||||||
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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). | ||
Pacific Life transferred its legal domicile from the State of California to the State of Nebraska effective September 1, 2005. PMHC transferred its state of legal domicile from the State of California to the State of Nebraska, effective June 29, 2007, to reunite PMHC and Pacific Life under one regulatory authority. | ||
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 2007, 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, individual annuities, mutual funds, pension and institutional products, 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 was determined to be 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 significant, 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 | ||
• | Investment impairments | ||
• | 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 and the valuation of deferred income tax assets and liabilities and unrecognized tax benefits | ||
• | Accounting for reinsurance transactions |
PL-7
• | Litigation and other contingencies |
Certain reclassifications have been made to the 2008 and 2007 consolidated financial statements to conform to the 2009 financial statement presentation. The most significant conforming reclassification was retrospectively adjusting the consolidated financial statements and respective notes to reflect the ACG transfer. | ||
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | ||
Effective September 30, 2009, the Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification) as the single source of authoritative U.S. GAAP. The Codification does not create new accounting and reporting guidance, rather it reorganized then-existing U.S. GAAP pronouncements into approximately 90 Topics within a consistent structure. All guidance in the Codification carries an equal level of authority. After the effective date of the Codification, all nongrandfathered accounting literature not included in the Codification is superseded and deemed nonauthoritative. Adoption of the Codification also changed how the Company references U.S. GAAP in its consolidated financial statements. | ||
In April 2009, the FASB issued additional guidance under the Codification’s Fair Value Measurements and Disclosures Topic. This update relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. The Company early adopted this guidance on March 31, 2009. This update provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. Also included is guidance on identifying circumstances that indicate a transaction is not orderly. The adoption of this guidance resulted in an increase of $436 million to the estimated fair value and a resulting decrease of $436 million to gross unrealized investment loss of residential mortgage-backed securities (RMBS) as of March 31, 2009. As of December 31, 2009, the year to date effect of this adoption was an increase of $214 million to the estimated fair value and a decrease of $214 million to the gross unrealized investment loss of RMBS. See Note 14 for information on the Company’s fair value measurements and expanded disclosures. | ||
In April 2009, the FASB issued additional guidance under the Codification’s Investments – Debt and Equity Securities Topic. For debt securities, this guidance replaces 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 other than temporary impairment (OTTI) shall be recognized in earnings equal to the entire difference between the debt security’s amortized cost basis and its 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 changes 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 to be recognized in earnings and non credit losses are to be recognized in other comprehensive income (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. | ||
Effective January 1, 2009, the FASB issued additional guidance to the Codification’s Consolidation Topic. This guidance improves the relevance, comparability and transparency of the financial information that a company provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. As a result of the adoption of this guidance, which required retrospective application of presentation requirements, total equity as of December 31, 2008 and 2007, increased by $244 million and $214 million, respectively, representing the noncontrolling interest, and other liabilities and total liabilities as of December 31, 2008 and 2007 decreased by $244 million and $214 million, respectively, as a result of reclassifying noncontrolling interest (previously known as minority interest) to equity. | ||
Effective January 1, 2007, the FASB issued additional guidance to the Codification’s Financial Services – Insurance Topic. This guidance governs the accounting for DAC on internal replacements on insurance and investment contracts. This guidance defines an internal replacement as a modification in product benefits, features, rights, or coverages that occur by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. The adoption of this guidance resulted in a reduction to DAC and the Company recorded a cumulative effect adjustment of $29 million, after tax, which was recorded as a reduction to retained earnings during the year ended December 31, 2007. |
PL-8
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, recorded 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 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 recorded equal to the difference between the estimated fair value and net carrying amount of the security. If the OTTI for a debt security is attributable to both credit and other factors, then the OTTI is bifurcated and the non credit related portion is recorded to OCI while the credit portion is recorded as a net realized investment loss. If the OTTI is related to credit factors only, it is recorded as a net realized investment loss. | ||
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 comprised of investment and accounting professionals 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, or interest-rate related, including 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 were 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. The SEC Issues Letter Clarifying Other-Than-Temporary Impairment Guidance for Perpetual Preferred Securities issued on October 15, 2008 states that if an investor holds a perpetual preferred security with an estimated fair value below cost that is not attributable to the credit deterioration of the issuer, then the investor would not be required to recognize an OTTI by asserting that it has the intent and ability to continue holding the security for a sufficient period to allow for an anticipated recovery in market value. | ||
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 amounts due according to the contractual terms of the mortgage loan |
PL-9
agreement. For mortgage loans deemed to be impaired, a write-down is taken for the difference between the carrying amount and the Company’s estimate of the present value of the expected future cash flows discounted at the current market rate and recorded in net realized investment gain (loss). As of December 31, 2009, two loans totaling $8 million were considered impaired, however no valuation allowance was necessary as the fair value of the collateral was greater than the carrying amount of the related loans. The Company had no write-downs during the years ended December 31, 2009, 2008 and 2007. 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 related investments qualifying for tax credits (LIHTC). 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. | ||
Investments in LIHTC are recorded under either the effective interest method, if they meet certain requirements, including a projected positive yield based solely on guaranteed credits, or are recorded under the equity method if these certain requirements are not met. For investments in LIHTC recorded under the effective interest method, the amortization of the original investment and the tax credits are recorded in the provision (benefit) for income taxes. For investments in LIHTC recorded under the equity method, the amortization of the initial investment is included in net investment income, and the related tax credits are recorded in the provision (benefit) for income taxes (Note 18). The amortization recorded in net investment income was $3 million, $5 million and $20 million for the years ended December 31, 2009, 2008 and 2007, respectively. | ||
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. If the derivative is designated as a fair value hedge, the changes in the estimated fair value of the derivative and the hedged item are recognized in net realized investment gain (loss). The change in 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). Estimated fair value exposure is calculated based on the aggregate estimated fair value of all derivative instruments with each counterparty, net of collateral received, in accordance with legally enforceable counterparty master netting agreements (Note 10). | ||
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. 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, interest expense or interest credited to policyholder account balances over its remaining life. | ||
CASH AND CASH EQUIVALENTS | ||
Cash and cash equivalents include all investments with an original maturity of three months or less. The Company entered into a series of Federal National Mortgage Association (FNMA) pass-through dollar roll transactions during the fourth quarter of 2008. The Company purchased FNMA pass through securities and was contractually obligated to resell the same or substantially the same securities within 30 days of purchase. The Company classified these dollar roll transactions as short-term secured loans and reported them as cash and cash equivalents. As of December 31, 2009 and 2008, the loans amounted to zero and $403 million, respectively. The fair values of the securities held in connection with the secured lending were zero and $410 million as of December 31, 2009 and 2008, respectively. | ||
RESTRICTED CASH | ||
Restricted cash primarily consists of security deposits, commitment fees, maintenance reserve payments, supplemental rental payments and rental payments received from certain lessees related to the aircraft leasing business. |
PL-10
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 commonly 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 change the contract, the existing DAC asset remains in place and any acquisition costs associated with the modification are immediately expensed. As of December 31, 2009 and 2008, the carrying value of DAC was $4.8 billion and $5.0 billion, respectively (Note 7). | ||
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 recorded directly to equity through OCI. | ||
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 (Note 7). | ||
The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. The Company offers a sales inducement to the policyholder where the policyholder receives a bonus credit, typically ranging from 0.5% to 8.0% of each deposit. The capitalized sales inducement balance included in the DAC asset was $583 million and $552 million as of December 31, 2009 and 2008, respectively. | ||
AIRCRAFT LEASING PORTFOLIO | ||
Aircraft are recorded at cost, which includes certain acquisition costs, less accumulated depreciation. Major improvements to aircraft are capitalized when incurred. The Company evaluates carrying values of aircraft based upon changes in market and other physical and economic conditions and will record impairment losses to recognize a loss in the value of the aircraft when management believes that, based on estimated future cash flows, the recoverability of the Company’s investment in an aircraft is unlikely (Note 9). The Company had four and two non-earning aircraft in the portfolio as of December 31, 2009 and 2008, respectively. | ||
GOODWILL FROM ACQUISITIONS | ||
Goodwill represents the excess of 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 from acquisitions, included in other assets, totaled $43 million as of December 31, 2009 and 2008. There were no goodwill impairment write-downs from continuing operations during the years ended December 31, 2009, 2008 and 2007. | ||
POLICYHOLDER ACCOUNT BALANCES | ||
Policyholder account balances on UL and investment-type contracts, such as funding agreements, annuity and 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 (Note 11). Interest credited to these contracts primarily ranged from 0.2% to 9.0%. |
PL-11
FUTURE POLICY BENEFITS | ||
Annuity reserves, which primarily consist of group retirement and structured settlement annuities, are equal to the present value of estimated future payments using pricing assumptions, as applicable, for interest rates, mortality, morbidity, retirement age and expenses (Note 11). Interest rates used in establishing such liabilities ranged from 1.6% to 11.3%. |
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 guaranteed living benefits (GLBs) are considered embedded derivatives and are recorded in future policy benefits (Note 11). |
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 directly 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, 2009 and 2008, 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 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 arrangements with this producer group’s reinsurance company. |
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 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. See Note 16. |
REVENUES, BENEFITS AND EXPENSES | ||
Insurance premiums, annuity contracts with life contingencies and traditional life and term insurance contracts, are recognized as revenue when due. Benefits and expenses are matched against such revenues to recognize profits over the lives of the contracts. This matching is accomplished by providing for liabilities for future policy benefits, expenses of contract administration and the amortization of DAC and URR. |
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 |
PL-12
charges that have been earned and assessed against related account values during the period. 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 from Pacific Life Fund Advisors LLC (PLFA), a wholly owned subsidiary of Pacific Life formed in 2007, 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. ACG has four capital leases, which are accounted for under the provisions in the Codification’s Leases Topic. As of December 31, 2009 and 2008, capital leases in the amount of $8 million and $11 million, respectively, are classified in other assets. |
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. Depreciation of investment real estate 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 and its wholly owned, Arizona domiciled life insurance subsidiary, Pacific Life & Annuity Company (PL&A), and Pacific Alliance Reinsurance Company of Vermont (PAR Vermont), a Vermont-based life reinsurance company 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 bases. 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. See Note 21. |
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. |
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. |
PL-13
FAIR VALUE OF FINANCIAL INSTRUMENTS | ||
The estimated fair value of financial instruments, disclosed in Notes 8, 10 and 14, 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 statutory 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 valuing investments and certain assets and accounting for deferred income taxes on a different basis. |
As of December 31, 2009, Pacific Life had one permitted practice approved by the NE DOI that differed from statutory accounting practices adopted by the National Association of Insurance Commissioners (NAIC). This permitted practice relates to the valuation of certain statutory separate account assets that are carried at book value instead of estimated fair value. Pacific Life’s statutory capital and surplus as of December 31, 2009 and 2008 did not reflect unrealized losses of $29 million and $88 million, respectively, with regards to this permitted practice. Pacific Life had a second permitted practice with a financial statement filing date of December 31, 2008 that expired on December 30, 2009. This permitted practice allowed Pacific Life to apply the revised version of Actuarial Guideline 39 (AG 39) for variable annuity reserves that is contained in the final recommendations submitted by the Capital & Surplus Relief Working Group to the Executive Committee of the NAIC. This permitted practice resulted in lowering statutory reserves by $442 million as of December 31, 2008. |
In addition, Pacific Life uses a NE DOI prescribed accounting practice for certain synthetic GIC reserves that differs from statutory accounting practices adopted by the NAIC. As of December 31, 2009 and 2008, this NE DOI prescribed accounting practice resulted in statutory reserves of $20 million and $12 million, respectively, as opposed to statutory reserves of zero and $640 million, respectively, using statutory accounting practices adopted by the NAIC. |
STATUTORY NET INCOME (LOSS) AND SURPLUS | ||
Statutory net income (loss) of Pacific Life was $652 million, ($1,529) million and $362 million for the years ended December 31, 2009, 2008 and 2007, respectively. Statutory capital and surplus of Pacific Life was $5,006 million and $3,136 million as of December 31, 2009 and 2008, 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, 2009 and 2008, Pacific Life, PL&A and PAR Vermont exceeded the minimum risk-based capital requirements. |
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 |
PL-14
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 2009 statutory results, Pacific Life could pay $629 million in dividends in 2010 to Pacific LifeCorp without prior approval from the NE DOI, subject to the notification requirement. |
No dividends were paid during 2009 and 2007. During the year ended December 31, 2008, Pacific Life paid a cash dividend to Pacific LifeCorp of $345 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 2009 statutory results, PL&A could pay $23 million in dividends to Pacific Life in 2010 without prior regulatory approval. No dividends were paid during 2009, 2008 and 2007. |
OTHER | ||
The Company has reinsurance contracts in place with a reinsurer whose financial stability has been deteriorating. In January 2009, the reinsurer’s domiciliary state regulator issued an order of supervision, which requires the regulator’s consent to any transaction outside the normal course of business. The Company will continue to monitor the events surrounding this reinsurer and evaluate its options to deal with any further deterioration of this reinsurer’s financial condition. As of December 31, 2009, statutory reserves ceded to this reinsurer amounted to approximately $162 million. |
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 $285 million and $278 million as of December 31, 2009 and 2008, respectively. Liabilities allocated to the Closed Block, which are primarily included in future policy benefits, amounted to $307 million and $311 million as of December 31, 2009 and 2008, respectively. The net contribution to income from the Closed Block was $4 million, $1 million and $1 million for the years ended December 31, 2009, 2008 and 2007, respectively. |
PL-15
4. | VARIABLE INTEREST ENTITIES |
The following table presents, as of December 31, 2009 and 2008, the total assets and maximum exposure to loss relating to VIEs, which the Company (i) has consolidated because it is the primary beneficiary or (ii) holds a significant variable interest, but has not consolidated because it is not the primary beneficiary: |
Primary Beneficiary | Not Primary Beneficiary | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Total | Exposure to | Total | Exposure to | |||||||||||||
Assets | Loss | Assets | Loss | |||||||||||||
(In Millions) |
||||||||||||||||
Aircraft securitizations |
$ | 2,642 | $ | 218 | (1) | $ | 371 | |||||||||
Private equity funds |
239 | 30 | ||||||||||||||
Asset-backed securities |
1,910 | $ | 103 | |||||||||||||
Total |
$ | 2,881 | $ | 248 | $ | 2,281 | $ | 103 | ||||||||
Aircraft securitizations |
$ | 2,777 | $ | 145 | (1) | $ | 427 | |||||||||
Private equity funds |
236 | 30 | ||||||||||||||
Asset-backed securities |
3,816 | $ | 93 | |||||||||||||
Total |
$ | 3,013 | $ | 175 | $ | 4,243 | $ | 93 | ||||||||
(1) | Excludes contingent purchase obligations (Note 21) totaling $100 million and $50 million as of December 31, 2009 and 2008, respectively. |
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 ACG Trust III acquired 74 of ACG’s aircraft through a private placement note offering in the amount of $1,860 million. ACG receives all of the expected residual return from ACG Trust III. 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). Non-recourse debt consolidated from ACG Trust III was $1,309 million and $1,445 million as of December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, the maximum exposure to loss, based on carrying value, was $130 million and $72 million, respectively. Consolidated assets are reported in aircraft leasing portfolio, net, restricted cash and other assets. Consolidated liabilities are reported in long-term debt and other liabilities. |
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 of ACG Trust II and absorbs any losses in the trust up to ACG’s equity interest. 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). Non-recourse debt consolidated from ACG Trust II was $666 million and $728 million as of December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, the maximum exposure to loss, based on carrying value, was $88 million and $73 million, respectively. Consolidated assets are reported in aircraft leasing portfolio, net, restricted cash and other assets. Consolidated liabilities are reported in long-term debt and other liabilities. |
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. The carrying value is comprised of beneficial interests issued by Aviation Trust. As of December 31, 2009 and 2008, the maximum exposure to loss, based on carrying value, was zero. |
PL-16
PRIVATE EQUITY FUNDS | ||
Private equity funds (the Funds) are three 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 carried interest based upon the performance of the Funds and is a VIE due to the lack of control by the other equity investors. 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 debt consolidated from the Funds was $2 million as of December 31, 2009 and 2008. Consolidated assets are reported in other investments and cash and cash equivalents and consolidated liabilities are reported in long-term debt. |
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 as the Company does not absorb a majority of the expected losses or receive a majority of the expected residual return. 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 $103 million and $93 million at December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, the Company recorded OTTIs of $60 million and $117 million, respectively, related to these securities. |
FUTURE ACCOUNTING CHANGE | ||
Effective January 1, 2010, the Company will change the methodology it employs to determine if an entity is a VIE and, once identified, if a VIE should be included in the consolidated financial statements. The new methodology will place more emphasis on the Company’s ability to direct the activities that most significantly impact the entity’s financial performance. The Company will examine anew all entities previously identified as VIEs. The Company does not expect this change to have a material impact on its consolidated financial statements. |
5. | INTEREST IN PIMCO |
As of December 31, 2007, the Company owned a beneficial economic interest in Pacific Investment Management Company LLC (PIMCO) through Allianz Global Investors of America LLC (interest in PIMCO). PIMCO offers investment products through managed accounts and institutional, retail and offshore mutual funds. The interest in PIMCO was reported at estimated fair value, as determined by a contractual put and call option price, with changes in estimated fair value reported as a component of OCI, net of taxes. |
During the year ended December 31, 2008, the Company exercised a put option and sold all of its remaining interest in PIMCO to Allianz of America, Inc., a subsidiary of Allianz SE, for $288 million. The Company recognized a pre-tax gain of $109 million for the year ended December 31, 2008. |
6. | DISCONTINUED OPERATIONS |
The Company’s broker-dealer operations and group insurance business 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. On June 20, 2007, a transaction closed whereby the Company sold certain of these broker-dealer subsidiaries to an unrelated third-party. Proceeds from the sale included cash of $53 million and a common stock interest in the buyer’s parent of $57 million. A pre-tax gain of $54 million was recognized from this sale during the year ended December 31, 2007. On December 31, 2007, a transaction closed whereby the Company sold another one of its broker-dealer subsidiaries to subsidiary management. The Company incurred a pre-tax loss of $1 million from this transaction during the year ended December 31, 2007. As of December 31, 2007, one broker-dealer |
PL-17
subsidiary remained classified as held for sale. On March 31, 2008, a transaction closed whereby the Company sold this held for sale subsidiary to an unrelated third-party. The Company recognized an insignificant pre-tax gain from this transaction during the year ended December 31, 2008. | ||
Operating results of discontinued operations were as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) |
||||||||||||
Revenues |
$ | 13 | $ | 276 | ||||||||
Benefits and expenses |
$ | 31 | 22 | 300 | ||||||||
Loss from discontinued operations |
(31 | ) | (9 | ) | (24 | ) | ||||||
Benefit from income taxes |
(11 | ) | (3 | ) | (8 | ) | ||||||
Loss from discontinued operations, net of taxes |
(20 | ) | (6 | ) | (16 | ) | ||||||
Net gain on sale of discontinued operations |
53 | |||||||||||
Provision for income taxes |
26 | |||||||||||
Net gain on sale of discontinued operations, net of taxes |
27 | |||||||||||
Discontinued operations, net of taxes |
($20 | ) | ($6 | ) | $ | 11 | ||||||
Assets and liabilities from discontinued operations are included in other assets and other liabilities, respectively. Assets related to discontinued operations were zero and $6 million as of December 31, 2009 and 2008, respectively. Liabilities related to discontinued operations were zero and $13 million as of December 31, 2009 and 2008, respectively. |
7. | DEFERRED POLICY ACQUISITION COSTS |
Components of DAC are as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) |
||||||||||||
Balance, January 1 |
$ | 5,012 | $ | 4,481 | $ | 4,248 | ||||||
Cumulative pre-tax effect of adoption of new
accounting principle (Note 1) |
7 | (45 | ) | |||||||||
Additions: |
||||||||||||
Capitalized during the year |
777 | 752 | 852 | |||||||||
Amortization: |
||||||||||||
Allocated to commission expenses |
(446 | ) | (444 | ) | (432 | ) | ||||||
Allocated to operating expenses |
(129 | ) | (133 | ) | (118 | ) | ||||||
Total amortization |
(575 | ) | (577 | ) | (550 | ) | ||||||
Allocated to OCI |
(415 | ) | 356 | (24 | ) | |||||||
Balance, December 31 |
$ | 4,806 | $ | 5,012 | $ | 4,481 | ||||||
During the years ended December 31, 2009, 2008 and 2007, the Company revised certain assumptions to develop EGPs for its products subject to DAC amortization (Note 1). This resulted in increases in DAC amortization expense of $23 million and $20 million for the years ended December 31, 2009 and 2008, respectively, and a decrease in DAC amortization expense of $12 million for the year ended December 31, 2007. The revised EGPs also resulted in an immaterial decrease in URR amortization for the year ended December 31, 2009, increased URR amortization of $2 million for the year ended December 31, 2008, and decreased URR amortization of $15 million for the year ended December 31, 2007. |
PL-18
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 represents amortized cost adjusted for credit related OTTIs and changes in the estimated fair value of fixed maturity securities attributable to the hedged risk in a fair value hedge. See Note 14 for information on the Company’s fair value measurement and disclosure. |
Net | ||||||||||||||||
Carrying | Gross Unrealized | Estimated | ||||||||||||||
Amount | Gains | Losses | Fair Value | |||||||||||||
(In Millions) |
||||||||||||||||
U.S. Treasury securities and obligations of
U.S. government authorities and agencies |
$ | 105 | $ | 10 | $ | 115 | ||||||||||
Obligations of states and political subdivisions |
633 | 12 | $ | 46 | 599 | |||||||||||
Foreign governments |
389 | 42 | 431 | |||||||||||||
Corporate securities |
17,256 | 905 | 308 | 17,853 | ||||||||||||
RMBS |
6,133 | 105 | 1,078 | 5,160 | ||||||||||||
Commercial mortgage-backed securities |
1,160 | 42 | 23 | 1,179 | ||||||||||||
Collateralized debt obligations |
118 | 27 | 33 | 112 | ||||||||||||
Other asset-backed securities |
562 | 45 | 17 | 590 | ||||||||||||
Total fixed maturity securities |
$ | 26,356 | $ | 1,188 | $ | 1,505 | $ | 26,039 | ||||||||
Perpetual preferred securities |
$ | 324 | $ | 6 | $ | 55 | $ | 275 | ||||||||
Other equity securities |
1 | 2 | 3 | |||||||||||||
Total equity securities |
$ | 325 | $ | 8 | $ | 55 | $ | 278 | ||||||||
Net | ||||||||||||||||
Carrying | Gross Unrealized | Estimated | ||||||||||||||
Amount | Gains | Losses | Fair Value | |||||||||||||
(In Millions) |
||||||||||||||||
U.S. Treasury securities and obligations of
U.S. government authorities and agencies |
$ | 98 | $ | 19 | $ | 117 | ||||||||||
Obligations of states and political subdivisions |
512 | 5 | $ | 148 | 369 | |||||||||||
Foreign governments |
211 | 41 | 7 | 245 | ||||||||||||
Corporate securities |
15,828 | 307 | 1,618 | 14,517 | ||||||||||||
RMBS |
6,133 | 105 | 1,306 | 4,932 | ||||||||||||
Commercial mortgage-backed securities |
1,191 | 15 | 106 | 1,100 | ||||||||||||
Collateralized debt obligations |
126 | 2 | 124 | |||||||||||||
Other asset-backed securities |
615 | 32 | 109 | 538 | ||||||||||||
Total fixed maturity securities |
$ | 24,714 | $ | 524 | $ | 3,296 | $ | 21,942 | ||||||||
Perpetual preferred securities |
$ | 385 | $ | 3 | $ | 174 | $ | 214 | ||||||||
Other equity securities |
2 | 2 | ||||||||||||||
Total equity securities |
$ | 387 | $ | 3 | $ | 174 | $ | 216 | ||||||||
PL-19
The Company has investments in perpetual preferred securities that are issued primarily by European and U.S. banks. The net carrying amount and estimated fair value of the available for sale perpetual preferred securities was $451 million and $391 million, respectively, as of December 31, 2009. Included in these amounts are perpetual preferred securities carried in trusts with a net carrying amount and estimated fair value of $127 million and $116 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, 2009, 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 |
$ | 1,825 | $ | 68 | $ | 25 | $ | 1,868 | ||||||||
Due after one year through five years |
5,235 | 288 | 54 | 5,469 | ||||||||||||
Due after five years through ten years |
7,210 | 366 | 135 | 7,441 | ||||||||||||
Due after ten years |
4,113 | 247 | 140 | 4,220 | ||||||||||||
18,383 | 969 | 354 | 18,998 | |||||||||||||
Mortgage-backed and asset-backed securities |
7,973 | 219 | 1,151 | 7,041 | ||||||||||||
Total |
$ | 26,356 | $ | 1,188 | $ | 1,505 | $ | 26,039 | ||||||||
PL-20
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 securities. |
Total | ||||||||||||
Gross | ||||||||||||
Estimated | Unrealized | |||||||||||
Number | Fair Value | Losses | ||||||||||
(In Millions) | ||||||||||||
Obligations of states and political subdivisions |
27 | $ | 383 | $ | 46 | |||||||
Corporate securities |
442 | 4,539 | 308 | |||||||||
RMBS |
307 | 3,844 | 1,078 | |||||||||
Commercial mortgage-backed securities |
19 | 339 | 23 | |||||||||
Collateralized debt obligations |
6 | 61 | 33 | |||||||||
Other asset-backed securities |
24 | 205 | 17 | |||||||||
Total fixed maturity securities |
825 | 9,371 | 1,505 | |||||||||
Perpetual preferred securities |
18 | 195 | 55 | |||||||||
Other securities |
31 | 97 | 26 | |||||||||
Total other securities |
49 | 292 | 81 | |||||||||
Total |
874 | $ | 9,663 | $ | 1,586 | |||||||
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) | |||||||||||||||||||||||
Obligations of states and political
subdivisions |
11 | $ | 116 | $ | 6 | 16 | $ | 267 | $ | 40 | ||||||||||||||
Corporate securities |
182 | 1,766 | 50 | 260 | 2,773 | 258 | ||||||||||||||||||
RMBS |
53 | 498 | 94 | 254 | 3,346 | 984 | ||||||||||||||||||
Commercial mortgage-backed securities |
6 | 100 | 5 | 13 | 239 | 18 | ||||||||||||||||||
Collateralized debt obligations |
5 | 59 | 32 | 1 | 2 | 1 | ||||||||||||||||||
Other asset-backed securities |
24 | 205 | 17 | |||||||||||||||||||||
Total fixed maturity securities |
257 | 2,539 | 187 | 568 | 6,832 | 1,318 | ||||||||||||||||||
Perpetual preferred securities |
18 | 195 | 55 | |||||||||||||||||||||
Other securities |
16 | 54 | 9 | 15 | 43 | 17 | ||||||||||||||||||
Total other securities |
16 | 54 | 9 | 33 | 238 | 72 | ||||||||||||||||||
Total |
273 | $ | 2,593 | $ | 196 | 601 | $ | 7,070 | $ | 1,390 | ||||||||||||||
PL-21
Total | ||||||||||||
Gross | ||||||||||||
Estimated | Unrealized | |||||||||||
Number | Fair Value | Losses | ||||||||||
(In Millions) | ||||||||||||
Obligations of states and political subdivisions |
32 | $ | 276 | $ | 148 | |||||||
Foreign governments |
5 | 66 | 7 | |||||||||
Corporate securities |
956 | 9,674 | 1,618 | |||||||||
RMBS |
342 | 3,693 | 1,306 | |||||||||
Commercial mortgage-backed securities |
45 | 796 | 106 | |||||||||
Collateralized debt obligations |
5 | 2 | 2 | |||||||||
Other asset-backed securities |
43 | 326 | 109 | |||||||||
Total fixed maturity securities |
1,428 | 14,833 | 3,296 | |||||||||
Perpetual preferred securities |
30 | 197 | 174 | |||||||||
Other securities |
24 | 95 | 28 | |||||||||
Total other securities |
54 | 292 | 202 | |||||||||
Total |
1,482 | $ | 15,125 | $ | 3,498 | |||||||
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) | |||||||||||||||||||||||
Obligations of states and political
subdivisions |
29 | $ | 254 | $ | 144 | 3 | $ | 22 | $ | 4 | ||||||||||||||
Foreign governments |
5 | 66 | 7 | |||||||||||||||||||||
Corporate securities |
655 | 6,692 | 805 | 301 | 2,982 | 813 | ||||||||||||||||||
RMBS |
145 | 2,229 | 699 | 197 | 1,464 | 607 | ||||||||||||||||||
Commercial mortgage-backed securities |
31 | 569 | 74 | 14 | 227 | 32 | ||||||||||||||||||
Collateralized debt obligations |
4 | 1 | 2 | 1 | 1 | |||||||||||||||||||
Other asset-backed securities |
25 | 203 | 47 | 18 | 123 | 62 | ||||||||||||||||||
Total fixed maturity securities |
894 | 10,014 | 1,778 | 534 | 4,819 | 1,518 | ||||||||||||||||||
Perpetual preferred securities |
7 | 29 | 16 | 23 | 168 | 158 | ||||||||||||||||||
Other securities |
18 | 89 | 27 | 6 | 6 | 1 | ||||||||||||||||||
Total other securities |
25 | 118 | 43 | 29 | 174 | 159 | ||||||||||||||||||
Total |
919 | $ | 10,132 | $ | 1,821 | 563 | $ | 4,993 | $ | 1,677 | ||||||||||||||
The Company has evaluated fixed maturity and other securities with gross unrealized losses and determined that the unrealized losses are temporary and that 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. | ||
Prime mortgages are loans made to borrowers with strong credit histories, whereas sub-prime mortgage lending is the origination of residential mortgage loans to customers 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 |
PL-22
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. |
The table below illustrates the breakdown of non-agency RMBS and commercial mortgage-backed securities (CMBS) by investment rating from independent rating agencies and vintage year of the underlying collateral as of December 31, 2009. |
Net | Rating as % of | Vintage Breakdown | ||||||||||||||||||||||||||||||||||
Carrying | Estimated | Net Carrying | 2004 and | |||||||||||||||||||||||||||||||||
Rating | Amount | Fair Value | Amount | Prior | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||||||||||||||
($ In Millions) | ||||||||||||||||||||||||||||||||||||
Prime RMBS: |
||||||||||||||||||||||||||||||||||||
AAA |
$ | 960 | $ | 878 | 29 | % | 21 | % | 7 | % | 1 | % | ||||||||||||||||||||||||
AA |
320 | 279 | 9 | % | 4 | % | 2 | % | 3 | % | ||||||||||||||||||||||||||
A |
252 | 208 | 8 | % | 1 | % | 2 | % | 3 | % | 2 | % | ||||||||||||||||||||||||
BAA |
525 | 402 | 16 | % | 2 | % | 7 | % | 6 | % | 1 | % | ||||||||||||||||||||||||
BA and below |
1,264 | 893 | 38 | % | 8 | % | 18 | % | 12 | % | ||||||||||||||||||||||||||
Total |
$ | 3,321 | $ | 2,660 | 100 | % | 28 | % | 26 | % | 31 | % | 15 | % | 0 | % | 0 | % | ||||||||||||||||||
Alt-A RMBS: |
||||||||||||||||||||||||||||||||||||
AAA |
$ | 58 | $ | 52 | 6 | % | 6 | % | ||||||||||||||||||||||||||||
AA |
13 | 16 | 1 | % | 1 | % | ||||||||||||||||||||||||||||||
A |
13 | 9 | 1 | % | 1 | % | ||||||||||||||||||||||||||||||
BAA |
24 | 23 | 3 | % | 1 | % | 2 | % | ||||||||||||||||||||||||||||
BA and below |
843 | 556 | 89 | % | 10 | % | 27 | % | 52 | % | ||||||||||||||||||||||||||
Total |
$ | 951 | $ | 656 | 100 | % | 8 | % | 11 | % | 29 | % | 52 | % | 0 | % | 0 | % | ||||||||||||||||||
Sub-prime RMBS: |
||||||||||||||||||||||||||||||||||||
AAA |
$ | 230 | $ | 179 | 52 | % | 52 | % | ||||||||||||||||||||||||||||
AA |
97 | 73 | 22 | % | 22 | % | ||||||||||||||||||||||||||||||
A |
21 | 13 | 5 | % | 5 | % | ||||||||||||||||||||||||||||||
BAA |
42 | 32 | 9 | % | 9 | % | ||||||||||||||||||||||||||||||
BA and below |
53 | 37 | 12 | % | 1 | % | 9 | % | 1 | % | 1 | % | ||||||||||||||||||||||||
Total |
$ | 443 | $ | 334 | 100 | % | 80 | % | 18 | % | 1 | % | 1 | % | 0 | % | 0 | % | ||||||||||||||||||
CMBS: |
||||||||||||||||||||||||||||||||||||
AAA |
$ | 1,017 | $ | 1,054 | 88 | % | 65 | % | 3 | % | 15 | % | 1 | % | 4 | % | ||||||||||||||||||||
AA |
66 | 61 | 6 | % | 4 | % | 2 | % | ||||||||||||||||||||||||||||
A |
37 | 32 | 3 | % | 3 | % | ||||||||||||||||||||||||||||||
BAA |
28 | 22 | 2 | % | 2 | % | ||||||||||||||||||||||||||||||
BA |
12 | 10 | 1 | % | 1 | % | ||||||||||||||||||||||||||||||
Total |
$ | 1,160 | $ | 1,179 | 100 | % | 73 | % | 3 | % | 0 | % | 17 | % | 1 | % | 6 | % | ||||||||||||||||||
As of December 31, 2009, the Company has received advances of $1.5 billion from the Federal Home Loan Bank (FHLB) of Topeka and has issued funding agreements to the FHLB of Topeka. Funding agreements are used as an alternative source of funds for the Company’s spread lending business and the funding agreement liabilities are included in general account policyholder account balances. Assets with an estimated fair value of $1.8 billion as of December 31, 2009 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, 2009, the Company holds $76 million of FHLB of Topeka stock. | ||
PL&A is a member of FHLB of San Francisco. As of December 31, 2009, no assets are pledged as collateral. As of December 31, 2009, the Company holds $25 million of FHLB of San Francisco stock. |
PL-23
The Company had a securities lending program administered by one of the largest U.S. financial institutions specializing in securities lending and short-term fixed-income asset management. This securities lending program was terminated in February 2009. Securities loaned were zero as of December 31, 2008. | ||
Major categories of investment income and related investment expense are summarized as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Fixed maturity securities |
$ | 1,448 | $ | 1,467 | $ | 1,492 | ||||||
Equity securities |
20 | 23 | 26 | |||||||||
Mortgage loans |
297 | 289 | 248 | |||||||||
Real estate |
92 | 86 | 68 | |||||||||
Policy loans |
229 | 223 | 209 | |||||||||
Partnerships and joint ventures |
(78 | ) | 21 | 170 | ||||||||
Other |
12 | 21 | 44 | |||||||||
Gross investment income |
2,020 | 2,130 | 2,257 | |||||||||
Investment expense |
158 | 136 | 137 | |||||||||
Net investment income |
$ | 1,862 | $ | 1,994 | $ | 2,120 | ||||||
The components of net realized investment gain (loss) are as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Fixed maturity securities: |
||||||||||||
Gross gains on sales |
$ | 35 | $ | 100 | $ | 117 | ||||||
Gross losses on sales |
(18 | ) | (37 | ) | (23 | ) | ||||||
Other |
12 | 4 | 20 | |||||||||
Total fixed maturity securities |
29 | 67 | 114 | |||||||||
Equity securities: |
||||||||||||
Gross gains on sales |
5 | |||||||||||
Gross losses on sales |
(11 | ) | ||||||||||
Other |
2 | 1 | ||||||||||
Total equity securities |
(9 | ) | 1 | 5 | ||||||||
Trading securities |
20 | (22 | ) | (1 | ) | |||||||
Variable annuity GLB embedded derivatives |
2,211 | (2,775 | ) | (222 | ) | |||||||
Variable annuity GLB policy fees |
147 | 108 | 78 | |||||||||
Variable annuity derivatives — interest rate swaps |
(104 | ) | 402 | |||||||||
Variable annuity derivatives — total return swaps |
(1,542 | ) | 646 | 13 | ||||||||
Equity put options |
(672 | ) | 853 | 31 | ||||||||
Synthetic GIC policy fees |
25 | 15 | ||||||||||
Other derivatives |
45 | (62 | ) | (11 | ) | |||||||
Other |
3 | 18 | 62 | |||||||||
Total |
$ | 153 | ($749 | ) | $ | 69 | ||||||
PL-24
As a result of the significant disruption in the housing, financial and credit markets, the OTTI charges recorded during the year ended December 31, 2009 were primarily related to the Company’s exposure to RMBS, certain structured securities and direct exposure to corporate securities. The table below summarizes the OTTIs by security type (In Millions): |
Recorded in | Included in | |||||||||||
Earnings | OCI | Total | ||||||||||
Year ended
December 31, 2009: |
||||||||||||
Corporate securities |
$ | 63 | (1) | $ | 2 | $ | 65 | |||||
RMBS |
116 | 315 | 431 | |||||||||
Collateralized debt obligations |
66 | 13 | 79 | |||||||||
Perpetual preferred securities |
26 | 26 | ||||||||||
Other investments |
40 | 40 | ||||||||||
Total OTTIs |
$ | 311 | $ | 330 | $ | 641 | ||||||
Year ended
December 31, 2008: |
||||||||||||
Corporate securities |
$ | 70 | ||||||||||
RMBS |
227 | |||||||||||
Collateralized debt obligations |
156 | |||||||||||
Other asset-backed securities |
1 | |||||||||||
Perpetual preferred securities |
68 | |||||||||||
Other equity securities |
58 | |||||||||||
Total OTTIs |
$ | 580 | ||||||||||
(1) | Included are $29 million of OTTI recorded in earnings on perpetual preferred securities carried in trusts. |
In accordance with additional guidance under the Codification’s Investments – Debt and Equity Securities Topic effective January 1, 2009, the Company began recording the credit loss portion of OTTI adjustments in earnings and the portion related to other factors in OCI. The table below details the amount of OTTIs attributable to credit losses recorded in earnings for which a portion was recognized in OCI (In Millions): |
Cumulative credit loss, January 1, 2009 |
$ | 88 | ||
Additions for credit impairments recognized on: |
||||
Securities not previously other than temporarily impaired |
48 | |||
Securities previously other than temporarily impaired |
106 | |||
Total additions |
154 | |||
Reductions for credit impairments previously recognized on: |
||||
Securities that matured or were sold |
(40 | ) | ||
Securities due to an increase in expected cash flows and time value of cash flows |
(2 | ) | ||
Total subtractions |
(42 | ) | ||
Cumulative credit loss, December 31, 2009 |
$ | 200 | ||
PL-25
The table below presents separately the gross unrealized losses on investments for which OTTI has been recorded in earnings in current or prior periods and the gross unrealized losses on temporarily impaired investments for which no OTTI has been recorded. |
Gross Unrealized Losses | ||||||||||||
OTTI | Non-OTTI | |||||||||||
Investments | Investments | Total | ||||||||||
(In Millions) | ||||||||||||
Obligations of states and political subdivisions |
$ | 46 | $ | 46 | ||||||||
Corporate securities |
$ | 2 | 306 | 308 | ||||||||
RMBS |
328 | 750 | 1,078 | |||||||||
CMBS |
23 | 23 | ||||||||||
Collateralized debt obligations |
32 | 1 | 33 | |||||||||
Other asset-backed securities |
17 | 17 | ||||||||||
Total fixed maturity securities |
$ | 362 | $ | 1,143 | $ | 1,505 | ||||||
Perpetual preferred securities |
$ | 55 | $ | 55 | ||||||||
Total equity securities |
$ | 55 | $ | 55 | ||||||||
The change in unrealized gain (loss) on investments in available for sale and trading securities is as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Available for sale securities: |
||||||||||||
Fixed maturity |
$ | 2,455 | ($3,269 | ) | ($211 | ) | ||||||
Equity |
124 | (143 | ) | (49 | ) | |||||||
Total available for sale securities |
$ | 2,579 | ($3,412 | ) | ($260 | ) | ||||||
Trading securities |
$ | 26 | ($19 | ) | ($2 | ) | ||||||
Trading securities totaled $206 million and $114 million as of December 31, 2009 and 2008, respectively. The cumulative unrealized gains (losses) on trading securities held as of December 31, 2009 and 2008 were $7 million and ($19) million, respectively. | ||
As of December 31, 2009 and 2008, fixed maturity securities of $12 million were on deposit with state insurance departments to satisfy regulatory requirements. | ||
Mortgage loans totaled $6,577 million and $5,622 million as of December 31, 2009 and 2008, respectively. Mortgage loans are collateralized by commercial real estate properties primarily located throughout the U.S. As of December 31, 2009, $1,122 million, $963 million, $785 million, $554 million and $369 million were located in California, Washington, Florida, Texas and Maryland, respectively. As of December 31, 2009, $543 million was located in Canada. There were no defaults during the years ended December 31, 2009, 2008, and 2007. The Company did not have any mortgage loans with accrued interest more than 180 days past due as of December 31, 2009 or 2008. As of December 31, 2009, mortgage loan investments with one commercial sponsor exceeded 10% of stockholder’s equity. The carrying value of these investments was $725 million as of December 31, 2009. | ||
Investments in real estate totaled $574 million and $459 million as of December 31, 2009 and 2008, respectively. There were no real estate write-downs during the years ended December 31, 2009, 2008 and 2007. |
PL-26
9. | AIRCRAFT LEASING PORTFOLIO, NET | |
Aircraft leasing portfolio, net, consisted of the following: |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Aircraft consolidated from VIEs |
$ | 3,081 | $ | 3,099 | ||||
Other aircraft |
3,217 | 2,667 | ||||||
6,298 | 5,766 | |||||||
Accumulated depreciation |
994 | 767 | ||||||
Aircraft leasing portfolio, net |
$ | 5,304 | $ | 4,999 | ||||
As of December 31, 2009, domestic and foreign future minimum rentals scheduled to be received under the noncancelable portion of operating leases are as follows (In Millions): |
2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||||||||||||||
Domestic |
$ | 23 | $ | 19 | $ | 15 | $ | 13 | $ | 13 | $ | 28 | ||||||||||||
Foreign |
526 | 448 | 369 | 274 | 214 | 390 | ||||||||||||||||||
Total operating leases |
$ | 549 | $ | 467 | $ | 384 | $ | 287 | $ | 227 | $ | 418 | ||||||||||||
As of December 31, 2009 and 2008, aircraft with a carrying amount of $4,954 million and $4,366 million, respectively, were assigned as collateral to secure debt (Notes 4 and 13). | ||
There were no impairments recorded during the years ended December 31, 2009, 2008 and 2007. | ||
During the years ended December 31, 2009, 2008 and 2007, ACG recognized pre-tax gains on the sale of aircraft of zero, zero and $18 million, respectively, which are included in other income. | ||
In December 2007, ACG sold its entire ownership interest in an unconsolidated affiliate. The transaction resulted in a pre-tax gain of $17 million, which is included in net realized investment gain (loss) for the year ended December 31, 2007. | ||
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, foreign exchange forward contracts, caps, floors 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 companies to recognize all derivative instruments as either assets or liabilities at fair value in the consolidated statements of financial condition. In accordance with accounting for derivatives and hedging activities, 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. | ||
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 |
PL-27
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 investment purchases and liability issuances are considered probable to occur and are generally completed within 22 years of the inception of the hedge. |
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. | ||
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. | ||
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. | ||
When a 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, and the ineffective portion of changes in the estimated fair value of the derivative is recorded in net realized investment gain (loss). For the years ended December 31, 2009, 2008 and 2007, the Company had net losses of zero, zero and $21 million, respectively, reclassified from accumulated other comprehensive income (AOCI) to earnings resulting from the discontinuance of cash flow hedges due to forecasted transactions that were no longer probable of occurring. Over the next twelve months, the Company anticipates that $24 million of deferred losses on derivative instruments in AOCI will be reclassified to earnings. For the years ended December 31, 2009, 2008 and 2007, all of the Company’s hedged forecasted transactions were determined to be probable of occurring. | ||
The Company had the following outstanding derivatives designated as cash flow hedges: |
Notional Amount | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Foreign currency interest rate swaps |
$ | 5,099 | $ | 6,488 | ||||
Forward starting interest rate swaps |
1,060 | 1,535 | ||||||
Interest rate swaps |
3,910 | 4,384 |
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 on 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. |
PL-28
DERIVATIVES DESIGNATED AS FAIR VALUE HEDGES |
Interest rate swap agreements are used to convert a fixed rate asset or liability to a floating 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. |
When a derivative is designated as a fair value hedge, the changes in the estimated fair value of the derivative and the hedged item are recognized in net realized investment gain (loss). The change in 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 the years ended December 31, 2009, 2008 and 2007, hedge ineffectiveness related to designated fair value hedges reflected in net realized investment gain (loss) was $5 million, ($1) million and zero, respectively. No component of the hedging instrument’s estimated fair value is excluded from the determination of effectiveness. |
The Company had the following outstanding derivatives designated as fair value hedges: |
Notional Amount | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Foreign currency interest rate swaps |
$ | 13 | $ | 18 | ||||
Interest rate swaps |
1,658 | 1,264 |
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 changes in the estimated fair value of the derivatives not designated as hedging instruments and the periodic cash flows are recognized in net realized investment gain (loss). |
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 in other assets or other liabilities as either a reinsurance recoverable or reinsurance payable. |
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 of the S&P 500 in the form of a payment or receipt, depending on whether the return relative to the index on trade date is positive or negative, respectively. Payments are recognized in realized investment loss and receipts are recognized in realized investment gain. The Company has used interest rate swaps to hedge fluctuations in the valuation of GLBs as a result of changes in risk free rates. These agreements involved 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. |
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 offers equity indexed universal life insurance products, which credits the total return of the S&P 500 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 indexed account capped at 12%, or a five year indexed account. |
PL-29
The Company utilizes one year European style S&P 500 call options to hedge the annual exposure of the indexed life insurance product’s index growth rate for the one year indexed account. The Company also purchases five year European style S&P 500 Asian call options to hedge the five year exposure of the indexed life insurance product’s index growth rate for the five year indexed account. |
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. |
The Company uses credit default swaps in combination with cash instruments to reproduce the investment characteristics of certain investments. Credit default swaps involve the receipt or payment of fixed amounts at specific intervals in exchange for the assumption of or protection from potential credit events associated with the underlying security. The Company writes credit default swaps for which a payment is delivered if the underlying security of the derivative defaults. The maximum potential amounts of future payments under credit default swaps were $50 million and $95 million as of December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, the fair value of credit derivatives sold by the Company was ($17) million and ($38) million, respectively. The terms for these instruments range from five to seven years. |
The Company had the following outstanding derivatives not designated as hedging instruments: |
Notional Amount | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Variable annuity GLB embedded derivatives |
$ | 36,408 | $ | 33,455 | ||||
Variable annuity derivatives — interest rate swaps |
2,150 | |||||||
Variable annuity derivatives — total return swaps |
4,456 | 2,437 | ||||||
Variable annuity GLB reinsurance contracts |
14,878 | 13,274 | ||||||
Equity put options |
5,267 | 5,173 | ||||||
Synthetic GICs |
23,993 | 23,856 | ||||||
Interest rate swaps |
178 | 535 | ||||||
Foreign currency interest rate swaps |
398 | 460 | ||||||
Other |
1,021 | 849 |
CONSOLIDATED FINANCIAL STATEMENT IMPACT |
Derivative instruments are recorded in the Company’s consolidated statements of financial condition at 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-30
The following table summarizes the gross asset or liability derivative 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, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In Millions) | (In Millions) | |||||||||||||||
Derivatives designated as hedging instruments: |
||||||||||||||||
Foreign currency interest rate swaps |
$ | 177 | $ | 308 | (1) | $ | 230 | $ | 87 | (1) | ||||||
69 | 146 | (5) | 154 | 423 | (5) | |||||||||||
Forward starting interest rate swap agreements |
34 | 88 | (1) | 23 | (1) | |||||||||||
8 | 232 | (5) | 45 | (5) | ||||||||||||
Interest rate swaps |
32 | 32 | (1) | 106 | 124 | (1) | ||||||||||
13 | 72 | (5) | 152 | 337 | (5) | |||||||||||
Total derivatives designated as hedging instruments |
333 | 878 | 642 | 1,039 | ||||||||||||
Derivatives not designated as hedging instruments: |
||||||||||||||||
Variable annuity derivatives — interest rate swaps |
232 | (1) | ||||||||||||||
140 | (5) | |||||||||||||||
Variable annuity derivatives — total return swaps |
6 | (1) | 60 | 33 | (1) | |||||||||||
55 | (5) | 4 | 53 | (5) | ||||||||||||
Equity put options |
329 | 350 | (1) | 16 | (1) | |||||||||||
41 | 587 | (5) | 14 | (5) | ||||||||||||
Foreign currency interest rate swaps |
21 | 1 | (1) | |||||||||||||
15 | (5) | 13 | (5) | |||||||||||||
Interest rate swaps |
9 | 18 | (1) | 2 | 3 | (1) | ||||||||||
1 | 11 | (5) | 39 | (5) | ||||||||||||
Other |
18 | 2 | (1) | 23 | 1 | (1) | ||||||||||
26 | 11 | (5) | 38 | (5) | ||||||||||||
Embedded derivatives: |
||||||||||||||||
Variable annuity GLB embedded derivatives
(including reinsurance contracts) |
52 | 429 | (2) | 754 | 3,342 | (3) | ||||||||||
Synthetic GICs |
3 | (3) | ||||||||||||||
Other |
44 | 8 | (4) | |||||||||||||
Total derivatives not designated as hedging instruments |
503 | 1,851 | 917 | 3,533 | ||||||||||||
Total derivatives |
$ | 836 | $ | 2,729 | $ | 1,559 | $ | 4,572 | ||||||||
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 |
PL-31
Net cash collateral received from counterparties was $237 million and $1,392 million as of December 31, 2009 and 2008, 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. Net cash collateral pledged to counterparties was $137 million and $66 million as of December 31, 2009 and 2008, 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 exposure to the counterparty is positive, the amount is reflected in other investments, whereas, if the net estimated fair value exposure to the counterparty is negative, the estimated fair value is included in future policy benefits or other liabilities, depending on the nature of the derivative. |
As of December 31, 2009 and 2008, the Company had also accepted collateral consisting of various securities with an estimated fair value of $14 million and $147 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, 2009 and 2008, zero and $15 million, respectively, of the collateral had been repledged. As of December 31, 2009 and 2008, the Company provided collateral in the form of various securities of zero and $17 million, respectively, which are included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. |
The following table summarizes amounts recorded 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 and the hedged items, and amounts realized on terminations. The net of the amounts presented for each year represent the ineffective portion of the hedge. The amounts presented do not include the periodic net coupon settlements of the derivatives or the coupon income (expense) related to the hedged item. |
Gain (Loss) | Gain (Loss) | |||||||||||||||||||||||
Recognized in | Recognized in | |||||||||||||||||||||||
Income on Derivatives | Income on Hedged Items | |||||||||||||||||||||||
Years Ended | Years Ended | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
(In Millions) | (In Millions) | |||||||||||||||||||||||
Derivatives in fair value hedges: |
||||||||||||||||||||||||
Foreign currency interest
rate swaps |
($1 | ) | ($1 | ) | $ | 1 | $ | 2 | ||||||||||||||||
Interest rate swaps |
$ | 97 | (135 | ) | (56 | ) | ($93 | ) | 134 | 56 | ||||||||||||||
Total |
$ | 97 | ($136 | ) | ($57 | ) | ($93 | ) | $ | 135 | $ | 58 | ||||||||||||
PL-32
The following table summarizes amounts recorded in the consolidated financial statements for derivatives designated as cash flow hedges. Gain 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 coupon settlements of the derivatives. |
Gain (Loss) | Gain (Loss) | Gain (Loss) | ||||||||||||||||||||||||||||||||||
Recognized in | Reclassified from | Recognized in Income | ||||||||||||||||||||||||||||||||||
OCI on Derivatives | AOCI into Income | on Derivatives | ||||||||||||||||||||||||||||||||||
(Effective Portion) | (Effective Portion) | (Ineffective Portion) | ||||||||||||||||||||||||||||||||||
Years Ended | Years Ended | Years Ended | ||||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||
(In Millions) | (In Millions) | (In Millions) | ||||||||||||||||||||||||||||||||||
Derivatives in cash flow hedges: |
||||||||||||||||||||||||||||||||||||
Foreign currency interest rate swaps |
$ | 42 | $ | 66 | ($97 | ) | ($104 | ) | ($368 | ) | ($3 | ) (1) | $ | 1 | (1) | |||||||||||||||||||||
9 | 14 | 18 | (3) | |||||||||||||||||||||||||||||||||
Forward starting interest rate swaps |
(254 | ) | 336 | 33 | 4 | (1) | ($1 | ) | $ | 3 | (2 | ) (1) | ||||||||||||||||||||||||
(1 | ) (2) | |||||||||||||||||||||||||||||||||||
(11 | ) | (1 | ) | (1 | ) (3) | |||||||||||||||||||||||||||||||
Interest rate swaps |
66 | (146 | ) | (83 | ) | 9 | (1 | ) (1) | 9 | (7 | ) | (1) | ||||||||||||||||||||||||
2 | 3 | (2) | ||||||||||||||||||||||||||||||||||
(18 | ) | (3 | ) (3) | |||||||||||||||||||||||||||||||||
Futures |
1 | 3 | 4 | (2) | ||||||||||||||||||||||||||||||||
(1 | ) | (1 | ) (3) | |||||||||||||||||||||||||||||||||
Total |
($146 | ) | $ | 256 | ($147 | ) | ($114 | ) | ($347 | ) | $ | 15 | $ | 8 | ($4 | ) | ($1 | ) | ||||||||||||||||||
Location on the consolidated statements of operations: |
(1) | Net realized investment gain (loss) | |
(2) | Net investment income | |
(3) | Interest credited to policyholder account balances |
PL-33
The following table summarizes amounts recorded in the consolidated financial statements 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 coupon settlements of ($1,476) million, $639 million and ($41) million for the years ended December 31, 2009, 2008 and 2007, respectively, which are recorded in net realized investment gain (loss). |
Amount of Gain (Loss) | ||||||||||||
Recognized in | ||||||||||||
Income on Derivatives | ||||||||||||
Years Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Derivatives not designated as hedging instruments: |
||||||||||||
Variable annuity derivatives — interest rate swaps |
($168 | ) | $ | 386 | (1) | |||||||
Variable annuity derivatives — total return swaps |
(102 | ) | (55 | ) | $ | 28 | (1) | |||||
Equity put options |
(580 | ) | 927 | 55 | (1) | |||||||
Foreign currency interest rate swaps |
(8 | ) | 12 | (2 | ) (1) | |||||||
(1 | ) | (1 | ) | (2) | ||||||||
Interest rate swaps |
(8 | ) | 2 | (1) | ||||||||
(1 | ) | (9 | ) | (2) | ||||||||
Other |
44 | (56 | ) | (1) | ||||||||
Embedded derivatives: |
||||||||||||
Variable annuity GLB embedded derivatives (including
reinsurance contracts) |
2,211 | (2,775 | ) | (222 | ) (1) | |||||||
Other embedded derivatives |
(14 | ) | 13 | 1 | (1) | |||||||
Total |
$ | 1,381 | ($1,566 | ) | ($138 | ) | ||||||
Location on the consolidated statements of operations: |
(1) | Net realized investment gain (loss) | |
(2) | Interest credited to policyholder account balances |
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, 2009 was $126 million. The maximum exposure to any single counterparty was $41 million at December 31, 2009. |
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 Pacific Life’s insurer financial strength ratings assigned by certain independent rating agencies. If Pacific Life’s insurer financial strength rating falls below a specified level, as defined within each counterparty master agreement or, in most cases, if one of the rating agencies ceases to provide an insurer financial strength rating, the counterparty can terminate the master agreement with payment due based on the estimated fair value of the underlying derivatives. As of December 31, 2009, Pacific Life’s insurer financial strength ratings were above the specified level. |
If Pacific Life’s insurer financial strength rating were to fall below the next investment grade from its current standing, the counterparties to the derivative instruments could request immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit risk related contingent features that are in a liability position on December 31, 2009, is $232 million for which the Company has posted collateral of $137 million in the normal course of business. If certain of Pacific Life’s insurer financial strength ratings were to fall one notch as of December 31, 2009, the Company would have been required to post an additional $14 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 |
PL-34
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. For the year ended December 31, 2009, the Company has incurred losses of $4 million, included in net realized investment gain (loss), on derivative instruments due to counterparty default related to the bankruptcy of Lehman Brothers Special Finance. These losses were a result of the termination of all remaining open positions with Lehman counterparties. |
11. | POLICYHOLDER LIABILITIES |
POLICYHOLDER ACCOUNT BALANCES | ||
The detail of the liability for policyholder account balances is as follows: |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Universal life |
$ | 19,298 | $ | 18,729 | ||||
Annuity and deposit liabilities |
7,109 | 4,515 | ||||||
Funding agreements |
5,240 | 7,890 | ||||||
GICs |
2,337 | 1,536 | ||||||
Total |
$ | 33,984 | $ | 32,670 | ||||
FUTURE POLICY BENEFITS |
The detail of the liability for future policy benefits is as follows: |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Annuity reserves |
$ | 4,960 | $ | 4,455 | ||||
Variable annuity GLB embedded derivatives |
754 | 3,342 | ||||||
URR |
734 | 925 | ||||||
Life insurance |
365 | 360 | ||||||
Closed Block liabilities |
306 | 311 | ||||||
Policy benefits payable |
260 | 433 | ||||||
Other |
24 | 15 | ||||||
Total |
$ | 7,403 | $ | 9,841 | ||||
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 guaranteed minimum death benefit (GMDB) and GLB features. For a discussion of certain GLBs accounted for as embedded derivatives, see Note 9. |
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 |
PL-35
December 31, | ||||||||
2009 | 2008 | |||||||
($ In Millions) | ||||||||
Return of net deposits |
||||||||
Separate account value |
$ | 46,884 | $ | 36,672 | ||||
Net amount at risk (1) |
4,017 | 11,557 | ||||||
Average attained age of contract holders |
61 years | 61 years | ||||||
Anniversary contract value |
||||||||
Separate account value |
$ | 16,483 | $ | 13,465 | ||||
Net amount at risk (1) |
2,541 | 5,750 | ||||||
Average attained age of contract holders |
63 years | 62 years | ||||||
Minimum return |
||||||||
Separate account value |
$ | 1,241 | $ | 1,107 | ||||
Net amount at risk (1) |
620 | 898 | ||||||
Average attained age of contract holders |
65 years | 64 years |
(1) | Represents the amount of death benefit in excess of the current account balance as of December 31. |
December 31, | ||||||||
2009 | 2008 | |||||||
($ In Millions) | ||||||||
Separate account value |
$ | 2,675 | $ | 2,230 | ||||
Average attained age of contract holders |
58 years | 57 years |
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
GMDB | GMIB | |||||||||||||||
(In Millions) | (In Millions) | |||||||||||||||
Balance, beginning of year |
$ | 119 | $ | 48 | $ | 62 | $ | 24 | ||||||||
Changes in reserves |
(11 | ) | 119 | (23 | ) | 38 | ||||||||||
Benefits paid |
(108 | ) | (48 | ) | (1 | ) | ||||||||||
Balance, end of year |
$ | 0 | $ | 119 | $ | 38 | $ | 62 | ||||||||
PL-36
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Asset type |
||||||||
Domestic equity |
$ | 25,760 | $ | 17,927 | ||||
International equity |
6,728 | 5,476 | ||||||
Bonds |
13,775 | 12,182 | ||||||
Money market |
621 | 1,087 | ||||||
Total separate account value |
$ | 46,884 | $ | 36,672 | ||||
13. | DEBT |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Short-term debt: |
||||||||
Credit facility recourse only to ACG |
$ | 105 | $ | 150 | ||||
Total short-term debt |
$ | 105 | $ | 150 | ||||
Long-term debt: |
||||||||
Surplus notes |
$ | 1,150 | $ | 150 | ||||
Fair value adjustment for derivatives and
hedging activities |
(13 | ) | 55 | |||||
Non-recourse long-term debt: |
||||||||
Debt recourse only to ACG |
1,636 | 1,271 | ||||||
ACG non-recourse debt |
761 | 687 | ||||||
Other non-recourse debt |
121 | 121 | ||||||
ACG VIE debt (Note 4) |
1,975 | 2,173 | ||||||
Other VIE debt (Note 4) |
2 | 2 | ||||||
Total long-term debt |
$ | 5,632 | $ | 4,459 | ||||
PL-37
PL-38
14. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
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 on inactive markets; and model-derived valuations for which all significant inputs are observable market data. Level 2 instruments include most corporate debt securities and U.S. government and agency mortgage-backed 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 highly 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-39
Gross | ||||||||||||||||||||||||
Derivatives | Netting | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | Adjustments (1) | Total | |||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||
U.S. Treasury securities and
obligations of
U.S. government authorities and agencies |
$ | 109 | $ | 6 | $ | 115 | ||||||||||||||||||
Obligations of states and political subdivisions |
565 | 34 | 599 | |||||||||||||||||||||
Foreign governments |
323 | 108 | 431 | |||||||||||||||||||||
Corporate securities |
15,566 | 2,287 | 17,853 | |||||||||||||||||||||
RMBS |
1,510 | 3,650 | 5,160 | |||||||||||||||||||||
CMBS |
852 | 327 | 1,179 | |||||||||||||||||||||
Collateralized debt obligations |
8 | 104 | 112 | |||||||||||||||||||||
Other asset-backed securities |
355 | 235 | 590 | |||||||||||||||||||||
Total fixed maturity securities |
19,288 | 6,751 | 26,039 | |||||||||||||||||||||
Perpetual preferred securities |
205 | 70 | 275 | |||||||||||||||||||||
Other equity securities |
$ | 3 | 3 | |||||||||||||||||||||
Total equity securities |
3 | 205 | 70 | 278 | ||||||||||||||||||||
Trading securities (2) |
92 | 85 | 29 | 206 | ||||||||||||||||||||
Cash equivalents |
1,714 | 1,714 | ||||||||||||||||||||||
Other investments |
163 | 163 | ||||||||||||||||||||||
Derivatives |
369 | 467 | $ | 836 | ($595 | ) | 241 | |||||||||||||||||
Separate account assets (3) |
52,305 | 116 | 101 | 52,522 | ||||||||||||||||||||
Total |
$ | 54,114 | $ | 20,063 | $ | 7,581 | $ | 836 | ($595 | ) | $ | 81,163 | ||||||||||||
Liabilities: |
||||||||||||||||||||||||
Derivatives |
$ | 645 | $ | 914 | $ | 1,559 | ($595 | ) | $ | 964 | ||||||||||||||
Total |
$ | 645 | $ | 914 | $ | 1,559 | ($595 | ) | $ | 964 | ||||||||||||||
PL-40
Gross | ||||||||||||||||||||||||
Derivatives | Netting | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | Adjustments (1) | Total | |||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||
U.S. Treasury securities and
obligations of
U.S. government authorities and agencies |
$ | 117 | $ | 117 | ||||||||||||||||||||
Obligations of states and political
subdivisions |
369 | 369 | ||||||||||||||||||||||
Foreign governments |
223 | $ | 22 | 245 | ||||||||||||||||||||
Corporate securities |
12,274 | 2,243 | 14,517 | |||||||||||||||||||||
RMBS |
1,577 | 3,355 | 4,932 | |||||||||||||||||||||
CMBS |
899 | 201 | 1,100 | |||||||||||||||||||||
Collateralized debt obligations |
20 | 104 | 124 | |||||||||||||||||||||
Other asset-backed securities |
328 | 210 | 538 | |||||||||||||||||||||
Total fixed maturity securities |
15,807 | 6,135 | 21,942 | |||||||||||||||||||||
Perpetual preferred securities |
202 | 12 | 214 | |||||||||||||||||||||
Other equity securities |
2 | 2 | ||||||||||||||||||||||
Total equity securities |
204 | 12 | 216 | |||||||||||||||||||||
Trading securities (2) |
17 | 97 | 114 | |||||||||||||||||||||
Cash equivalents |
$ | 2,597 | 2,597 | |||||||||||||||||||||
Other investments |
150 | 150 | ||||||||||||||||||||||
Derivatives |
1,294 | 1,435 | $ | 2,729 | ($656 | ) | 2,073 | |||||||||||||||||
Separate account assets (3) |
41,145 | 275 | 61 | 41,481 | ||||||||||||||||||||
Total |
$ | 43,742 | $ | 17,597 | $ | 7,890 | $ | 2,729 | ($656 | ) | $ | 68,573 | ||||||||||||
Liabilities: |
||||||||||||||||||||||||
Derivatives |
$ | 1,095 | $ | 3,477 | $ | 4,572 | ($656 | ) | $ | 3,916 | ||||||||||||||
Total |
$ | 1,095 | $ | 3,477 | $ | 4,572 | ($656 | ) | $ | 3,916 | ||||||||||||||
(1) | Netting adjustments represent the impact of offsetting asset and liability positions held with the same counterparty as permitted by guidance for offsetting in the Codification’s Derivatives and Hedging Topic. | |
(2) | Trading securities are presented in other investments in the consolidated statements of financial condition. | |
(3) | Separate account assets are measured at 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 fair value of separate account assets as prescribed by guidance 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 table above differ from the amounts presented in the consolidated statements of financial condition because cash and receivables for securities are not subject to the guidance under the Codification’s Fair Value Measurements and Disclosures Topic. |
PL-41
PL-42
• | 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 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. |
PL-43
• | 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). |
Purchases, | ||||||||||||||||||||||||||||
Total Gains or Losses | Transfers | Sales, | Unrealized | |||||||||||||||||||||||||
In and/or | Issuances, | Gains | ||||||||||||||||||||||||||
January 1, | Included in | Included in | Out of | and | December 31, | (Losses) | ||||||||||||||||||||||
2009 | Earnings | OCI | Level 3 | Settlements | 2009 | Still Held (1) | ||||||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||
U.S. Treasury securities and
obligations of U.S. government
authorities and agencies |
$ | 6 | $ | 6 | ||||||||||||||||||||||||
Obligations of states and
political subdivisions |
($3 | ) | 7 | $ | 30 | 34 | ||||||||||||||||||||||
Foreign governments |
$ | 22 | $ | 2 | 5 | 71 | 8 | 108 | ||||||||||||||||||||
Corporate securities |
2,243 | (28 | ) | 644 | (974 | ) | 402 | 2,287 | ($5 | ) | ||||||||||||||||||
RMBS |
3,355 | (115 | ) | 437 | 427 | (454 | ) | 3,650 | ||||||||||||||||||||
CMBS |
201 | 1 | 26 | 60 | 39 | 327 | ||||||||||||||||||||||
Collateralized debt obligations |
104 | (67 | ) | 71 | (4 | ) | 104 | |||||||||||||||||||||
Other asset-backed securities |
210 | 2 | 10 | 42 | (29 | ) | 235 | |||||||||||||||||||||
Total fixed maturity securities |
6,135 | (205 | ) | 1,190 | (361 | ) | (8 | ) | 6,751 | (5 | ) | |||||||||||||||||
Perpetual preferred securities |
12 | (17 | ) | 12 | (5 | ) | 68 | 70 | ||||||||||||||||||||
Other equity securities |
1 | 4 | (28 | ) | 23 | |||||||||||||||||||||||
Total equity securities |
12 | (16 | ) | 16 | (33 | ) | 91 | 70 | ||||||||||||||||||||
Trading securities |
97 | (51 | ) | (17 | ) | 29 | 2 | |||||||||||||||||||||
Other investments |
150 | 24 | (11 | ) | 163 | |||||||||||||||||||||||
Derivatives, net |
(2,042 | ) | 1,504 | 1 | 90 | (447 | ) | 1,597 | ||||||||||||||||||||
Separate account assets (2) |
61 | 6 | 20 | 14 | 101 | 12 | ||||||||||||||||||||||
Total |
$ | 4,413 | $ | 1,289 | $ | 1,231 | ($425 | ) | $ | 159 | $ | 6,667 | $ | 1,606 | ||||||||||||||
PL-44
Purchases, | ||||||||||||||||||||||||||||
Transfers | Sales, | Unrealized | ||||||||||||||||||||||||||
Total Gains or Losses | In and/or | Issuances, | Gains | |||||||||||||||||||||||||
January 1, | Included in | Included in | Out of | and | December 31, | (Losses) | ||||||||||||||||||||||
2008 | Earnings | OCI | Level 3 | Settlements | 2008 | Still Held (1) | ||||||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||
Foreign governments |
$ | 32 | ($7 | ) | ($3 | ) | $ | 22 | ||||||||||||||||||||
Corporate securities |
1,505 | $ | 2 | (329 | ) | $ | 733 | 332 | 2,243 | ($16 | ) | |||||||||||||||||
RMBS |
431 | (1 | ) | (168 | ) | 3,025 | 68 | 3,355 | ||||||||||||||||||||
CMBS |
434 | (40 | ) | (141 | ) | (52 | ) | 201 | ||||||||||||||||||||
Collateralized debt obligations |
230 | (90 | ) | (35 | ) | (1 | ) | 104 | ||||||||||||||||||||
Other asset-backed securities |
242 | (4 | ) | (16 | ) | (11 | ) | (1 | ) | 210 | ||||||||||||||||||
Total fixed maturity securities |
2,874 | (93 | ) | (595 | ) | 3,606 | 343 | 6,135 | (16 | ) | ||||||||||||||||||
Perpetual preferred securities |
46 | (33 | ) | (1 | ) | 12 | ||||||||||||||||||||||
Other equity securities |
4 | (4 | ) | |||||||||||||||||||||||||
Total equity securities |
50 | (37 | ) | (1 | ) | 12 | ||||||||||||||||||||||
Trading securities |
47 | (12 | ) | 10 | 52 | 97 | (11 | ) | ||||||||||||||||||||
Other investments |
460 | 105 | (133 | ) | (282 | ) | 150 | |||||||||||||||||||||
Derivatives, net |
(103 | ) | (1,945 | ) | 2 | 4 | (2,042 | ) | (1,822 | ) | ||||||||||||||||||
Separate account assets(2) |
11 | (5 | ) | 46 | 9 | 61 | (25 | ) | ||||||||||||||||||||
Total |
$ | 3,339 | ($1,987 | ) | ($726 | ) | $ | 3,662 | $ | 125 | $ | 4,413 | ($1,874 | ) | ||||||||||||||
(1) | Represents the net amount of total gains or losses for the period, recorded in earnings, attributable to the change in unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held as of December 31, 2009 and 2008. | |
(2) | The realized/unrealized gains (losses) included in net income (loss) for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income (loss) for the Company. |
PL-45
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, 2009 | December 31, 2008 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(In Millions) | ||||||||||||||||
Assets: |
||||||||||||||||
Mortgage loans |
$ | 6,577 | $ | 6,660 | $ | 5,622 | $ | 5,645 | ||||||||
Policy loans |
6,509 | 6,509 | 6,920 | 6,920 | ||||||||||||
Other invested assets |
196 | 185 | 305 | 334 | ||||||||||||
Restricted cash |
221 | 221 | 227 | 227 | ||||||||||||
Liabilities: |
||||||||||||||||
Funding agreements and GICs (1) |
7,572 | 8,093 | 9,419 | 10,136 | ||||||||||||
Annuity and deposit liabilities |
7,109 | 7,109 | 4,515 | 4,515 | ||||||||||||
Short-term debt |
105 | 105 | 150 | 150 | ||||||||||||
Long-term debt |
5,632 | 5,806 | 4,459 | 4,373 |
(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, 2009 and 2008: | ||
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 | ||
The carrying amounts of policy loans are a reasonable estimate of their fair values because interest rates are generally variable and based on current market rates. | ||
OTHER INVESTED ASSETS | ||
Included in other invested assets are private equity investments in which the estimated fair value of private equity investments is based on the ownership percentage of the underlying equity of the investments. | ||
RESTRICTED CASH | ||
The carrying values approximate fair values due to the short-term maturities of these instruments. | ||
FUNDING AGREEMENTS AND GICs | ||
The fair value of funding agreements and GICs is estimated using the rates currently offered for deposits of similar remaining maturities. | ||
ANNUITY AND DEPOSIT LIABILITIES | ||
The estimated fair value of annuity and deposit liabilities approximates carrying value and primarily includes policyholder deposits and accumulated credited interest. The estimated fair value of deposit liabilities with no defined maturities is the amount payable on demand. |
PL-46
DEBT | ||
The carrying amount of short-term debt is a reasonable estimate of its fair value because the interest rates are variable and based on current market rates. 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. | ||
15. | OTHER COMPREHENSIVE INCOME (LOSS) | |
The Company displays comprehensive income (loss) and its components on the consolidated statements of equity. The disclosure of the gross components of other comprehensive income (loss) and related taxes are as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Unrealized gain (loss) on derivatives and securities available
for sale, net: |
||||||||||||
Gross holding gain (loss): |
||||||||||||
Securities available for sale |
$ | 2,601 | ($3,870 | ) | ($239 | ) | ||||||
Derivatives |
(146 | ) | 256 | (147 | ) | |||||||
Income tax (expense) benefit |
(861 | ) | 1,269 | 135 | ||||||||
Reclassification adjustment — realized (gain) loss: |
||||||||||||
Sale of securities available for sale |
251 | 458 | (21 | ) | ||||||||
Derivatives |
25 | (4 | ) | (15 | ) | |||||||
Income tax expense (benefit) |
(98 | ) | (159 | ) | 12 | |||||||
Allocation of holding (gain) loss to DAC |
(415 | ) | 356 | (24 | ) | |||||||
Allocation of holding (gain) loss to future policy benefits |
85 | (119 | ) | (15 | ) | |||||||
Income tax expense (benefit) |
113 | (83 | ) | 14 | ||||||||
Cumulative effect of adoption of new accounting principle |
(263 | ) | ||||||||||
Income tax expense |
93 | |||||||||||
Unrealized gain (loss) on derivatives and securities available for sale, net |
1,385 | (1,896 | ) | (300 | ) | |||||||
Other, net: |
||||||||||||
Holding gain (loss) on interest in PIMCO and other security |
22 | (24 | ) | 5 | ||||||||
Income tax (expense) benefit |
(8 | ) | 9 | (1 | ) | |||||||
Reclassification of realized gain on sale of interest in PIMCO |
(109 | ) | ||||||||||
Income tax on realized gain |
42 | |||||||||||
Net unrealized gain (loss) on interest in PIMCO and other
security |
14 | (82 | ) | 4 | ||||||||
Cumulative effect of adoption of new accounting principle,
net of tax |
(20 | ) | ||||||||||
Other, net of tax |
33 | (15 | ) | |||||||||
Other, net |
47 | (97 | ) | (16 | ) | |||||||
Total other comprehensive income (loss), net |
$ | 1,432 | ($1,993 | ) | ($316 | ) | ||||||
PL-47
16. | 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. U.S. GAAP benefit reserves for such riders are based on guidance in the Codification’s Financial Services – Insurance Topic for accounting and reporting of certain non traditional long-duration contracts and separate accounts. Substantially all the U.S. GAAP benefit reserves relating to NLGRs issued after June 30, 2005 are 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. Funded reserves and irrevocable letters of credit (LOC) held in trust accounts with Pacific Life as beneficiary provide security for statutory reserve credits taken by Pacific Life. Pacific LifeCorp guarantees the obligations of PAR Bermuda and PAR Vermont under the LOC agreement. | ||
The Company entered into treaties to reinsure a portion of new variable annuity business under modified coinsurance arrangements and certain variable annuity living and death benefit riders under coinsurance agreements. Effective January 1, 2008, the quota share on these variable annuity reinsurance treaties was increased from a total of 39% to 45%. Additionally, effective January 1, 2008, the Company recaptured a portion of the variable annuity business ceded during 2007. Effective January 1, 2009, all but one reinsurance treaty terminated for new business, reducing the quota share to 15%. The final treaty terminated for new business issued after March 31, 2009. Variable annuity business ceded prior to these dates continues to be reinsured. | ||
Reinsurance receivables and payables generally include amounts related to claims, reserves and reserve related items. Reinsurance receivables were $404 million and $839 million as of December 31, 2009 and 2008, respectively. Reinsurance payables were $37 million and $38 million as of December 31, 2009 and 2008, respectively. | ||
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 components of insurance premiums presented in the consolidated statements of operations are as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Direct premiums |
$ | 666 | $ | 410 | $ | 271 | ||||||
Reinsurance
ceded (1) |
(323 | ) | (291 | ) | (274 | ) | ||||||
Reinsurance assumed |
60 | (2) | 53 | 53 | ||||||||
Insurance premiums |
$ | 403 | $ | 172 | $ | 50 | ||||||
(1) | Included are $21 million, $13 million and $12 million of reinsurance ceded to PAR Bermuda for the years ended December 31, 2009, 2008 and 2007, respectively. | |
(2) | Included are $4 million of assumed premiums from Pacific Life Re, a wholly owned subsidiary of Pacific LifeCorp. |
PL-48
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. Certain subsidiaries did not participate in this plan. The full-benefit vesting period for all participants was five years. Pacific Life’s funding policy was to contribute amounts to the plan sufficient to meet the minimum funding requirements set forth in ERISA, plus such additional amounts as was determined appropriate. All such contributions were made to a tax-exempt trust. | ||
The Company amended the ERP to terminate effective December 31, 2007. In anticipation of the final settlement of the defined benefit pension plan, the plan’s investment strategy was revised and the mutual fund investments were sold, transferred to a separate account group annuity contract managed by the Company and invested primarily in fixed income investments to better match the expected duration of the liabilities. | ||
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 $5 million in 2008 and recognized the final settlement costs for the ERP totaling $72 million in 2009. | ||
Pacific Life also maintains supplemental employee retirement plans (SERPs) for certain eligible employees. As of December 31, 2009 and 2008, the projected benefit obligation was $37 million and $32 million, respectively. The fair value of plan assets as of December 31, 2009 and 2008 was zero. The net periodic benefit expense of the SERPs was $4 million, $5 million and $6 million for the years ended December 31, 2009, 2008 and 2007, respectively. | ||
The following table sets forth the benefit obligations, plan assets and funded status of the defined benefit plans: |
December 31, 2009 | December 31, 2008 | |||||||||||||||
ERP | SERP | ERP | SERP | |||||||||||||
(In Millions) | (In Millions) | |||||||||||||||
Defined benefit plans: |
||||||||||||||||
Benefit obligation, end of year |
$ | 37 | $ | 198 | $ | 32 | ||||||||||
Fair value of plan assets, end of year |
$ | 26 | 242 | |||||||||||||
Over (under) funded status, end of year |
$ | 26 | ($37 | ) | $ | 44 | ($32 | ) | ||||||||
The Company incurred a net pension expense of $79 million, $8 million and $9 million for the years ended December 31, 2009, 2008 and 2007, respectively, as detailed in the following table: |
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||||||
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 |
$ | 12 | 2 | $ | 12 | 2 | $ | 14 | 2 | |||||||||||||||
Expected return on plan assets |
(12 | ) | (14 | ) | (16 | ) | ||||||||||||||||||
Settlement costs |
72 | 5 | 4 | |||||||||||||||||||||
Amortization of net obligations and prior
service cost |
3 | 1 | 2 | 1 | ||||||||||||||||||||
Net periodic pension expense |
$ | 75 | $ | 4 | $ | 3 | $ | 5 | $ | 4 | $ | 5 | ||||||||||||
PL-49
Significant plan assumptions: |
December 31, 2009 | December 31, 2008 | |||||||||||||||
ERP | SERP | ERP | SERP | |||||||||||||
Weighted-average
assumptions used to
determine benefit
obligations: |
||||||||||||||||
Discount rate |
6.35 | % | 6.30 | % | 6.35 | % | 6.30 | % | ||||||||
Salary rate |
N/A | 4.50 | % | N/A | 4.50 | % |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Weighted-average assumptions used
to determine
the ERP’s net periodic benefit
expense: |
||||||||||||
Discount rate |
6.30 | % | 6.25 | % | 5.75 | % | ||||||
Expected long-term return on plan assets |
N/A | 5.25 | % | 6.13 | % |
The salary rate used to determine the net periodic benefit expense for the SERP was 4.5% for the years ended December 31, 2009, 2008 and 2007. | ||
Pacific Life expects to contribute $3 million to the SERP in 2010. The expected benefit payments are as follows for the years ending December 31 (In Millions): |
2010 | 2011 | 2012 | 2013 | 2014 | 2015-2019 | |||||
$3
|
$3 | $3 | $3 | $3 | $15 |
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 amounted to $26 million, $29 million and $25 million for the years ended December 31, 2009, 2008 and 2007, 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, 2009, 2008 and 2007 was $1 million. As of December 31, 2009 and 2008, the accumulated benefit obligation was $19 million and $18 million, respectively. The fair value of the plan assets as of December 31, 2009 and 2008 was zero. | ||
The discount rate used in determining the accumulated postretirement benefit obligation was 5.50% and 6.35% for 2009 and 2008, respectively. |
PL-50
Benefit payments for the year ended December 31, 2009 amounted to $3 million. The expected benefit payments are as follows for the years ending December 31 (In Millions): |
2010 | 2011 | 2012 | 2013 | 2014 | 2015-2019 | |||||
$3 | $4 | $4 | $4 | $4 | $24 |
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 annually. 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 (benefit) for income taxes is as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Current |
($407 | ) | $ | 196 | $ | 43 | ||||||
Deferred |
451 | (511 | ) | 86 | ||||||||
Provision (benefit) for income taxes from continuing operations |
44 | (315 | ) | 129 | ||||||||
Provision (benefit) for income taxes on discontinued operations |
(11 | ) | (3 | ) | 18 | |||||||
Total |
$ | 33 | ($318 | ) | $ | 147 | ||||||
A reconciliation of the provision (benefit) for income taxes from continuing operations based on the Federal corporate statutory tax rate of 35% to the provision (benefit) for income taxes from continuing operations reflected in the consolidated financial statements is as follows: |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(In Millions) | ||||||||||||
Provision (benefit) for income taxes at the statutory rate |
$ | 170 | ($199 | ) | $ | 292 | ||||||
Separate account dividends received deduction |
(93 | ) | (107 | ) | (103 | ) | ||||||
Low income housing and foreign tax credits |
(19 | ) | (31 | ) | (33 | ) | ||||||
Other |
(14 | ) | 22 | (27 | ) | |||||||
Provision (benefit) for income taxes from continuing operations |
$ | 44 | ($315 | ) | $ | 129 | ||||||
Upon adoption of new guidance to the Codification’s Income Taxes Topic relating to the accounting for uncertainty in income taxes on January 1, 2007, the Company had unrecognized tax benefits of $32 million, which relate entirely to an uncertain tax position regarding refund claims for the impact of short-term capital gains on computing separate account Dividends Received Deductions (DRD). |
During the year ended December 31, 2008, the Company’s tax contingency related to the accounting for uncertainty in income taxes increased by $402 million for a tax position for which there was uncertainty about the timing, but not the deductibility, of certain tax deductions. Since the benefits of the tax position were not being claimed on an original return and the Company did not receive cash, interest or penalties were not accrued. Due to the nature of deferred tax accounting, the tax position does not have an impact on the annual effective tax rate. |
PL-51
The $434 million tax contingency related to the accounting for uncertainty in income taxes was decreased by $420 million as a result of events that occurred during the year ended December 31, 2009. The Company effectively settled $18 million of the gross uncertain tax position related to DRD, which resulted in the realization of $9 million of tax benefits. The Company also resolved the uncertain tax accounting position on certain tax deductions resulting in a $402 million decrease. The provision for income taxes from continuing operations has also been reduced by $10 million for additional interest income resulting from favorable tax settlements. |
A reconciliation of the changes in the unrecognized tax benefits is as follows (In Millions): |
Balance at January 1, 2007 |
$ | 32 | ||
Additions and deletions
|
||||
Balance at December 31, 2007 |
32 | |||
Additions and deletions |
402 | |||
Balance at December 31, 2008 |
434 | |||
Additions and deletions |
(420 | ) | ||
Balance at December 31, 2009 |
$ | 14 | ||
Depending on the outcome of Internal Revenue Service (IRS) audits, approximately $7 million of the unrecognized DRD tax benefits may be realized during the next twelve months. All realized tax benefits and related interest are recorded as a discrete item that will impact the effective tax rate in the accounting period in which the uncertain tax position is ultimately settled. |
During the years ended December 31, 2009, 2008 and 2007, the Company paid an immaterial amount of interest and penalties to state tax authorities. |
PL-52
The net deferred tax (liability) asset, included in other liabilities and other assets as of December 31, 2009 and 2008, respectively, is comprised of the following tax effected temporary differences: |
December 31, | ||||||||
2009 | 2008 | |||||||
(In Millions) | ||||||||
Deferred tax assets: |
||||||||
Policyholder reserves |
$ | 724 | $ | 1,274 | ||||
Investment valuation |
283 | 271 | ||||||
Tax net operating loss carryforward |
249 | 168 | ||||||
Tax credit carryforward |
214 | 122 | ||||||
Deferred compensation |
45 | 42 | ||||||
Maintenance reserves |
38 | 46 | ||||||
Dividends to policyholders |
8 | 8 | ||||||
Other |
25 | 27 | ||||||
Total deferred tax assets |
1,586 | 1,958 | ||||||
Deferred tax liabilities: |
||||||||
DAC |
(1,313 | ) | (1,222 | ) | ||||
Depreciation |
(563 | ) | (458 | ) | ||||
Reinsurance |
(77 | ) | (74 | ) | ||||
Hedging |
(44 | ) | (14 | ) | ||||
Partnership income |
(28 | ) | (65 | ) | ||||
Retirement benefits |
(18 | ) | ||||||
Other |
(41 | ) | (43 | ) | ||||
Total deferred tax liabilities |
(2,066 | ) | (1,894 | ) | ||||
Net deferred tax asset (liability) from continuing operations |
(480 | ) | 64 | |||||
Unrealized loss on derivatives and securities available for sale |
101 | 947 | ||||||
Unrealized loss on interest in PIMCO and other security |
8 | |||||||
Deferred taxes on cumulative changes in accounting principles |
120 | 27 | ||||||
Minimum pension liability and other adjustments |
(10 | ) | 8 | |||||
Net deferred tax asset (liability) |
($269 | ) | $ | 1,054 | ||||
The tax net operating loss carryforwards relate to Federal tax losses incurred in 1998 through 2008 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 2008 with a ten-year carryforward. |
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 and 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 IRS and is audited periodically by some state taxing authorities. The IRS has completed audits of the Company’s tax returns through the tax years ended December 31, 2005 and has commenced audits for tax years 2006, 2007 and 2008. The State of California recently concluded audits for tax years 2003 and 2004 without a material assessment. The Company does not expect the Federal and state audits to result in any material assessments. |
PL-53
19. | SEGMENT INFORMATION | |
The Company has four operating segments: Life Insurance, Investment Management, Annuities & Mutual Funds and Aircraft Leasing. 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 Investment Management segment provides investment and insurance products to institutional investors, pension fund sponsors and structured settlement annuitants, primarily through its home office marketing team and other intermediaries. The segment’s principal products include GICs, synthetic GICs, funding agreement-backed notes issued to institutional investors via medium-term note programs or to the FHLB of Topeka, as well as structured settlement annuities issued in conjunction with personal injury awards and group retirement annuities sold to pension plans. | ||
The Annuities & Mutual Funds segment’s principle products include variable and fixed annuities, and mutual funds, and are offered through multiple distribution sources. Distribution channels include independent planners, financial institutions and national/regional wirehouses. | ||
The Aircraft Leasing segment (Note 9) offers aircraft leasing to the airline industry throughout the world and provides brokerage and asset management services to other third-parties. | ||
The Corporate and Other segment primarily includes investment income, expenses and assets not attributable to the operating segments, and the operations of certain subsidiaries that do not qualify as operating segments. The Corporate and Other segment also includes the interest in PIMCO 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). | ||
The operating segments, excluding Aircraft Leasing, 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 substantially all of its revenues and net income from customers located in the U.S. As of December 31, 2009 and 2008, the Company had foreign investments with an estimated fair value of $7.2 billion and $5.8 billion, respectively. Aircraft leased to foreign customers were $5.0 billion and $4.8 billion as of December 31, 2009 and 2008, respectively. Revenues derived from any customer did not exceed 10% of consolidated total revenues for the years ended December 31, 2009, 2008 and 2007. |
PL-54
The following is segment information as of and for the year ended December 31, 2009: |
Annuities | ||||||||||||||||||||||||
Life | Investment | & Mutual | Aircraft | Corporate | ||||||||||||||||||||
Insurance | Management | Funds | Leasing | and Other | Total | |||||||||||||||||||
REVENUES | (In Millions) | |||||||||||||||||||||||
Policy fees and insurance premiums |
$ | 1,063 | $ | 628 | $ | 581 | $ | 3 | $ | 2,275 | ||||||||||||||
Net investment income |
892 | 759 | 278 | $ | 1 | (68 | ) | 1,862 | ||||||||||||||||
Net realized investment gain (loss) |
55 | 313 | 7 | (222 | ) | 153 | ||||||||||||||||||
OTTIs |
(63 | ) | (176 | ) | (16 | ) | (56 | ) | (311 | ) | ||||||||||||||
Investment advisory fees |
18 | 190 | 208 | |||||||||||||||||||||
Aircraft leasing revenue |
578 | 578 | ||||||||||||||||||||||
Other income |
10 | 112 | 13 | 2 | 137 | |||||||||||||||||||
Total revenues |
1,920 | 1,266 | 1,458 | 599 | (341 | ) | 4,902 | |||||||||||||||||
BENEFITS AND EXPENSES |
||||||||||||||||||||||||
Interest credited |
681 | 379 | 193 | 1,253 | ||||||||||||||||||||
Policy benefits |
363 | 903 | (40 | ) | 1,226 | |||||||||||||||||||
Commission expenses |
353 | 18 | 320 | 691 | ||||||||||||||||||||
Operating expenses |
290 | 26 | 273 | 59 | 134 | 782 | ||||||||||||||||||
Depreciation of aircraft |
227 | 227 | ||||||||||||||||||||||
Interest expense |
182 | 55 | 237 | |||||||||||||||||||||
Total benefits and expenses |
1,687 | 1,326 | 746 | 468 | 189 | 4,416 | ||||||||||||||||||
Income (loss) from continuing operations before
provision (benefit) for income taxes |
233 | (60 | ) | 712 | 131 | (530 | ) | 486 | ||||||||||||||||
Provision (benefit) for income taxes |
66 | (24 | ) | 151 | 39 | (188 | ) | 44 | ||||||||||||||||
Income (loss) from continuing operations |
167 | (36 | ) | 561 | 92 | (342 | ) | 442 | ||||||||||||||||
Discontinued operations, net of taxes |
(20 | ) | (20 | ) | ||||||||||||||||||||
Net income (loss) |
167 | (36 | ) | 561 | 92 | (362 | ) | 422 | ||||||||||||||||
Less: net (income) loss attributable to the
noncontrolling
interest from continuing operations |
(9 | ) | 23 | 14 | ||||||||||||||||||||
Net income (loss) attributable to the Company |
$ | 167 | ($36 | ) | $ | 561 | $ | 83 | ($339 | ) | $ | 436 | ||||||||||||
Total assets |
$ | 28,589 | $ | 13,256 | $ | 57,903 | $ | 6,091 | $ | 2,638 | $ | 108,477 | ||||||||||||
DAC |
1,865 | 59 | 2,882 | 4,806 | ||||||||||||||||||||
Separate account assets |
5,590 | 67 | 46,907 | 52,564 | ||||||||||||||||||||
Policyholder and contract liabilities |
21,133 | 12,526 | 7,728 | 41,387 | ||||||||||||||||||||
Separate account liabilities |
5,590 | 67 | 46,907 | 52,564 |
PL-55
The following is segment information as of and for the year ended December 31, 2008: |
Annuities | ||||||||||||||||||||||||
Life | Investment | & Mutual | Aircraft | Corporate | ||||||||||||||||||||
Insurance | Management | Funds | Leasing | and Other | Total | |||||||||||||||||||
REVENUES | (In Millions) | |||||||||||||||||||||||
Policy fees and insurance premiums |
$ | 943 | $ | 363 | $ | 691 | $ | 1,997 | ||||||||||||||||
Net investment income |
855 | 876 | 178 | $ | 85 | 1,994 | ||||||||||||||||||
Net realized investment gain (loss) |
24 | 51 | (768 | ) | (56 | ) | (749 | ) | ||||||||||||||||
OTTIs |
(69 | ) | (398 | ) | (30 | ) | ($3 | ) | (80 | ) | (580 | ) | ||||||||||||
Realized investment gain on interest in PIMCO |
109 | 109 | ||||||||||||||||||||||
Investment advisory fees |
22 | 233 | 255 | |||||||||||||||||||||
Aircraft leasing revenue |
571 | 571 | ||||||||||||||||||||||
Other income |
11 | 117 | 38 | 1 | 167 | |||||||||||||||||||
Total revenues |
1,786 | 892 | 421 | 606 | 59 | 3,764 | ||||||||||||||||||
BENEFITS AND EXPENSES |
||||||||||||||||||||||||
Interest credited |
661 | 440 | 133 | 1,234 | ||||||||||||||||||||
Policy benefits |
372 | 684 | 150 | 1,206 | ||||||||||||||||||||
Commission expenses |
268 | 18 | 429 | 715 | ||||||||||||||||||||
Operating expenses |
263 | 34 | 317 | 40 | 78 | 732 | ||||||||||||||||||
Depreciation of aircraft |
208 | 208 | ||||||||||||||||||||||
Interest expense |
221 | 17 | 238 | |||||||||||||||||||||
Total benefits and expenses |
1,564 | 1,176 | 1,029 | 469 | 95 | 4,333 | ||||||||||||||||||
Income (loss) from continuing operations before
provision (benefit) for income taxes |
222 | (284 | ) | (608 | ) | 137 | (36 | ) | (569 | ) | ||||||||||||||
Provision (benefit) for income taxes |
61 | (103 | ) | (329 | ) | 48 | 8 | (315 | ) | |||||||||||||||
Income (loss) from continuing operations |
161 | (181 | ) | (279 | ) | 89 | (44 | ) | (254 | ) | ||||||||||||||
Discontinued operations, net of taxes |
(6 | ) | (6 | ) | ||||||||||||||||||||
Net income (loss) |
161 | (181 | ) | (279 | ) | 89 | (50 | ) | (260 | ) | ||||||||||||||
Less: net (income) loss attributable to the
noncontrolling
interest from continuing operations |
(8 | ) | 11 | 3 | ||||||||||||||||||||
Net income (loss) attributable to the Company |
$ | 161 | ($181 | ) | ($279 | ) | $ | 81 | ($39 | ) | ($257 | ) | ||||||||||||
Total assets |
$ | 26,695 | $ | 15,155 | $ | 45,285 | $ | 5,400 | $ | 2,633 | $ | 95,168 | ||||||||||||
DAC |
2,118 | 64 | 2,830 | 5,012 | ||||||||||||||||||||
Separate account assets |
4,525 | 284 | 36,696 | 41,505 | ||||||||||||||||||||
Policyholder and contract liabilities |
20,786 | 14,099 | 7,626 | 42,511 | ||||||||||||||||||||
Separate account liabilities |
4,525 | 284 | 36,696 | 41,505 |
PL-56
The following is segment information for the year ended December 31, 2007: |
Annuities | ||||||||||||||||||||||||
Life | Investment | & Mutual | Aircraft | Corporate | ||||||||||||||||||||
Insurance | Management | Funds | Leasing | and Other | Total | |||||||||||||||||||
REVENUES | (In Millions) | |||||||||||||||||||||||
Policy fees and insurance premiums |
$ | 777 | $ | 224 | $ | 779 | $ | 1,780 | ||||||||||||||||
Net investment income |
803 | 905 | 186 | $ | 9 | $ | 217 | 2,120 | ||||||||||||||||
Net realized investment gain (loss) |
4 | 115 | (99 | ) | 17 | 32 | 69 | |||||||||||||||||
OTTIs |
(3 | ) | (95 | ) | (98 | ) | ||||||||||||||||||
Investment advisory fees |
29 | 298 | 327 | |||||||||||||||||||||
Aircraft leasing revenue |
535 | 535 | ||||||||||||||||||||||
Other income |
9 | 84 | 50 | 4 | 147 | |||||||||||||||||||
Total revenues |
1,619 | 1,149 | 1,248 | 611 | 253 | 4,880 | ||||||||||||||||||
BENEFITS AND EXPENSES |
||||||||||||||||||||||||
Interest credited |
618 | 504 | 144 | 1,266 | ||||||||||||||||||||
Policy benefits |
308 | 535 | 12 | 855 | ||||||||||||||||||||
Commission expenses |
209 | 11 | 470 | 690 | ||||||||||||||||||||
Operating expenses |
252 | 34 | 346 | 49 | 88 | 769 | ||||||||||||||||||
Depreciation of aircraft |
189 | 189 | ||||||||||||||||||||||
Interest expense |
261 | 16 | 277 | |||||||||||||||||||||
Total benefits and expenses |
1,387 | 1,084 | 972 | 499 | 104 | 4,046 | ||||||||||||||||||
Income from continuing operations before
provision (benefit) for income taxes |
232 | 65 | 276 | 112 | 149 | 834 | ||||||||||||||||||
Provision (benefit) for income taxes |
58 | 12 | (6 | ) | 32 | 33 | 129 | |||||||||||||||||
Income from continuing operations |
174 | 53 | 282 | 80 | 116 | 705 | ||||||||||||||||||
Discontinued operations, net of taxes |
11 | 11 | ||||||||||||||||||||||
Net income |
174 | 53 | 282 | 80 | 127 | 716 | ||||||||||||||||||
Less: net income attributable to the noncontrolling
interest from continuing operations |
(2 | ) | (36 | ) | (38 | ) | ||||||||||||||||||
Net income attributable to the Company |
$ | 174 | $ | 53 | $ | 282 | $ | 78 | $ | 91 | $ | 678 | ||||||||||||
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. Prior to May 1, 2007, Pacific Life served in this capacity. 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 $244 million, $287 million and $337 million for the years ended December 31, 2009, 2008 and 2007, 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 $9 million, $7 million and $7 million for the years ended December 31, 2009, 2008 and 2007, respectively. | ||
In addition, effective May 1, 2007, a service plan adopted by the Pacific Select Fund went into effect whereby the fund pays PSD, as distributor of the fund, a service fee in connection with services rendered or procured to or for shareholders of the fund or their variable contract owners. These services may include, but are not limited to, payment of compensation to broker-dealers, including |
PL-57
PSD itself, and other financial institutions and organizations, which assist in providing any of the services. For the years ended December 31, 2009 and 2008, PSD received $86 million and $100 million, respectively, in service fees from the Pacific Select Fund, which are recorded in other income. For the period May 1, 2007 through December 31, 2007, PSD received $74 million in service fees from the Pacific Select Fund, which are also recorded in other income. The service fees were allocated to the operating segments, primarily the Annuities & Mutual Funds segment (Note 19). | ||
As discussed in Note 16, NLGR benefits are reinsured with PAR Bermuda and PAR Vermont. | ||
ACG has derivative swap contracts with Pacific LifeCorp as the counterparty. The notional amounts total $2.0 billion and $1.8 billion as of December 31, 2009 and 2008, respectively. The estimated fair values of the derivatives were net liabilities of $48 million and $106 million as of December 31, 2009 and 2008, respectively. | ||
21. | COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS | ||
The Company has outstanding commitments to make investments primarily in mortgage loans, limited partnerships and other investments, as follows (In Millions): |
Years Ending December 31: | ||||
2010 |
$ | 1,005 | ||
2011 through 2014 |
494 | |||
2015 and thereafter |
91 | |||
Total |
$ | 1,590 | ||
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 $8 million, $10 million and $13 million for the years ended December 31, 2009, 2008 and 2007, 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 $15 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: | ||||
2010 |
$ | 8 | ||
2011 through 2014 |
20 | |||
2015 and thereafter |
2 | |||
Total |
$ | 30 | ||
As of December 31, 2009, ACG has commitments with major aircraft manufacturers to purchase aircraft at an estimated delivery price of $6,370 million with delivery from 2010 through 2017. Such purchase commitments may be funded: |
• | up to $635 million in less than one year, | ||
• | an additional $2,325 million in one to three years, | ||
• | an additional $2,116 million in three to five years, and | ||
• | an additional $1,021 million thereafter. |
As of December 31, 2009, deposits related to these agreements totaled $273 million and are included in other assets. | ||
In connection with an acquisition in 2005, ACG assumed residual value support agreements with expiration dates ranging from 2011 to 2015. The gross remaining residual value exposure under these agreements was $99 million as of December 31, 2009 and 2008. As of December 31, 2009, the Company has estimated that it has no measurable liability under the remaining residual value guarantee agreements. |
PL-58
In connection with the reinsurance of NLGR benefits from Pacific Life to PAR Bermuda and PAR Vermont (Note 16), 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, 2009, a $340 million letter of credit had been issued from this facility for PAR Bermuda. In addition, a letter of credit issued for PAR Vermont totaled $52 million as of December 31, 2009. Pacific LifeCorp guarantees the obligations of PAR Bermuda and PAR Vermont under the letter of credit agreement. | ||
CONTINGENCIES — LITIGATION | ||
During the year ended December 31, 2007, Pacific Life settled a national class action lawsuit, Cooper v. Pacific Life, for a combination of cash distributions and contract credits to owners of qualified annuity contracts who purchased their contracts between August 19, 1998, and April 30, 2002, or paid premium payments during that time period. Pacific Life strongly disagreed with the claims in the lawsuit. The settlement is not considered an admission or concession with respect to any claims made in the lawsuit and did not have a material adverse effect on the Company’s consolidated financial position. Initial distributions were made to eligible class members in the first quarter of 2008 with subsequent annual distributions for four years thereafter. | ||
The Company is a respondent in a number of other 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 | ||
On August 16, 2007, the IRS issued Revenue Ruling 2007-54, which provided the IRS’ interpretation of tax law regarding the computation of the DRD. On September 25, 2007, the IRS issued 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. | ||
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. 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. | ||
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. |
PL-59
In relation to the ACG Trust II securitization (Note 4), Pacific Life is contingently obligated to purchase certain notes from ACG Trust II to cover shortfalls in amounts due to the holders of the notes, up to certain levels as specified under the related agreements. As of December 31, 2009, the maximum potential amount of this future investment commitment was $100 million. | ||
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, Pacific Life 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. | ||
22. | SUBSEQUENT EVENTS | |
The Company has evaluated events subsequent to December 31, 2009 and through March 4, 2010, the date the consolidated financial statements were available to be issued. The Company has not evaluated subsequent events after that date for presentation in these consolidated financial statements. | ||
As of January 1, 2010, the Board of Directors of Pacific LifeCorp and Pacific Life authorized a cash capital contribution to ACG in the amount of $350 million, which could be made up to March 31, 2010. | ||
Effective January 1, 2010, the Investment Management segment’s products were moved into other segments of the Company. Structured settlement and group retirement annuities were moved to the Annuities & Mutual Fund segment and the other institutional investment products became part of the Corporate and Other segment. |
PL-60
(1) |
(a) | Resolution of the Board of Directors of the Depositor dated November 22, 1989 and copies of the Memoranda concerning Pacific Select Exec Separate Account dated May 12, 1988 and January 26, 1993.1 | ||||
(b) | Resolution of the Board of Directors of Pacific Life Insurance Company authorizing conformity to the terms of the current Bylaws.1 | |||||
(2) | Inapplicable | |||||
(3) |
(a) | Distribution Agreement Between Pacific Life Insurance Company and Pacific Mutual Distributors, Inc. (formerly known as Pacific Equities Network)1 | ||||
(b) | Form of Selling Agreement Between Pacific Mutual Distributors, Inc. and Various Broker-Dealers1 | |||||
(c) | Distribution Agreement Between Pacific Select Distributors, Inc. and T. Rowe Price Investment Services, Inc.3 | |||||
(4) |
(a) | Flexible Premium Variable Life Insurance Policy15 | ||||
(b) | Accelerated Living Benefit Rider (form R92-ABR)1 | |||||
(c) | Spouse Term Rider (form R08RTA)11 | |||||
(d) | Children’s Term Rider (form R84-CT)1 | |||||
(e) | Accidental Death Benefit (form R84-AD)1 | |||||
(f) | Disability Benefit Rider (form R84-DB)1 | |||||
(g) | Waiver of Charges (form R08WC)11 | |||||
(h) | Guaranteed Insurability Rider (form R84-GI)1 | |||||
(i) | Annual Renewable Term Rider (form R08RTP)11 | |||||
(j) | Surrender Value Enhancement Rider — Individual (form R08SEI)11 | |||||
(k) | Surrender Value Enhancement Rider — Trust/Executive Benefit (form R08SET)11 | |||||
(l) | Short Term No Lapse Guarantee Rider (form R04PNL)9 | |||||
(m) | Overloan Protection Rider (form R08OLP)11 | |||||
(n) | Minimum Earnings Benefit Rider (form R06MEB)10 | |||||
(o) | SVER Term Insurance Rider (form R09SVERI)13 | |||||
(p) | SVER Term Insurance Rider — Trust/Executive Benefit (form R09SVERT)13 | |||||
(r) | Indexed Fixed Account Rider (form R09IAR)15 | |||||
(5) | Application for Flexible Premium Variable Life Insurance Policy & General Questionnaire11 | |||||
(6) |
(a) | Bylaws of Pacific Life Insurance Company1 | ||||
(b) | Articles of Incorporation of Pacific Life Insurance Company1 | |||||
(c) | Restated Articles of Incorporation of Pacific Life Insurance Company4 | |||||
(d) | Bylaws of Pacific Life Insurance Company As Amended Effective September 1, 20054 |
(7) | Form of Reinsurance Contract1 | |||||||
(8) |
(a) | Participation Agreement between Pacific Life Insurance Company and Pacific Select Fund1 | ||||||
(b) | Participation Agreement with Variable Insurance Products Fund, Variable Insurance Products Fund II and Variable Insurance Products Fund III2 | |||||||
(c) | Service Contract with Fidelity Distributors Corporation2 | |||||||
(d) | Participation Agreement with Merrill Lynch Variable Series Fund, Inc.3 | |||||||
(e) | Administrative Services Agreement with FAM Distributors, Inc.2 | |||||||
(f) | Participation Agreement with T. Rowe Price Equity Series, Inc.3 | |||||||
(g) | Administrative Services Agreement with T. Rowe Price Associates, Inc.3 | |||||||
(h) | Participation Agreement with Van Eck Worldwide Insurance Trust3 | |||||||
(i) | Service Agreement with Van Eck Securities Corporation2 | |||||||
(j) | Participation Agreement between Pacific Life, PSD, American Funds Insurance Series, American Funds Distributors and Capital Research And Management Company3 | |||||||
(k) | Participation Agreement with Janus Aspen Series5 | |||||||
(l) | Distribution and Shareholder Service Agreement with Janus Capital Management LLC5 | |||||||
(m) | Administrative Services Agreement with Janus Distributors LLC5 | |||||||
(n) | Participation Agreement with Lazard Retirement Series, Inc.5 | |||||||
(o) | Service Agreement with Lazard Asset Management Securities LLC5 | |||||||
(p) | Participation Agreement with Legg Mason Partners III5 | |||||||
(q) | Service Agreement with Legg Mason Investor Services, LLC5 | |||||||
(r) | Participation Agreement with MFS Variable Insurance Trust5 | |||||||
(s) | Service Agreement with Massachusetts Financial Services Company5 | |||||||
(t) | Participation Agreement with GE Investments Funds, Inc. | |||||||
(u) | Service Agreement with GE Investments Funds, Inc. | |||||||
(v) | Participation Agreement with Franklin Templeton Variable Insurance Products Trust | |||||||
(1) First Amendment to Participation Agreement | ||||||||
(w) | Administrative Services Agreement with Franklin Templeton Services, LLC | |||||||
(1) First Amendment to Administrative Services Agreement | ||||||||
(x) | Form of Amendment to Fidelity Distributors Corporation Participation Agreement6 | |||||||
(y) | Form of Amendment to Fidelity Investments Institutional Operations Company, Inc. Service Agreement7 | |||||||
(z) | Form of Amendment to Fidelity Distributors Corporation Service Contract8 | |||||||
(aa) | Participation Agreement between Pacific Life Insurance Company, Pacific Life & Annuity and M Fund12 | |||||||
(bb) | Distribution and Services Agreement (Amended and Restated) with GE Investment Distributors, Inc. | |||||||
(9) | Inapplicable | |||||||
(10) | Inapplicable | |||||||
(11) | Opinion and consent of legal officer of Pacific Life as to legality of Policies being registered12 | |||||||
(12) | Inapplicable | |||||||
(13) | Inapplicable | |||||||
(14) | a) | Consent of Registered Public Accounting Firm | ||||||
b) | Consent of Independent Auditors | |||||||
(15) | Inapplicable | |||||||
(16) | Inapplicable | |||||||
(17) | Memorandum Describing Issuance, Transfer and Redemption Procedures15 | |||||||
(18) | Power of Attorney14 |
1 |
Filed as part of Registration Statement on Form N-6 via EDGAR on September 10, 2004, File No. 333-118913, Accession Number 0000892569-04-000869. |
2 |
Filed as part of Post-Effective Amendment No. 2 to the Registration Statement on Form N-6 via EDGAR on February 10, 2005, File No. 333-118913, Accession Number 0000892569-05-000054. |
3 |
Filed as part of Post-Effective Amendment No. 34 to the Registration Statement on Form N-6 via EDGAR on April 19, 2005, File No. 033-21754, Accession Number 0000892569-05-000254. |
4 |
Filed as part of Post-Effective Amendment No. 5 to the Registration Statement on Form N-6 via EDGAR on December 6, 2005, File No. 333-118913, Accession Number 0000892569-05-001150. |
5 |
Filed as part of Post-Effective Amendment No. 9 to the Registration Statement on Form N-6 via EDGAR on April 16, 2007, File No. 333-118913, Accession Number 000892569-07-000444. |
6 |
Filed as Exhibit 8(y) as part of Post-Effective Amendment No. 11 to the Registration Statement on Form N-6 via EDGAR on September 28, 2007, File No. 333-118913, Accession Number 0000892569-07-001219. |
7 |
Filed as Exhibit 8(z) as part of Post-Effective Amendment No. 11 to the Registration Statement on Form N-6 via EDGAR on September 28, 2007, File No. 333-118913, Accession Number 0000892569-07-001219. |
8 |
Filed as Exhibit 8(aa) as part of Post-Effective Amendment No. 11 to the Registration Statement on Form N-6 via EDGAR on September 28, 2007, File No. 333-118913, Accession Number 0000892569-07-001219. |
9 |
Filed as Exhibit 4(q) as part of Post-Effective Amendment No. 21 to the Registration Statement on Form N-6 via EDGAR on March 1, 2004, File No. 333-60461, Accession Number 0001193125-04-032150. |
10 |
Filed as Exhibit 4(x) as part of Post-Effective Amendment No. 28 to the Registration Statement on Form N-6 via EDGAR on December 23, 2007, File No. 333-60461, Accession Number 0000892569-05-001357. |
|
11 |
Filed as part of the Registration Statement on Form N-6 via EDGAR on April 4, 2008, File No. 333 - 150092, Accession Number 0000892569-08-000513. | |
12 |
Filed as part of the Registration Statement on Form N-6 via EDGAR on July 9, 2008, File No. 333-152224, Accession Number 0000892569-08-000978. | |
13 |
Filed as part of the Registration Statement on Form N-6 via EDGAR on February 13, 2009, File No. 333-152224, Accession Number 0000892569-09-000079. | |
14 |
Filed as part of Post-Effective Amendment No. 4 to the Registration Statement on Form N-6 via EDGAR on April 22, 2009, File No. 333-152224, Accession Number 0000892569-09-000468. |
15 |
Filed as part of Post-Effective Amendment No. 7 to the Registration Statement on Form N-6 via EDGAR on January 29, 2010, File No. 333-152224, Accession Number 0000950123-10-006280. |
Name and Address | Positions and Offices with Pacific Life | |
James T. Morris | Director, Chairman, President and Chief Executive Officer | |
Khanh T. Tran | Director, Executive Vice President and Chief Financial Officer | |
Sharon A. Cheever | Director, Senior Vice President and General Counsel | |
Audrey L. Milfs | Director, Vice President and Secretary | |
Michael A. Bell |
Executive Vice President | |
Edward R. Byrd | Senior Vice President and Chief Accounting Officer | |
Denis P. Kalscheur | Senior Vice President and Treasurer | |
Brian D. Klemens | Vice President and Controller |
The address for each of the persons listed above is as follows:
700 Newport Center Drive
Newport Beach, California 92660
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 | ||||||
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 | ||||||
Aviation Capital Group Corp. |
Delaware | 100 | ||||||
ACG Acquisition Corporation V |
Delaware | 100 | ||||||
ACG Acquisition 41 LLC |
Delaware | 100 | ||||||
ACG Acquisition 42 LLC |
Delaware | 100 | ||||||
ACG Acquisition 4063 LLC |
Delaware | 100 | ||||||
ACG Acquisition 4084 LLC |
Delaware | 100 | ||||||
ACG Acquisition 29677 LLC |
Delaware | 100 | ||||||
ACG International Ltd. |
Bermuda | 100 | ||||||
ACG Acquisition Ireland III Limited |
Ireland | 100 | ||||||
ACG Acquisition Ireland IV Ltd. |
Ireland | 100 | ||||||
ACG Acquisition Ireland V Ltd. |
Ireland | 100 | ||||||
ACG
Investment Capital Partners LLC |
Delaware | 50 | ||||||
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 Ireland Limited |
Ireland | 100 | ||||||
ACG Acquisition Labuan Ltd. |
Labuan | 100 | ||||||
ACG Acquisitions Sweden AB |
Sweden | 100 | ||||||
ACG
Acquisition (Bermuda) Ltd. |
Bermuda | 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 30746 LLC |
Delaware | 100 | ||||||
ACG
Acquisition Ireland 2004-1 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 34 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 Aviation Services (International) Inc. |
Washington | 100 | ||||||
Boullioun Aircraft Holding Company, Inc. |
Washington | 100 | ||||||
Boullioun Portfolio Finance III LLC |
Nevada | 100 | ||||||
ACG Funding 2005-1 Holding LLC |
Delaware | 100 | ||||||
ACG Funding Trust 2005-1 |
Delaware | 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 30271 LLC |
Delaware | 100 | ||||||
ACG Acquisition 30286 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 | ||||||
0168 Statutory Trust |
Connecticut | 100 | ||||||
0179 Statutory Trust |
Connecticut | 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 3141 LLC |
Delaware | 100 | ||||||
ACG Acquisition Aruba NV |
Aruba | 100 | ||||||
ACG Trust 2006-1 Holding LLC |
Delaware | 100 | ||||||
ACG Funding Trust 2006-1 |
Delaware | 100 | ||||||
ACG Capital Partners LLC |
Delaware | 50 | ||||||
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 | ||||||
College Savings Bank |
New Jersey | 100 | ||||||
Pacific Asset Funding, LLC |
Delaware | 100 | ||||||
PL Trading Company, LLC |
Delaware | 100 | ||||||
Pacific Life Trade Services, Limited |
Hong Kong | 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 |
# | Abbreviated structure |
|
+ | A Division of Pacific Life Fund Advisors LLC does business as Pacific Asset Management | |
Item 29. Indemnification
(a) | The Distribution Agreement between Pacific Life and Pacific Select
Distributors, Inc. (PSD) provides substantially as follows:
Pacific Life hereby agrees to indemnify and hold harmless PSD and its officers and directors, and employees for any expenses (including legal expenses), losses, claims, damages, or liabilities incurred by reason of any untrue or alleged untrue statement or representation of a material fact or any omission or alleged omission to state a material fact required to be stated to make other statements not misleading, if made in reliance on any prospectus, registration statement, post-effective amendment thereof, or sales materials supplied or approved by Pacific Life or the Separate Account. Pacific Life shall reimburse each such person for any legal or other expenses reasonably incurred in connection with investigating or defending any such loss, liability, damage, or claim. However, in no case shall Pacific Life be required to indemnify for any expenses, losses, claims, damages, or liabilities which have resulted from the willful misfeasance, bad faith, negligence, misconduct, or wrongful act of PSD. |
|
PSD hereby agrees to indemnify and hold harmless Pacific Life, its officers, directors, and employees, and the Separate Account for any expenses, losses, claims, damages, or liabilities arising out of or based upon any of the following in connection with the offer or sale of the contracts: (1) except for such statements made in reliance on any prospectus, registration statement or sales material supplied or approved by Pacific Life or the Separate Account, any untrue or alleged untrue statement or representation is made; (2) any failure to deliver a currently effective prospectus; (3) the use of any unauthorized sales literature by any officer, employee or agent of PSD or Broker; (4) any willful misfeasance, bad faith, negligence, misconduct or wrongful act. PSD shall reimburse each such person for any legal or other expenses reasonably incurred in connection with investigating or defending any such loss, liability, damage, or claim. | ||
(b) | The Form of Selling Agreement between Pacific Life, Pacific Select Distributors, Inc. (PSD) and Various Broker-Dealers provides substantially as follows: | |
Pacific Life and PSD agree to indemnify and hold harmless Selling Broker-Dealer and General Agent, their officers, directors, agents and employees, against any and all losses, claims, damages or liabilities to which they may become subject under the 1933 Act, the 1934 Act, 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 1933 Act, or any prospectus included as a part thereof, as from time to time amended and supplemented, or in any advertisement or sales literature approved in writing by Pacific Life and PSD pursuant to Section IV.E. Of this Agreement. | ||
Selling Broker-Dealer and General Agent agree to indemnify and hold harmless Pacific Life, the Fund and PSD, their officers, directors, agents and employees, against any and all losses, claims, damages or liabilities to which they may become subject under the 1933 Act, the 1934 Act 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: (a) any oral or written misrepresentation by Selling Broker- Dealer or General Agent or their officers, directors, employees or agents unless such misrepresentation is contained in the registration statement for the Contracts or Fund shares, any prospectus included as a part thereof, as from time to time amended and supplemented, or any advertisement or sales literature approved in writing by Pacific Life and PSD pursuant to Section IV.E. of this Agreement, (b) the failure of Selling Broker-Dealer or General Agent or their officers, directors, employees or agents to comply with any applicable provisions of this Agreement or (c) claims by Sub-agents or employees of General Agent or Selling Broker-Dealer for payments of compensation or remuneration of any type. Selling Broker-Dealer and General Agent will reimburse Pacific Life or PSD or any director, officer, agent or employee of either entity for any legal or other expenses reasonably incurred by Pacific Life, PSD, or such officer, director, agent or employee in connection with investigating or defending any such loss, claims, damages, liability or action. This indemnity agreement will be in addition to any liability which Broker-Dealer may otherwise have. |
Item 30. Principal Underwriters
(a) | PSD also acts as principal underwriter for Pacific Select Variable Annuity Separate Account, Separate Account A, 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 31. 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 32. Management Services
Not applicable
Item 33. Fee Representation
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 Life Insurance Policy 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.
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485 (b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 9 to the Registration Statement on Form N-6 to be signed on its behalf by the undersigned, duly authorized, in the City of Newport Beach, and State of California on the day of April 26, 2010.
PACIFIC SELECT EXEC SEPARATE ACCOUNT | ||||
(Registrant) | ||||
BY: | PACIFIC LIFE INSURANCE COMPANY | |||
BY: | ||||
James T. Morris* | ||||
Director, Chairman, President and Chief Executive Officer | ||||
BY: | PACIFIC LIFE INSURANCE COMPANY | |||
(Depositor) | ||||
BY: | ||||
James T. Morris* | ||||
Director, Chairman, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 9 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
Signature | Title | Date | ||||
James T. Morris* |
Director, Chairman, President and Chief Executive Officer |
April 26, 2010 |
||||
Khanh T. Tran* |
Director, Executive Vice President and Chief Financial Officer |
April 26, 2010 |
||||
Sharon A. Cheever* |
Director, Senior Vice President and General Counsel |
April 26, 2010 |
||||
Audrey L. Milfs* |
Director, Vice President and Secretary |
April 26, 2010 |
||||
Michael A. Bell* |
Executive Vice President |
April 26, 2010 |
||||
Edward R. Byrd* |
Senior Vice President and Chief Accounting Officer |
April 26, 2010 |
||||
Denis P. Kalscheur* |
Senior Vice President and Treasurer |
April 26, 2010 |
||||
Brian D. Klemens* |
Vice President and Controller |
April 26, 2010 |
*By: | /s/ SHARON A. CHEEVER | April 26, 2010 | |||
Sharon A. Cheever | |||||
as attorney-in-fact |
(Power of Attorney is contained as Exhibit 18 in Post-Effective Amendment No. 4 to the Registration Statement on Form N-6 for the Pacific Select Exec Separate Account, filed on April 22, 2009, File No. 333-152224, Accession Number 0000892569-09-000468, and incorporated by reference herein.)
This ‘485BPOS’ Filing | Date | Other Filings | ||
---|---|---|---|---|
12/30/23 | ||||
3/31/13 | ||||
4/30/11 | ||||
Effective on: | 5/1/10 | 485BPOS | ||
Filed on: | 4/26/10 | 485BPOS | ||
3/31/10 | ||||
3/4/10 | ||||
2/26/10 | ||||
1/29/10 | 485APOS | |||
1/15/10 | ||||
1/1/10 | ||||
12/31/09 | 24F-2NT, N-30D, NSAR-U | |||
12/30/09 | 485BXT, UPLOAD | |||
11/2/09 | ||||
9/30/09 | ||||
7/6/09 | ||||
5/26/09 | ||||
5/22/09 | ||||
5/1/09 | 485BPOS | |||
4/30/09 | ||||
4/22/09 | 485BPOS | |||
3/31/09 | ||||
2/26/09 | NSAR-U | |||
2/13/09 | 485APOS | |||
1/1/09 | ||||
12/31/08 | 24F-2NT, N-30D, NSAR-U | |||
10/15/08 | 497 | |||
9/10/08 | ||||
7/9/08 | N-6 | |||
5/2/08 | 497, 497J | |||
5/1/08 | 485BPOS | |||
4/4/08 | N-6 | |||
3/31/08 | ||||
1/1/08 | ||||
12/31/07 | 24F-2NT, N-30D, NSAR-U, NT-NSAR | |||
12/23/07 | ||||
9/28/07 | 485BPOS | |||
9/25/07 | ||||
8/16/07 | ||||
6/29/07 | ||||
6/20/07 | 497 | |||
5/1/07 | 485BPOS | |||
4/16/07 | 485BPOS | |||
1/1/07 | ||||
11/1/06 | 485BPOS | |||
10/1/06 | ||||
8/18/06 | ||||
1/1/06 | ||||
12/31/05 | 24F-2NT, N-30D, NSAR-U | |||
12/23/05 | 485APOS | |||
12/6/05 | 485BPOS | |||
9/1/05 | ||||
6/30/05 | N-30D | |||
5/1/05 | 485BPOS | |||
4/19/05 | 485BPOS | |||
2/10/05 | 485BPOS | |||
9/10/04 | N-6 | |||
3/1/04 | 485APOS, NSAR-U | |||
4/30/02 | 485BPOS | |||
8/19/98 | N-30D | |||
9/1/97 | ||||
4/1/94 | ||||
1/26/93 | ||||
List all Filings |