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1. IUL illustrations may not appropriately set realistic consumer expectations as to the product’s performance risks; and

2. IUL illustrations may not sufficiently disclose product charges. We believe that each of these criticisms can be addressed through improved and more effective disclosure.

Setting Consumer Expectations – Illustrations Should Show Both Upside Potential and Downside Risk

Many IUL illustrations are created assuming one credited rate will be applied for all policy years. In other words, the illustration assumes that the index will grow at the same rate each and every year the policy remains in force. Often, the rate assumed is the maximum AG 49 rate. While this illustration is supported under AG 49, the likelihood of this assumption being realized is, of course, small. Importantly, lost in any constant rate illustration are the normal, year-to-year fluctuations in the index growth rate.

For consumers to better understand how an index-based product operates, and to appropriately set expectations, illustrations should show a reasonably-expected range in the index growth rate. By varying the rate year-to-year, consumers will better understand the short-term risk that an index segment will receive credit at the floor (typically zero), as well as the long-term risk that lower-than-expected credits may require additional premium.

Demonstrating variability in the index growth rate may also help demonstrate risks related to higher-cost policies, including charged-for multipliers. Specifically, while multipliers may push expected policy credits higher in positive index growth years, additional charges may further depress credits in years when the index growth is negative.

We believe that an illustration that applies a range of potential returns to policy mechanics, showing both potential upside and downside under various alternative market scenarios, such as those derived from historical equity growth returns, will help consumers better understand the potential volatility associated with IUL products. The NAIC has established some precedent for this approach in its Annuity Disclosure Model Regulation’s use of historical returns.1

Pacific Life has developed a draft supplemental demonstration, whereby various historical returns are used to depict a range of potential returns, which we’ve attached hereto as part of a Summary Page Concept, Exhibit 1. By using historical periods where returns would result in the greatest and least index value growth, as prescribed by the Annuity Disclosure Model, IUL illustrations may better depict the variation in index value growth that a consumer may reasonably expect.

Additionally, we believe that such a demonstration will also facilitate comparisons across IUL products with different risk profiles. For example, those products with paid-for multipliers can expect to show a broader range of variation using various historical scenarios than those without

1 NAIC Annuity Disclosure Model Regulation, Section 6F(9)

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such features. The difference between the positive and negative historical scenarios will help consumers visualize the product’s performance risk.

Finally, such a demonstration could include additional product features, including index loans and buy-up accounts, that would show the related risks, including the incremental impact of those features and their costs.

Clearly Disclosing Product Charges

Considering the increases in product complexity, it remains important that consumers understand policy charges and their potential impact on product performance. Pacific Life has developed and deployed illustration pages detailing both the policy charges and policy credits, a sample of which is attached hereto as Exhibit 2. You’ll note that the Policy Credits pages break out Basic Indexed Interest Credits from both Persistency Credits and the Enhanced Performance Factor Rider Credits, making clear to the consumer the composition of the Total Indexed Interest Credit. The Policy Credits pages also call out the Enhanced Performance Factor Rider Charge, which helps consumers understand the significance of the charge as related to the illustrated credit. Similarly, the Policy Charges pages detail premiums, deductions, credits and policy values.

Together, the illustration’s Policy Credits and Policy Charges pages attempt to clearly identify both policy charges and credits. Ensuring that these or similar break-out pages are provided to consumers for each IUL sale will help bring heightened transparency to these products.

Of course, this is only one example of how insurers might provide more effective disclosure of charges to consumers.

That said, we respectfully submit the following comments in response to Items 13 through 16: Item 13. Clarify whether charges can impact assumed earned interest underlying the DCS It is our understanding that insurers have various reasonable interpretations of AG 49 and the application of the 145% limit that support IUL bonus features. We support clarification of the 145% limit that is consistent with those interpretations. Item 14. Limit the use of variable / index loans Pacific Life believes all product features should be permitted to be appropriately illustrated and supports illustration of variable loans distinctly from fixed or other loans. While we would support clarity around the illustrated interest rate credited and the rate charged and whether they should be inclusive of any bonus or multipliers, we believe that effective disclosure should be considered. Effective disclosure would offer consumers an improved depiction of any downside impacts that selecting a variable loan may have on their policy performance.

Item 15. Have consistent treatment of various IUL product types Pacific Life supports consistent treatment of different IUL product designs while appropriately communicating to consumers a product’s risk/reward profile, but we need to better understand

EXHIBIT 1

SAMPLE SUMMARY PAGE CONCEPT

Summary Page ConceptThis is still a preliminary concept and is intended only for the purposes of illustrating how disclosure may be made more effective. Other ideas about how to provide more meaningful disclosure to consumers exist and we continue to support their discussion.

The Summary Page concept suggests that a page or two be inserted at the beginning of all IUL illustrations that conveys to consumers the potential outcomes of their policy under multiple scenarios.

Scenarios should be standardized for all products and could be derived from existing AG 49 historical scenarios.

Aside from the numerical aspects, the Summary Page should also include:

• Information on why the sequence of returns is relevant and important

• Information on what the low- and high-case scenarios are and how they were derived

• Plain-language description about what the information being shown is and any assumptions made

• A signature requirement

The next slide shows how a consumer would be able to better understand the impacts of features that add additional potential benefits along with additional charges, including multipliers. The difference between the high and low scenarios represents a reasonable range of expected credits over time. This type of demonstration may help better set consumer’s expectations.

Summary Page

Key Information

Metric Worst Scenario* Illustrated Scenario Best ScenarioCSV at yr5 56,554 56,554 56,554

CSV at yr10 56,554 56,554 56,554CSV at yr15 56,554 56,554 56,554

CSV at yr20 56,554 56,554 56,554CSV at yr25 56,554 56,554 56,554CSV at yr30 56,554 56,554 56,554CSV at yr45 56,554 56,554 56,554CSV at yr60 56,554 56,554 56,554CSV at yr75 56,554 56,554 56,554

Additional Information

Managing Expectations • Product A: No Multiplier • Product B: Multiplier

Metric Bad Scenario Illustrated Scenario High ScenarioCSV at yr5 57,374 60,664 62,324

CSV at yr10 150,775 163,281 186,399CSV at yr15 256,071 318,169 400,640CSV at yr20 353,800 541,173 706,461CSV at yr25 110,760 466,456 974,677CSV at yr30 N/A 368,637 1,071,889CSV at yr45 N/A 62,157 2,416,844CSV at yr60 N/A 79,729 5,108,141CSV at yr75 N/A 10,785 20,024,225

Metric Low Scenario* Illustrated Scenario High ScenarioCSV at yr5 56,554 58,348 59,506

CSV at yr10 145,968 151,570 162,566CSV at yr15 257,137 284,599 320,403CSV at yr20 379,261 464,784 530,925CSV at yr25 217,784 391,054 598,123CSV at yr30 25,080 303,994 590,589CSV at yr45 N/A 49,925 914,219CSV at yr60 N/A 61,183 1,523,029CSV at yr75 N/A 8,335 6,026,219

Metric Low Scenario Illustrated Scenario High ScenarioSum of Premiums 300,000 300,000 300,000

Sum of Distributions 427,467 811,680 811,680Lapse Year 31 N/A N/A

Metric Low Scenario Illustrated Scenario High ScenarioSum of Premiums 300,000 300,000 300,000

Sum of Distributions 348,431 991,840 991,840Lapse Year 28 N/A N/A

EXHIBIT 2

SAMPLE POLICY CHARGES AND CREDITS PAGES

  

Pacific Discovery Xelerator IUL 2 - GPT - Life Insurance IllustrationFlexible Premium Indexed Adjustable Life Insurance

Form Series ICC15 P15IUL or P15IUL based on state of policy issueFor Presentation in MN

Policy CreditsPolicy CreditsPolicy CreditsPolicy Credits

I-1Y Life Insurance Producer: For:Pacific Life Insurance Company, 45 Enterprise, Aliso Viejo, CA 92656

19.10.6950D.H Run: 1/11/2019 1:26 PM PDX IUL 2 - GPT - NonGI

This report is not complete and cannot be presented without the Basic Illustration.  Please refer to the Basic Illustration for guaranteedelements and other important information.  Non-guaranteed elements are not guaranteed.

Fixed Account Indexed AccountsEnhanced Enhanced

Performance PerformanceBasic Fixed Persistency Total Fixed Basic Indexed Persistency Factor Rider Total Indexed Factor Rider

Year Interest Credit Credit Credit Interest Credit Credit Credit Interest Credit Charge1 Total Credit(1) (2) (3) (4) (5) (6) (7) (8) (9)

1 0 0 0 179 0 0 179 0 1792 0 0 0 279 0 300 578 240 5783 0 0 0 414 0 445 859 350 8594 0 0 0 577 0 620 1,197 482 1,1975 0 0 0 768 0 825 1,593 637 1,5936 0 0 0 986 0 1,059 2,044 814 2,0447 0 0 0 1,229 0 1,320 2,549 1,013 2,5498 0 0 0 1,501 0 1,612 3,113 1,234 3,1139 0 0 0 1,805 0 1,937 3,742 1,481 3,742

10 0 0 0 2,139 0 2,294 4,433 1,753 4,433Total 0 0 0 9,877 0 10,411 20,288 8,004 20,288

11 0 0 0 2,524 107 2,707 5,337 2,064 5,33712 0 0 0 2,963 227 3,176 6,365 2,421 6,36513 0 0 0 3,435 354 3,680 7,469 2,805 7,46914 0 0 0 3,942 489 4,222 8,654 3,218 8,65415 0 0 0 4,487 640 4,805 9,932 3,661 9,93216 0 0 0 5,071 803 5,427 11,301 4,135 11,30117 0 0 0 5,697 977 6,095 12,769 4,643 12,76918 0 0 0 6,372 1,159 6,814 14,345 5,190 14,34519 0 0 0 7,099 1,365 7,587 16,052 5,778 16,05220 0 0 0 7,883 1,578 8,422 17,883 6,412 17,883

Total 0 0 0 59,350 7,698 63,346 130,394 48,331 130,394

21 0 0 0 8,757 1,821 8,247 18,825 6,256 18,82522 0 0 0 9,690 2,091 7,894 19,675 5,968 19,67523 0 0 0 10,687 2,361 7,340 20,388 5,530 20,38824 0 0 0 11,747 2,656 6,561 20,965 4,926 20,96525 0 0 0 12,875 2,943 5,531 21,349 4,138 21,34926 0 0 0 14,025 3,278 6,023 23,327 4,505 23,32727 0 0 0 15,268 3,407 6,554 25,229 4,901 25,22928 0 0 0 16,599 3,528 7,122 27,249 5,324 27,24929 0 0 0 18,025 3,688 7,730 29,443 5,777 29,44330 0 0 0 19,559 3,794 8,384 31,737 6,264 31,737

Total 0 0 0 196,584 37,264 134,732 368,581 101,922 368,581

31 0 0 0 21,207 3,945 9,086 34,239 6,787 34,23932 0 0 0 22,986 4,093 9,843 36,922 7,350 36,92233 0 0 0 24,908 4,238 10,661 39,807 7,958 39,80734 0 0 0 26,992 4,378 11,547 42,917 8,617 42,91735 0 0 0 29,257 4,514 12,510 46,281 9,332 46,28136 0 0 0 31,698 4,640 13,547 49,885 10,104 49,88537 0 0 0 34,303 3,853 14,653 52,809 10,926 52,80938 0 0 0 37,016 2,900 15,804 55,720 11,782 55,72039 0 0 0 39,833 1,975 16,998 58,806 12,670 58,80640 0 0 0 42,760 1,004 18,237 62,001 13,591 62,001

Total 0 0 0 507,545 72,806 267,618 847,969 201,038 847,969

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Pacific Discovery Xelerator IUL 2 - GPT - Life Insurance IllustrationFlexible Premium Indexed Adjustable Life Insurance

Form Series ICC15 P15IUL or P15IUL based on state of policy issueFor Presentation in MN

Policy CreditsPolicy CreditsPolicy CreditsPolicy Credits

I-1Y Life Insurance Producer: For:Pacific Life Insurance Company, 45 Enterprise, Aliso Viejo, CA 92656

19.10.6950D.H Run: 1/11/2019 1:26 PM PDX IUL 2 - GPT - NonGI

This report is not complete and cannot be presented without the Basic Illustration.  Please refer to the Basic Illustration for guaranteedelements and other important information.  Non-guaranteed elements are not guaranteed.

Column DescriptionsColumn DescriptionsColumn DescriptionsColumn DescriptionsColumn NameColumn NameColumn NameColumn Name DescriptionDescriptionDescriptionDescription

YearYearYearYear The number of years from when the policy was issued.

Fixed AccountFixed AccountFixed AccountFixed AccountBasic Fixed Interest CreditBasic Fixed Interest CreditBasic Fixed Interest CreditBasic Fixed Interest Credit(1)(1)(1)(1)

The credit that the Fixed Account earns due to the assumed current interest rate.

Persistency Credit (2)Persistency Credit (2)Persistency Credit (2)Persistency Credit (2) The credit that the Fixed Account earns due to the non-guaranteed Fixed AccountPersistency Credit factor.

Total Fixed Credit (3)Total Fixed Credit (3)Total Fixed Credit (3)Total Fixed Credit (3) The Basic Fixed Interest Credit (1) plus the Fixed Account Persistency Credit (2) equals theTotal Fixed Credit (3).

Indexed AccountsIndexed AccountsIndexed AccountsIndexed AccountsBasic Indexed InterestBasic Indexed InterestBasic Indexed InterestBasic Indexed InterestCredit (4)Credit (4)Credit (4)Credit (4)

The Indexed Interest Credit that each Indexed Account earns at segment maturity.

Persistency Credit (5)Persistency Credit (5)Persistency Credit (5)Persistency Credit (5) The portion of the Segment Indexed Credits that are earned due to the Indexed AccountPersistency Credit factor.

Enhanced PerformanceEnhanced PerformanceEnhanced PerformanceEnhanced PerformanceFactor Rider Credit (6)Factor Rider Credit (6)Factor Rider Credit (6)Factor Rider Credit (6)

The portion of the Segment Indexed Credits that are earned due to the EnhancedPerformance Factor Rider.

Total Indexed InterestTotal Indexed InterestTotal Indexed InterestTotal Indexed InterestCredit (7)Credit (7)Credit (7)Credit (7)

The Basic Indexed Credit (4), the Indexed Account Persistency Credit (5) plus the EnhancedPerformance Factor Rider Credit (6) equals the Total Indexed Credit (7).

Enhanced PerformanceEnhanced PerformanceEnhanced PerformanceEnhanced PerformanceFactor Rider Charge (8)Factor Rider Charge (8)Factor Rider Charge (8)Factor Rider Charge (8)

The charge associated with the Enhanced Performance Factor Rider.

Total Credit (9)Total Credit (9)Total Credit (9)Total Credit (9) The Total Fixed Credit (3) plus the Total Indexed Credit (7) equals the Total Credit (9).

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Pacific Discovery Xelerator IUL 2 - GPT - Life Insurance IllustrationFlexible Premium Indexed Adjustable Life Insurance

Form Series ICC15 P15IUL or P15IUL based on state of policy issueFor Presentation in MN

Policy ChargesPolicy ChargesPolicy ChargesPolicy ChargesAll assumptions are based on non-guaranteed values unless otherwise stated.

I-1Y Life Insurance Producer: For:Pacific Life Insurance Company, 45 Enterprise, Aliso Viejo, CA 92656

19.10.6950D.H Run: 1/11/2019 1:26 PM PDX IUL 2 - GPT - NonGI

This report is not complete and cannot be presented without the Basic Illustration.  Please refer to the Basic Illustration for guaranteed elements and other important information. Non-guaranteed elements are not guaranteed.

What What IsYou What We Deduct  Added What Your Policy Values Are1 Pay

                 Non- Non- Non-

Guaranteed Administrative Guaranteed Guaranteed Policy Cash AlternatePremium Premium and Rider Coverage Cost of Total Interest Accumulated Surrender Surrender Accumulated

Year Age Outlay* Loads2 Charges Charge Insurance Charges Credit1 Value Charge Value Value

1 45 5,000 -295 -128 -2,852 -294 -3,569 179 1,610 4,447 0 1,4902 46 5,000 -295 -373 -2,424 -399 -3,490 578 3,697 2,226 1,471 3,0883 47 5,000 -295 -488 -1,996 -471 -3,251 859 6,306 2,000 4,306 4,9614 48 5,000 -295 -628 -1,711 -504 -3,138 1,197 9,365 1,778 7,587 6,9865 49 5,000 -295 -792 -1,426 -507 -3,020 1,593 12,939 1,556 11,382 9,1706 50 5,000 -295 -979 -1,283 -488 -3,046 2,044 16,937 1,335 15,603 11,3727 51 5,000 -295 -1,188 -1,141 -456 -3,080 2,549 21,406 1,113 20,293 13,5838 52 5,000 -295 -1,422 -998 -411 -3,126 3,113 26,393 887 25,506 15,7929 53 5,000 -295 -1,683 -855 -351 -3,185 3,742 31,950 443 31,506 17,985

10 54 5,000 -295 -1,971 -855 -285 -3,406 4,433 37,976 0 37,976 19,999Total 50,000 -2,950 -9,653 -15,541 -4,167 -32,312 20,288

11 55 5,000 -295 -2,299 0 -348 -2,943 5,337 45,371 0 45,371 24,72512 56 5,000 -295 -2,678 0 -440 -3,413 6,365 53,324 0 53,324 29,45213 57 5,000 -295 -3,084 0 -546 -3,926 7,469 61,867 0 61,867 34,16714 58 5,000 -295 -3,522 0 -656 -4,473 8,654 71,048 0 71,048 38,86515 59 5,000 -295 -3,992 0 -797 -5,083 9,932 80,896 0 80,896 43,51416 60 5,000 -295 -4,494 0 -1,008 -5,797 11,301 91,400 0 91,400 48,04417 61 5,000 -295 -5,033 0 -1,136 -6,464 12,769 102,704 0 102,704 52,53518 62 5,000 -295 -5,614 0 -1,273 -7,182 14,345 114,867 0 114,867 56,97619 63 5,000 -295 -6,239 0 -1,416 -7,949 16,052 127,970 0 127,970 61,36320 64 5,000 -295 -6,913 0 -1,551 -8,759 17,883 142,095 0 142,095 65,700

Total 100,000 -5,900 -53,521 -15,541 -13,338 -88,300 130,394

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