SecProbe.io

CORRESP
1
filename1.htm

		FlexGuard S3 Correspondence 4-9 333-236098 Combined Document

Richard H. Kirk

Vice President, Corporate Counsel

 The Prudential Insurance Company of America

213 Washington Street, Newark, NJ  07102-2917

Tel   203-925-3707

richard.kirk@prudential.com

April 8, 2020

VIA EDGAR

Alberto H. Zapata, Esq.

Senior Counsel

Disclosure Review and Accounting Office

Division of Investment Management

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC  20549

Re:

 Response to SEC Staff Comments on Registration Statements

Prudential Annuities Life Assurance Corporation Variable Account B

Registration Statement on Form N-4, SEC File Nos. 333-236099 and 811-05438

Prudential Annuities Life Assurance Corporation

Registration Statement on Form S-3, SEC File No. 333-236098

Dear Mr. Zapata:

On behalf of the above-referenced Registrants, below are responses to Staff comments received by letter dated March 27, 2020 to the registration statements noted above.  Included in this submission is a revised prospectus for the B Series contract which is marked to show the changes described below.  Applicable comments will also be applied to the I Series prospectus.  The staff’s comments and our responses are as follows:

1. General Comments

a.

 Please confirm that all missing information, including all exhibits, will be filed in

pre-effective amendments to the registration statements. We may have further comments when you supply the omitted information.

b.

 Please clarify supplementally whether there are any types of guarantees or support agreements with third parties to support any contract features or benefits, or whether

Alberto H. Zapata, Esq.

April 8, 2020

Page 2

Prudential Annuities Life Assurance Corporation (“PALAC”) will be solely responsible for any benefits or features associated with the contract.

c.

 Please revise the prospectus where necessary in order to clarify references to the indexed investment options and references to the variable subaccounts. For example, the language of the Partial Withdrawals subsection in the Access To Your Money subsection refers only to the indexed investment options, but this is not clear from the title of the subsection. Please also ensure that terms are used consistently. For example, the prospectus alternates between “portfolios” and “Portfolios.”

d.

 On the cover page and elsewhere, the registration statement refers to the product as an

“index-linked variable annuity.” To avoid the potential for investor confusion, please use a different naming convention for the product, such as an “index linked and variable combination annuity.”

Responses:

1.a.    We confirm that all missing information, including all exhibits, will be filed in pre-effective amendments to the registration statements.

1.b.    There are no types of guarantees or support agreements with third parties to support any contract features or benefits.  Prudential Annuities Life Assurance Corporation is solely responsible for any benefits or features associated with the contract.

1.c.    We have revised the prospectus where necessary in order to clarify references to the index strategy options and references to the variable subaccounts.  We have also endeavored to ensure that terms are used consistently.  These changes are marked in the revised prospectus which is included with this submission.  For example, we have revised the title of the Partial Withdrawals subsection in the Access to Account Value section of the prospectus to read, “Partial Withdrawals and Interim Value of Index Strategies.”

1.d.    We will use the following naming convention to describe the product: “index-linked and variable annuity”.  Based on our conversations, we will also use the product marketing name, “Prudential FlexGuard.”

2. Comment - Cover Page

Please add disclosure to the cover page:

Alberto H. Zapata, Esq.

April 8, 2020

Page 3

a.

 explaining that the prospectus describes all material rights and obligations of annuity purchasers under the contract;

b.

 explaining that payments PALAC makes under the contract regarding the Annuity are subject to the creditworthiness and claims paying ability of PALAC;

c.

 identifying the available Indexed Strategies in chart form with columns for the index names, Index Strategy Terms, and Buffer percentages;

d.

 stating that the risk of loss can become greater in the case of an early withdrawal due to any charges and adjustments imposed on such withdrawals. Please also note, if this is the case (such as when the implied volatility of the instruments used to calculate Interim Value has increased) that these adjustments can result in loss even when the index has risen; and

e.

 stating that the prospectus describes all material rights and obligations of the purchaser under the annuity contract.

Responses:

2.a.    We have added disclosure to the cover page as follows: “This prospectus describes all material rights and obligations of Annuity purchasers under the Annuity contracts.”

2.b.    We have added a supplemental disclosure currently on the cover page as follows: “The guarantees provided by the Annuity contracts and payments PALAC makes under the Annuity contracts are the obligations of, and subject to the creditworthiness and claims paying ability of, PALAC.”

2.c.    We have added a chart on the cover page identifying the available Index Strategies in the form you describe.

2.d.    We have added disclosure to the cover page as follows: “The risk of loss may be greater in the case of an early withdrawal due to any charges and adjustments applied to such withdrawals.  These charges and adjustments may result in loss even when the value of an Index has increased.”

2.e.    This comment is the same as comment 2.a.  We will add the disclosure as described in our response to comment 2.a.

3.Comment - Special Terms (pp. 1-2)

Alberto H. Zapata, Esq.

April 8, 2020

Page 4

The definition for the terms Participation Rate refers to other terms, Step Rate Plus Index Strategy and Tiered Participation Rate, that are not themselves defined in this section. Please revise this section to avoid forcing investors to look later in the prospectus for terms you are using earlier in the prospectus.

Response:    We have revised this section as requested.

4.Comment - Expense Tables and Expense Examples (pp. 4-6)

a.

 Please confirm that all maximum guaranteed charges for the expenses listed in the tables on page 4 are disclosed. The maximum charges must precede any current fees listed.

b.

 Please include in the preamble to the portfolio company expenses the applicable date for such expenses. Please confirm the date on which the obligation to provide fee waiver or expense reimbursement for the International Growth Portfolio or the Total Return Series terminates.

c.

 Please confirm that the most expensive combinations of riders are shown in the expense examples.

Responses:

4.a.     We confirm that the maximum guaranteed charges are disclosed in the table on page 4 which are also the current charges.

4.b.     We have included in the preamble to the portfolio company expenses the applicable date for such expenses, which is December 31, 2019.  We confirm the date on which the obligation to provide fee waiver or expense reimbursement for the International Growth Portfolio and the Total Return Series as continuing through at least April 30, 2021.

4.c.     We confirm that the most expensive combinations of fees and expenses associated with the Annuity contract are shown in the expense examples.

5. Comment - Summary (pp. 8-9)

a.

 With regard to the prospectus registered on Form S-3, please move the Summary and the Risk Factors section before the Summary of Fees and Expenses, Expense Examples

Alberto H. Zapata, Esq.

April 8, 2020

Page 5

and Condensed Financial Information sections. See Reg S-K § 105. Alternatively, please consider including the Summary of Fees and Expenses and Expense Examples as a subsection of the Summary section.

b.

 Please expand the discussion of the differences between the Index Strategy Allocation Options and the Variable Investment Subaccount options. Please provide a more fulsome discussion addressing the major differences between these benefit choices, including the nature of the assets used to pay benefits and structural legal differences.

c.

 Please expand the description of the Strategies to address how they operate. Please describe each one briefly, in one or two sentences, and also describe why an investor might choose one Strategy over another.

d.

 Please add disclosure detailing the length of the Index Strategy Terms available as part of the Index Strategies as well as the reference indices that will be available.

e.

 Please add disclosure explaining how the Cap Rate and Buffer are reset and any attendant right to reject resets.

f.

 Explain whether contract holders can transfer between Variable Investment Subaccounts and between Variable Investment Subaccounts and Index Strategies. Please include whether there is any charge for such transfers. Add any transfer charges, if applicable, to the fee tables.

g.

 Please include a description of any rights the registrant has to change or discontinue an index, either at the end or in the middle of an Index Strategy Term; include whether the registrant can opt out of renewing segments that offer downside protections. Also, disclose if the registrant has a right to recalculate index performance from the beginning of an Index Strategy Term using a new index introduced in the middle of the term.

h.

 Please add disclosure explaining what charges and adjustments are imposed if the investor makes withdrawals from a segment before the end of an Index Strategy Term. Please disclose any adjustment that uses derivatives to estimate what the performance of the Index would be had the investor held the withdrawn amounts to the end of the Index Strategy Term. Please prominently note if this adjustment may result in a loss to the investor even if the reference index at the time of withdrawal is higher than the beginning of the Index Strategy Term.

Responses:

5.a.    We have implemented the alternative approach you describe in your comment – that is, include the Summary of Fees and Expenses and Expense Examples as a subsection of the

Alberto H. Zapata, Esq.

April 8, 2020

Page 6

Summary section – in order to meet the requirements of Form N-4 as well as Form S-3.  These changes are marked in the revised prospectus which is included with this submission.

5.b.    We have added disclosure to the Summary section to expand the discussion of the differences between the Index Strategy Allocation Options and the Variable Investment Subaccount Options.      These changes are marked in the revised prospectus which is included with this submission.

5.c.    We have added disclosure to the Summary section to expand the description of each of the Strategies to address how they operate.  These changes are marked in the revised prospectus which is included with this submission.

5.d.    We added the following disclosure to the Summary section: “We currently offer one-year, three-year and six-year Index Strategy Terms.  We currently offer Index Strategies based on the S&P 500 Index and the MSCI EAFE Index.”

5.e.     We have added disclosure to the Summary section as follows: “New Cap Rates will be set for Index Strategy Terms upon Index Anniversary Dates.  These Cap Rates will be set based upon the current interest rate and market environment.  New Buffers may be offered as new Index Strategy Options.”  Any changes to Cap Rates and Buffers do not impact Owners who are already allocated to an Index Strategy.  They will be invested in that Index Strategy with existing Cap Rates and Buffers until the Index Strategy End Date.

5.f.    We have added the following disclosure to the Summary section:

“You may transfer Account Value between Variable Investment Subaccounts or from Index Strategies to Variable Investment Subaccounts at any time.  On each Index Anniversary Date, you may reallocate Account Value allocated to Variable Investment Subaccounts and any Index Strategy(ies) that has reached an Index Strategy End Date into any available Index Strategy.  There is no charge for such transfers.”

The transfer and reallocation guidelines are explained more expansively in the Managing Your Account Value section of the prospectus.

5.g.    We have added the following disclosure to the Summary section:

“Indices: We reserve the right to add and remove an Index at any time. If an Index is discontinued or changed in a manner that results in a material change in the formula or method of calculating the Index, we reserve the right to substitute it with an alternative Index and will notify you of any such substitution.  Upon substitution of an Index, we will calculate your Index Return on the replaced Index up until the date of substitution and the substitute Index from the date of substitution to the Index Strategy End Date.  An Index substitution will not change your Index Strategy. A substitution

Alberto H. Zapata, Esq.

April 8, 2020

Page 7

of an Index between the Index Strategy Start Date and Index Strategy End Date may impact the calculation of your Index Credit on the Index Strategy End Date. When we notify you of any substitution of an Index, we will also inform you of the potential impacts to your Index Credit. You may transfer your allocation in the impacted Index Strategy, at Interim Value, to the Variable Investment Subaccounts, where you may then use the funds to start a new Index Strategy on the next Index Anniversary Date.”

5.h.    We have added disclosure in the Summary section explaining what charges and adjustments are imposed if the investor makes withdrawals from an Index Strategy before the end of the Index Strategy Term, including any adjustment that uses derivatives to estimate what the return of the Index would be had the investor held the withdrawn amounts to the Index Strategy End Date.  These changes are marked in the revised prospectus which is included with this submission.

6.Comment - Risk Factors (pp. 10-11)

a.

 The Buffers subsection of the prospectus states that Point to Point Index Strategy Terms can be more than one year and seems to suggest that the Buffers are measured across the entirety of the Term. If so, please note this fact in the Risk of Loss – Index Strategies subsection and that losses can cumulatively over the years of a multi-year term exceed the limit of a Buffer.

b.

  Please disclose whether PALAC is reserving the right to change Cap Rates and Buffers between Index Strategy Terms. If so, state that investors should evaluate whether such changes in the new Index Strategy Term are appropriate for their investment goals and provide context regarding the effect of these changes.

c.

 In the Limitation on Index Strategy Returns section, note the risk that even if the index has risen by an amount less than the applicable cap, amounts credited under the Step Rate Strategy will be less than the rise in the index if the rate increase is more than the Step Rate, which maybe as little as 1%.

d.

 In the Reallocation of Index Strategies subsection, the prospectus notes that amounts available at an Index Strategy Term End Date for which there are no reinvestment instructions or for which the same Index Strategy isn’t available will be transferred to the Holding Account until the next Anniversary Date. In addition, in the Managing Your Account Value, the prospectus notes that reallocation instructions must be received at least two days (currently noted in brackets) prior to the Index Anniversary Date. Please note that failure to provide those instructions on a timely basis, i.e., by two days before the start of a Strategy will result in the amounts being transferred to the Holding Account, which earns money market rates and