Letters to the Editor
The Wall Street Journal
4300 Route 1 Ridge Road, Bldg #1
South Brunswick, NJ 08852

To the Editor:

We are writing in response to the recent article entitled "How Annuity Holders Can Pull a Switcheroo" by Karen Damato, which appeared in The Wall Street Journal on December 6, 2002. The article suggests that investors can increase the sums that their heirs will receive when the annuity holders die by withdrawing most of the cash from their annuity and making a partial exchange for a second annuity. We are concerned that the article emphasizes the death benefit to such a degree that other equally or in some cases more important points may be overlooked and, as a result, could cause readers to enter into exchange transactions that are not appropriate.

The decision to exchange one variable annuity for another requires careful consideration of a number of factors in addition to attempting to maximize death benefits for the investor's heirs in the event of the death of the investor during the accumulation period. These factors include:

• Investors exchanging an annuity may be giving up investment options, guarantees and other valuable features that are not offered by the new annuity. Conversely, the new annuity may include features that are not needed by the investor and result in additional costs.
• Surrender charges may be incurred on the old contract if it is still in the surrender period.
• The new contract may impose a new surrender charge period. This could result in effectively lengthening the period of time an investor could be subject to surrender charges.
• Comparison of the annual fees and charges of the existing and new annuity.
• Careful consideration of the tax consequences. There is little guidance from te Internal Revenue Service on the subject of partial exchanges of annuities and considerable uncertainty exists regarding the tax treatment of subsequent distributions from contracts involved in partial exchanges. Investors considering a partial exchange should consult with a tax advisor to review their particular transaction to determine the nature of any tax consequences.

The NASD cautions investors that they should not agree to exchange an annuity until they study all of the options carefully, have all of their questions answered, and are satisfied that the exchange is better than keeping the current contract. NAVA believes this is sound advice that is applicable to partial as well as complete exchanges. We share a common goal of educating the public about variable annuities and trust our response will assist you in this effort.

Sincerely,

Mark Mackey
President & CEO
NAVA