Registration Nos. 33-11158
811-4965
========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 9
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUST
REGISTERED ON FORM N-8B-2
ALLIANZ LIFE VARIABLE ACCOUNT A
_______________________________
(Exact Name of Trust)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
_______________________________________________
(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403-2195
_______________________________________________
__________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Name and Address of Agent for Service
_____________________________________
Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Title and amount of securities being registered:
Individual Flexible Premium Variable Life Insurance Policies.
It is proposed that this filing will become effective:
_____immediately upon filing pursuant to paragraph (b) of Rule 485
__X__on May 1, 1996 pursuant to paragraph (b) of Rule 485
_____60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has declared that it has registered an indefinite number or
amount of securities in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed a Rule 24f-2 Notice for the most
recent fiscal year on or about February 28, 1996 .
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION ON PROSPECTUS
___________ _____________________
<S>
<C>
1 The Company, The
.. Variable Account
2 The Company
3 Not Applicable
4 Distribution of the
Policy
5 The Variable Account
6(a) Not Applicable
(b) Not Applicable
9 Not Applicable
10 Premium Payments
11 Franklin Valuemark
Funds
12 Franklin Valuemark
Funds
13 Deductions and Charges
14 Premium Payments
15 The Variable Account
16 Franklin Valuemark
Funds
17 Account Value, Cash
Surrender Value and
Transfer Rights
18 Premium Payments
19 Not Applicable
20 Not Applicable
21 Not Applicable
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 The Company
26 The Company
27 The Company
28 The Company
29 The Company
30 The Company
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 The Company
37 Not Applicable
38 Distribution of the
Policy
9 Distribution of the
Policy
40 Not Applicable
41(a) Distribution of the
Policy
42 Not Applicable
43 Not Applicable
44 Premium Payments
45 Not Applicable
46 Account Value, Cash
Surrender Value and
Transfer Rights
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 The Company
52 Franklin Valuemark
Funds
53 Tax Status
54 Financial Statements
55 Not Applicable
</TABLE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
<TABLE>
<CAPTION>
<S> <C>
ISSUED BY: ADMINISTERED BY:
ALLIANZ LIFE INSURANCE COMPANY ALLIANZ LIFE VALUELIFE SERVICE CENTER
OF NORTH AMERICA 2323 BRYAN STREET
1750 HENNEPIN AVENUE DALLAS, TX 75201
MINNEAPOLIS, MN 55403 OR
(800) 542-5427 P.O. BOX 219066
DALLAS, TX 75221
(800) 525-7330
</TABLE>
This Prospectus describes a flexible premium variable life insurance
policy ("Policy") offered by Allianz Life Insurance Company of North America
("Company"). Prior to April 1, 1993, the Company was known as North American
Life and Casualty Company. The Policy has been designed to be used in
connection with estate planning and other insurance needs of individuals.
Upon acceptance, premiums will be allocated to Allianz Life Variable
Account A ("Variable Account"), a separate account of the Company. Prior to
May 1, 1993, the name of the Variable Account was NALAC Variable Account A.
The Variable Account is divided into Sub-Accounts. Each Sub-Account invests in
one Fund of Franklin Valuemark Funds ("Trust"). The Trust is a series fund
with twenty-three Funds, twenty of which are currently available in connection
with the Policy : the Money Market Fund, the Adjustable U.S. Government
Fund, the High Income Fund, the Investment Grade Intermediate Bond Fund, the
Templeton Global Income Securities Fund, The U.S.
Government Securities Fund, the Growth and Income Fund, the Income
Securities Fund, the Real Estate Securities Fund, the Rising Dividends
Fund, the Templeton Global Asset Allocation Fund, the Utility Equity Fund,
the Capital Growth Fund , the Precious Metals Fund, the Small Cap Fund
,the Templeton Developing Markets Equity Fund, the Templeton Global Growth
Fund, the Templeton International Equity Fund, the Templeton International
Smaller Companies Fund and the Templeton Pacific Growth Fund. SUBJECT
TO REGULATORY APPROVAL, SHARES OF THE U.S. GOVERNMENT SECURITIES FUND WILL BE
SUBSTITUTED FOR SHARES OF THE ADJUSTABLE U.S. GOVERNMENT FUND AND THE
INVESTMENT GRADE INTERMEDIATE BOND FUND ON OCTOBER 25, 1996, OR AS SOON AS
POSSIBLE THEREAFTER. THUS, FOLLOWING THE SUBSTITUTION, THE ADJUSTABLE AND THE
INTERMEDIATE BOND FUNDS WILL NO LONGER BE AVAILABLE AS ELIGIBLE INVESTMENTS
FOR OWNERS. SEE "FRANKLIN VALUEMARK FUNDS, PROPOSED SUBSTITUTION TRANSACTION,"
BELOW. Prior to May 1, 1996, the Templeton Global Income Securities Fund was
known as the Global Income Fund. See "Summary" and "Tax Status -
Diversification" for a discussion of owner control of the underlying
investments in a variable life policy.
The Owner of the Policy bears the complete investment risk for all
amounts allocated to the Variable Account. The Cash Value and under certain
circumstances, the Death Benefit of the Policy may increase or decrease
depending on the investment experience of the Variable Account.
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE THE POLICY AS A REPLACEMENT FOR
ANOTHER TYPE OF LIFE INSURANCE. IT ALSO MAY NOT BE ADVANTAGEOUS TO PURCHASE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO OBTAIN ADDITIONAL INSURANCE
PROTECTION IF THE PURCHASER ALREADY OWNS ANOTHER FLEXIBLE PREMIUM LIFE
INSURANCE POLICY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THIS PROSPECTUS MUST BE ACCOMPANIED BY OR PRECEDED BY A CURRENT PROSPECTUS FOR
FRANKLIN VALUEMARK FUNDS.
Dated: May 1, 1996
This page intentionally left blank.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
DEFINITIONS
SUMMARY
THE COMPANY
THE VARIABLE ACCOUNT
FRANKLIN VALUEMARK FUNDS
Description of the Funds
General
Substitution of Securities
Proposed Substitution Transaction
PREMIUM PAYMENTS
General
Planned Periodic Premiums
Unscheduled Premiums
Grace Period
Reinstatement
Allocation of Premium
Dollar Cost Averaging
DEDUCTIONS AND CHARGES
Mortality and Expense Risk Charge
Administrative Charges
Insurance Risk Charges
Charges for Additional Benefit Riders
Surrender Charges
Partial Surrender Fee
Premium Taxes
Transfer Fee
Other Expenses
Income Tax Charge
DEATH BENEFIT
Death Benefit
Change in Death Benefit
Change in Face Amount
Face Amount Increase
Face Amount Decrease
Guaranteed Death Benefit Rider
Accelerated Benefit Rider
POLICY ACCOUNT, CASH VALUE, NET CASH VALUE, TRANSFER RIGHTS AND SURRENDERS
Policy Account
Method of Determining Sub-Account Values
Cash Value, Net Cash Value
Transfer Rights
Partial Surrenders
Full Surrenders
LOAN PROVISIONS
Policy Loans
Loan Interest Charged
Loan Limit
Security
Restrictions on Making Loans
Repaying Policy Debt
Limit on Policy Debt
OWNERSHIP
Transfer of Ownership
Assignment
BENEFICIARY PROVISIONS
DELAY OF PAYMENTS
MANAGEMENT OF THE COMPANY
TAX STATUS
Introduction
Diversification
Tax Treatment of the Policy
Policy Proceeds
Tax Treatment of Loans and Surrenders
Multiple Policies
Tax Treatment of Assignments
Qualified Plans
VARIABLE ACCOUNT VOTING RIGHTS
Disregard of Voting Instructions
DISTRIBUTION OF THE POLICY
REPORTS TO OWNERS
LEGAL PROCEEDINGS
EXPERTS
LEGAL OPINIONS
FINANCIAL STATEMENTS
APPENDIX A
</TABLE>
This page intentionally left blank.
DEFINITIONS
BENEFICIARY, CONTINGENT BENEFICIARY. The person or persons who will receive
any death benefit proceeds. The Primary Beneficiary and the Contingent
Beneficiary, if any, are named in the application, unless changed. The
Contingent Beneficiary, if any, will become the Beneficiary should the Primary
Beneficiary die prior to the date of death of the Insured.
CASH VALUE. The Policy Account minus the Surrender Charge.
COMPANY. Allianz Life Insurance Company of North America.
DEATH BENEFIT. The amount to be paid to the Beneficiary upon the death of the
Insured.
ELIGIBLE INVESTMENT . Those investments available under the Policy.
FACE AMOUNT OF INSURANCE. The amount of coverage chosen by the Owner used to
determine the Death Benefit. The minimum Face Amount is $100,000.
FIXED ACCOUNT. The Company's general investment account which contains all
the assets of the Company with the exception of the Variable Account and other
segregated asset accounts.
INSURANCE RISK AMOUNT. The excess of the Death Benefit over the Policy
Account.
INSURED. The person whose life is covered by the Policy. The Insured is named
on the Coverage Page of the Policy.
ISSUE DATE. The date when the Insured's life is covered under the Policy. The
Issue Date is shown on the Coverage Page of the Policy.
MATURITY BENEFIT. An amount equal to the Policy Account less any outstanding
Policy Debt. This amount will be paid to the Owner on the Maturity Date.
MATURITY DATE. The last date on which premiums can be paid and coverage
continued under the Policy.
NET CASH VALUE. The Cash Value minus any Policy Debt.
OWNER. The person having all rights under the Policy. The Owner as of the
Issue Date is named on the Coverage Page of the Policy.
POLICY ACCOUNT. The sum of the amounts in the Fixed Account and in the
Sub-Accounts of the Variable Account under the Policy.
POLICY DEBT. The total of any outstanding loans made on the Policy, including
interest paid in advance for the current Policy Year.
POLICY MONTH. The first Policy Month starts on the Issue Date. Future Policy
Months start on the same day in each subsequent month, known as a Monthly
Anniversary Date.
POLICY YEAR, POLICY ANNIVERSARY. The first Policy Year starts on the Issue
Date. Future Policy Years start on the same day and month in each subsequent
year, known as a Policy Anniversary.
REALLOCATION DATE. The date thirty (30) days after the Policy is released to
an active status in the Company's processing system.
SERVICE OFFICE. The Company's ValueLife Service Center shown on the
cover page.
SUB-ACCOUNT. A segment of the Variable Account. Each Sub-Account is
invested in shares of a Fund of an Eligible Investment.
VALUATION DATE. The Variable Account will be valued each day that the New
York Stock Exchange is open for trading which is Monday through Friday, except
for normal business holidays.
VALUATION PERIOD. The period commencing at the close of business of the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
VARIABLE ACCOUNT. A separate account maintained by the Company into which
premiums for the Policy and certain other policies are allocated. The Variable
Account has been designated "Allianz Life Variable Account A". Prior to May 1,
1993, the name of the Variable Account was NALAC Variable Account A.
SUMMARY
THE POLICY
The Policy described in this Prospectus is a flexible premium variable
life insurance policy. The Policy is "flexible" because unlike the fixed
premium and benefits of an ordinary whole life insurance policy, the frequency
and amount of premium payments can vary, the Owner can choose between death
benefit options and can increase or decrease the amount of insurance coverage,
all within the same policy of insurance.
The Policy is "variable" because the Policy Account, when allocated to
the Variable Account, and under certain circumstances the death benefit under
the Policy, may increase or decrease depending upon the investment results of
the selected Eligible Investments or Portfolios within an Eligible
Investment .
There are two death benefit options: Option A and Option B. If Death
Benefit Option A is in effect, the Death Benefit is the greater of the Total
Face Amount at the beginning of the Policy Month when the death occurs or the
Policy Account on the date of death multiplied by the applicable factor. Under
this option, the amount of the Death Benefit is fixed, except when it is
determined by such a percentage. If Death Benefit Option B is in effect, the
Death Benefit is the greater of the total Face Amount at the beginning of the
Policy Month when the death occurs plus the Policy Account on the date of
death or the Policy Account on the date of death multiplied by the applicable
factor. Under this option, the amount of the Death Benefit is variable. The
Owner can change the selection of death benefit option.
During the life of the Insured, the Owner can surrender the Policy for
all or part of its Net Cash Value.
The Owner may obtain a Policy Loan, using the Policy Cash Value as
security.
The Company makes available a number of riders that can be elected to
meet a variety of needs of the Insured. See "Death Benefit" section for a
description of the Guaranteed Death Benefit Rider and the Accelerated Benefit
Rider.
The Policy has been designed to comply with the definition of life
insurance contained in Section 7702 of the Internal Revenue Code of 1986, as
amended ("Code"). However, the law in this regard is very complex and unclear.
While every attempt has been made to comply, there is the risk that the
Internal Revenue Service will not concur with the Company's interpretations of
Section 7702 that were made in determining such compliance. Furthermore, under
certain circumstances, the Policy could be treated as a "modified endowment
contract" under Section 7702A of the Code. For a further discussion, see "Tax
Status - Tax Treatment of the Policy."
THE VARIABLE ACCOUNT
The Variable Account is a separate account of the Company which was
established to hold the investments which underlie the Policy. The Variable
Account is divided into Sub-Accounts. Each of the Sub-Accounts is invested
solely in the shares of one of the Funds of the Trust. (See "Franklin
Valuemark Funds".)
The Treasury Department has indicated that guidelines may be forthcoming
under which a variable life insurance policy will not be treated as life
insurance for tax purposes if the Owner of the Policy has excessive control
over the investments underlying the Policy. The issuance of such guidelines
may require the Company to impose limitations on the Owner's right to control
the investment. It is not known whether any such guidelines would have a
retroactive effect. (See "Tax Status - Diversification".)
DEDUCTIONS AND CHARGES
The Company makes certain deductions from premiums, the Policy Account
and from the assets of the Variable Account. These deductions are made for
premium taxes, for mortality and expense risks, for administrative expenses,
for sales charges and for providing life insurance protection. These
deductions can be summarized as follows:
CHARGE FOR PREMIUM TAXES. This charge is for state and local premium
taxes and is deducted from each premium payment. The charge is equal to 2.5%
of each premium payment and approximates the average expenses to the Company
associated with premium taxes. See "Deductions and Charges - Premium Taxes."
MORTALITY AND EXPENSE RISK CHARGE. This risk charge is guaranteed not to
exceed, on an annual basis, 0.90% of the average daily net assets of each
Sub-Account and is deducted from the Sub-Account on each Valuation Date. The
current risk charge is equal, on an annual basis, to 0.60% of the average
daily net assets of each Sub-Account.
ADMINISTRATIVE CHARGES. This charge is equal to:
a) on an annual basis, 0.15% of the average daily net assets of each
Sub-Account and is deducted from the Sub-Account on each Valuation Date; plus
b) $20 per Policy Month for the first Policy Year, and $9 per Policy
Month guaranteed thereafter. Currently, the charge is $5 per Policy Month
after the first Policy Year. These amounts are deducted from the Policy
Account on the Monthly Anniversary Date.
CHARGES FOR ADDITIONAL BENEFIT RIDERS. The amount of the charge, if any,
each Policy Month for additional benefit riders is determined in accordance
with the rider and is shown on the Coverage Page of the Policy.
INSURANCE RISK CHARGE. On each Monthly Anniversary Date, the Company
deducts from the Policy Account the cost of insurance for the next Policy
Month. This charge provides death benefit protection for the following Policy
Month.
SURRENDER CHARGES. A Surrender Charge may be deducted in the event of a
full or partial surrender. The Surrender Charge consists of two parts: a
Deferred Administrative Expense and a Deferred Sales Load. The Deferred
Administrative Expense is $5.00 per $1,000 of Face Amount of Insurance for the
first three Policy Years, then grades linearly to zero over Policy Years 4
through 13. The Deferred Sales Load is the lesser of 30% of the Surrender
Charge Premium, plus 5% of all premiums over the Surrender Charge Premium
(SCP), or the following percentage of SCP.
<TABLE>
<CAPTION>
<S> <C>
YEARS % OF SCP
1-8 65%
9 60%
10 55%
11 44%
12 33%
13 22%
14 11%
15+ 0%
</TABLE>
For some higher issue ages, the Standard Non-Forfeiture Law of the
state where the Policy is delivered may limit Surrender Charges to
amounts less than those defined above. A Surrender Charge may also
be deducted in the event of a decrease in Face Amount.
PARTIAL SURRENDER FEE. If the Owner surrenders only a portion of the Net
Cash Value at any time during the Insured's lifetime, there is an
administrative fee assessed which is currently equal to the lesser of $25 or
2% of the Partial Surrender Amount. A Partial Surrender that does not exceed
10% of the Net Cash Value may be made once each Policy Year without incurring
a Surrender Charge or the Partial Surrender Fee.
TRANSFER FEE. The Owner may transfer values from one Sub-Account to
another or to or from the Fixed Account. The first 12 transfers in a Policy
Year are free. The fee for each additional transfer is the lesser of $25 or 2%
of the amount transferred. Prescheduled automatic dollar cost averaging
transfers are not counted.
OTHER EXPENSES. The investment managers for the Trust are paid fees for
their services based upon each Fund's net assets.
RIGHT TO EXAMINE
The Policy may be cancelled by returning it with a written request for
cancellation to the Company at its ValueLife Service Center by the
later of: (a) the 20th day after the Owner receives it; or (b) the 45th day
after the application was signed. If this is done, the Company will refund
any premium paid. Prior to the Reallocation Date, premiums will be allocated
to the Money Market Sub-Account. On the Reallocation Date, the amount in the
Money Market Sub-Account will be allocated to the Sub-Accounts of the Variable
Account and to the unloaned portion of the Fixed Account according to the
allocation percentages on the application. This transfer does not count in
determining the applicability of the transfer fee. The Reallocation Date is
the date 30 days after the Policy is released to an active status in the
Company's processing system.
CHANGE IN PLAN
The Owner may exchange the Policy for a similar one for another plan of
insurance. Any such change of plan is subject to the Company's approval and
the requirements and payment it may determine.
THE COMPANY
Allianz Life Insurance Company of North America (the "Company") is a
stock life insurance company organized under the laws of the state of
Minnesota in 1896. On April 1, 1993, the Company changed its name from North
American Life and Casualty Company ("NALAC") to its present name. The Company
is a wholly-owned subsidiary of Allianz Versicherungs-AG Holding ("Allianz").
Allianz is headquartered in Munich, Germany, and has sales outlets throughout
the world. Both NALAC and Fidelity Union Life Insurance Company of Dallas,
Texas had been owned by Allianz since 1979. Over the last decade there
has been a gradual consolidation of operations. On May 31, 1993, Fidelity
Union was consolidated into the Company. The Company offers fixed and variable
life insurance and annuities, and group life, accident and health insurance.
NALAC Financial Plans, Inc. is a wholly-owned subsidiary of the Company.
It provides marketing services for the Company and is the principal
underwriter of the Policy. NALAC Financial Plans, Inc. is reimbursed for
expenses incurred in the distribution of the Policies.
The Company provides administration for the Policy at its ValueLife
Service Center : 2323 Bryan Street, Dallas, TX 75201 or P.O. Box 219066,
Dallas, TX 75221, (800) 525-7330.
THE VARIABLE ACCOUNT
The Board of Directors of the Company established the Variable Account on
May 31, 1985. The Variable Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended (the "1940 Act").
The assets of the Variable Account are the property of the Company.
However, the assets of the Variable Account equal to the reserves and other
policy liabilities with respect to the Variable Account are not chargeable
with liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with the
Policies, credited to or charged against the Variable Account without regard
to other income, gains or losses of the Company. The Company's obligations
arising under the Policies are general corporate obligations.
The Variable Account meets the definition of a "separate account" under
the federal securities laws.
The Variable Account is divided into Sub-Accounts with the assets of each
Sub-Account invested in one of the Funds of Franklin Valuemark Funds.
Franklin Valuemark Funds is comprised of twenty-three Funds, twenty of
which are currently available in connection with the Policy.
FRANKLIN VALUEMARK FUNDS
Each of the Sub-Accounts of the Variable Account is invested solely in
the shares of one of the Funds of Franklin Valuemark Funds ("Trust"). The
Trust is an open-end management investment company registered under the 1940
Act . While a brief summary of the investment objectives is set
forth below, more comprehensive information, including a discussion of
potential risks, is found in the prospectus for the Trust which is included
with this Prospectus. PURCHASERS SHOULD READ THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS FOR THE TRUST CAREFULLY BEFORE INVESTING.
Franklin Advisers, Inc. ("Advisers"), 777 Mariners Island Blvd., San
Mateo, California 94404, serves as each Fund's (except the Templeton Global
Growth Fund, the Templeton Developing Markets Equity Fund, the Templeton
Global Asset Allocation Fund and the Templeton International Smaller
Companies Fund ) investment manager. The investment manager for the
Templeton Global Growth Fund and the Templeton Global Asset Allocation
Fund is Templeton Global Advisers Limited, formerly known as Templeton,
Galbraith & Hansberger, Ltd., Lyford Cay Nassau, N.P. Bahamas. As of
October 1, 1995 the investment manager for the Templeton Developing
Markets Equity Fund is Templeton Asset Management Ltd., formerly known as
Templeton Investment Management (Singapore) Pte Ltd., 20 Raffles Place,
Ocean Towers, Singapore. The investment manager for the Templeton
International Smaller Companies Fund is Templeton Investment Counsel, Inc.,
Broward Financial Centre, Fort Lauderdale, Florida. All investment
managers or sub advisers are referred to collectively as
"Managers." The Managers are direct or indirect wholly-owned subsidiaries of
Franklin Resources, Inc., a publicly-owned holding company. The Managers,
subject to the overall policies, control and direction and review of the Board
of Trustees of the Trust, are responsible for recommending and providing
advice with respect to each Fund's investments, and for determining which
securities will be purchased, retained or sold as well as for execution of
portfolio transactions. Certain Managers have retained one or more
subadvisers . Advisers act as investment managers or
administrator to 36 U.S. registered investment companies
( 119 separate series) with aggregate assets of over $81 billion.
Templeton Global Investors, Inc. "Business Manager") , Broward
Financial Centre, Suite 2100,Ft. Lauderdale, Florida, provides certain
administrative facilities and services for certain of the Funds.
Franklin Templeton Investor Services, Inc., 777 Mariners Island Blvd.,
San Mateo, California 94404, also a wholly-owned subsidiary of
Franklin Resources , Inc., maintains the records of the Trust's
shareholder accounts, processes purchases and redemptions of shares, and
serves as each Fund's dividend paying agent.
DESCRIPTION OF THE FUNDS
FUND SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
The Money Market Fund seeks high current income , consistent with
capital preservation and liquidity. The Fund will pursue its objective
by investing exclusively in high quality money market instruments. An
investment in the Money Market Fund is neither insured nor guaranteed
by the U.S. government. The Money Market Fund attempts to maintain a
stable net asset value of $1.00 per share, although no assurances can be given
that the Fund will be able to do so.
FUNDS SEEKING CURRENT INCOME
Adjustable U.S. Government Fund
The Adjustable U.S. Government Fund seeks a high level of current income,
consistent with lower volatility of principal, by investing primarily in
adjustable rate securities which are issued or guaranteed by the U.S.
government, its agencies or instrumentalities. SUBJECT TO REGULATORY
APPROVAL, SHARES OF THE U.S. GOVERNMENT SECURITIES FUND WILL BE SUBSTITUTED
FOR SHARES OF THE FUND ON OCTOBER 25, 1996, OR AS SOON AS POSSIBLE THEREAFTER,
AND THUS, FOLLOWING THE SUBSTITUTION, THE FUND WOULD NO LONGER BE AVAILABLE
AS AN ELIGIBLE INVESTMENT FOR OWNERS. SEE "FRANKLIN VALUEMARK FUNDS -
PROPOSED SUBSTITUTION TRANSACTION," BELOW.
High Income Fund
The High Income Fund seeks a high level of current income, with capital
appreciation as a secondary objective, by investing in debt obligations and
dividend-paying common and preferred stocks. Debt obligations include high
yield, high risk, lower rated obligations (commonly referred to as "junk
bonds") which involve increased risks related to the creditworthiness of their
issuers.
Investment Grade Intermediate Bond Fund
The Investment Grade Intermediate Bond Fund seeks current income,
consistent with preservation of capital, primarily through investment in
intermediate-term investment grade corporate obligations and in U.S.
government securities. SUBJECT TO REGULATORY APPROVAL, SHARES OF THE U.S.
GOVERNMENT SECURITIES FUND WILL BE SUBSTITUTED FOR SHARES OF THE FUND ON
OCTOBER 25, 1996, OR AS SOON AS POSSIBLE THEREAFTER, AND THUS,FOLLOWING THE
SUBSTITUTION, THE FUND WOULD NO LONGER BE AVAILABLE AS AN ELIGIBLE INVESTMENT
FOR OWNERS. SEE "FRANKLIN VALUEMARK FUNDS - PROPOSED SUBSTITUTION
TRANSACTION," BELOW.
Templeton Global Income Securities Fund
The Templeton Global Income Securities Fund (formerly the Global
Income Fund) seeks a high level of current income, consistent with
preservation of capital, with capital appreciation as a secondary
consideration, through investing in foreign and domestic debt obligations,
including up to 25% in high yield, high risk, lower rated debt obligations
(commonly referred to as "junk bonds") , and related currency
transactions. Investing in a non-diversified fund of global securities,
including those of developing markets issuers , involves increased
susceptibility to the special risks associated with foreign investing
The U.S. Government Securities Fund
The U.S. Government Securities Fund seeks current income and safety of
capital by investing exclusively in obligations issued or guaranteed by
the U.S. government or its agencies or instrumentalities.
FUNDS SEEKING GROWTH AND INCOME
Growth and Income Fund
The Growth and Income Fund seeks capital appreciation, with current
income return as a secondary objective, by investing primarily in U.S.
common stocks, securities convertible into common stocks and preferred
stocks.
Income Securities Fund
The Income Securities Fund seeks to maximize income while maintaining
prospects for capital appreciation by investing in a diversified portfolio
of domestic and foreign, including developing markets , debt obligations
and/or equity securities. Debt obligations include high yield, high
risk , lower rated obligations (commonly referred to as "junk bonds")
which involve increased risks related to the creditworthiness of
their issuers .
Real Estate Securities Fund
The Real Estate Securities Fund seeks capital appreciation, with
current income return as a secondary objective, by concentrating its
investments in publicly traded securities of U.S. companies in the real
estate industry.
Rising Dividends Fund
The Rising Dividends Fund seeks capital appreciation , primarily
through investment in the equity securities of companies that have paid
consistently rising dividends over the past ten years. Preservation of
capital is also an important consideration. The Fund seeks current income
incidental to capital appreciation.
Templeton Global Asset Allocation Fund
The Templeton Global Asset Allocation Fund seeks a high level of total
return through a flexible policy of investing in equity securities, debt
obligations, including up to 25% in high yield, high risk, lower rated debt
obligations commonly referred to as "junk bonds"), and money market
instruments of issuers in any nation, including developing markets nations.
The mix of investments among the three market segments will be adjusted in
an attempt to capitalize on total return potential produced by changing
economic conditions throughout the world. Foreign investing involves
special risks.
Utility Equity Fund
The Utility Equity Fund seeks both capital appreciation and current
income by investing in securities of domestic and foreign ,including
developing markets, issuers engaged in the public utilities
industry.
FUNDS SEEKING CAPITAL GROWTH
Capital Growth Fund
The Capital Growth Fund seeks capital appreciation, with current income
as a secondary consideration. The Fund invests primarily in equity
securities, including common stocks and securities convertible into common
stocks.
Precious Metals Fund
The Precious Metals Fund seeks capital appreciation, with current income
return as a secondary objective, by concentrating its investments in
securities of U.S. and foreign companies , including those in
developing markets, engaged in mining, processing or dealing in gold and
other precious metals.
Small Cap Fund
The Small Cap Fund seeks long-term capital growth. The Fund seeks to
accomplish its objective by investing primarily in equity securities of small
capitalization growth companies. The Fund may also invest in foreign
securities, including those of developing markets issuers. Because of the
Fund's investments in small capitalization companies, an investment in the
Fund may involve greater risks and higher volatility and should not be
considered a complete investment program.
Templeton Developing Markets Equity Fund
The Templeton Developing Markets Equity Fund seeks long-term capital
appreciation. The Fund seeks to achieve this objective by investing
primarily in equities of issuers in countries having
developing markets. The Fund is subject to the heightened foreign
securities investment risks that accompany foreign developing markets and an
investment in the Fund may be considered speculative.
Templeton Global Growth Fund
The Templeton Global Growth Fund seeks long-term capital growth. The Fund
hopes to achieve its objective through a flexible policy of investing in
stocks and debt obligations of companies and governments of any nation,
including developing markets. The realization of income, if any, is only
incidental to accomplishment of the Fund's objective of long-term capital
growth. Foreign investing involves special risks.
Templeton International Equity Fund
The Templeton International Equity Fund seeks long-term growth of
capital. Under normal conditions, the Templeton International Equity Fund
will invest at least 65% of its total assets in an internationally mixed
portfolio of foreign equity securities which trade on markets in countries
other than the U.S. , including developing markets , and are
(i) issued by companies domiciled in countries other than the U.S.
, or (ii) issued by companies that derive at least 50% of either
their revenues or pre-tax income from activities outside of the U.S. .
Foreign investing involves special risks.
Templeton International Smaller Companies Fund
The Templeton International Smaller Companies Fund seeks long-term capital
appreciation. The Fund seeks to achieve this objective by investing
primarily in equity securities of smaller companies outside the U.S.,
including developing markets. Foreign investing involves special risks and
smaller company investments may involve higher volatility. An investment in
the Fund may not be considered a complete investment program.
Templeton Pacific Growth Fund
The Templeton Pacific Growth Fund seeks long-term growth of capital ,
primarily through investing at least 65% of its total assets in equity
securities which trade on markets in the Pacific Rim, including developing
markets, and are (i) issued by companies domiciled in the Pacific Rim
or (ii) issued by companies that derive at least 50% of either their
revenues or pre-tax income from activities in the Pacific Rim. Investing in a
portfolio of geographically concentrated foreign securities, including
developing markets, involves increased susceptibility to the special
risks of foreign investing and an investment in the Fund may be considered
speculative.
THE TEMPLETON GLOBAL ASSET ALLOCATION FUND, TEMPLETON DEVELOPING MARKETS
EQUITY FUND, TEMPLETON GLOBAL GROWTH FUND, TEMPLETON GLOBAL INCOME
SECURITIES FUND, GROWTH AND INCOME FUND, INCOME SECURITIES FUND,
INVESTMENT GRADE INTERMEDIATE BOND FUND, TEMPLETON INTERNATIONAL EQUITY FUND,
TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND, MONEY MARKET FUND,
TEMPLETON PACIFIC GROWTH FUND, PRECIOUS METALS FUND, SMALL CAP FUND,
AND UTILITY EQUITY FUND MAY INVEST MORE THAN 10% OF THEIR TOTAL NET ASSETS IN
FOREIGN SECURITIES WHICH ARE SUBJECT TO SPECIAL AND ADDITIONAL RISKS RELATED
TO CURRENCY FLUCTUATIONS, MARKET VOLATILITY AND ECONOMIC, SOCIAL AND POLITICAL
UNCERTAINTY; INVESTING IN DEVELOPING MARKETS INVOLVES SIMILAR BUT HEIGHTENED
RISKS RELATED TO THE RELATIVELY SMALL SIZE AND LESSER LIQUIDITY OF THESE
MARKETS. SEE "HIGHLIGHTED RISK CONSIDERATIONS , FOREIGN
TRANSACTIONS" IN THE TRUST PROSPECTUS
THE HIGH INCOME FUND AND THE INCOME SECURITIES FUND MAY INVEST UP TO 100%
OF THEIR RESPECTIVE NET ASSETS IN SECURITIES OR DEBT OBLIGATIONS RATED BELOW
INVESTMENT GRADE, COMMONLY KNOWN AS "JUNK BONDS," OR IN OBLIGATIONS
WHICH HAVE NOT BEEN RATED BY ANY RATING AGENCY. INVESTMENTS RATED BELOW
INVESTMENT GRADE INVOLVE GREATER RISKS, INCLUDING PRICE VOLATILITY AND
RISK OF DEFAULT THAN INVESTMENTS IN HIGHER RATED OBLIGATIONS .
SEE "HIGHLIGHTED RISK CONSIDERATIONS , LOWER RATED DEBT
OBLIGATIONS" IN THE TRUST PROSPECTUS.
GENERAL
There is no assurance that the investment objectives of any of the Funds
will be met. Owners bear the complete investment risk for Policy Account
values allocated to a Sub-Account.
Additional Funds and/or additional Eligible Investments may, from
time to time, be made available as investments to underlie the Policy.
However, the right to make such selections will be limited by the terms and
conditions imposed on such transactions by the Company.
Trust shares are issued and redeemed only in connection with variable
annuity contracts and variable life insurance policies issued through separate
accounts of the Company and its affiliates. The Trust does not foresee any
disadvantage to Owners arising out of the fact that the Trust may be made
available to separate accounts which are used in connection with both variable
annuity and variable life insurance products. Nevertheless, the Trust's Board
of Trustees intends to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what
action, if any, should be taken in response thereto. If such a conflict were
to occur, one of the separate accounts might withdraw its investment in the
Trust. This might force the Trust to sell portfolio securities at
disadvantageous prices.
SUBSTITUTION OF SECURITIES
If the shares of any Fund of the Trust should no longer be available for
investment by the Variable Account or, if in the judgment of the Company,
further investment in such shares should become inappropriate in view of the
purpose of the Policy, the Company may substitute shares of another Eligible
Investment (or Fund within the Trust). No substitution of securities in
any Sub-Account may take place without prior approval of the Securities and
Exchange Commission and under such requirements as it may impose.
PROPOSED SUBSTITUTION TRANSACTION
1. DESCRIPTION. Under its authority described above, the Company has proposed
a substitution transaction (the "Substitution") such that shares of The U.S.
Government Securities Fund ("Government Fund") would be substituted for all
shares of both the Adjustable U.S. Government Fund ("Adjustable Fund") and
the Investment Grade Intermediate Bond Fund ("Bond Fund") held by Sub-Accounts
of the Variable Account. Owners' interests in the Adjustable and Bond Fund
Sub-Accounts would be replaced by interests of equivalent value in the
Government Fund Sub-Account. As a result, following the Substitution, the
Adjustable Fund and Bond Fund Sub-Accounts would no longer be available to
Owners.
In April 1996, the Company and the Variable Account filed an application with
the Securities and Exchange Commission requesting an order approving the
Substitution. Upon obtaining the order, and subject to any prior approval by
applicable state insurance authorities, the Company and the Variable Account
propose to complete the Substitution on October 25, 1996
, or as soon
as possible thereafter.
2. REASONS FOR SUBSTITUTION. The Company has proposed the Substitution for
several reasons: the similarity of the affected Funds' investment objectives,
strategies and risks; the limited recent demand by Owners for fixed-income
investment choices; and the potential to benefit Owners through economies of
scale, including potentially lower operating expenses, by consolidating the
affected Funds' assets.
3. EFFECT ON OWNERS. Except as stated in this paragraph, Owners may continue
to redeem or transfer their Policy Account as stated under "POLICY ACCOUNT,
CASH VALUE, NET CASH VALUE, TRANSFER RIGHTS AND SURRENDERS -- TRANSFER
RIGHTS." Within five days after the Substitution, the Company will send to
Owners a written notice showing the shares of the Adjustable Fund and the
Bond Fund that have been eliminated and the shares of the Government Fund that
have been substituted (the "Notice"). For a 30-day period beginning on the
date following the mailing of the Notice, transfers out of the Government Fund
Sub-Account to any other available Sub-Account will not count toward the limit
on the annual number of free transfers. However, transfers pursuant to a
"market timing" strategy will continue to be subject to the applicable
restrictions on such transfers, as described under "Transfer Rights."
OWNERS CONSIDERING NEW PURCHASES OR TRANSFERS TO EITHER THE ADJUSTABLE OR BOND
FUNDS MAY ALSO WISH TO CONSIDER THE GOVERNMENT FUND, WHICH HAS SIMILAR
INVESTMENT OBJECTIVES AND POLICIES, AND TO CONSULT WITH THEIR INVESTMENT
REPRESENTATIVES. SEE THE ACCOMPANYING FRANKLIN VALUEMARK FUNDS PROSPECTUS.
Immediately following the Substitution, the Company will treat the
Sub-Accounts invested in shares of the Adjustable Fund, Bond Fund and
Government Fund as a single Sub-Account of the Variable Account for
administrative purposes. The Company will effect the Substitution by
simultaneously placing orders to redeem all shares of the Adjustable Fund and
Bond Fund and to purchase shares of the Government Fund equal in value to the
shares redeemed. The net asset values of all affected shares will be
determined as of the close of the business day immediately before the date of
these orders. The Company will bear the expenses of the Substitution, and
will send affected Owners a notice within five days after the Substitution.
The Company believes, based on its review of existing federal income tax laws
and regulations, that the Substitution will not have any tax consequences to
Owners.
Effective immediately, Owners may elect to use the Government Fund Sub-Account
as the source account for investments in other Funds through the Dollar Cost
Averaging ("DCA") program. If the Adjustable Fund Sub-Account is an Owner's
DCA source account at the time of the Substitution, the Government Fund
Sub-Account will automatically become the DCA source account after the
Substitution. If an Owner is using DCA to invest in the Bond Fund
Sub-Account, his or her DCA program will be adjusted to reflect DCA into the
Government Fund Sub-Account using the same allocation percentages when the
Substitution occurs, unless he or she has previously contacted the Company to
select other Sub-Accounts.
FOR FURTHER INFORMATION, PLEASE CONTACT
THE VALUELIFE SERVICE CENTER, 800/525-7330.
PREMIUM PAYMENTS
GENERAL
The initial premium for a Policy is due before the Company will deliver
the Policy. Before the Company will deliver a Policy, the application and the
premium must be in good order as determined by the Company's administrative
rules.
PLANNED PERIODIC PREMIUMS
Planned periodic premiums may be paid annually, semi-annually, quarterly
or monthly. The Owner selects the planned periodic premium and payment
interval at the time of application. The Owner may change the amount and
frequency of premiums. The Company has the right to limit the amount of any
increase. Each premium after the initial premium must be at least $25 ($50 in
Maryland). Except in Maryland, the Company may increase this minimum limit 90
days after it sends the Owner a written notice of such increase.
UNSCHEDULED PREMIUMS
Additional unscheduled premium payments can be made at any time while the
Policy is in force. The Company has the right to limit the number and amount
of such premium payments. In order to preserve the favorable tax status of the
Policy, the Company may limit the amount of premiums paid and may return any
premiums that exceed the limits under the tax laws of the United States.
GRACE PERIOD
During the first 10 Policy Years (5 Policy Years in Massachusetts), a
grace period begins on the Monthly Anniversary Date when:
* the Net Cash Value is not large enough to cover the monthly deduction
made on that date; and
* adjusted premium payments are less than Accumulated Guaranteed
Coverage Premiums.
Adjusted premium payments as of a Monthly Anniversary Date equal:
* total premiums the Company has received on or before that date; minus
* any partial surrenders the Owner has made on or before that date, and
any Policy Debt.
Accumulated Guaranteed Coverage Premiums as of a Monthly Anniversary Date
equal:
* the Total Guaranteed Coverage Premium; multiplied by
* one plus the number of months the Policy has been in force as of that
Monthly Anniversary Date.
If the same Total Guaranteed Coverage Premium has not been in effect
every month during this period, Accumulated Guaranteed Coverage Premiums will
be based on the different premiums that were in effect and the number of
months for which each applied.
After the first 10 Policy Years (5 Policy Years in Massachusetts), a
grace period begins on the Monthly Anniversary Date when the Net Cash Value is
not large enough to cover the monthly deduction made on that date.
The Company will continue the Policy in effect for 61 days after a grace
period begins. If the Insured dies during a grace period, the Company will
deduct the premium that would have been required to keep the Policy from
terminating at the end of the grace period, as described below, from the
amount it would otherwise pay.
The Policy will terminate without value at the end of a grace period
unless the Company receives a premium large enough to keep the Policy from
terminating at the end of that grace period, as described below, before the
grace period ends. This premium must also meet the minimum premium
requirements.
During the first 10 Policy Years (5 Policy Years in Massachusetts), the
premium required to keep the Policy from terminating at the end of a grace
period equals the lesser of:
* three monthly deductions; or
* Accumulated Guaranteed Coverage Premiums for the Monthly Anniversary
Date when the grace period began minus adjusted premium payments as
of that date.
After the first 10 Policy Years (5 Policy Years in Massachusetts), the
premium required to keep the Policy from terminating at the end of a grace
period equals three monthly deductions.
The Company will notify the Owner in writing at least 31 days before a
grace period ends. The notice will show how much must be paid to keep the
Policy from terminating at the end of that grace period. The Company will send
the notice to the Owner's last known address on file.
REINSTATEMENT
The Policy may be reinstated (coverage restored) anytime within five
years after it has terminated at the end of a grace period. To reinstate the
Policy the Owner must:
* submit an application for reinstatement;
* submit proof satisfactory to the Company that the Insured is still
insurable at the risk classification that applies for the latest Face
Amount portion then in effect;
* pay or agree to reinstatement of any Policy Debt; and
* pay the premium required to reinstate the Policy.
The premium required to reinstate the Policy equals the total of the
following amounts:
* the amounts that would have been required for the Policy to continue
in force without entering a grace period for each month during the
grace period at the end of which it terminated; and
* the amount that will be required for the Policy to continue in force
without entering a grace period for the next 3 months after the
reinstatement date.
The reinstatement date will be the Monthly Anniversary Date on or
following the day the Company approves the application for reinstatement. The
Policy Account on the reinstatement date will be equal to the Policy Account
on the Monthly Anniversary Date when the grace period ended. The Surrender
Charge on the reinstatement date will be equal to the Surrender Charge on the
Monthly Anniversary Date when the grace period ended.
The Policy may not be reinstated after:
* it has been surrendered for its Net Cash Value; or
* the Insured's Death; or
* the Maturity Date.
ALLOCATION OF PREMIUM
The premium is allocated to the Fixed Account or one or more of the
Sub-Accounts of the Variable Account as selected by the Owner. Prior to the
Reallocation Date, the initial premium is allocated to the Money Market
Sub-Account.
On the Reallocation Date, the Policy Account will be allocated to one or
more of the Sub-Accounts in accordance with the premium allocation on record.
This allocation is not deemed to be a transfer subject to the transfer fee
provision (see "Transfer Fee"). The Company reserves the right to limit the
number of allocations that an Owner can have at any one time. SUBJECT TO
REGULATORY APPROVAL, SHARES OF THE U.S. GOVERNMENT SECURITIES FUND WILL BE
SUBSTITUTED FOR SHARES OF THE ADJUSTABLE U.S. GOVERNMENT FUND AND THE
INVESTMENT GRADE INTERMEDIATE BOND FUND ON OCTOBER 25, 1996, OR AS SOON AS
POSSIBLE THEREAFTER. THUS, FOLLOWING THE SUBSTITUTION, THE ADJUSTABLE
U.S. GOVERNMENT AND THE INVESTMENT GRADE INTERMEDIATE BOND FUNDS WILL NO
LONGER BE AVAILABLE AS ELIGIBLE INVESTMENTS FOR OWNERS. SEE "FRANKLIN
VALUEMARK FUNDS - PROPOSED SUBSTITUTION TRANSACTION."
DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which, if elected, enables an Owner to
systematically allocate specified dollar amounts from the Money Market
Sub-Account , the Adjustable U.S. Government Sub-Account or The
U.S. Government Securities Sub-Account to the Policy's other Sub-Accounts
(maximum of five) at regular intervals. By allocating on a regularly scheduled
basis, as opposed to allocating the total amount at one particular time, an
Owner may be less susceptible to the impact of market fluctuations. UPON
REGULATORY APPROVAL OF THE PROPOSED SUBSTITUTION TRANSACTION, THE ADJUSTABLE
U.S. GOVERNMENT AND INVESTMENT GRADE INTERMEDIATE BOND FUNDS WILL NO LONGER BE
AVAILABLE IN THE DOLLAR COST AVERAGING PROGRAM. SEE "FRANKLIN VALUEMARK
FUNDS - PROPOSED SUBSTITUTION TRANSACTION."
Dollar Cost Averaging may be selected for 12 to 36 months. The minimum
amount per period to allocate is $1,000. All dollar cost averaging transfers
will be made effective the tenth of the month (or the next Valuation Date if
the tenth of the month is not a Valuation Date). Election into this program
may occur at any time by properly completing the Dollar Cost Averaging
election form, returning it to the Company by the first of the month, to be
effective that month, and insuring that sufficient value is in either the
Money Market Sub-Account , the Adjustable U.S. Government Sub-Account
or The U.S. Government Securities Sub-Account. When utilizing the
Dollar Cost Averaging program, an Owner must be invested in either the Money
Market Sub-Account , the Adjustable U.S. Government Sub-Account or
The U.S. Government Securities Sub-Account and may be invested in a
maximum of five of the other Sub-Accounts.
Dollar Cost Averaging will terminate when any of the following occurs:
(1) the number of designated transfers has been completed; (2) the value of
the Money Market Sub-Account the Adjustable U.S. Government Sub-Account
or The U.S. Government Securities Sub-Account (as applicable) is
insufficient to complete the next transfer; (3) the Owner requests termination
in writing and such writing is received by the first of the month in order to
cancel the transfer scheduled to take effect that month; or (4) the Policy is
terminated. There is no current charge for Dollar Cost Averaging but the
Company reserves the right to charge for this program. In the event there are
additional transfers, the transfer fee may be charged. The Company does not
intend to profit from any such charge.
DEDUCTIONS AND CHARGES
Deductions under the Policy will be made as follows:
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a Mortality and Expense Risk Charge from each
Sub-Account on each Valuation Date. This risk charge is guaranteed not to
exceed, on an annual basis, 0.90% of the average daily net assets of the
Sub-Account. The current risk charge is equal, on an annual basis, to 0.60% of
the average daily net assets of each Sub-Account. This risk charge compensates
the Company for assuming the mortality and expense risks under the Policy. The
mortality risk assumed by the Company is that the Insureds, as a group, may
not live as long as expected. The expense risk assumed by the Company is that
actual expenses may be greater than those assumed. The Company is responsible
for all administration of the Policy and the Variable Account. The Company
expects to profit from this charge.
ADMINISTRATIVE CHARGES
The Company deducts Administrative Charges from each Sub-Account on each
Valuation Date and from the Policy Account on each Monthly Anniversary Date.
The asset-based charge is equal, on an annual basis, to 0.15% of the average
daily net assets of the Sub-Account. The Policy charge is equal to $20 per
Policy Month for the first Policy Year and $9 per Policy Month guaranteed
thereafter. Currently, the charge is $5 per Policy Month after the first
Policy Year. This charge reimburses the Company for expenses incurred in the
administration of the Policies and the Variable Account. Such expenses include
but are not limited to: confirmations, annual reports and account statements,
maintenance of Policy records, maintenance of Variable Account records,
administrative personnel costs, mailing costs, data processing costs, legal
fees, accounting fees, filing fees, the costs of other services necessary for
Policy Owner servicing and all accounting, valuation, regulatory and updating
requirements. The Company will not profit from the charges and they will be
reduced to the extent that the amount of the charges is in excess of that
necessary to reimburse the Company for its administrative expenses. Should the
guaranteed charges prove to be insufficient, the Company will not increase the
charges above such guaranteed levels and will incur the loss.
INSURANCE RISK CHARGES
The insurance risk charge for each Policy Month equals the total of the
insurance risk charges for that month for each Face Amount portion then in
effect. To determine the insurance risk charge for a Face Amount portion for a
Policy Month the Company multiplies:
* the Insurance Risk Amount for the Face Amount portion for that month;
by
* the cost of insurance rate that applies to the Face Amount portion for
that month.
The Insurance Risk Amount for a Face Amount portion for a Policy Month
equals the excess of:
* the Death Benefit associated with that Face Amount portion; over
* the amount of the beginning Policy Account, before the monthly
deduction for the month is subtracted, applied to reduce the risk
amount for that Face Amount portion.
If Death Benefit Option B is in effect, the beginning Policy Account is
attributed to the Initial Face Amount in determining the Death Benefit
associated with each Face Amount portion.
The amount of the Death Benefit based on the beginning Policy Account may
exceed the sum of the Face Amount portions and any beginning Policy Account
attributed to the Initial Face Amount. The excess will be attributed to the
most recent Face Amount portion then in effect in determining the Death
Benefit associated with each Face Amount portion.
The beginning Policy Account is applied, first, to reduce the risk amount
for the Initial Face Amount. Any beginning Policy Account in excess of the
Initial Face Amount is then applied to reduce the risk amount for the first
Face Amount increase portion in an amount up to that Face Amount portion.
Remainders are successively applied to reduce the risk amount for the
following Face Amount increase portions in the order of the increases until
the entire Policy Account has been applied.
The cost of insurance rate for a Face Amount portion for a Policy Month
equals the sum of:
* the standard cost of insurance rate for that month from the table of
standard cost of insurance rates declared by the Company's Board of
Directors (the declared standard cost of insurance rate); and
* an additional rate for any extra mortality risk classification that
applies for the Face Amount portion as shown on the Coverage Page of
the Policy, or the supplement to the Coverage Page if the Face Amount
has been changed.
The additional rate for an extra mortality risk classification for any
Policy Month equals the amount of extra mortality that the risk classification
represents for that month.
The total cost of insurance rate for a Policy Month will be uniform for
all Face Amount portions that:
* are in the same Face Amount band, sex, and risk classification;
* take effect when the Insureds are the same age; and
* have been in force the same length of time.
The Company may change the declared cost of insurance rates from time to
time based on its expectations as to future cost elements such as: investment
earnings, mortality, persistency, expenses and taxes. Any change the Company
makes will apply to all Face Amount portions in the same risk classification.
The declared standard cost of insurance rates for each Policy Month will
not be more than the amount shown in the table contained in the Policy. The
table is based on the Insured's age at his or her last birthday at the
beginning of each year (attained age), the Insured's sex and whether or not
the Insured has qualified for the non-smoker classification. For the Initial
Face Amount, the Insured's attained age is determined at the beginning of each
Policy Year. For each Face Amount increase, attained age is determined at the
beginning of each Policy Year measured from the date the increase took effect.
Since the mortality tables used with the Policy distinguish between males
and females, the cost of insurance and the benefits payable will differ
between males and females of the same age. Employers, employee plans and
employee organizations should seek legal advice to determine whether the Civil
Rights Act of 1964, Title VII, or other applicable law prohibits the use of
sex distinct mortality tables. The Company will offer the Policy based upon
unisex mortality tables where required.
CHARGES FOR ADDITIONAL BENEFIT RIDERS
The amount of the charge, if any, each Policy Month for additional
benefit riders is determined in accordance with the rider and is shown on the
Coverage Page of the Policy.
SURRENDER CHARGES
A Surrender Charge may be deducted in the event of a full or partial
surrender. The Surrender Charge consists of two parts: a Deferred
Administrative Expense and a Deferred Sales Load. The Deferred Administrative
Expense is $5.00 per $1,000 of Face Amount of Insurance for the first three
Policy Years, then grades linearly to zero over Policy Years 4 through 13. The
Deferred Sales Load is the lesser of 30% of the Surrender Charge Premium, plus
5% of all premiums over the Surrender Charge Premium (SCP), or the following
percentage of SCP.
<TABLE>
<CAPTION>
the standard premium for the base policy. based policy standard guaranteed coverage premium
<S> <C>
Years % of SCP
1-8 65%
9 60%
10 55%
11 44%
12 33%
13 22%
14 11%
15+ 0%
</TABLE>
For some higher issue ages, the Standard Non-Forfeiture Law of the state
where the Policy is delivered may limit Surrender Charges to amounts less than
those defined above.
The Surrender Charge may also be deducted in the event of a decrease in
Face Amount.
The Surrender Charge at any time during the first Policy Year equals the
Surrender Charge at the end of the year. The Surrender Charge during any
subsequent Policy Year will be calculated based on end of year Surrender
Charges and the portion of the year that has been completed.
When the Policy terminates, the Policy Account may be less than the
Surrender Charge. If so, the Owner will not have to pay the difference. If the
Policy is reinstated, the Surrender Charge will also be reinstated.
PARTIAL SURRENDER FEE
If the Owner surrenders only a portion of the Net Cash Value at any time
during the Insured's lifetime, there is an administrative fee assessed which
is currently equal to the lesser of $25 or 2% of the Partial Surrender Amount.
(See "Policy Account, Cash Value, Net Cash Value, Transfer Rights and
Surrenders - Partial Surrenders".) A Partial Surrender that does not exceed
10% of the Net Cash Value may be made once each Policy Year without
incurring a Surrender Charge or the Partial Surrender Fee.
PREMIUM TAXES
There is a charge for state and local premium taxes and it is deducted
from each premium payment. The charge is equal to 2.5% of each premium payment
and approximates the average expenses to the Company associated with premium
taxes. Premium taxes currently imposed on the Policies offered hereby range
from 2% to 3.5% of premium payments. It is therefore possible that an Owner
may be assessed a charge for premium taxes which is greater than the
applicable charge in his or her state.
TRANSFER FEE
The Owner may transfer values from one Sub-Account to another or to or
from the Fixed Account. The first 12 transfers in a Policy Year are free. The
fee for each additional transfer is currently the lesser of $25 or 2% of the
amount transferred. Prescheduled automatic dollar cost averaging transfers are
not counted nor is the transfer of the initial premium at the end of the free
look period.
OTHER EXPENSES
The Managers for the Trust are paid
fees for their services based upon each Fund's net assets which
are described in the accompanying Trust prospectus.
INCOME TAX CHARGE
The Company does not currently assess any charge for income taxes
incurred by the Company as a result of the operation of the Sub-Accounts of
the Variable Account. The Company reserves the right to assess a charge
for such taxes against the Sub-Accounts if the Company determines that such
taxes will be incurred.
DEATH BENEFIT
DEATH BENEFIT
The amount of the Death Benefit depends on the total Face Amount, the
Policy Account on the date of the Insured's death and the Death Benefit
option (Option A or Option B) in effect at that time.
The total Face Amount is the sum of all of the Face Amount portions. The
Initial Face Amount and each Face Amount increase still in effect are Face
Amount portions. The Initial Face Amount and the Death Benefit option in
effect on the Issue Date are shown on the Coverage Page of the Policy.
OPTION A. The amount of the Death Benefit under Option A is the greater
of:
* the total Face Amount at the beginning of the Policy Month when the
death occurs; or
* the Policy Account on the date of death multiplied by the applicable
factor from the Table of Death Benefit Factors contained in the Policy.
OPTION B. The amount of the Death Benefit under Option B is the greater
of:
* the total Face Amount at the beginning of the Policy Month when the
death occurs plus the Policy Account on the date of death; or
* the Policy Account on the date of death multiplied by the applicable
factor from the Table of Death Benefit Factors.
CHANGE IN DEATH BENEFIT
The Owner may change the Death Benefit option after the Policy has been
in force for at least one year, subject to the following requirements:
* the Owner must request the change in writing;
* once the Death Benefit option has been changed, it cannot be changed
again for the next three years;
* if Death Benefit Option A is to be changed to Option B, the Owner must
submit proof satisfactory to the Company that the Insured is still
insurable at the risk classification that applies for the Initial
Face Amount as shown on the Coverage Page of the Policy. The Face
Amount will not change; and
* if Death Benefit Option B is changed to Option A, the Face Amount will
be increased by an amount equal to the Policy Account on the date of
the change. The risk classification for the last Face Amount portion
to go into effect which is still in force will apply to the Face
Amount increase. This increase will not result in any increase in
premiums, expense charges or Surrender Charges.
Any change in a Death Benefit option will take effect on the Monthly
Anniversary Date on or following the date the Company approves the request for
the change.
CHANGE IN FACE AMOUNT
The Owner may change the Face Amount of the Policy on any Monthly
Anniversary Date after the Policy has been in force at least one year, subject
to the following requirements. Once the Face Amount has been changed, it
cannot be changed again for the next twelve months.
FACE AMOUNT INCREASE. To increase the Face Amount the Owner must:
* submit an application for the increase;
* submit proof satisfactory to the Company that the Insured is an
insurable risk; and
* pay any additional premium which is required.
The Face Amount can only be increased before the Insured reaches age 81.
Each Face Amount increase must be at least as large as the Minimum Face Amount
Increase (currently $25,000). A Face Amount increase will take effect on the
Monthly Anniversary Date on or following the day the Company approves the
application for the increase.
The risk classification that applies for any Face Amount increase may be
different from the risk classification that applies for the Initial Face
Amount.
The following changes will be made to reflect the increase:
* the Guaranteed Coverage Premium will be increased.
* the Monthly Administrative Charge will increase to $20 per month for
the twelve months following the increase.
* additional Surrender Charges equal to the Face Amount increase (in
$1,000's) multiplied by the Surrender Charge Factors will apply for
13 years following the increase.
The Company will furnish a supplement to the Coverage Page of the Policy
that shows:
* the risk classification and the amount of the increase; and
* the values for the changes described above.
FACE AMOUNT DECREASE. The Owner must request in writing any decrease in
the Face Amount. The decrease will take effect on the later of:
* the Monthly Anniversary Date on or following the day the Company
receives the Owner's request for the decrease; or
* the Monthly Anniversary Date one year after the last change in Face
Amount was made.
A Face Amount decrease will be used to reduce any previous Face Amount
increases which are then in effect starting with the latest increase and
continuing in the reverse order in which the increases were made. If any
portion of the decrease is left after all Face Amount increases have been
reduced, it will be used to reduce the Initial Face Amount. The Company will
not permit a Face Amount decrease that would reduce the Initial Face Amount
below the Minimum Face Amount, currently $100,000.
The Guaranteed Coverage Premium will be reduced to reflect the Face
Amount decrease. The new Guaranteed Coverage Premium will be shown on a
supplement to the Coverage Page of the Policy.
The Company will deduct a charge from the Policy Account when the Face
Amount is decreased. The maximum charge the Company will deduct each time the
Face Amount is decreased is the lesser of:
* the total of the current Surrender Charge for the amount of each Face
Amount portion reduced; or
* the Policy Account when the decrease is made.
The charge will be deducted for each Face Amount portion reduced,
starting with the charge for the first Face Amount portion reduced, and
continuing in the same order in which the reductions are made until the charge
is completely deducted.
Future Surrender Charges will be reduced proportionately for any charges
deducted. After the Face Amount is decreased, the Surrender Charges for each
Face Amount portion for which a charge is deducted will be equal to the
Surrender Charges shown for that Face Amount portion on the Coverage Page of
the Policy, or in the supplement to the Coverage Page, multiplied by the ratio
of:
* the amount of the Surrender Charge in effect for the Face Amount
portion at the time the charge is deducted minus the amount of the
charge deducted for the Face Amount portion; divided by
* the amount of the Surrender Charge in effect for the Face Amount
portion at the time the charge is deducted.
GUARANTEED DEATH BENEFIT RIDER
The Owner can elect a Guaranteed Death Benefit Rider. This Rider provides
that the Policy will remain in force to attained age 95 for Death Benefit
Option A Policies and to attained age 80 for Death Benefit Option B Policies,
regardless of the performance of the underlying Fund, so long as the minimum
required premium is paid. The premium required is significantly higher than
the minimum premium required to issue the Policy and to keep it in force.
There is an additional charge for this benefit, currently $0.01 per $1000 of
Face Amount per Policy Month. A Policy cannot have both the Guaranteed Death
Benefit Rider and any of the following riders:
* Insured Term Rider
* Spouse Term Rider
ACCELERATED BENEFIT RIDER
The Owner can elect the Accelerated Benefit Rider. This rider provides
that the Owner may elect to receive some of the death benefit proceeds of the
Policy if the Insured is suffering from a terminal illness, as defined in the
rider. Death Benefits, Cash Values, if any, and Loan Values, if any, will be
reduced if a benefit is paid pursuant to this rider.
POLICY ACCOUNT, CASH VALUE,
NET CASH VALUE, TRANSFER
RIGHTS AND SURRENDERS
POLICY ACCOUNT
On the Issue Date, the beginning Policy Account equals:
* the first premium paid less the charge for premium taxes, the initial
Insurance Risk Charge and the initial charge for any additional
benefit riders; minus
* the monthly deduction for the first Policy Month.
After the Issue Date the Policy Account equals the sum of the amounts in
the Fixed Account and in the Sub-Accounts of the Variable Account under the
Policy.
METHOD OF DETERMINING SUB-ACCOUNT VALUES
Sub-Account values will fluctuate in accordance with the investment
experience of the applicable underlying Fund held within the Sub-Account. In
order to determine these Sub-Account values, the Company utilizes Sub-Account
valuation units. The value of a unit applicable during any Valuation Period is
determined at the end of that Period.
When the first shares of the Funds were purchased for the Sub-Accounts,
each Sub-Account valuation unit was valued at $10. The value of a unit within
each Sub-Account on any Valuation Date thereafter is determined by dividing
(a) by (b), where:
(a) is equal to:
1. the total value of the net assets in the Sub-Account; minus
2. the daily Mortality and Expense Risk Charge; minus
3. the daily charge for the asset-based Administrative Charge; plus or
minus
4. a charge or credit for any tax provision established for the
Sub-Account.
and (b) is the total number of units applicable to that Sub-Account
at the end of the Valuation Period.
A valuation unit may increase or decrease in value from Valuation Date to
Valuation Date.
CASH VALUE, NET CASH VALUE
The Cash Value equals:
* the Policy Account; minus
* the Surrender Charges.
See "Deductions and Charges" regarding a description of the Surrender
Charges.
The Net Cash Value equals:
* the Cash Value; minus
* any Policy Debt.
During the Insured's life the Owner may:
* take loans based on the Cash Value;
* make Partial Surrenders; or
* surrender the Policy for its Net Cash Value.
TRANSFER RIGHTS
At the Owner's request the Company will transfer amounts from the value
in any Sub-Account of the Variable Account to one or more of the Sub-Accounts
of the Variable Account or to the Fixed Account. The minimum amount that can
be transferred from the value in a Sub-Account of the Variable Account on any
date is the lesser of the Minimum Transfer Amount (currently $500) or the
value in that Sub-Account on that date. The Owner may transfer on any Policy
Anniversary an amount from the unloaned value in the Fixed Account to one or
more Sub-Accounts of the Variable Account. However, transfers will be made
only if:
* the Company receives such request at least 30 days before that Policy
Anniversary; and
* the amount requested is not more than the greater of 25% of the
unloaned value in the Fixed Account on that Anniversary or the Minimum
Transfer Amount.
In no event will the Company transfer more than such unloaned value. The
minimum amount that the Company will transfer from the value in the Fixed
Account on any Policy Anniversary is the lesser of the Minimum Transfer
Amount, currently $500, or the unloaned value in the Fixed Account on that
date. Upon regulatory approval of the proposed Substitution transaction,
Owners who have selected the Adjustable U.S. Government Fund or the
Investment Grade Intermediate Bond Fund may be entitled to certain special
transfer rights. See "Franklin Valuemark Funds - Proposed Substitution
Transaction."
Twelve transfers may be made in a Policy Year without the imposition of a
charge. The Company may charge a transfer fee for additional transfers in a
Policy Year. The current transfer fee is the lesser of $25 or 2% of the amount
transferred. The Owner may tell the Company how much of such a transfer fee is
to come from the unloaned value in the Fixed Account and from the values in
each of the Sub-Accounts of the Variable Account. If the Owner does not tell
the Company, it will make such deduction based on the proportions that the
unloaned values in the Fixed Account and the value in the Sub-Accounts of the
Variable Account bear to the total unloaned value in the Policy Account.
Neither the Variable Account nor the Trust are designed for
professional market timing organizations , other entities ,
or individuals using programmed , large, or frequent
transfers. A pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to the Fund and may be refused. Accounts
under common ownership or control may be aggregated for purposes of transfer
limits. In coordination with the Trust, the Company reserves the right
to restrict the transfer privilege or reject any specific premium allocation
request for any person whose transactions seem to follow a timing pattern.
An Owner may elect to make transfers by telephone. To elect this option
the Owner must do so in writing to the Company. If there are Joint Owners,
unless the Company is informed to the contrary, instructions will be accepted
from either one of the Joint Owners. The Company will use reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If it does not, the Company may be liable for any losses due to unauthorized
or fraudulent instructions. The Company tape records all telephone
instructions.
PARTIAL SURRENDERS
The Owner may make a partial surrender from the Net Cash Value at any
time during the Insured's life and before the Policy has terminated. The
Minimum Partial Surrender Amount is currently $500. The Partial Surrender may
not exceed the Net Cash Value, less $300.
The Company will assess a Partial Surrender Fee when a partial surrender
is made. The maximum Partial Surrender Fee the Company will make is $50 and
the current charge is the lesser of 2% of the Partial Surrender Amount or $25.
In addition, a Surrender Charge may be assessed on the amount withdrawn. See
"Surrender Charges" above. A Partial Surrender that does not exceed 10% of the
Net Cash Value may be made once each Policy Year without incurring a Surrender
Charge or the Partial Surrender Fee.
When a partial surrender is made, the amount of the partial surrender,
the Partial Surrender Fee and the Surrender Charge, if any, will be deducted
from the Policy Account. The Owner elects how much of each partial surrender,
Partial Surrender Fee and Surrender Charge is to come from the unloaned value
in the Fixed Account and from values in each of the Sub-Accounts of the
Variable Account. If the Owner does not so elect, or if the Company
cannot make the Surrender on the basis of the Owner's direction or those
allocation percentages, the Company will make it based on the proportions that
the unloaned value in the Fixed Account and unloaned values in the
Sub-Accounts of the Variable Account bear to the total unloaned value in the
Policy Account.
The Face Amount will be reduced if Death Benefit Option A is in effect
when a partial surrender is made. Such a reduction will be equal to the amount
of the partial surrender minus the excess, if any, of:
* the Death Benefit at the time the partial surrender is made; over
* the Face Amount at the time the partial surrender is made.
However, if the amount of the partial surrender is less than or equal to
the excess described above, the Face Amount will not be reduced.
Any Face Amount reduction will be used first to reduce any Face Amount
increases then in effect starting with the latest increase and continuing in
the reverse order in which the increases were made. If any of the reduction is
left after all Face Amount increases have been reduced, it will be used to
reduce the Initial Face Amount.
The Company will not permit a partial surrender that would reduce the
Face Amount below the minimum Face Amount (currently $100,000). The Company
may limit the number of partial surrenders in a Policy Year, but this limit
will not be less than one.
FULL SURRENDERS
The Owner may completely surrender the Policy and receive the Net Cash
Value anytime during the Insured's life and before the Policy has terminated.
The full surrender will take effect on the later of:
* the date the Company receives the Owner's written request for the
surrender; or
* the date the Owner requests, in writing, for the surrender to take
effect.
The Policy and all coverage under it will terminate at 12:01 a.m. at
the Company's ValueLife Service Center Office on the date the surrender
takes effect.
Partial and full surrenders may have federal tax consequences (see "Tax
Status").
LOAN PROVISIONS
POLICY LOANS
The Company will loan money to the Owner at the loan interest rate the
Company establishes for each Policy Year during which the loan is outstanding.
The request by the Owner for a loan must be in writing.
The Policy Loan will be divided into two parts, the Preferred Loan and
the Non-Preferred Loan. A Preferred Loan may be made not more than once per
Policy Year, beginning the later of the tenth Policy Anniversary or the
anniversary following the Insured's 60th birthday. No more than 10% of the
Cash Value of the Policy at the time of the loan may be made as a Preferred
Loan. Any portion of a loan that is not a Preferred Loan is a Non-Preferred
Loan.
The Policy Loan must be allocated to the Fixed Account. If the Policy
Loan requested exceeds the loan limit, the Owner may also request a transfer
of values from the Sub-Accounts of the Variable Account to the Fixed Account,
if such values are available. These values will be determined at the time of
the request for transfer. If the Owner does not indicate the proportions of
the Sub-Accounts to be transferred, the Company will make the transfers based
on the proportions that the values in the Sub-Accounts of the Variable Account
bear to the total unloaned value in the Policy Account.
Policy loans may have federal tax consequences (see "Tax Status").
LOAN INTEREST CHARGED
There may be a lower declared loan interest rate each year for the
Preferred Loan than for the Non-Preferred Loan. The Company will determine the
loan interest rates for a Policy Year at least 60 days before the Policy Year
begins. The maximum annual loan interest rates the Company will use for
Preferred and Non-Preferred Loans for a Policy (the maximum allowable rate)
are the greater of:
* the guaranteed interest rate for the Fixed Account shown on the
Coverage Page of the Policy for a Policy Year (currently 3.5% for all Policy
Years) plus 1%; or
* MOODY'S CORPORATE BOND YIELD AVERAGE, MONTHLY AVERAGE CORPORATES as
published by Moody's Investors Service, Inc., for the calendar month ending
two months before the date on which the loan interest rate is determined.
If MOODY'S CORPORATE BOND YIELD AVERAGE, MONTHLY AVERAGE CORPORATES is no
longer published on a timely basis, the Company will use a substantially
similar average approved by the insurance department in the state where the
Policy was delivered to determine the maximum allowable rate.
If the maximum allowable rate for a Policy is at least 1/2% lower than
the loan interest rate in effect for the previous Policy Year, the Company
will decrease the loan interest rate to not more than the maximum allowable
rate. If the maximum allowable rate for a Policy Year is at least 1/2% higher
than either loan interest rate in effect for the previous Policy Year, the
Company may increase either loan interest rate to not more than the maximum
allowable rate. The Company will not use a loan interest rate for any Policy
Year that exceeds 15%. The Company will notify the Owner as to the Preferred
Loan and Non-Preferred Loan interest rates that apply at the time a new loan
is made or when any Policy Debt is reinstated. If either loan interest rate
that applies to an existing Policy Loan is increased, the Company will notify
the Owner in writing at least 30 days before the new rate takes effect.
When a loan is made, interest for the rest of the current Policy Year
must be paid in advance. If interest is not paid when due, it will be added to
the Policy Debt and allocated to the Fixed Account. The accumulation of
Preferred Loans, together with interest on such loans, is the Preferred Debt.
The accumulation of Non-Preferred Loans, together with interest on such loans,
is the Non-Preferred Debt. Total Policy Debt is the sum of the Preferred Debt
and the Non-Preferred Debt, and equals the total outstanding loan with
interest. If the Total Policy Debt (including interest in advance) exceeds the
Fixed Account, the Company will transfer values from the Sub-Accounts of the
Variable Account to the Fixed Account if such values are available, based on
the proportions that the values in the Sub-Accounts of the Variable Account
bear to the total value of the Sub-Accounts of the Variable Account. The
unpaid interest will then be treated as part of the Policy Debt and will bear
interest at the loan rates.
LOAN LIMIT
A loan may be for any amount which does not exceed the loan limit.
The loan limit equals:
* the Cash Value on the date the loan is made; minus
* interest for the rest of the current Policy Year; minus
* any existing Policy Debt.
SECURITY
The Policy will be the only security for the loan.
RESTRICTIONS ON MAKING LOANS
Loans will not be available during a grace period or after the Insured
dies.
REPAYING POLICY DEBT
The Policy Debt, or any part, may be repaid at any time as long as the
Policy is in force. The Company has the right to not accept partial loan
repayments for amounts less than $50. Any Policy Debt outstanding will be
deducted before any benefit proceeds are paid or applied under a payment
option.
Repayments will be applied first to the Non-Preferred Debt Account, and
then to the Preferred Debt Account, unless the Owner specifies differently.
Repayments will be allocated to the Fixed Account and to the Sub-
Accounts of the Variable Account based on the premium allocation schedule then
in effect, unless a different allocation is requested.
When there is Policy Debt outstanding, any payments received will be
applied first as repayment of debt, rather than as premium, unless the Company
is instructed otherwise.
LIMIT ON POLICY DEBT
Total Policy Debt must not exceed the Cash Value. If Total Policy Debt,
adjusted for any unearned loan interest, ever equals or exceeds the Cash
Value, the Company can terminate the Policy. The Policy will terminate 61 days
after the Company has mailed a written notice to the Owner and to anyone who
is relying on the Policy as collateral security as shown on the Company's
records. A notice will be sent to the last known address the Company has on
file.
OWNERSHIP
The Owner, as of the Issue Date, is named on the Coverage Page of the
Policy. The Owner may be the Insured or someone other than the Insured. If
another person has become the Owner after the Issue Date, the Company will
have a record of such change.
During the Insured's life, the Owner may exercise any rights and receive
all benefits described in the Policy.
While the Insured is alive, the Owner may exercise all the rights of the
Policy subject to the rights of:
1. any assignee under an assignment filed with the Dallas Office; and
2. any irrevocably named Beneficiary.
TRANSFER OF OWNERSHIP
The Owner may transfer ownership of the Policy. The Company will not be
responsible for any payment it makes or other action the Company takes before
a copy of the written transfer is received by it. The Company is not
responsible for the validity of the transfer. The Company may require the
Policy to record the transfer.
The new Owner takes the Policy subject to all Policy Debt.
ASSIGNMENT
The Owner may assign the Policy. A copy of any assignment must be filed
with the ValueLife Service Center . The Company is not responsible for
the validity of any assignment. If the Owner assigns the Policy, the Owner's
rights and those of any revocably-named person will be subject to the
assignment. An assignment will not affect any payments the Company may make or
actions it may take before such assignment has been recorded at the Company's
ValueLife Service Center .
BENEFICIARY PROVISIONS
The Company will pay any Death Benefit proceeds to the Primary
Beneficiary. Contingent Beneficiaries may be named to receive the proceeds
if the Primary Beneficiary dies before the Insured. If no named Beneficiary
is living when the Insured dies, the proceeds will be paid to the Owner or the
Owner's estate.
Primary and Contingent Beneficiaries are as named in the application,
unless changed by the Owner. The Beneficiaries may be changed by the Owner
at any time during the Insured's life. To change a Beneficiary, a written
request must be made to the Company. The Company may require the Policy to
record the change. The request will take effect when signed, subject to any
action the Company takes before receiving it.
One or more irrevocable Beneficiaries may be named. An irrevocable
Beneficiary is one whose rights cannot be reduced or destroyed without his or
her consent.
If a Beneficiary is a minor, the Company will make payment to the
guardian of his or her estate. The Company may require proof of age of any
Beneficiary.
Proceeds payable to a Beneficiary will be free from the claims of
creditors, to the extent allowed by law.
DELAY OF PAYMENTS
The Company will generally pay Policy proceeds within seven business days
of receipt of a completed request for such payment. The Company reserves the
right to suspend or postpone any type of payment from the Variable Account for
any period when:
a. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
b. trading on the New York Stock Exchange is restricted;
c. an emergency exists as a result of which disposal of securities held
in the Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Variable Account's net assets; or
d. the Securities and Exchange Commission, by order, so permits delay
for the protection of Owners.
The applicable rules of the Securities and Exchange Commission will
govern as to whether the conditions described in (b) and (c) exist.
The insurance laws of some states require that the Company reserve the
right to defer making payment of Cash Surrender Values and loans from the
Fixed Account for up to six months from the date of request. In such states
the Company provides a Policy reserving this right.
MANAGEMENT OF THE COMPANY
The directors and executive officers of the Company and their principal
occupations for the past 5 years are as follows:
<TABLE>
<CAPTION>
<S> <C>
NAME PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS
Lowell C. Anderson Chairman, President and Chief Executive Officer of
the Company since October, 1988. From 1985 to
1988, Mr. Anderson was President and Chief
Operating Officer of the Company
Herbert F. Hansmeyer Chairman of the Board of Allianz of America
Corp. Member of the Board of Management of
Allianz -AG, Munich, Germany, since 1986;
formerly Chief Executive Officer of Allianz
Insurance Company, Los Angeles, California ;
formerly President and Chief Executive Officer of
FFIC.
Dr. Jerry E. Robertson Former Executive Vice President, 3M/Life
Sciences Sector.
Dr. Gerhard Rupprecht Chairman of the Board of Management -
Allianz Lebensversicherungs, since 1979.
Michael P . Sullivan President, Chief Executive Officer and
Director of International Dairy Queen, Inc. since
1987.
Alan A. Grove Vice President - Corporate Legal Officer
and Secretary of the Company.
J. Ward Hamlin Vice President - Underwriting of the Company.
Robert S. James President - Individual Marketing Division of the
Company since March 31, 1995 . Previously
President of Financial Markets Division.
Edward J. Bonach Senior Vice President - Chief Financial Officer
and Treasurer of the Company since 1993. Senior
Vice President and Chief Actuary previously.
Ronald L. Wobbeking President - Mass Marketing Division of the
Company since September 1991. Previously Senior
Vice President Mass Marketing.
Rev. Dennis J. Dease President, University of St. Thomas.
James R. Campbell Executive Vice President of Norwest Corporation
</TABLE>
TAX STATUS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S
UNDERSTANDING OF CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO LIFE INSURANCE
IN GENERAL. THE COMPANY CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN
SUCH LAWS WILL BE MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE
REGARDING THE POSSIBILITY OF SUCH CHANGES. SECTION 7702 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), DEFINES THE TERM "LIFE
INSURANCE CONTRACT" FOR PURPOSES OF THE CODE. THE COMPANY BELIEVES THAT THE
POLICIES TO BE ISSUED WILL QUALIFY AS "LIFE INSURANCE CONTRACTS" UNDER SECTION
7702. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE POLICIES.
PURCHASERS BEAR THE COMPLETE RISK THAT THE POLICIES MAY NOT BE TREATED AS
"LIFE INSURANCE" UNDER FEDERAL INCOME TAX LAWS. PURCHASERS SHOULD CONSULT
THEIR OWN TAX ADVISERS. IT SHOULD BE FURTHER UNDERSTOOD THAT THE FOLLOWING
DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL RULES NOT DESCRIBED IN THIS
PROSPECTUS MAY BE APPLICABLE IN CERTAIN SITUATIONS.
INTRODUCTION
The discussion contained herein is general in nature and is not intended
as tax advice. Each person concerned should consult a competent tax adviser.
No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion herein is based upon the Company's understanding of
current federal income tax laws as they are currently interpreted. No
representation is made regarding the likelihood of continuation of those
current federal income tax laws or of the current interpretations by the
Internal Revenue Service.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Variable Account is not a separate entity
from the Company and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of variable life insurance policies. The Code provides
that a variable life insurance policy will not be treated as life insurance
for any period (and any subsequent period) for which the investments are not,
in accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification
of the Policy as a life insurance contract would result in the imposition of
federal income tax on the Owner with respect to earnings allocable to the
Policy prior to the receipt of payments under the Policy. The Code contains a
safe harbor provision which provides that life insurance policies such as the
Policies meet the diversification requirements if, as of the close of each
quarter, the underlying assets meet the diversification standards for a
regulated investment company and no more than fifty-five (55%) percent of the
total assets consist of cash, cash items, U.S. Government securities and
securities of other regulated investment companies. There is an exception for
securities issued by the U.S. Treasury in connection with variable life
insurance policies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
Section 1.817-5), which establish diversification requirements for the
investment portfolios underlying variable contracts such as the Policies. The
Regulations amplify the diversification requirements for variable contracts
set forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if: (i) no more than 55% of the value of the total
assets of the portfolio is represented by any one investment; (ii) no more
than 70% of the value of the total assets of the portfolio is represented by
any two investments; (iii) no more than 80% of the value of the total assets
of the portfolio is represented by any three investments; and (iv) no more
than 90% of the value of the total assets of the portfolio is represented by
any four investments. For purposes of these Regulations, all securities of the
same issuer are treated as a single investment.
The Code further provides that, for purposes of determining whether or
not the diversification standards imposed on the underlying assets of variable
contracts by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer".
The Company intends that each Fund of the Trust underlying the Policies
will be managed by the Managers for the Trust in such a manner as to comply
with these diversification requirements.
The Treasury Department has indicated that the diversification
Regulations do not provide guidance regarding the circumstances in which Owner
control of the investments of the Variable Account will cause the Owner to be
treated as the owner of the assets of the Variable Account, thereby resulting
in the loss of favorable tax treatment for the Policy. At this time it cannot
be determined whether additional guidance will be provided and what standards
may be contained in such guidance.
The amount of Owner control which may be exercised under the Policy is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Owner to be considered as the owner of the assets of the
Variable Account.
In the event any forthcoming guidance or ruling is considered to set
forth a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owner
being retroactively determined to be the owner of the assets of the Variable
Account.
Due to the uncertainty in this area, the Company reserves the right to
modify the Policy in an attempt to maintain favorable tax treatment.
TAX TREATMENT OF THE POLICY
The Policy has been designed to comply with the definition of life
insurance contained in Section 7702 of the Code. Although some interim
guidance has been provided and proposed regulations have been issued, final
regulations have not been adopted. Section 7702 of the Code requires the use
of reasonable mortality and other expense charges. In establishing these
charges, the Company has relied on the interim guidance provided in IRS Notice
88-128 and proposed regulations issued on July 5, 1991. Currently, there is
even less guidance as to a Policy issued on a substandard risk basis and thus
it is even less clear whether a Policy issued on such basis would meet the
requirements of Section 7702 of the Code.
While the Company has attempted to comply with Section 7702, the law in
this area is very complex and unclear. There is a risk, therefore, that the
Internal Revenue Service will not concur with the Company's interpretations of
Section 7702 that were made in determining such compliance. In the event the
Policy is determined not to so comply, it would not qualify for the favorable
tax treatment usually accorded life insurance policies. Owners should consult
their tax advisers with respect to the tax consequences of purchasing the
Policy.
POLICY PROCEEDS
The tax treatment accorded to loan proceeds and/or surrender payments
from the Policies will depend on whether the Policy is considered to be a
Modified Endowment Contract. (See "Tax Treatment of Loans and Surrenders".)
Otherwise, the Company believes that the Policy should receive the same
federal income tax treatment as any other type of life insurance. As such, the
death benefit thereunder is excludable from the gross income of the
Beneficiary under Section 101(a) of the Code. Also, the Owner is not deemed to
be in constructive receipt of the Policy Account or Net Cash Value, including
increments thereon, under a Policy until there is a distribution of such
amounts.
Federal, state and local estate, inheritance and other tax consequences
of ownership, or receipt of Policy proceeds, depend on the circumstances of
each Owner or Beneficiary.
TAX TREATMENT OF LOANS AND SURRENDERS
Section 7702A of the Code sets forth the rules for determining when a
life insurance policy will be deemed to be a Modified Endowment Contract. A
Modified Endowment Contract is a contract which is entered into or materially
changed on or after June 21, 1988 and fails to meet the 7-pay test. A Policy
fails to meet the 7-pay test when the cumulative amount paid under the Policy
at any time during the first 7 Policy Years exceeds the sum of the net level
premiums which would have been paid on or before such time if the Policy
provided for paid-up future benefits after the payment of seven (7) level
annual premiums. A material change would include any increase in the future
benefits or addition of qualified additional benefits provided under a policy
unless the increase is attributable to: (1) the payment of premiums necessary
to fund the lowest death benefit and qualified additional benefits payable in
the first seven policy years; or (2) the crediting of interest or other
earnings (including policyholder dividends) with respect to such premiums.
Furthermore, any Policy received in exchange for a Policy classified as a
Modified Endowment Contract will be treated as a Modified Endowment Contract
regardless of whether it meets the 7- pay test. The status of an exchange of a
contract issued before June 21, 1988 is unclear, however, the Internal Revenue
Service has taken the position in a Private Letter Ruling that a contract
received in an exchange on or after June 21, 1988 will be considered as
entered into as of the date of the exchange and therefore subject to Section
7702A.
Due to the flexible premium nature of the Policy, the determination of
whether it qualifies for treatment as a Modified Endowment Contract depends
on the individual circumstances of each Policy.
If the Policy is classified as a Modified Endowment Contract, then
surrenders and/or loan proceeds are taxable to the extent of income in the
Policy. Such distributions are deemed to be on a last-in, first-out basis,
which means the taxable income is distributed first. Loan proceeds and/or
surrender payments may also be subject to an additional 10% federal income tax
penalty applied to the income portion of such distribution. The penalty shall
not apply, however, to any distributions: (1) made on or after the date on
which the taxpayer reaches age 5912; (2) which is attributable to the taxpayer
becoming disabled (within the meaning of Section 72(m)(7) of the Code); or (3)
which is part of a series of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of such taxpayer and
his beneficiary.
If a Policy is not classified as a Modified Endowment Contract, then any
surrenders shall be treated first as a recovery of the investment in the
Policy which would not be received as taxable income. However, if a
distribution is the result of a reduction in benefits under the Policy within
the first fifteen years after the Policy is issued in order to comply with
Section 7702, such distribution will, under rules set forth in Section 7702,
be taxed as ordinary income to the extent of income in the Policy.
Any loans from a Policy which is not classified as a Modified Endowment
Contract, will be treated as indebtedness of the Owner and not a distribution.
Personal interest payable on a loan under a Policy owned by an individual
is generally not deductible. Furthermore, no deduction will be allowed for
interest on loans under Policies covering the life of any employee or officer
of the taxpayer or any person financially interested in the business carried
on by the taxpayer to the extent the indebtedness for such employee, officer
or financially interested person exceeds $50,000. The deductibility of
interest payable on Policy loans may be subject to further rules and
limitations under Sections 163 and 264 of the Code.
Policy Owners should seek competent tax advice on the tax consequences of
taking loans, distributions or surrendering any Policy.
MULTIPLE POLICIES
The Code further provides that multiple Modified Endowment Contracts that
are issued within a calendar year period to the same owner by one company or
its affiliates are treated as one Modified Endowment Contract for purposes of
determining the taxable portion of any loans or distributions. Such treatment
may result in adverse tax consequences including more rapid taxation of the
loans or distributed amounts from such combination of contracts. Policy Owners
should consult a tax adviser prior to purchasing more than one Modified
Endowment Contract in any calendar year period.
TAX TREATMENT OF ASSIGNMENTS
An assignment of a Policy may be a taxable event. Policy Owners should
therefore consult competent tax advisers should they wish to assign their
Policies.
QUALIFIED PLANS
The Policies may be used in conjunction with certain Qualified Plans.
Because the rules governing such use are complex, a purchaser should not do so
until he has consulted a competent Qualified Plans consultant.
VARIABLE ACCOUNT VOTING RIGHTS
In accordance with its view of present applicable law, the Company will
vote the shares of the Trust held in the Variable Account at special meetings
of the shareholders of the Trust in accordance with instructions received from
Owners (or Beneficiaries if applicable) having the voting interest in the
Variable Account. The Company will vote shares for which it has not received
instructions in the same proportion as it votes shares for which it has
received instructions. The Company will vote shares it owns in the same
proportion as it votes shares for which it has received instructions. The
Trust does not hold regular meetings of shareholders.
If the Investment Company Act of 1940 or any regulation thereunder should
be amended or if the present interpretation thereof should change, and as a
result the Company determines that it is permitted to vote the shares of the
Trust in its own right, it may elect to do so.
The voting interests of the Owner (or the Beneficiary if applicable) in
the Trust will be determined as follows: Owners may cast one vote for each
$100 of Account Value of the Policy allocated to the Sub-Account on the record
date for the shareholder meeting of the Trust. Fractional votes are counted.
The number of shares which a person has a right to vote will be
determined as of the date to be chosen by the Company not more than sixty
(60) days prior to the meeting of the Trust. Voting instructions will be
solicited by written communication at least fourteen (14) days prior to such
meeting.
Each Owner (or Beneficiary if applicable) having the voting interest in
the Variable Account will receive periodic reports relating to the Trust in
which he or she has an interest, proxy material and a form with which to give
such voting instructions with respect to the proportion of the shares held in
the Variable Account corresponding to his or her interest in the Variable
Account.
DISREGARD OF VOTING INSTRUCTIONS
The Company may, when required to do so by state insurance authorities,
vote shares of the Trust without regard to instructions from Owners if such
instructions would require such shares to be voted to cause any Fund of the
Trust to make (or refrain from making) investments which would result in
changes in the sub-classification or investment objectives of the Trust or a
Fund. The Company may also disapprove changes in the investment policy
initiated by the Owners or trustees of the Trust, if such disapproval is
reasonable and is based on a good faith determination by the Company that the
change would violate state or federal law or the change would not be
consistent with the investment objectives of the Trust or a Fund or which
varies from the general quality and nature of investments and investment
techniques used by other funds with similar investment objectives underlying
other separate accounts of the Company or of an affiliated life insurance
company. In the event the Company does disregard voting instructions, a
summary of this action and the reasons for such action will be included in the
next semi - annual report to Owners.
DISTRIBUTION OF THE POLICY
The Policy is sold by licensed insurance agents, where the Policy may be
lawfully sold, who are registered representatives of broker- dealers which are
registered under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealers, Inc.
The Policy is distributed through the p rincipal
u nderwriter NALAC Financial Plans, Inc., 1750 Hennepin
Avenue, Minneapolis, MN, a wholly-owned subsidiary of the Company.
Commissions will be paid to broker-dealers who sell the
P olicies.Broker-dealers will be paid commissions and expense
reimbursements up to an amount equal to 100% of the first Guaranteed Coverage
Premium; 4% of the next six Guaranteed Coverage Premiums; and 2% of all
premiums paid thereafter. Similar commissions are paid on premiums received
after any increase in Face Amount, or the addition of a rider. In addition,
broker-dealers may also receive additional compensation, based on meeting
certain production standards.
REPORTS TO OWNERS
The Company will send to each Owner annual reports of the Variable
Account. Within 30 days after each Policy Anniversary, an annual statement
will be sent to each Owner. The statement will show the current amount of
death benefit payable under the Policy, the current Policy Account, the
current Net Cash Value, current Indebtedness and will show all transactions
previously confirmed. The statement will also show premiums paid, investment
returns and all charges deducted during the Policy Year.
Confirmations will be mailed to Policy Owners within seven days of the
transaction of: (a) the receipt of premium other than by monthly
pre-authorized checks or drafts or government allotments; (b) any transfer
between Sub-Accounts; (c) any loan, interest repayment, or loan repayment; (d)
any surrender; (e) exercise of the free look privilege; (f) any exchange of
the Policy; and (g) payment of the death benefit under the Policy. Upon
request, a Policy Owner shall be entitled to a receipt evidencing payment of
premium.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the
Principal Underwriter is a party or to which the assets of the Variable
Account are subject. The Company is not involved in any litigation that is
of material importance in relation to its total assets or that relates
to the Variable Account.
EXPERTS
The financial statements of Allianz Life Variable Account A and
the consolidated financial statements of Allianz Life included in this
Prospectus have been audited by KPMG Peat Marwick LLP, independent auditors,
as indicated in their reports included in this Prospectus, and are included
herein, In reliance upon such reports and upon the authority of said firm as
experts in accounting and auditing.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein
should be considered only as bearing upon the ability of the Company to meet
its obligations under the Policies.
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
December 31, 1995
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Allianz Life Insurance Company of North America and
Policyholders of Allianz Life Variable Account A:
We have audited the accompanying statements of assets and liabilities of the
sub-accounts of Allianz Life Variable Account A as of December 31, 1995, and
the related statements of operations and changes in net assets for each of the
years in the three-year period then ended. These financial statements are the
responsibility of the Variable Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Investment securities held in custody for the benefit of the Variable Account
were confirmed to us by the Franklin Valuemark Funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of the sub-accounts of
Allianz Life Variable Account A at December 31, 1995, and the results of their
operations and the changes in their net assets for each of the years in the
three-year period then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 22, 1996
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities
December 31, 1995
U.S.
Money Growth and Precious High Real Estate Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
-------- ---------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Money Market Fund, 688,783
shares, cost $688,783 $688,783 - - - - -
Growth and Income Fund,
61,923 shares, cost $784,975 - 1,061,358 - - - -
Precious Metals Fund,
11,972 shares, cost $155,552 - - 168,569 - - -
High Income Fund, 94,672
shares, cost $1,083,932 - - - 1,293,220 - -
Real Estate Securities Fund,
9,253 shares, cost $129,563 - - - - 161,011 -
U.S. Government Securities Fund,
46,630 shares, cost $493,541 - - - - - 652,815
-------- ---------- -------- --------- ----------- ----------
Total assets 688,783 1,061,358 168,569 1,293,220 161,011 652,815
-------- ---------- -------- --------- ----------- ----------
Liabilities:
Accrued mortality and expense risk charges 5,545 6,553 3,028 8,702 1,189 4,693
Accrued administrative charges 1,386 1,639 757 2,176 297 1,173
-------- ---------- -------- --------- ----------- ----------
Total liabilities 6,931 8,192 3,785 10,878 1,486 5,866
-------- ---------- -------- --------- ----------- ----------
Net assets $681,852 1,053,166 164,784 1,282,342 159,525 646,949
======== ========== ======== ========= =========== ==========
Policy owners' equity (note 5) $681,852 1,053,166 164,784 1,282,342 159,525 646,949
======== ========== ======== ========= =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities (Continued)
December 31, 1995
Zero Zero Zero
Utility Coupon Coupon Coupon Global
Equity Fund - Fund - Fund - Income
Fund 2000 2005 2010 Fund
---------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Utility Equity Fund, 87,060
shares, cost $1,090,116 $1,558,380 - - - -
Zero Coupon Fund - 2000,
22,437 shares, cost $242,285 - 352,928 - - -
Zero Coupon Fund - 2005,
19,602 shares, cost $206,775 - - 340,680 - -
Zero Coupon Fund - 2010,
6,514 shares, cost $87,335 - - - 117,505 -
Global Income Fund,
6,678 shares, cost $83,776 - - - - 89,882
---------- ------- ------- ------- ------
Total assets 1,558,380 352,928 340,680 117,505 89,882
---------- ------- ------- ------- ------
Liabilities:
Accrued mortality and expense risk charges 9,966 2,805 2,816 1,415 683
Accrued administrative charges 2,492 701 704 354 171
---------- ------- ------- ------- ------
Total liabilities 12,458 3,506 3,520 1,769 854
---------- ------- ------- ------- ------
Net assets $1,545,922 349,422 337,160 115,736 89,028
========== ======= ======= ======= ======
Policy owners' equity (note 5) $1,545,922 349,422 337,160 115,736 89,028
========== ======= ======= ======= ======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities (Continued)
December 31, 1995
Investment Adjustable Templeton Templeton
Grade Income U.S. Pacific Rising International
Intermediate Securities Government Growth Dividends Equity
Bond Fund Fund Fund Fund Fund Fund
------------- ---------- ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Investment Grade Intermediate Bond
Fund, 4,694 shares, cost $62,378 $ 65,953 - - - - -
Income Securities Fund,
32,025 shares, cost $485,185 - 527,453 - - - -
Adjustable U.S. Government Fund,
2,355 shares, cost $25,140 - - 25,340 - - -
Templeton Pacific Growth Fund,
21,600 shares, cost $283,997 - - - 300,461 - -
Rising Dividends Fund,
10,919 shares, cost $121,353 - - - - 138,230 -
Templeton International Equity Fund,
41,923 shares, cost $541,531 - - - - - 558,415
------------- ---------- ---------- --------- --------- -------------
Total assets 65,953 527,453 25,340 300,461 138,230 558,415
------------- ---------- ---------- --------- --------- -------------
Liabilities:
Accrued mortality and expense risk charges 771 2,710 380 1,958 881 2,511
Accrued administrative charges 192 677 95 489 220 628
------------- ---------- ---------- --------- --------- -------------
Total liabilities 963 3,387 475 2,447 1,101 3,139
------------- ---------- ---------- --------- --------- -------------
Net assets $ 64,990 524,066 24,865 298,014 137,129 555,276
============= ========== ========== ========= ========= =============
Policy owners' equity (note 5) $ 64,990 524,066 24,865 298,014 137,129 555,276
============= ========== ========== ========= ========= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Assets and Liabilities (Continued)
December 31, 1995
Templeton Templeton
Developing Templeton Global
Markets Global Asset Total
Equity Growth Allocation All
Fund Fund Fund Funds
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Developing Markets Equity
Fund, 21,362 shares, cost $207,452 $ 208,923 - -
Templeton Global Growth Fund,
29,782 shares, cost $326,613 - 349,937 -
Templeton Global Asset Allocation
Fund, 21 shares, cost $236 - - 221
----------- --------- ----------
Total assets 208,923 349,937 221 8,660,064
----------- --------- ---------- ---------
Liabilities:
Accrued mortality and expense risk charges 883 1,262 1 58,752
Accrued administrative charges 221 316 - 14,688
----------- --------- ---------- ---------
Total liabilities 1,104 1,578 1 73,440
----------- --------- ---------- ---------
Net assets $ 207,819 348,359 220 8,586,624
=========== ========= ========== =========
Policy owners' equity (note 5) $ 207,819 348,359 220 8,586,624
=========== ========= ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
Growth Growth Growth
Money Money Money and and and
Market Market Market Income Income Income
Fund Fund Fund Fund Fund Fund
---------- --------- --------- -------- -------- ---------
1995 1994 1993 1995 1994 1993
---------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 33,164 14,466 9,437 10,179 4,301 5,989
---------- --------- --------- -------- -------- ---------
Expenses:
Mortality and expense risk charges 4,898 2,689 2,266 5,842 3,726 4,110
Administrative charges 1,225 672 567 1,460 932 1,028
---------- --------- --------- -------- -------- ---------
Total expenses 6,123 3,361 2,833 7,302 4,658 5,138
---------- --------- --------- -------- -------- ---------
Investment income (loss), net 27,041 11,105 6,604 2,877 (357) 851
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on mutual funds - - - 22,157 8,957 -
---------- --------- --------- -------- -------- ---------
Realized gains (losses) on sales of investments:
Proceeds from sales 965,636 513,009 202,473 97,576 114,661 228,561
Cost of investments sold (965,636) (513,009) (202,473) (77,218) (94,631) (188,907)
---------- --------- --------- -------- -------- ---------
Total realized gains (losses) on
sales of investments, net - - - 20,358 20,030 39,654
---------- --------- --------- -------- -------- ---------
Realized gains (losses) on investments, net - - - 42,515 28,987 39,654
Net change in unrealized appreciation
(depreciation) on investments - - - 184,273 (45,642) 19,332
---------- --------- --------- -------- -------- ---------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net - - - 226,788 (16,655) 58,986
---------- --------- --------- -------- -------- ---------
Net increase (decrease) in net assets from operations $ 27,041 11,105 6,604 229,665 (17,012) 59,837
========== ========= ========= ======== ======== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Precious Precious Precious High High High
Metals Metals Metals Income Income Income
Fund Fund Fund Fund Fund Fund
---------- --------- --------- -------- -------- --------
1995 1994 1993 1995 1994 1993
---------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 3,600 626 1,029 78,044 44,601 37,831
---------- --------- --------- -------- -------- --------
Expenses:
Mortality and expense risk charges 2,489 700 999 7,709 6,671 6,406
Administrative charges 622 175 250 1,927 1,668 1,602
---------- --------- --------- -------- -------- --------
Total expenses 3,111 875 1,249 9,636 8,339 8,008
---------- --------- --------- -------- -------- --------
Investment income (loss), net 489 (249) (220) 68,408 36,262 29,823
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on mutual funds 2,665 - - - 6,061 -
---------- --------- --------- -------- -------- --------
Realized gains (losses) on sales of investments:
Proceeds from sales 161,878 11,123 220,760 47,176 51,287 40,079
Cost of investments sold (146,847) (9,528) (208,874) (39,566) (45,931) (35,650)
---------- --------- --------- -------- -------- --------
Total realized gains (losses) on
sales of investments, net 15,031 1,595 11,886 7,610 5,356 4,429
---------- --------- --------- -------- -------- --------
Realized gains (losses) on investments, net 17,696 1,595 11,886 7,610 11,417 4,429
Net change in unrealized appreciation
(depreciation) on investments (10,144) (2,094) 49,249 122,964 (81,774) 110,533
---------- --------- --------- -------- -------- --------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net 7,552 (499) 61,135 130,574 (70,357) 114,962
---------- --------- --------- -------- -------- --------
Net increase (decrease) in net assets from operations $ 8,041 (748) 60,915 198,982 (34,095) 144,785
========== ========= ========= ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Real Real Real U.S. U.S. U.S.
Estate Estate Estate Government Government Government
Securities Securities Securities Securities Securities Securities
Fund Fund Fund Fund Fund Fund
------------ ----------- ----------- ----------- ----------- -----------
1995 1994 1993 1995 1994 1993
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 3,875 613 603 41,763 29,171 24,746
------------ ----------- ----------- ----------- ----------- -----------
Expenses:
Mortality and expense risk charges 833 672 385 3,974 3,380 4,158
Administrative charges 208 168 96 994 845 1,039
------------ ----------- ----------- ----------- ----------- -----------
Total expenses 1,041 840 481 4,968 4,225 5,197
------------ ----------- ----------- ----------- ----------- -----------
Investment income (loss), net 2,834 (227) 122 36,795 24,946 19,549
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain
distributions on mutual funds - - - - 2,285 3,795
------------ ----------- ----------- ----------- ----------- -----------
Realized gains (losses) on
sales of investments:
Proceeds from sales 22,803 5,838 10,124 33,799 131,317 22,770
Cost of investments sold (19,244) (4,033) (7,269) (26,326) (99,718) (16,285)
------------ ----------- ----------- ----------- ----------- -----------
Total realized gains (losses) on
sales of investments, net 3,559 1,805 2,855 7,473 31,599 6,485
------------ ----------- ----------- ----------- ----------- -----------
Realized gains (losses) on investments, net 3,559 1,805 2,855 7,473 33,884 10,280
Net change in unrealized appreciation
(depreciation) on investments 14,488 759 5,891 56,173 (91,983) 27,413
------------ ----------- ----------- ----------- ----------- -----------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net 18,047 2,564 8,746 63,646 (58,099) 37,693
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
net assets from operations $ 20,881 2,337 8,868 100,441 (33,153) 57,242
============ =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Zero Zero Zero
Utility Utility Utility Coupon Coupon Coupon
Equity Equity Equity Fund - Fund - Fund -
Fund Fund Fund 1995 1995 1995
--------- --------- --------- --------- -------- -------
1995 1994 1993 1995 1994 1993
--------- --------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 70,912 44,904 25,962 17,379 15,282 15,253
--------- --------- --------- --------- -------- -------
Expenses:
Mortality and expense risk charges 8,983 6,698 8,255 (594) 1,529 1,574
Administrative charges 2,246 1,674 2,064 (149) 383 394
--------- --------- --------- --------- -------- -------
Total expenses 11,229 8,372 10,319 (743) 1,912 1,968
--------- --------- --------- --------- -------- -------
Investment income (loss), net 59,683 36,532 15,643 18,122 13,370 13,285
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on mutual funds - 7,958 138 86 625 3,220
--------- --------- --------- --------- -------- -------
Realized gains (losses) on sales of investments:
Proceeds from sales 112,297 183,473 185,645 273,701 4,692 5,351
Cost of investments sold (88,887) (138,153) (121,008) (236,082) (3,908) (4,170)
--------- --------- --------- --------- -------- -------
Total realized gains (losses) on
sales of investments, net 23,410 45,320 64,637 37,619 784 1,181
--------- --------- --------- --------- -------- -------
Realized gains (losses) on investments, net 23,410 53,278 64,775 37,705 1,409 4,401
Net change in unrealized appreciation
(depreciation) on investments 259,686 (253,440) 47,455 (37,457) (14,916) (1,412)
--------- --------- --------- --------- -------- -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net 283,096 (200,162) 112,230 248 (13,507) 2,989
--------- --------- --------- --------- -------- -------
Net increase (decrease) in net assets from operations $342,779 (163,630) 127,873 18,370 (137) 16,274
========= ========= ========= ========= ======== =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Zero Zero Zero Zero Zero Zero
Coupon Coupon Coupon Coupon Coupon Coupon
Fund - Fund - Fund - Fund - Fund - Fund -
2000 2000 2000 2005 2005 2005
-------- -------- ------- ------- -------- --------
1995 1994 1993 1995 1994 1993
-------- -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $13,993 14,292 12,537 12,928 11,417 12,406
-------- -------- ------- ------- -------- --------
Expenses:
Mortality and expense risk charges 2,179 1,769 1,943 2,227 1,741 2,279
Administrative charges 545 442 486 557 435 570
-------- -------- ------- ------- -------- --------
Total expenses 2,724 2,211 2,429 2,784 2,176 2,849
-------- -------- ------- ------- -------- --------
Investment income (loss), net 11,269 12,081 10,108 10,144 9,241 9,557
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on mutual funds - 2,038 637 - 3,569 138
-------- -------- ------- ------- -------- --------
Realized gains (losses) on sales of investments:
Proceeds from sales 3,895 14,723 6,582 4,311 75,603 47,063
Cost of investments sold (2,731) (10,946) (4,419) (2,816) (52,536) (30,041)
-------- -------- ------- ------- -------- --------
Total realized gains (losses) on
sales of investments, net 1,164 3,777 2,163 1,495 23,067 17,022
-------- -------- ------- ------- -------- --------
Realized gains (losses) on investments, net 1,164 5,815 2,800 1,495 26,636 17,160
Net change in unrealized appreciation
(depreciation) on investments 44,013 (41,764) 30,329 68,320 (72,608) 44,629
-------- -------- ------- ------- -------- --------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net 45,177 (35,949) 33,129 69,815 (45,972) 61,789
-------- -------- ------- ------- -------- --------
Net increase (decrease) in net assets from operations $56,446 (23,868) 43,237 79,959 (36,731) 71,346
======== ======== ======= ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Zero Zero Zero
Coupon Coupon Coupon Global Global Global
Fund - Fund - Fund - Income Income Income
2010 2010 2010 Fund Fund Fund
-------- -------- ------- -------- ------- -------
1995 1994 1993 1995 1994 1993
-------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 3,109 7,316 5,501 2,871 494 798
-------- -------- ------- -------- ------- -------
Expenses:
Mortality and expense risk charges 916 926 827 470 129 151
Administrative charges 229 231 207 118 32 38
-------- -------- ------- -------- ------- -------
Total expenses 1,145 1,157 1,034 588 161 189
-------- -------- ------- -------- ------- -------
Investment income (loss), net 1,964 6,159 4,467 2,283 333 609
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on mutual funds - 3,560 224 - 204 259
-------- -------- ------- -------- ------- -------
Realized gains (losses) on sales of investments:
Proceeds from sales 1,827 79,261 3,258 15,642 2,577 449
Cost of investments sold (1,569) (81,331) (2,479) (15,250) (2,445) (429)
-------- -------- ------- -------- ------- -------
Total realized gains (losses) on
sales of investments, net 258 (2,070) 779 392 132 20
-------- -------- ------- -------- ------- -------
Realized gains (losses) on investments, net 258 1,490 1,003 392 336 279
Net change in unrealized appreciation
(depreciation) on investments 32,162 (29,320) 10,850 6,634 (2,030) 2,156
-------- -------- ------- -------- ------- -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net 32,420 (27,830) 11,853 7,026 (1,694) 2,435
-------- -------- ------- -------- ------- -------
Net increase (decrease) in net assets from operations $34,384 (21,671) 16,320 9,309 (1,361) 3,044
======== ======== ======= ======== ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Investment Investment Investment
Grade Grade Grade Income Income Income
Intermediate Intermediate Intermediate Securities Securities Securities
Bond Fund Bond Fund Bond Fund Fund Fund Fund
-------------- ------------- ------------- ----------- ----------- -----------
1995 1994 1993 1995 1994 1993
-------------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 3,949 253 195 19,772 2,467 813
-------------- ------------- ------------- ----------- ----------- -----------
Expenses:
Mortality and expense risk charges 529 169 51 2,265 963 221
Administrative charges 132 42 13 566 241 55
-------------- ------------- ------------- ----------- ----------- -----------
Total expenses 661 211 64 2,831 1,204 276
-------------- ------------- ------------- ----------- ----------- -----------
Investment income (loss), net 3,288 42 131 16,941 1,263 537
Realized gains (losses) and unrealized
appreciation (depreciation) on investments
Realized capital gain
distributions on mutual funds - 36 32 1,592 367 118
-------------- ------------- ------------- ----------- ----------- -----------
Realized gains (losses)
on sales of investments:
Proceeds from sales 44,251 577 85 55,949 29,910 5,434
Cost of investments sold (43,145) (565) (77) (55,228) (30,339) (4,871)
-------------- ------------- ------------- ----------- ----------- -----------
Total realized gains (losses) on
sales of investments, net 1,106 12 8 721 (429) 563
-------------- ------------- ------------- ----------- ----------- -----------
Realized gains (losses)
on investments, net 1,106 48 40 2,313 (62) 681
Net change in unrealized appreciation
(depreciation) on investments 2,630 150 419 47,314 (9,527) 4,145
-------------- ------------- ------------- ----------- ----------- -----------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 3,736 198 459 49,627 (9,589) 4,826
-------------- ------------- ------------- ----------- ----------- -----------
Net increase (decrease) in
net assets from operations $ 7,024 240 590 66,568 (8,326) 5,363
============== ============= ============= =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Adjustable Adjustable Adjustable Templeton Templeton Templeton
U.S. U.S. U.S. Pacific Pacific Pacific
Government Government Government Growth Growth Growth
Fund Fund Fund Fund Fund Fund
------------ ----------- ----------- ---------- ---------- ----------
1995 1994 1993 1995 1994 1993
------------ ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 1,373 184 192 4,502 347 -
------------ ----------- ----------- ---------- ---------- ----------
Expenses:
Mortality and expense risk charges 139 27 34 1,485 689 315
Administrative charges 35 7 9 371 172 79
------------ ----------- ----------- ---------- ---------- ----------
Total expenses 174 34 43 1,856 861 394
------------ ----------- ----------- ---------- ---------- ----------
Investment income (loss), net 1,199 150 149 2,646 (514) (394)
Realized gains (losses) and unrealized
appreciation (depreciation) on investments
Realized capital gain
distributions on mutual funds - - - 1,872 672 -
------------ ----------- ----------- ---------- ---------- ----------
Realized gains (losses)
on sales of investments:
Proceeds from sales 11,606 8,733 82 60,917 116,746 743
Cost of investments sold (11,571) (8,814) (80) (59,672) (108,205) (666)
------------ ----------- ----------- ---------- ---------- ----------
Total realized gains (losses) on
sales of investments, net 35 (81) 2 1,245 8,541 77
------------ ----------- ----------- ---------- ---------- ----------
Realized gains (losses) on investments, net 35 (81) 2 3,117 9,213 77
Net change in unrealized appreciation
(depreciation) on investments 240 (98) (25) 13,125 (24,505) 28,189
------------ ----------- ----------- ---------- ---------- ----------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 275 (179) (23) 16,242 (15,292) 28,266
------------ ----------- ----------- ---------- ---------- ----------
Net increase (decrease) in
net assets from operations $ 1,474 (29) 126 18,888 (15,806) 27,872
============ =========== =========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Rising Rising Rising Templeton Templeton Templeton
Dividends Dividends Dividends International International International
Fund Fund Fund Equity Fund Equity Fund Equity Fund
----------- ---------- ---------- -------------- -------------- --------------
1995 1994 1993 1995 1994 1993
----------- ---------- ---------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 1,695 601 99 6,289 71 -
----------- ---------- ---------- -------------- -------------- --------------
Expenses:
Mortality and expense risk charges 587 227 208 2,178 323 93
Administrative charges 147 57 52 545 81 23
----------- ---------- ---------- -------------- -------------- --------------
Total expenses 734 284 260 2,723 404 116
----------- ---------- ---------- -------------- -------------- --------------
Investment income (loss), net 961 317 (161) 3,566 (333) (116)
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain
distributions on mutual funds - - - 7,792 95 -
----------- ---------- ---------- -------------- -------------- --------------
Realized gains (losses)
on sales of investments:
Proceeds from sales 6,910 752 394 37,517 895 88,730
Cost of investments sold (6,447) (796) (402) (36,911) (878) (84,735)
----------- ---------- ---------- -------------- -------------- --------------
Total realized gains (losses) on
sales of investments, net 463 (44) (8) 606 17 3,995
----------- ---------- ---------- -------------- -------------- --------------
Realized gains (losses)
on investments, net 463 (44) (8) 8,398 112 3,995
Net change in unrealized appreciation
(depreciation) on investments 19,701 (2,053) (1,565) 19,054 (3,562) 1,391
----------- ---------- ---------- -------------- -------------- --------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 20,164 (2,097) (1,573) 27,452 (3,450) 5,386
----------- ---------- ---------- -------------- -------------- --------------
Net increase (decrease) in
net assets from operations $ 21,125 (1,780) (1,734) 31,018 (3,783) 5,270
=========== ========== ========== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Templeton Templeton Templeton
Developing Developing Developing Templeton Templeton Templeton
Markets Markets Markets Global Global Global
Equity Equity Equity Growth Growth Growth
Fund Fund Fund Fund Fund Fund
------------ ----------- ---------- ---------- ---------- ---------
1995 1994 1993 1995 1994 1993
------------ ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 562 - - 1,137 - -
------------ ----------- ---------- ---------- ---------- ---------
Expenses:
Mortality and expense risk charges 3,898 3,197 - 1,255 65 -
Administrative charges 975 799 - 314 16 -
------------ ----------- ---------- ---------- ---------- ---------
Total expenses 4,873 3,996 - 1,569 81 -
------------ ----------- ---------- ---------- ---------- ---------
Investment income (loss), net (4,311) (3,996) - (432) (81) -
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain
distributions on mutual funds 132 - - - - -
------------ ----------- ---------- ---------- ---------- ---------
Realized gains (losses)
on sales of investments:
Proceeds from sales 37,410 2,518 - 28,814 3,901 -
Cost of investments sold (37,995) (2,585) - (28,227) (3,952) -
------------ ----------- ---------- ---------- ---------- ---------
Total realized gains (losses) on
sales of investments, net (585) (67) - 587 (51) -
------------ ----------- ---------- ---------- ---------- ---------
Realized gains (losses) on investments, net (453) (67) - 587 (51) -
Net change in unrealized appreciation
(depreciation) on investments 4,422 (2,951) - 23,468 (144) -
------------ ----------- ---------- ---------- ---------- ---------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 3,969 (3,018) - 24,055 (195) -
------------ ----------- ---------- ---------- ---------- ---------
Net increase (decrease) in
net assets from operations $ (342) (7,014) - 23,623 (276) -
============ =========== ========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Operations (Continued)
For the years ended December 31, 1995, 1994 and 1993
Templeton Templeton Templeton
Global Global Global
Asset Asset Asset Total Total Total
Allocation Allocation Allocation All All All
Fund Fund Fund Funds Funds Funds
------------ ---------- ---------- ----------- ----------- ----------
1995 1994 1993 1995 1994 1993
------------ ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 4 - - 331,100 191,406 153,391
------------ ---------- ---------- ----------- ----------- ----------
Expenses:
Mortality and expense risk charges 25 - - 52,287 36,290 34,275
Administrative charges 6 - - 13,073 9,072 8,572
------------ ---------- ---------- ----------- ----------- ----------
Total expenses 31 - - 65,360 45,362 42,847
------------ ---------- ---------- ----------- ----------- ----------
Investment income (loss), net (27) - - 265,740 146,044 110,544
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain
distributions on mutual funds - - - 36,296 36,427 8,561
------------ ---------- ---------- ----------- ----------- ----------
Realized gains (losses)
on sales of investments:
Proceeds from sales 168 - - 2,024,083 1,351,596 1,068,583
Cost of investments sold (151) - - (1,901,519) (1,212,303) (912,835)
------------ ---------- ---------- ----------- ----------- ----------
Total realized gains (losses) on
sales of investments, net 17 - - 122,564 139,293 155,748
------------ ---------- ---------- ----------- ----------- ----------
Realized gains (losses)
on investments, net 17 - - 158,860 175,720 164,309
Net change in unrealized appreciation
(depreciation) on investments (15) - - 871,051 (677,502) 378,979
------------ ---------- ---------- ----------- ----------- ----------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 2 - - 1,029,911 (501,782) 543,288
------------ ---------- ---------- ----------- ----------- ----------
Net increase (decrease) in
net assets from operations $ (25) - - 1,295,651 (355,738) 653,832
============ ========== ========== =========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets
For the years ended December 31, 1995, 1994 and 1993
Growth Growth Growth
Money Money Money and and and
Market Market Market Income Income Income
Fund Fund Fund Fund Fund Fund
----------- --------- -------- ---------- -------- ---------
1995 1994 1993 1995 1994 1993
----------- --------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 27,041 11,105 6,604 2,877 (357) 851
Realized gains (losses) on investments, net - - - 42,515 28,987 39,654
Net change in unrealized appreciation
(depreciation) on investments - - - 184,273 (45,642) 19,332
----------- --------- -------- ---------- -------- ---------
Net increase (decrease) in net assets
from operations 27,041 11,105 6,604 229,665 (17,012) 59,837
----------- --------- -------- ---------- -------- ---------
Contract transactions (note 5):
Purchase payments 1,140,571 835,456 - 233,408 15,811 -
Transfers between funds (843,539) (442,767) 16,604 111,030 97,056 (88,021)
Surrenders and terminations (48,126) (101,035) (66,017) (54,886) (49,775) (67,969)
Other transactions (note 2) (124,660) (81,114) (6,376) (92,033) (49,647) 400
----------- --------- -------- ---------- -------- ---------
Net increase (decrease) in net assets
resulting from contract transactions 124,246 210,540 (55,789) 197,519 13,445 (155,590)
----------- --------- -------- ---------- -------- ---------
Increase (decrease) in net assets 151,287 221,645 (49,185) 427,184 (3,567) (95,753)
----------- --------- -------- ---------- -------- ---------
Net assets at beginning of year 530,565 308,920 358,105 625,982 629,549 725,302
----------- --------- -------- ---------- -------- ---------
Net assets at end of year $ 681,852 530,565 308,920 1,053,166 625,982 629,549
=========== ========= ======== ========== ======== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Precious Precious Precious High High High
Metals Metals Metals Income Income Income
Fund Fund Fund Fund Fund Fund
---------- --------- --------- ---------- ---------- ----------
1995 1994 1993 1995 1994 1993
---------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 489 (249) (220) 68,408 36,262 29,823
Realized gains (losses) on investments, net 17,696 1,595 11,886 7,610 11,417 4,429
Net change in unrealized appreciation
(depreciation) on investments (10,144) (2,094) 49,249 122,964 (81,774) 110,533
---------- --------- --------- ---------- ---------- ----------
Net increase (decrease) in net assets
from operations 8,041 (748) 60,915 198,982 (34,095) 144,785
---------- --------- --------- ---------- ---------- ----------
Contract transactions (note 5):
Purchase payments 24,963 988 - 44,935 4,791 -
Transfers between funds 23,956 89,216 (102,112) 37,055 (10,182) (1,243)
Surrenders and terminations (81,139) (8,168) - (14,331) (14,141) -
Other transactions (note 2) (12,332) (2,128) (140) (30,818) (7,272) (11,334)
---------- --------- --------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from contract transactions (44,552) 79,908 (102,252) 36,841 (26,804) (12,577)
---------- --------- --------- ---------- ---------- ----------
Increase (decrease) in net assets (36,511) 79,160 (41,337) 235,823 (60,899) 132,208
---------- --------- --------- ---------- ---------- ----------
Net assets at beginning of year 201,295 122,135 163,472 1,046,519 1,107,418 975,210
---------- --------- --------- ---------- ---------- ----------
Net assets at end of year $ 164,784 201,295 122,135 1,282,342 1,046,519 1,107,418
========== ========= ========= ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Real Real Real U.S. U.S. U.S.
Estate Estate Estate Government Government Government
Securities Securities Securities Securities Securities Securities
Fund Fund Fund Fund Fund Fund
------------ ----------- ----------- ----------- ----------- -----------
1995 1994 1993 1995 1994 1993
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 2,834 (227) 122 36,795 24,946 19,549
Realized gains (losses) on investments, net 3,559 1,805 2,855 7,473 33,884 10,280
Net change in unrealized appreciation
(depreciation) on investments 14,488 759 5,891 56,173 (91,983) 27,413
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
from operations 20,881 2,337 8,868 100,441 (33,153) 57,242
------------ ----------- ----------- ----------- ----------- -----------
Contract transactions (note 5):
Purchase payments 53,203 7,592 - 25,128 1,041 -
Transfers between funds 38,779 14,088 (4,205) 24,109 (111,346) (8,013)
Surrenders and terminations (8,139) - - (18,462) - -
Other transactions (note 2) (23,508) (3,026) 1,380 (18,318) (8,820) (9,256)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from contract transactions 60,335 18,654 (2,825) 12,457 (119,125) (17,269)
------------ ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net assets 81,216 20,991 6,043 112,898 (152,278) 39,973
------------ ----------- ----------- ----------- ----------- -----------
Net assets at beginning of year 78,309 57,318 51,275 534,051 686,329 646,356
------------ ----------- ----------- ----------- ----------- -----------
Net assets at end of year $ 159,525 78,309 57,318 646,949 534,051 686,329
============ =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Zero Zero Zero
Utility Utility Utility Coupon Coupon Coupon
Equity Equity Equity Fund - Fund - Fund -
Fund Fund Fund 1995 1995 1995
----------- ---------- ---------- --------- -------- --------
1995 1994 1993 1995 1994 1993
----------- ---------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 59,683 36,532 15,643 18,122 13,370 13,285
Realized gains (losses) on investments, net 23,410 53,278 64,775 37,705 1,409 4,401
Net change in unrealized appreciation
(depreciation) on investments 259,686 (253,440) 47,455 (37,457) (14,916) (1,412)
----------- ---------- ---------- --------- -------- --------
Net increase (decrease) in net assets
from operations 342,779 (163,630) 127,873 18,370 (137) 16,274
----------- ---------- ---------- --------- -------- --------
Contract transactions (note 5):
Purchase payments 116,016 11,599 - - - -
Transfers between funds 124,589 (62,456) (19,863) (270,886) - -
Surrenders and terminations (35,449) (23,338) (91,320) - - -
Other transactions (note 2) (76,186) (39,723) (18,834) (2,815) (3,292) (3,050)
----------- ---------- ---------- --------- -------- --------
Net increase (decrease) in net assets
resulting from contract transactions 128,970 (113,918) (130,017) (273,701) (3,292) (3,050)
----------- ---------- ---------- --------- -------- --------
Increase (decrease) in net assets 471,749 (277,548) (2,144) (255,331) (3,429) 13,224
----------- ---------- ---------- --------- -------- --------
Net assets at beginning of year 1,074,173 1,351,721 1,353,865 255,331 258,760 245,536
----------- ---------- ---------- --------- -------- --------
Net assets at end of year $1,545,922 1,074,173 1,351,721 - 255,331 258,760
=========== ========== ========== ========= ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Zero Zero Zero Zero Zero Zero
Coupon Coupon Coupon Coupon Coupon Coupon
Fund - Fund - Fund - Fund - Fund - Fund -
2000 2000 2000 2005 2005 2005
--------- -------- -------- -------- --------- --------
1995 1994 1993 1995 1994 1993
--------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 11,269 12,081 10,108 10,144 9,241 9,557
Realized gains (losses) on investments, net 1,164 5,815 2,800 1,495 26,636 17,160
Net change in unrealized appreciation
(depreciation) on investments 44,013 (41,764) 30,329 68,320 (72,608) 44,629
--------- -------- -------- -------- --------- --------
Net increase (decrease) in net assets
from operations 56,446 (23,868) 43,237 79,959 (36,731) 71,346
--------- -------- -------- -------- --------- --------
Contract transactions (note 5):
Purchase payments - - - - - -
Transfers between funds 10,631 - - - (41,224) (31,627)
Surrenders and terminations - (7,535) - - (28,826) -
Other transactions (note 2) (3,895) (5,488) (3,880) (4,312) (3,853) (2,637)
--------- -------- -------- -------- --------- --------
Net increase (decrease) in net assets
resulting from contract transactions 6,736 (13,023) (3,880) (4,312) (73,903) (34,264)
--------- -------- -------- -------- --------- --------
Increase (decrease) in net assets 63,182 (36,891) 39,357 75,647 (110,634) 37,082
--------- -------- -------- -------- --------- --------
Net assets at beginning of year 286,240 323,131 283,774 261,513 372,147 335,065
--------- -------- -------- -------- --------- --------
Net assets at end of year $349,422 286,240 323,131 337,160 261,513 372,147
========= ======== ======== ======== ========= ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Zero Zero Zero
Coupon Coupon Coupon Global Global Global
Fund - Fund - Fund - Income Income Income
2010 2010 2010 Fund Fund Fund
--------- --------- -------- -------- ------- -------
1995 1994 1993 1995 1994 1993
--------- --------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 1,964 6,159 4,467 2,283 333 609
Realized gains (losses) on investments, net 258 1,490 1,003 392 336 279
Net change in unrealized appreciation
(depreciation) on investments 32,162 (29,320) 10,850 6,634 (2,030) 2,156
--------- --------- -------- -------- ------- -------
Net increase (decrease) in net assets
from operations 34,384 (21,671) 16,320 9,309 (1,361) 3,044
--------- --------- -------- -------- ------- -------
Contract transactions (note 5):
Purchase payments - - - 42,908 1,813 -
Transfers between funds - (74,884) 90,077 18,457 21,778 -
Surrenders and terminations - - - (6,040) - -
Other transactions (note 2) (1,826) (3,577) (1,956) (18,424) (1,388) (348)
--------- --------- -------- -------- ------- -------
Net increase (decrease) in net assets
resulting from contract transactions (1,826) (78,461) 88,121 36,901 22,203 (348)
--------- --------- -------- -------- ------- -------
Increase (decrease) in net assets 32,558 (100,132) 104,441 46,210 20,842 2,696
--------- --------- -------- -------- ------- -------
Net assets at beginning of year 83,178 183,310 78,869 42,818 21,976 19,280
--------- --------- -------- -------- ------- -------
Net assets at end of year $115,736 83,178 183,310 89,028 42,818 21,976
========= ========= ======== ======== ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Investment Investment Investment
Grade Grade Grade Income Income Income
Intermediate Intermediate Intermediate Securities Securities Securities
Bond Fund Bond Fund Bond Fund Fund Fund Fund
-------------- ------------- ------------- ----------- ----------- -----------
1995 1994 1993 1995 1994 1993
-------------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 3,288 42 131 16,941 1,263 537
Realized gains (losses)
on investments, net 1,106 48 40 2,313 (62) 681
Net change in unrealized
appreciation (depreciation)
on investments 2,630 150 419 47,314 (9,527) 4,145
-------------- ------------- ------------- ----------- ----------- -----------
Net increase (decrease) in
net assets from operations 7,024 240 590 66,568 (8,326) 5,363
-------------- ------------- ------------- ----------- ----------- -----------
Contract transactions (note 5):
Purchase payments 14,163 1,391 - 223,737 22,483 -
Transfers between funds 8,123 75,010 - 186,849 153,200 7,985
Surrenders and terminations (40,771) - - (14,487) - -
Other transactions (note 2) (7,440) (908) (84) (109,005) (33,608) (341)
-------------- ------------- ------------- ----------- ----------- -----------
Net increase (decrease) in
net assets resulting from
contract transactions (25,925) 75,493 (84) 287,094 142,075 7,644
-------------- ------------- ------------- ----------- ----------- -----------
Increase (decrease) in net assets (18,901) 75,733 506 353,662 133,749 13,007
-------------- ------------- ------------- ----------- ----------- -----------
Net assets at beginning of year 83,891 8,158 7,652 170,404 36,655 23,648
-------------- ------------- ------------- ----------- ----------- -----------
Net assets at end of year $ 64,990 83,891 8,158 524,066 170,404 36,655
============== ============= ============= =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Adjustable Adjustable Adjustable Templeton Templeton Templeton
U.S. U.S. U.S. Pacific Pacific Pacific
Government Government Government Growth Growth Growth
Fund Fund Fund Fund Fund Fund
------------ ----------- ----------- ---------- ---------- ----------
1995 1994 1993 1995 1994 1993
------------ ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 1,199 150 149 2,646 (514) (394)
Realized gains (losses) on investments, net 35 (81) 2 3,117 9,213 77
Net change in unrealized appreciation
(depreciation) on investments 240 (98) (25) 13,125 (24,505) 28,189
------------ ----------- ----------- ---------- ---------- ----------
Net increase (decrease) in net assets
from operations 1,474 (29) 126 18,888 (15,806) 27,872
------------ ----------- ----------- ---------- ---------- ----------
Contract transactions (note 5):
Purchase payments 12,633 5,636 - 141,914 13,634 -
Transfers between funds 11,222 (2,444) - 74,887 91,481 109,893
Surrenders and terminations - - - (10,270) - -
Other transactions (note 2) (7,891) (358) (81) (92,189) (67,497) (543)
------------ ----------- ----------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from contract transactions 15,964 2,834 (81) 114,342 37,618 109,350
------------ ----------- ----------- ---------- ---------- ----------
Increase (decrease) in net assets 17,438 2,805 45 133,230 21,812 137,222
------------ ----------- ----------- ---------- ---------- ----------
Net assets at beginning of year 7,427 4,622 4,577 164,784 142,972 5,750
------------ ----------- ----------- ---------- ---------- ----------
Net assets at end of year $ 24,865 7,427 4,622 298,014 164,784 142,972
============ =========== =========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Templeton Templeton Templeton
Rising Rising Rising International International International
Dividends Dividends Dividends Equity Equity Equity
Fund Fund Fund Fund Fund Fund
----------- ---------- ---------- -------------- -------------- --------------
1995 1994 1993 1995 1994 1993
----------- ---------- ---------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 961 317 (161) 3,566 (333) (116)
Realized gains (losses)
on investments, net 463 (44) (8) 8,398 112 3,995
Net change in unrealized
appreciation (depreciation)
on investments 19,701 (2,053) (1,565) 19,054 (3,562) 1,391
----------- ---------- ---------- -------------- -------------- --------------
Net increase (decrease) in
net assets from operations 21,125 (1,780) (1,734) 31,018 (3,783) 5,270
----------- ---------- ---------- -------------- -------------- --------------
Contract transactions (note 5):
Purchase payments 52,764 4,169 - 297,409 32,269 -
Transfers between funds 38,476 5,960 18,787 206,753 104,241 11,738
Surrenders and terminations (264) - - (9,230) - -
Other transactions (note 2) (19,499) (1,199) (393) (111,967) (8,365) (77)
----------- ---------- ---------- -------------- -------------- --------------
Net increase (decrease) in
net assets resulting from
contract transactions 71,477 8,930 18,394 382,965 128,145 11,661
----------- ---------- ---------- -------------- -------------- --------------
Increase (decrease) in net assets 92,602 7,150 16,660 413,983 124,362 16,931
----------- ---------- ---------- -------------- -------------- --------------
Net assets at beginning of year 44,527 37,377 20,717 141,293 16,931 -
----------- ---------- ---------- -------------- -------------- --------------
Net assets at end of year $ 137,129 44,527 37,377 555,276 141,293 16,931
=========== ========== ========== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Templeton Templeton Templeton
Developing Developing Developing Templeton Templeton Templeton
Markets Markets Markets Global Global Global
Equity Equity Equity Growth Growth Growth
Fund Fund Fund Fund Fund Fund
------------ ----------- ---------- ---------- ---------- ---------
1995 1994 1993 1995 1994 1993
------------ ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($4,311) (3,996) - (432) (81) -
Realized gains (losses) on investments, net (453) (67) - 587 (51) -
Net change in unrealized appreciation
(depreciation) on investments 4,422 (2,951) - 23,468 (144) -
------------ ----------- ---------- ---------- ---------- ---------
Net increase (decrease) in net assets
from operations (342) (7,014) - 23,623 (276) -
------------ ----------- ---------- ---------- ---------- ---------
Contract transactions (note 5):
Purchase payments 169,165 19,997 - 237,156 27,117 -
Transfers between funds 63,297 44,206 - 114,188 45,458 -
Surrenders and terminations (18,763) - - (6,710) - -
Other transactions (note 2) (61,489) (1,238) - (86,658) (5,539) -
------------ ----------- ---------- ---------- ---------- ---------
Net increase (decrease) in net assets
resulting from contract transactions 152,210 62,965 - 257,976 67,036 -
------------ ----------- ---------- ---------- ---------- ---------
Increase (decrease) in net assets 151,868 55,951 - 281,599 66,760 -
------------ ----------- ---------- ---------- ---------- ---------
Net assets at beginning of year 55,951 - - 66,760 - -
------------ ----------- ---------- ---------- ---------- ---------
Net assets at end of year $ 207,819 55,951 - 348,359 66,760 -
============ =========== ========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Statements of Changes in Net Assets (Continued)
For the years ended December 31, 1995, 1994 and 1993
Templeton Templeton Templeton
Global Global Global
Asset Asset Asset Total Total Total
Allocation Allocation Allocation All All All
Fund Fund Fund Funds Funds Funds
------------ ---------- ---------- ---------- ---------- ----------
1995 1994 1993 1995 1994 1993
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($27) - - 265,740 146,044 110,544
Realized gains (losses) on investments, net 17 - - 158,860 175,720 164,309
Net change in unrealized appreciation
(depreciation) on investments (15) - - 871,051 (677,502) 378,979
------------ ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
from operations (25) - - 1,295,651 (355,738) 653,832
------------ ---------- ---------- ---------- ---------- ----------
Contract transactions (note 5):
Purchase payments - - - 2,830,073 1,005,787 -
Transfers between funds 311 - - (21,713) (3,609) -
Surrenders and terminations - - - (367,067) (232,818) (225,306)
Other transactions (note 2) (66) - - (905,331) (328,040) (57,550)
------------ ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from contract transactions 245 - - 1,535,962 441,320 (282,856)
------------ ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets 220 - - 2,831,613 85,582 370,976
------------ ---------- ---------- ---------- ---------- ----------
Net assets at beginning of year - - - 5,755,011 5,669,429 5,298,453
------------ ---------- ---------- ---------- ---------- ----------
Net assets at end of year $ 220 - - 8,586,624 5,755,011 5,669,429
============ ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
of
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements
December 31, 1995
1. ORGANIZATION
Allianz Life Variable Account A (Variable Account) is a segregated investment
account of Allianz Life Insurance Company of North America (Allianz Life)
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940 (as
amended). The Variable Account was established on May 31, 1985 and commenced
operations September 8, 1987. Accordingly, it is an accounting entity wherein
all segregated account transactions are reflected.
The Variable Account's assets are the property of Allianz Life and are held
for the benefit of the owners and other persons entitled to payments under
variable life policies issued through the Variable Account and underwritten by
Allianz Life. The assets of the Variable Account, equal to the reserves and
other liabilities of the Variable Account, are not chargeable with liabilities
that arise from any other business which Allianz Life may conduct.
The Variable Account's sub-accounts may invest, at net asset values, in one or
more of the funds of the Franklin Valuemark Funds (FVF), managed by Franklin
Advisers, Inc., in accordance with the selection made by the policy owner.
Not all funds are available as investment options for the products which
comprise the Variable Account.
Certain officers and trustees of the FVF are also officers and/or directors of
Franklin Advisers, Inc. and/or Allianz Life.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at 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.
INVESTMENTS
Investments of the Variable Account are valued daily at market value using net
asset values provided by Franklin Advisers, Inc.
Realized investment gains include realized gain distributions received from
the respective funds and gains on the sale of fund shares as determined by the
average cost method.
Realized gain distributions are reinvested in the respective funds. Dividend
distributions received from the FVF are reinvested in additional shares of the
FVF and are recorded as income to the Variable Account on the ex-dividend
date.
A Fixed Account investment option is available to variable universal life
policy owners. This account is comprised of equity and fixed income
investments which are part of the general assets of Allianz Life. The
liabilities of the Fixed Account are part of the general obligations of
Allianz Life and are not included in the Variable Account. The guaranteed
minimum rate of return on the Fixed Account is 3.5%.
The Templeton Developing Markets Equity Fund, Templeton Global Growth Fund and
Fixed Account were added as available investment options on July 1, 1994. The
Templeton Global Asset Allocation Fund and Small Cap Fund were added as
available investment options on May 1, 1995 and November 1, 1995,
respectively. The Small Cap Fund had no investment activity during 1995. The
Zero Coupon - 1995 Fund matured and was closed on December 15, 1995.
In April 1995, the Equity Growth Fund name was changed to Growth and Income
Fund.
EXPENSES
ASSET BASED EXPENSES
A mortality and expense risk charge is deducted from the Variable Account on a
daily basis equal, on an annual basis, to .60% of the daily net assets of the
Variable Account.
An administrative charge is deducted from the Variable Account on a daily
basis equal, on an annual basis, to .15% of the daily net assets of the
Variable Account.
CONTRACT BASED EXPENSES
A cost of insurance charge is deducted against each policy by liquidating
units. The amount of the charge is based upon age, sex, rate class and net
amount at risk (death benefit less total cash surrender value). Total cost of
insurance charges paid by the policy owners for the years ended December 31,
1995, 1994 and 1993 were $581,193, $123,231 and $46,026, respectively.
A deferred issue charge is deducted annually, at the end of the policy year,
from each single premium variable life policy for the first ten policy years
by liquidating units. The amount of the charge is 7% of the single premium
consisting of 2.5% for premium taxes, 4% for sales charge and .5% for policy
issue charge (in the State of California, 2.35%, 4.15% and .5%, respectively).
If the policy is surrendered before the full amount is collected, the
uncollected portion of this charge is deducted from the account value. Total
deferred issue charges paid by the policy owners for the years ended December
31, 1995, 1994 and 1993 were $28,613, $32,516 and $34,016, respectively.
A policy charge is deducted on each monthly anniversary date from each
variable universal life policy by liquidating units. The amount of the charge
is equal to 2.5% of each premium payment for premium taxes plus $20 per month
for the first policy year and $9 per month guaranteed thereafter. Currently,
Allianz Life has agreed to voluntarily limit the charge to $5 per month after
the first policy year. Total policy charges paid by the policy owners for the
years ended December 31, 1995 and 1994 were $292,695 and $64,030,
respectively. There were no variable universal life policies issued during
the year ended December 31, 1993.
Twelve free transfers are permitted each contract year. Thereafter, the fee
is the lesser of $25 or 2% of the amount transferred. No transfer charges
were paid by the policy owners during the years ended December 31, 1995, 1994
and 1993, respectively. Transfers to the Fixed Account during the years ended
December 31, 1995 and 1994 were $21,713 and $3,609, respectively.
The cost of insurance, deferred issue, policy and transfer charges paid are
reflected in the Statements of Changes in Net Assets as other transactions.
3. INVESTMENT TRANSACTIONS
The sub-account purchases of fund shares, including reinvestment of dividend
distributions, were as follows during the year ended December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund $1,122,415
Growth and Income Fund 326,793
Precious Metals Fund 123,585
High Income Fund 162,053
Real Estate Securities Fund 86,588
U.S. Government Securities Fund 88,014
Utility Equity Fund 312,133
Zero Coupon Fund - 1995 17,464
Zero Coupon Fund - 2000 24,625
Zero Coupon Fund - 2005 12,928
Zero Coupon Fund - 2010 3,109
Global Income Fund 55,385
Investment Grade Intermediate Bond Fund 22,252
Income Securities Fund 363,976
Adjustable U.S. Government Fund 28,937
Templeton Pacific Growth Fund 180,053
Rising Dividends Fund 80,078
Templeton International Equity Fund 434,389
Templeton Developing Markets Equity Fund 180,752
Templeton Global Growth Fund 285,990
Templeton Global Asset Allocation Fund 387
</TABLE>
4. FEDERAL INCOME TAXES
Operations of the Variable Account form a part of, and are taxed with,
operations of Allianz Life, which is taxed as a life insurance company under
the Internal Revenue Code.
Allianz Life does not expect to incur any federal income taxes in the
operation of the Variable Account. If in the future Allianz Life determines
that the Variable Account may incur federal income taxes, it may then assess a
charge against the Variable Account for such taxes.
<PAGE>
5. CONTRACT TRANSACTIONS - UNIT ACTIVITY
Transactions in units for each fund for the years ended December 31, 1995,
1994 and 1993, were as follows:
<TABLE>
<CAPTION>
Growth Real U.S.
Money and Precious High Estate Government
Market Income Metals Income Securities Securities
Fund Fund Fund Fund Fund Fund
--------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1992 26,464 36,756 16,401 65,825 3,450 39,596
Contract transactions:
Transfers between funds 1,266 (4,296) (8,477) (59) (272) (451)
Surrenders and terminations (4,833) (3,404) - - - -
Other transactions (467) 84 9 (701) 87 (533)
--------- ---------- --------- ---------- ----------- -----------
Net increase (decrease) in units
resulting from contract transactions (4,034) (7,616) (8,468) (760) (185) (984)
--------- ---------- --------- ---------- ----------- -----------
Units outstanding at December 31, 1993 22,430 29,140 7,933 65,065 3,265 38,612
========= ========== ========= ========== =========== ===========
Accumulation unit value
per unit at December 31, 1993 $ 13.773 21.604 15.396 17.020 17.556 17.775
========= ========== ========= ========== =========== ===========
Contract transactions:
Purchase payments 59,285 751 67 265 419 62
Transfers between funds (31,325) 4,606 6,162 (637) 861 (6,440)
Surrenders and terminations (7,250) (2,364) (578) (869) - -
Other transactions (5,759) (2,338) (143) (444) (177) (520)
--------- ---------- --------- ---------- ----------- -----------
Net increase (decrease) in units
resulting from contract transactions 14,951 655 5,508 (1,685) 1,103 (6,898)
--------- ---------- --------- ---------- ----------- -----------
Units outstanding at December 31, 1994 37,381 29,795 13,441 63,380 4,368 31,714
========= ========== ========= ========== =========== ===========
Accumulation unit value
per unit at December 31, 1994 $ 14.194 21.010 14.977 16.512 17.928 16.840
========= ========== ========= ========== =========== ===========
Contract transactions:
Purchase payments 77,441 9,561 1,662 2,463 2,884 1,355
Transfers between funds (57,166) 4,664 1,698 1,925 2,056 1,281
Surrenders and terminations (3,275) (2,237) (5,150) (772) (427) (965)
Other transactions (8,613) (3,762) (820) (1,663) (1,253) (983)
--------- ---------- --------- ---------- ----------- -----------
Net increase (decrease) in units
resulting from contract transactions 8,387 8,226 (2,610) 1,953 3,260 688
--------- ---------- --------- ---------- ----------- -----------
Units outstanding at December 31, 1995 45,768 38,021 10,831 65,333 7,628 32,402
========= ========== ========= ========== =========== ===========
Accumulation unit value
per unit at December 31, 1995 $ 14.898 27.700 15.214 19.628 20.913 19.966
========= ========== ========= ========== =========== ===========
Accumulation net assets at December 31, 1995 $681,852 1,053,166 164,784 1,282,342 159,525 646,949
========= ========== ========= ========== =========== ===========
</TABLE>
<PAGE>
5. CONTRACT TRANSACTIONS - UNIT ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
Zero Zero Zero Zero
Utility Coupon Coupon Coupon Coupon Global
Equity Fund - Fund - Fund - Fund - Income
Fund 1995 2000 2005 2010 Fund
----------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1992 72,790 14,686 15,439 17,524 3,968 1,562
Contract transactions:
Transfers between funds (998) - - (1,326) 3,524 -
Surrenders and terminations (4,617) - - - - -
Other transactions (934) (175) (190) (156) (84) (25)
----------- -------- -------- -------- -------- -------
Net increase (decrease) in units
resulting from contract transactions (6,549) (175) (190) (1,482) 3,440 (25)
----------- -------- -------- -------- -------- -------
Units outstanding at December 31, 1993 66,241 14,511 15,249 16,042 7,408 1,537
=========== ======== ======== ======== ======== =======
Accumulation unit value
per unit at December 31, 1993 $ 20.406 17.832 21.191 23.198 24.745 14.297
=========== ======== ======== ======== ======== =======
Contract transactions:
Purchase payments 654 - - - - 133
Transfers between funds (3,468) - - (1,953) (3,442) 1,607
Surrenders and terminations (1,253) - (379) (1,348) - -
Other transactions (2,205) (186) (276) (182) (162) (102)
----------- -------- -------- -------- -------- -------
Net increase (decrease) in units
resulting from contract transactions (6,272) (186) (655) (3,483) (3,604) 1,638
----------- -------- -------- -------- -------- -------
Units outstanding at December 31, 1994 59,969 14,325 14,594 12,559 3,804 3,175
=========== ======== ======== ======== ======== =======
Accumulation unit value
per unit at December 31, 1994 $ 17.912 17.823 19.614 20.821 21.866 13.483
=========== ======== ======== ======== ======== =======
Contract transactions:
Purchase payments 5,744 - - - - 2,992
Transfers between funds 6,185 (14,174) 458 - - 1,333
Surrenders and terminations (1,893) - - - - (416)
Other transactions (3,807) (151) (178) (177) (69) (1,283)
----------- -------- -------- -------- -------- -------
Net increase (decrease) in units
resulting from contract transactions 6,229 (14,325) 280 (177) (69) 2,626
----------- -------- -------- -------- -------- -------
Units outstanding at December 31, 1995 66,198 - 14,874 12,382 3,735 5,801
=========== ======== ======== ======== ======== =======
Accumulation unit value
per unit at December 31, 1995 $ 23.353 - 23.491 27.229 30.991 15.347
=========== ======== ======== ======== ======== =======
Accumulation net assets at December 31, 1995 $1,545,922 - 349,422 337,160 115,736 89,028
=========== ======== ======== ======== ======== =======
</TABLE>
<PAGE>
5. CONTRACT TRANSACTIONS - UNIT ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
Investment
Grade Adjustable Templeton
Intermediate Income U.S. Pacific Rising
Bond Securities Government Growth Dividends
Fund Fund Fund Fund Fund
-------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1992 588 1,598 410 586 1,899
Contract transactions:
Transfers between funds - 527 - 9,382 1,714
Surrenders and terminations - - - - -
Other transactions (6) (21) (7) (44) (37)
-------------- ----------- ----------- ---------- ----------
Net increase (decrease) in units
resulting from contract transactions (6) 506 (7) 9,338 1,677
-------------- ----------- ----------- ---------- ----------
Units outstanding at December 31, 1993 582 2,104 403 9,924 3,576
============== =========== =========== ========== ==========
Accumulation unit value
per unit at December 31, 1993 $ 14.017 17.423 11.481 14.407 10.453
============== =========== =========== ========== ==========
Contract transactions:
Purchase payments 100 1,334 495 998 418
Transfers between funds 5,385 9,100 (213) 6,850 601
Surrenders and terminations - - - - -
Other transactions (65) (2,024) (31) (5,137) (121)
-------------- ----------- ----------- ---------- ----------
Net increase (decrease) in units
resulting from contract transactions 5,420 8,410 251 2,711 898
-------------- ----------- ----------- ---------- ----------
Units outstanding at December 31, 1994 6,002 10,514 654 12,635 4,474
============== =========== =========== ========== ==========
Accumulation unit value
per unit at December 31, 1994 $ 13.978 16.208 11.374 13.042 9.952
============== =========== =========== ========== ==========
Contract transactions:
Purchase payments 963 12,397 1,060 10,718 4,625
Transfers between funds 562 10,593 966 5,757 3,323
Surrenders and terminations (2,761) (783) - (779) (23)
Other transactions (507) (6,107) (667) (7,009) (1,699)
-------------- ----------- ----------- ---------- ----------
Net increase (decrease) in units
resulting from contract transactions (1,743) 16,100 1,359 8,687 6,226
-------------- ----------- ----------- ---------- ----------
Units outstanding at December 31, 1995 4,259 26,614 2,013 21,322 10,700
============== =========== =========== ========== ==========
Accumulation unit value
per unit at December 31, 1995 $ 15.260 19.691 12.352 13.977 12.816
============== =========== =========== ========== ==========
Accumulation net assets at December 31, 1995 $ 64,990 524,066 24,865 298,014 137,129
============== =========== =========== ========== ==========
</TABLE>
<PAGE>
5. CONTRACT TRANSACTIONS - UNIT ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
Templeton Templeton
Templeton Developing Templeton Global
International Markets Global Asset Total
Equity Equity Growth Allocation All
Fund Fund Fund Fund Funds
--------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1992 - - - - 319,542
Contract transactions:
Transfers between funds 1,375 - - - 1,909
Surrenders and terminations - - - - (12,854)
Other transactions (7) - - - (3,207)
--------------- ----------- ---------- ----------- ----------
Net increase (decrease) in units
resulting from contract transactions 1,368 - - - (14,152)
--------------- ----------- ---------- ----------- ----------
Units outstanding at December 31, 1993 1,368 - - - 305,390
=============== =========== ========== =========== ==========
Accumulation unit value
per unit at December 31, 1993 $ 12.375 - - -
=============== =========== ========== ===========
Contract transactions:
Purchase payments 2,526 2,054 2,721 - 72,282
Transfers between funds 8,168 4,590 4,585 - 5,037
Surrenders and terminations - - - - (14,041)
Other transactions (659) (545) (558) - (21,634)
--------------- ----------- ---------- ----------- ----------
Net increase (decrease) in units
resulting from contract transactions 10,035 6,099 6,748 - 41,644
--------------- ----------- ---------- ----------- ----------
Units outstanding at December 31, 1994 11,403 6,099 6,748 - 347,034
=============== =========== ========== =========== ==========
Accumulation unit value
per unit at December 31, 1994 $ 12.390 9.173 9.894 -
=============== =========== ========== ===========
Contract transactions:
Purchase payments 22,647 18,183 22,517 - 197,212
Transfers between funds 15,984 6,624 11,063 27 3,159
Surrenders and terminations (691) (2,067) (627) - (22,866)
Other transactions (8,513) (6,629) (8,230) (6) (62,126)
--------------- ----------- ---------- ----------- ----------
Net increase (decrease) in units
resulting from contract transactions 29,427 16,111 24,723 21 115,379
--------------- ----------- ---------- ----------- ----------
Units outstanding at December 31, 1995 40,830 22,210 31,471 21 462,413
=============== =========== ========== =========== ==========
Accumulation unit value
per unit at December 31, 1995 $ 13.600 9.357 11.069 10.637
=============== =========== ========== ===========
Accumulation net assets at December 31, 1995 $ 555,276 207,819 348,359 220 8,586,624
=============== =========== ========== =========== ==========
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1995 and 1994
<PAGE>
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Allianz Life Insurance Company of North America:
We have audited the accompanying consolidated balance sheets of Allianz Life
Insurance Company of North America (a wholly owned subsidiary of Allianz of
America, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholder's equity and cash flows
for each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Allianz Life Insurance Company of North America and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations and changes in
stockholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
In 1994, as discussed in note 1 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. In 1993, as discussed in notes 1,
8 and 10 to the consolidated financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statements of
Financial Accounting Standards No. 106, Accounting for Postretirement Benefits
Other Than Pensions and No. 109, Accounting for Income Taxes.
KPMG Peat Marwick LLP
February 6, 1996
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
(in thousands except share data)
Assets 1995 1994
- ---------------------------------------------------------- ----------- ----------
<S> <C> <C>
Investments:
Fixed maturities, at amortized cost $ 0 90,615
Fixed maturities, at market 2,549,598 1,906,208
Equity securities, at market 254,458 131,712
Mortgage loans on real estate 203,128 163,099
Real estate, at cost 8,806 4,685
Investment in real estate partnerships, at equity 11,975 12,551
Certificates of deposit and short-term securities 31,501 155,307
Policy loans 104,184 101,899
Other long-term investments 650 1,117
----------- ----------
Total investments 3,164,300 2,567,193
Cash 10,936 63,883
Accrued investment income 36,858 34,786
Receivables (net of allowance for uncollectible
accounts of $7,697 in 1995 and $9,607 in 1994) 124,700 111,400
Reinsurance receivable:
Funds held on deposit 1,060,566 927,353
Recoverable on future policy benefit reserves 43,248 35,387
Recoverable on unpaid claims 109,075 105,603
Receivable on paid claims 22,172 26,736
Prepaid insurance premiums 4,078 4,317
Home office property and equipment (net of accumulated
depreciation of $21,256 in 1995 and $28,547 in 1994) 8,790 11,612
Deferred acquisition costs 826,994 798,442
Federal income tax recoverable 3,947 3,794
Other assets 11,048 9,818
----------- ----------
Assets, exclusive of separate account assets 5,426,712 4,700,324
Separate account assets 8,402,003 6,965,755
----------- ----------
Total assets $13,828,715 11,666,079
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Balance Sheets, continued
December 31, 1995 and 1994
(in thousands except share data)
Liabilities and Stockholder's Equity 1995 1994
- --------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Liabilities:
Future policy benefit reserves:
Life $ 1,088,964 1,022,537
Annuity 2,601,943 2,304,560
Policy and contract claims 371,898 355,411
Unearned premiums 34,181 40,376
Reinsurance payable 72,838 81,507
Deferred income taxes 140,174 5,807
Accrued expenses 41,266 29,006
Commissions due and accrued 22,979 24,190
Other policyholder funds 82,138 73,509
Other liabilities 19,137 76,314
------------ -----------
Liabilities, exclusive of separate account liabilities 4,475,518 4,013,217
Separate account liabilities 8,402,003 6,965,755
------------ -----------
Total liabilities 12,877,521 10,978,972
------------ -----------
Minority interest in subsidiary 0 7,662
------------ -----------
Stockholder's equity:
Common stock, $1 par value, 20,000,000 shares
authorized, issued and outstanding 20,000 20,000
Preferred stock, $1 par value, cumulative, 200 million
shares authorized, 25 million shares issued and outstanding
in 1995 and 40 million shares issued and outstanding in 1994 25,000 40,000
Additional paid-in capital 407,088 406,494
Net unrealized holding gain (loss) on securities
available-for-sale, net of deferred federal income taxes 139,204 (62,073)
Net unrealized Canadian currency loss (3,455) (3,787)
Retained earnings 363,357 278,811
------------ -----------
Total stockholder's equity 951,194 679,445
------------ -----------
Commitments and contingencies (notes 7 and 12)
Total liabilities and stockholder's equity $13,828,715 11,666,079
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Statements of Income
Years Ended December 31, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
----------- --------- ---------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 257,647 234,295 217,717
Other life policy considerations 93,158 92,254 88,003
Annuity considerations 147,112 120,240 69,583
Accident and health premiums 527,059 547,508 508,785
----------- --------- ---------
Total premiums and considerations 1,024,976 994,297 884,088
Premiums ceded 223,226 244,208 202,904
----------- --------- ---------
Net premiums and considerations 801,750 750,089 681,184
Investment income, net 201,158 181,291 174,831
Realized investment gains, net 29,202 829 28,318
Other 10,140 12,703 9,347
----------- --------- ---------
Total revenue 1,042,250 944,912 893,680
----------- --------- ---------
Benefits and expenses:
Life insurance benefits 268,163 254,326 233,694
Annuity benefits 145,636 131,793 113,500
Accident and health insurance benefits 374,743 379,122 341,676
----------- --------- ---------
Total benefits 788,542 765,241 688,870
Benefit recoveries 210,702 212,144 155,043
----------- --------- ---------
Net benefits 577,840 553,097 533,827
Commissions and other agent compensation 233,939 313,715 398,161
General and administrative expenses 115,419 111,116 109,333
Taxes, licenses and fees 17,672 22,514 25,239
Increase in deferred acquisition costs, net (28,552) (132,090) (253,234)
Minority interest in income of consolidated subsidiary (30) (66) 0
----------- --------- ---------
Total benefits and expenses 916,288 868,286 813,326
----------- --------- ---------
Income from operations before income taxes 125,962 76,626 80,354
----------- --------- ---------
Income tax expense (benefit):
Current 12,993 5,098 30,215
Deferred 25,772 16,053 (6,496)
----------- --------- ---------
Total income tax expense 38,765 21,151 23,719
----------- --------- ---------
Income before cumulative effect of
changes in accounting 87,197 55,475 56,635
Cumulative effect of changes in accounting 0 0 26,875
----------- --------- ---------
Net income $ 87,197 55,475 83,510
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity
Years Ended December 31, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year $ 20,000 20,000 20,000
--------- --------- --------
Preferred Stock:
Balance at beginning of year 40,000 0 0
Issuance of stock during the year 0 40,000 0
Redemption of stock during the year (15,000) 0 0
--------- --------- --------
Balance at end of year 25,000 40,000 0
--------- --------- --------
Additional paid-in capital:
Balance at beginning of year 406,494 401,304 401,304
Additional contribution from parent 594 5,190 0
--------- --------- --------
Balance at end of year 407,088 406,494 401,304
--------- --------- --------
Net unrealized gain (loss) on investments:
Balance at beginning of year (62,073) 9,071 12,071
Cumulative effect of implementation of Statement
No. 115, net of deferred federal income taxes 0 74,866 0
Net unrealized gain on securities transferred
from held-to-maturity to available-for-sale
classification, net of deferred federal income taxes 1,789 0 0
Net unrealized gain (loss) during the year,
net of deferred federal income taxes 199,488 (146,010) (3,000)
--------- --------- --------
Balance at end of year 139,204 (62,073) 9,071
--------- --------- --------
Net unrealized Canadian currency gain (loss):
Balance at beginning of year (3,787) (2,708) (1,835)
Net unrealized gain (loss) during the year,
net of deferred federal income taxes 332 (1,079) (873)
--------- --------- --------
Balance at end of year (3,455) (3,787) (2,708)
--------- --------- --------
Retained earnings:
Balance at beginning of year 278,811 223,749 140,239
Net income 87,197 55,475 83,510
Cash dividend to stockholder (2,651) (413) 0
--------- --------- --------
Balance at end of year 363,357 278,811 223,749
--------- --------- --------
Total stockholder's equity $951,194 679,445 651,416
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net income $ 87,197 55,475 83,510
---------- --------- ---------
Adjustments to reconcile net income to net
cash used in operating activities:
Realized gains on investments (29,202) (829) (28,318)
Deferred federal income tax (benefit) expense 25,772 16,053 (6,496)
Cumulative effect of changes in accounting 0 0 (26,875)
Charges to policy account balances (120,254) (125,488) (105,912)
Interest credited to policy account balances 169,151 150,490 147,983
Change in:
Accrued investment income (2,072) (764) (2,725)
Receivables (13,300) 12,040 (20,206)
Reinsurance receivables (190,953) (93,453) (107,809)
Deferred acquisition costs (28,552) (132,090) (253,234)
Future policy benefit reserves 66,932 20,791 (9,557)
Policy and contract claims 25,116 25,072 40,211
Unearned premiums (6,195) (1,194) (2,111)
Reinsurance payable (8,669) 19,779 31,653
Current tax recoverable (153) (6,255) 1,085
Deferred tax liability 0 0 15,936
Accrued expenses and other liabilities (43,867) 54,626 14,657
Commissions due and accrued (1,211) 3,316 1,461
Depreciation and amortization (23,391) (11,498) (7,681)
Other, net 916 (86) 2,303
---------- --------- ---------
Total adjustments (179,932) (69,490) (315,635)
---------- --------- ---------
Net cash used in operating activities (92,735) (14,015) (232,125)
---------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years Ended December 31, 1995, 1994 and 1993
(in thousands)
1995 1994 1993
------------ --------- -----------
<S> <C> <C> <C>
Cash flows used in investing activities:
Purchase of fixed maturities, at amortized cost $ 0 0 (1,191,749)
Purchase of fixed maturities, at market (1,533,290) (928,532) 0
Purchase of equity securities (166,701) (145,267) (205,345)
Purchase of other long-term investments 0 (467) (650)
Funding of mortgage loans (66,301) (64,808) (20,097)
Sale of fixed maturities, at amortized cost 0 0 666,893
Sale of fixed maturities, at market 1,242,988 791,659 0
Matured or redeemed fixed maturities, at amortized cost 7,022 4,342 314,223
Matured fixed maturities, at market 38,991 32,508 0
Sale of equity securities 97,619 150,347 217,524
Repayment of mortgage loans 25,563 28,206 15,989
Sale of minority interest in subsidiary 0 0 8,189
Purchase of minority interest's shares in subsidiary (7,903) 0 0
Net change in certificates of deposit and
short-term securities 123,806 (96,344) 33,330
Other (2,851) (6,232) 782
------------ --------- -----------
Net cash used in investing activities (241,057) (234,588) (160,911)
------------ --------- -----------
Cash flows used in financing activities:
Policyholders' deposits to account balances $ 553,699 526,918 639,633
Policyholders' withdrawals from account balances (291,102) (235,309) (164,911)
Change in assets held under reinsurance agreements 36,354 (59,349) (75,658)
Net change in mortgage notes payable (1,049) (39) (36)
Additional paid-in capital from parent 594 5,190 0
Preferred stock transactions (15,000) 40,000 0
Cash dividends paid (2,651) (413) 0
------------ --------- -----------
Net cash used in financing activities 280,845 276,998 399,028
------------ --------- -----------
Net change in cash (52,947) 28,395 5,992
Cash at beginning of year 63,883 35,488 29,496
------------ --------- -----------
Cash at end of year $ 10,936 63,883 35,488
============ ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(in thousands)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allianz Life Insurance Company of North America (the Company) is a wholly
owned subsidiary of Allianz of America, Inc. (AZOA), a majority-owned
subsidiary of Allianz A.G. Holding, a Federal Republic of Germany company.
The Company is a life insurance company which is licensed to sell both group
and individual life, annuity and accident and health policies in the United
States, Canada and several U.S. territories. Based on 1995 gross premium
volume, 13%, 71% and 16% of the Company's business is life, annuity and
accident and health, respectively. The Company's primary distribution
channels are through strategic alliances with other insurance companies and
third party marketing organizations. The Company has a significant
relationship as of December 31, 1995 with a mutual fund company and its
broker/dealer network related to sales of its variable life and variable
annuity products and another significant administration, marketing and
reinsurance relationship with an unrelated insurance company.
Following is a summary of the significant accounting policies reflected in the
accompanying consolidated financial statements.
BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) which vary in certain respects
from accounting rules prescribed or permitted by state insurance regulatory
authorities. The accounts of the Company's major subsidiaries, Preferred Life
Insurance Company of New York and Canadian American Financial Corporation and
other less significant subsidiaries have been consolidated. All significant
intercompany balances and transactions have been eliminated in consolidation.
Certain amounts as previously reported have been reclassified to be consistent
with the current year's presentation.
The preparation of financial statements in conformity with GAAP requires
management to make certain estimates and assumptions that affect reported
assets and liabilities including reporting or disclosure of contingent assets
and liabilities as of the balance sheet date and the reported amounts of
revenues and expenses during the reporting period. Actual results could vary
significantly from management's estimates.
RECOGNITION OF TRADITIONAL LIFE, GROUP LIFE AND GROUP ACCIDENT AND HEALTH
REVENUE
Traditional life products include products with guaranteed premiums and
benefits and consist principally of whole life and term insurance policies,
limited payment contracts and certain annuity products with life
contingencies.
Premiums on traditional life and group life products are recognized as income
when due. Group accident and health premiums are recognized as earned on a pro
rata basis over the risk coverage periods. Benefits and expenses for
traditional and group products are matched with earned premiums so that
profits are recognized over the premium paying periods of the contracts. This
matching is accomplished by establishing provisions for future policy benefits
and policy and contract claims, and deferring and amortizing related policy
acquisition costs.
<PAGE>
RECOGNITION OF NONTRADITIONAL AND VARIABLE LIFE AND ANNUITY REVENUE
Nontraditional and variable life insurance and interest sensitive contracts
that have significant mortality or morbidity risk are accounted for in
accordance with the retrospective deposit method. Interest sensitive
contracts that do not have significant mortality or morbidity risk are
accounted for in a manner consistent with interest bearing financial
instruments. For both types of contracts, premium receipts are reported as
deposits to the contractholder's account while revenues consist of amounts
assessed against contractholders including surrender charges and earned
administrative service fees. Mortality or morbidity charges are also
accounted for as revenue on those contracts containing mortality or morbidity
risk. Benefits consist of interest credited to contractholder's accounts and
claims or benefits incurred in excess of the contractholder's balance.
DEFERRED ACQUISITION COSTS
Acquisition costs, consisting of commissions and other costs which vary with
and are primarily related to production of new business, are deferred. For
traditional life and group life products, such costs are amortized over the
revenue-producing period of the related policies using the same actuarial
assumptions used in computing future policy benefit reserves. Acquisition
costs for accident and health insurance policies are deferred and amortized
over the lives of the policies in the same manner as premiums are earned. For
interest sensitive products, acquisition costs are amortized in relation to
the present value of expected future gross profits from investment margins and
mortality, morbidity and expense charges. Deferred acquisition costs amortized
during 1995, 1994 and 1993 were $117,782, $108,676 and $72,431, respectively.
FUTURE POLICY BENEFIT RESERVES
Future policy benefit reserves on traditional life products are computed by
the net level premium method based upon estimated future investment yield,
mortality and withdrawal assumptions, commensurate with the Company's
experience, modified as necessary to reflect anticipated trends, including
possible unfavorable deviations. Most life reserve interest assumptions are
graded from 9% to 5.5%.
Future policy benefit reserves for interest sensitive products are generally
carried at accumulated contract values. Reserves on some deferred annuity
contracts are computed based on contractholder cash value accumulations,
adjusted for mortality, withdrawal and interest margin assumptions.
Fair values of investment contracts, which include deferred annuities and
other annuities without significant mortality risk, were determined by testing
amounts payable on demand against discounted cash flows using interest rates
commensurate with the risks involved. Fair values are based on the amount
payable on demand at December 31, 1995 and 1994.
POLICY AND CONTRACT CLAIMS
Policy and contract claims represent an estimate of claims and claim
adjustment expenses on accident and health and life insurance policies that
have been reported but not yet paid and incurred but not yet reported as of
December 31.
REINSURANCE
Insurance liabilities are reported before the effects of reinsurance. Amounts
paid or deemed to have been paid for claims covered by reinsurance contracts
are recorded as reinsurance receivable. Reinsurance receivables are recognized
in a manner consistent with the liabilities related to the underlying
reinsured contracts.
<PAGE>
INVESTMENTS
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities which addresses the accounting and reporting for investments
in equity securities that have readily determinable fair values and for all
investments in debt securities. Those investments are classified in one of
three categories. Debt securities that the Company has the positive intent
and ability to hold to maturity are classified as "held-to-maturity
securities" and reported at amortized cost. Debt and equity securities bought
and held principally for the purpose of selling them in the near term are
classified as "trading securities" and reported at fair value, with unrealized
gains and losses included in earnings. Debt and equity securities not
classified as either "held-to-maturity securities" or "trading securities" are
classified as "available-for-sale securities" and reported at fair value, with
unrealized gains and losses reported as a separate component of stockholders'
equity, net of deferred taxes. SFAS No. 115 did not permit retroactive
application of its provisions. The Company classified the majority of its
investment portfolio as "available-for-sale securities" with a limited number
of securities classified as "held-to-maturity" at January 1, 1994.
At December 31, 1995, the Company transferred all of its securities with an
amortized cost of $83,357 classified as "held-to-maturity' to the
"available-for-sale" classifications as provided in the Financial Accounting
Standards Board (FASB) Special Report on the implementation of SFAS No. 115.
The effect of this transfer was an increase in stockholder's equity of $1,789.
All of the Company's investment portfolio is classified as
"available-for-sale" at December 31, 1995.
Short-term investments are carried at amortized cost which approximates
market. Policy loans are reflected at their unpaid principal balances.
Mortgage loans are reflected at unpaid principal balances adjusted for premium
and discount amortization and an allowance for uncollectible balances. During
1995, the Company adopted SFAS No. 114, Accounting by Creditors for Impairment
of a Loan and SFAS No. 118, Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures. SFAS No. 114 addresses accounting by
creditors for impairment of certain loans. It requires that impaired loans
within the scope of the Statement be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate
or, alternatively, at the loan's observable market price of the fair value of
supporting collateral. The Company analyzes loan impairment at least once a
year when assessing the adequacy of the allowance for possible credit losses.
SFAS No. 118 permits existing income recognition practices to continue. The
Company does not accrue interest on impaired loans and accounts for interest
income on a cash basis. The adoption of these Statements did not have a
material impact on the Company's net income or financial position.
Investments in real estate are reflected at the lower of cost or market value.
Real estate occupied by the Company is reflected at cost, less accumulated
depreciation. Investments in real estate, exclusive of land, are being
depreciated on a straight-line basis over estimated useful lives ranging from
3 to 30 years.
Realized gains and losses are computed based on the specific identification
method.
As of December 31, 1995 and 1994, investments with a carrying value of $37,879
and $44,337, respectively, were held on deposit with various insurance
departments as required by statutory regulations.
The fair values of invested assets, excluding investments in real estate, are
deemed by management to approximate their estimated market values. The fair
value of mortgage loans has been calculated using discounted cash flows and is
based on pertinent information available to management as of year end. Policy
loan balances which are supported by the underlying cash value of the policies
approximate fair value. Changes in market conditions subsequent to year end
<PAGE>
may cause estimates of fair values to differ from the amounts presented
herein.
INCOME TAXES
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 in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
SEPARATE ACCOUNTS
Separate accounts represent funds for which investment income and investment
gains and losses accrue directly to the policyholders and contractholders.
Each account has specific investment objectives and the assets are carried at
market value. The assets of each account are legally segregated and are not
subject to claims which arise out of any other business of the Company.
Fair values of separate accounts assets were determined using the market value
of the investments held in segregated fund accounts. Fair values of separate
accounts liabilities were determined using the cash surrender values of the
policyholder's and contractholder's account.
RECEIVABLES
Receivable balances approximate estimated fair values. This is based on
pertinent information available to management as of year end including the
financial condition and credit worthiness of the parties underlying the
receivables. Changes in market conditions subsequent to year end may cause
estimates of fair values to differ from the amounts presented herein.
ACCOUNTING CHANGES
The impact of implementation of SFAS No. 115 in 1994 was an increase in equity
of $74,866 at January 1, 1994.
<TABLE>
<CAPTION>
The table below presents the cumulative effect of changes, net of tax, in
accounting principles implemented in 1993 on after tax net income:
<S> <C>
SFAS No. 106, Accounting for Postretirement Benefits Other Than Pensions $(4,006)
SFAS No. 109, Accounting for Income Taxes 30,881
--------
Total cumulative effect on after tax net income
of changes in accounting principles $26,875
========
</TABLE>
ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED
In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
SFAS No. 121 also addresses the accounting for long-lived assets that are
expected to be disposed of by a company. The Company will adopt SFAS No. 121
in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
<PAGE>
(2) BUSINESS COMBINATION
On May 31, 1993, the Company acquired the majority of the assets and
liabilities of Fidelity Union Life Insurance Company (FULICO), a wholly owned
subsidiary of AZOA, through an assumption reinsurance arrangement. FULICO
remained in existence retaining only its corporate charter and those assets
necessary to maintain its charter and licenses to conduct life insurance and
annuity business until it was sold in 1994.
The Company accounted for this transaction as an "as-if pooling of interests"
involving the combination of entities under the common control of AZOA.
Accordingly, all financial data for periods prior to May 31, 1993 were
restated to include the operations of FULICO and all intercompany transactions
were eliminated.
<TABLE>
<CAPTION>
Total revenues and net income, before adoption of any changes in accounting,
of the separate companies for the five-months ended May 31, 1993 were:
Allianz Life FULICO Combined
------------- ------ --------
<S> <C> <C> <C>
Five-months ended May 31, 1993:
Total revenue $ 309,159 78,814 387,973
Net income 19,224 12,944 32,168
</TABLE>
(3) INVESTMENTS
<TABLE>
<CAPTION>
Investments at December 31, 1995 consist of:
Amount
Amortized Estimated shown on
cost fair balance
or cost value sheet
---------- --------- ---------
<S> <C> <C> <C>
Fixed maturities - Available-for-sale:
U.S. government $ 793,311 867,793 867,793
States and political subdivisions 469 481 481
Foreign government 254,457 265,797 265,797
Public utilities 32,100 36,728 36,728
Corporate securities 709,906 747,609 747,609
Mortgage backed securities 516,538 548,182 548,182
Collateralized mortgage obligations 80,949 83,008 83,008
---------- --------- ---------
Total fixed maturities $2,387,730 2,549,598 2,549,598
---------- --------- ---------
Equity securities - Available-for-sale:
Common stocks:
Public utilities 9,305 10,377 10,377
Banks, trusts and insurance companies 6,305 7,108 7,108
Industrial and miscellaneous 171,163 221,002 221,002
Nonredeemable preferred stocks 14,835 15,971 15,971
---------- --------- ---------
Total equity securities $ 201,608 254,458 254,458
---------- --------- ---------
<PAGE>
Other investments:
Mortgage loans on real estate 203,128 XXXXXXXXX 203,128
Real estate:
Investment properties 8,806 XXXXXXXXX 8,806
Partnerships 11,975 XXXXXXXXX 11,975
Certificates of deposit and short term securities 31,501 XXXXXXXXX 31,501
Policy loans 104,184 XXXXXXXXX 104,184
Other long term investments 650 XXXXXXXXX 650
---------- --------- ---------
Total other investments $ 360,244 XXXXXXXXX 360,244
---------- --------- ---------
Total investments $2,949,582 XXXXXXXXX 3,164,300
========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1995 and 1994, the amortized cost, gross unrealized gains, gross
unrealized losses and estimated fair values of marketable securities are as follows:
Amortized Gross Gross Estimated
cost unrealized unrealized fair
or cost gains losses value
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
1995:
Available-for-sale:
U.S. government $ 793,311 74,482 0 867,793
States and political subdivisions 469 12 0 481
Foreign government 254,457 11,613 273 265,797
Public utilities 32,100 4,628 0 36,728
Corporate securities 709,906 41,746 4,043 747,609
Mortgage backed securities 516,538 31,644 0 548,182
Collateralized mortgage obligations 80,949 2,751 692 83,008
---------- ---------- ---------- ---------
Total fixed maturities 2,387,730 166,876 5,008 2,549,598
Equity securities 201,608 61,753 8,903 254,458
---------- ---------- ---------- ---------
Total $2,589,338 228,629 13,911 2,804,056
========== ========== ========== =========
1994:
Held-to maturity:
Corporate securities $ 90,615 110 5,166 85,559
---------- ---------- ---------- ---------
Total held-to-maturity 90,615 110 5,166 85,559
---------- ---------- ---------- ---------
Available-for-sale:
U.S. government 495,048 49 31,403 463,694
States and political subdivisions 519 3 24 498
Foreign government 44,818 562 1,886 43,494
Public utilities 79,170 1,154 322 80,002
Corporate securities 1,099,623 7,034 63,790 1,042,867
Mortgage backed securities 228,894 0 7,815 221,079
Collateralized mortgage obligations 57,739 0 3,165 54,574
---------- ---------- ---------- ---------
Total fixed maturities 2,005,811 8,802 108,405 1,906,208
Equity securities 127,048 18,556 13,892 131,712
---------- ---------- ---------- ---------
Total available-for-sale 2,132,859 27,358 122,297 2,037,920
---------- ---------- ---------- ---------
Total $2,223,474 27,468 127,463 2,123,479
========== ========== ========== =========
</TABLE>
<PAGE>
The changes in unrealized gains (losses) on fixed maturities
available-for-sale securities were $261,471 and $(214,245) and the changes in
unrealized losses on held-to-maturity securities were $0 and $(8,783) for the
years ended December 31, 1995 and 1994, respectively. The change in
unrealized gains from fixed maturities was $33,645 for the year ended December
31, 1993.
The changes in unrealized gains (losses) in equity investments, which include
common stocks and nonredeemable preferred stocks, and other investments were
$48,186, $(9,587) and $(2,468) for the years ended December 31, 1995, 1994 and
1993, respectively.
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of fixed maturities at December
31, 1995, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated
cost fair value
---------- ----------
<S> <C> <C>
Available-for-sale:
Due in one year or less $ 3,494 3,552
Due after one year through five years 282,290 295,698
Due after five years through ten years 1,252,516 1,337,963
Due after ten years 251,943 281,195
Mortgage backed securities 597,487 631,190
---------- ----------
Totals $2,387,730 2,549,598
========== ==========
</TABLE>
Gross gains of $41,962 and $26,848 and gross losses of $14,607 and $26,805
were realized on sales of available-for-sale securities in 1995 and 1994,
respectively; related taxes were $9,574 and $715 in 1995 and 1994,
respectively. Proceeds from redemptions of held-to-maturity securities
during 1995 and 1994 were $7,022 and $4,342, respectively, with no gain
or loss realized on the transactions. Proceeds from sales of fixed
maturity securities in 1993 were $666,893. Gross gains of $25,229 and
gross losses of $2,102 were realized on sales of fixed maturities in 1993;
related taxes were $8,094.
<TABLE>
<CAPTION>
Net realized investment gains (losses) for the respective years ended December
31 are summarized as follows:
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Fixed maturities, at amortized cost $ 0 0 23,127
Fixed maturities, at market 21,877 (2,712) 0
Equity securities 5,478 2,745 5,876
Mortgage loans (687) (1,667) (189)
Real estate 2,530 2,067 (513)
Other 4 396 17
-------- ------- -------
Net gains before taxes 29,202 829 28,318
<PAGE>
Tax expense on net realized gains 10,218 352 10,329
-------- ------- -------
Net gains after taxes $18,984 477 17,989
======== ======= =======
</TABLE>
In 1995, in conjunction with an expanded marketing agreement, the Company
provided an unrelated insurance company with $30 million in exchange for a
fifteen year convertible debenture paying 5% interest for the first five years
with the interest rate reset annually thereafter at the one-year LIBOR plus
1%. If converted, the Company would obtain approximately 10% equity ownership
in the unrelated company. The Company has no intention of converting the
debenture in the near term.
During 1995 and 1994, the Company entered into mortgage backed security
reverse repurchase transactions ("dollar rolls") with certain securities
dealers. Under this program, the Company sells certain securities for
delivery in the current month and simultaneously contracts with the same
dealer to repurchase similar, but not identical, securities on a specified
future date. The Company gives up the right to receive principal and interest
on the securities sold. As of December 31, 1995 there were no outstanding
amounts under the Company's dollar roll program. As of December 31, 1994,
mortgage backed securities underlying the agreements were carried at a market
value of $58,174 and other liabilities included $58,150 for funds received
under these agreements. Average balances outstanding were $67,735 and $66,110
and weighted average interest rates were 7.4% and 6.5% during 1995 and 1994,
respectively.
During 1995 and 1994 the Company participated in a securities lending program
that is administered by Allianz Investment Corporation (AIC), an affiliated
company. Under this program, the Company loans U.S. Treasury Notes to
qualified third parties. The Company obtains collateral for the loan equal to
102 percent of the estimated market value and accrued interest on the loaned
securities and receives a portion of the interest earned on the collateral.
In addition, the Company maintains full ownership rights to the securities
loaned, including investment income and has the ability to sell the securities
while they are on loan with the consent of the borrower. There were no
securities on loan at December 31, 1995. As of December 31, 1994, the
estimated market value of the loaned securities was $110,063, collateralized
by investments in FNMA securities.
<TABLE>
<CAPTION>
Impaired mortgage loans are defined as those where it is probable that amounts
due according to contractual terms, including principal and interest, will not
be collected. Impaired mortgage loans are measured by the Company at the fair
value of collateral. Interest income on impaired mortgage loans is recorded
on a cash basis. Below is a summary of impaired mortgage loans as of December
31, 1995.
Impaired Impaired Total
mortgage loans mortgage loans impaired
with a related without a related mortgage
allowance allowance loans
--------------- ----------------- --------
<S> <C> <C> <C>
Balance $ 9,210 8,541 17,751
Related allowance 3,580 - 3,580
--------------- ----------------- --------
Balance, net of allowance $ 5,630 8,541 14,171
=============== ================= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Below is a summary of interest income on impaired mortgage loans.
1995
-------
<S> <C>
Average impaired mortgage loans $19,671
Total interest income on impaired mortgage loans 1,100
Interest income on impaired mortgage loans recorded on a cash basis 1,100
</TABLE>
<TABLE>
<CAPTION>
The valuation allowances at December 31, 1995, 1994 and 1993 and the changes in the
allowance for the years then ended are summarized as follows:
Writedowns
Beginning Charged to Charged to End
of year Operations Allowance Recoveries of year
---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
December 31, 1995:
Mortgage loans $ 11,552 914 0 1,979 10,487
Investment in real estate 1,550 0 0 1,550 0
---------- ---------- ---------- ---------- -------
Total valuation allowance $ 13,102 914 0 3,529 10,487
========== ========== ========== ========== =======
December 31, 1994:
Mortgage loans $ 11,552 1,598 0 1,598 11,552
Investment in real estate 1,550 0 0 0 1,550
---------- ---------- ---------- ---------- -------
Total valuation allowance $ 13,102 1,598 0 1,598 13,102
========== ========== ========== ========== =======
December 31, 1993:
Mortgage loans $ 13,602 0 0 2,050 11,552
Investment in real estate 1,854 973 0 1,277 1,550
---------- ---------- ---------- ---------- -------
Total valuation allowance $ 15,456 973 0 3,327 13,102
========== ========== ========== ========== =======
</TABLE>
<TABLE>
<CAPTION>
Major categories of net investment income for the respective years ended
December 31 are:
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Interest:
Fixed maturities, at amortized cost $ 6,284 6,966 142,814
Fixed maturities, at market 158,421 141,611 0
Mortgage loans 16,125 13,706 12,764
Policy loans 6,688 6,329 6,404
Short-term investments 7,182 3,012 4,159
<PAGE>
Dividends:
Preferred stock 581 495 231
Common stock 3,204 2,673 2,496
Rental income on real estate 2,781 3,135 2,540
Interest on assets held by reinsurers 10,445 10,470 10,074
Other 833 577 1,131
-------- ------- -------
Total investment income 212,544 188,974 182,613
Investment expenses 11,386 7,683 7,782
-------- ------- -------
Net investment income $201,158 181,291 174,831
======== ======= =======
</TABLE>
(4) SUMMARY TABLE OF FAIR VALUE DISCLOSURES
<TABLE>
<CAPTION>
1995 1995 1994 1994
---------- ---------- ---------- ----------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets
- -------------------------------------------
Fixed maturities, at amortized cost:
Corporate securities $ 0 $ 0 $ 90,615 $ 85,559
Fixed maturities, at market:
U.S. Government 867,793 867,793 463,694 463,694
States and political subdivisions 481 481 498 498
Foreign governments 265,797 265,797 43,494 43,494
Public utilities 36,728 36,728 80,002 80,002
Corporate securities 747,609 747,609 1,042,867 1,042,867
Mortgage backed securities 548,182 548,182 221,079 221,079
Collateralized mortgage obligations 83,008 83,008 54,574 54,574
Equity securities 254,458 254,458 131,712 131,712
Mortgage loans 203,128 212,766 163,099 162,903
Short term investments 31,501 31,501 155,307 155,307
Policy loans 104,184 104,184 101,899 101,899
Other long term investments 650 650 1,117 1,117
Receivables 124,700 124,700 111,874 111,874
Separate accounts assets 8,402,003 8,402,003 6,965,755 6,965,755
Financial liabilities
- -------------------------------------------
Investment contracts 3,063,100 2,542,260 2,753,304 2,319,872
Separate account liabilities 8,402,003 8,181,725 6,965,755 6,715,730
</TABLE>
See Note 1 "Summary of Significant Accounting Policies" for description of the
methods and significant assumptions used to estimate fair values.
(5) RECEIVABLES
<TABLE>
<CAPTION>
<PAGE>
Receivables at December 31 consist of the following:
1995 1994
-------- -------
<S> <C> <C>
Premiums due $ 83,695 76,840
Agents balances 7,236 7,299
Related party receivables 922 1,042
Reinsurance commission receivable 16,693 13,723
Scholarship enrollment fees 6,822 6,753
Due from administrators 6,149 2,735
Other 3,183 3,008
-------- -------
Total receivables $124,700 111,400
======== =======
</TABLE>
(6) ACCIDENT AND HEALTH CLAIMS RESERVES
Accident and health claims reserves are based on long-range projections
subject to uncertainty. Uncertainty regarding reserves of a given accident
year is gradually reduced as new information emerges each succeeding year,
thereby allowing more reliable re-evaluations of such reserves. While
management believes that reserves as of December 31, 1995 are adequate,
uncertainties in the reserving process could cause such reserves to develop
favorably or unfavorably in the near term as new or additional information
emerges. Any adjustments to reserves are reflected in the operating results
of the periods in which they are made. Movements in reserves which are small
relative to the amount of such reserves could significantly impact future
reported earnings of the Company.
<TABLE>
<CAPTION>
Activity in the accident and health claims reserves, exclusive of long term
care, hospital indemnity and AIDS reserves of $18,858, $11,149 and $8,742 in
1995, 1994 and 1993, respectively, is summarized as follows:
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance
recoverables of $96,090, $86,551 and $91,303 $185,028 170,123 168,872
Incurred related to:
Current year 242,024 230,995 226,815
Prior years (9,163) (7,290) (8,432)
--------- -------- --------
Total incurred 232,861 223,705 218,383
--------- -------- --------
Paid related to:
Current year 100,165 82,338 84,172
Prior years 125,920 126,462 132,960
--------- -------- --------
Total paid 226,085 208,800 217,132
--------- -------- --------
Balance at December 31, net of reinsurance
recoverables of $99,292, $96,090 and $86,551 $191,804 185,028 170,123
========= ======== ========
</TABLE>
There were no significant adjustments to accident and health claim liabilities
resulting from changes in estimates of benefits related to prior years.
<PAGE>
(7) REINSURANCE
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by ceding
risks under excess coverage and coinsurance contracts. The Company retains a
maximum of $1 million coverage per individual life.
Reinsurance contracts do not relieve the Company from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for amounts
deemed uncollectible. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk to minimize its exposure
to significant losses from reinsurer insolvencies.
Included in reinsurance receivables at December 31, 1995 are $873,724, $67,819
and $148,319 recoverable from insurers who, as of December 31, 1995, were
rated A+, A+ and B++, respectively by Best's Insurance Reports. A contingent
liability exists to the extent that the Company's reinsurers are unable to
meet their contractual obligations. Management is of the opinion that no
liability will accrue to the Company with respect to this contingency.
<TABLE>
<CAPTION>
Life insurance, annuities and accident and health business assumed from and ceded to other
companies is as follows:
Percentage
Assumed Ceded of amount
Gross from other to other Net assumed
Year ended amount companies companies amount to net
- -------------------------------- ----------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1995:
Life insurance In force $39,601,531 28,790,199 6,884,645 61,507,085 46.8%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance 242,704 108,102 40,291 310,515 34.8%
Annuities 145,994 1,117 10,376 136,735 0.8%
Accident and health insurance 361,290 165,769 172,559 354,500 46.8%
----------- ---------- --------- ---------- -----------
Total premiums 749,988 274,988 223,226 801,750 34.3%
=========== ========== ========= ========== ===========
December 31, 1994:
Life insurance In force $39,789,859 24,411,513 6,893,030 57,308,342 42.6%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance 230,241 96,308 35,578 290,971 33.1%
Annuities 119,045 1,195 6,806 113,434 1.1%
Accident and health insurance 388,759 158,749 201,824 345,684 45.9%
----------- ---------- --------- ---------- -----------
Total premiums 738,045 256,252 244,208 750,089 34.2%
=========== ========== ========= ========== ===========
December 31, 1993:
Life insurance In force $39,784,564 21,861,833 6,297,943 55,348,454 39.5%
----------- ---------- --------- ---------- -----------
Premiums:
Life insurance 220,287 85,433 42,323 263,397 32.4%
Annuities 68,713 870 6,633 62,950 1.4%
Accident and health insurance 365,894 142,891 153,948 354,837 40.3%
----------- ---------- --------- ---------- -----------
Total premiums 654,894 229,194 202,904 681,184 33.6%
=========== ========== ========= ========== ===========
</TABLE>
<PAGE>
Of the amounts ceded to others, the Company ceded life insurance inforce of
$182,638, $86,055 and $30,841 in 1995, 1994 and 1993, respectively, and life
insurance premiums earned of $641, $203 and $98 in 1995, 1994 and 1993,
respectively, to its ultimate parent Allianz Aktiengesellshaft. The Company
also ceded accident and health premiums earned to Allianz Aktiengesellshaft of
$(7,520), $12,256 and $8,966 in 1995, 1994 and 1993.
In addition to the above transactions, the Company ceded a portion of its
mortality risk associated with the variable annuity product to Allianz
Aktiengesellshaft. The Company recorded a recoverable on future policy
benefit reserves of $930 as of December 31, 1995.
(8) INCOME TAXES
INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Total income tax expense (benefit) for the years ended December 31 are as follows:
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income tax expense attributable to operations:
Current tax expenses $ 12,993 5,098 30,215
-------- -------- --------
Deferred tax (benefit) expense 25,772 16,053 (10,847)
Benefit of operating loss carryforwards 0 0 3,406
Adjustment of deferred tax assets and
liabilities for enacted change in tax rates 0 0 945
-------- -------- --------
Total deferred tax (benefit) expense 25,772 16,053 (6,496)
-------- -------- --------
Total income tax expense attributable to operations 38,765 21,151 23,719
Income tax effect on equity:
Income tax allocated to cumulative effect of
adoption of SFAS No. 106 0 0 (2,064)
Income tax allocated to stockholder's equity:
Adoption of SFAS No. 115 0 40,312 0
Attributable to unrealized gains and losses for the year 108,559 (79,201) 62
-------- -------- --------
Total income tax effect on equity $147,324 (17,738) 21,717
======== ======== ========
</TABLE>
COMPONENTS OF INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Income tax expense computed at the statutory rate of 35% in 1995, 1994 and 1993,
varies from tax expense reported in the Consolidated Statements of Income for the
respective years ended December 31 as follows:
<PAGE>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Income tax expense computed at the statutory rate $44,087 26,819 28,125
Dividends received deductions and tax-exempt interest (5,430) (3,967) (2,189)
Foreign tax (464) (79) (1,324)
Interest on tax deficiency 408 (716) 528
Impact of statutory rate change on deferred tax liability 0 0 945
Utilization of net operating loss and alternative
minimum tax credits 0 0 (2,549)
Other 164 (906) 183
-------- ------- -------
Income tax expense as reported $38,765 21,151 23,719
======== ======= =======
</TABLE>
COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES ON THE BALANCE SHEET
<TABLE>
<CAPTION>
Tax effects of temporary differences giving rise to the significant components of the
net deferred tax liability at December 31 are as follows:
1995 1994
-------- -------
<S> <C> <C>
Deferred tax assets:
Provision for post retirement benefits $ 1,936 1,885
Allowance for uncollectible accounts 2,283 2,961
Policy reserves 175,963 188,602
Unrealized losses on investments in available for sale securities 0 35,584
-------- -------
Total deferred tax assets 180,182 229,032
-------- -------
Deferred tax liabilities:
Deferred acquisition costs 234,393 229,577
Net unrealized gain 72,975 0
Other 12,988 5,262
-------- -------
Total deferred tax liabilities 320,356 234,839
-------- -------
Net deferred tax liability $140,174 5,807
======== =======
</TABLE>
Although realization is not assured, the Company believes it is not necessary
to establish a valuation allowance for the deferred tax asset as it is more
likely than not the deferred tax asset will be realized principally through
future reversals of existing taxable temporary differences and future taxable
income. The amount of the deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future reversals of existing
taxable temporary differences and future taxable income are reduced.
As of December 31, 1995, the Company had no tax loss carryforwards or
alternative minimum tax credits.
The Company files a consolidated federal income tax return with AZOA and all
of its wholly owned subsidiaries. The consolidated tax allocation agreement
stipulates that each company participating in the return will bear its share
of the tax liability pursuant to United States Treasury Department
regulations. The Company and each of its insurance subsidiaries generally
will be paid for the tax benefit on their losses, and any other tax
attributes, to the extent they could have obtained a benefit against their
<PAGE>
post-1990 separate return taxable income or tax. Income taxes paid by the
Company were $14,865, $15,162 and $28,465 in 1995, 1994 and 1993,
respectively. At December 31, 1995 and 1994 the Company has a tax recoverable
from AZOA of $3,257 and $5,095 and a recoverable from Revenue Canada Taxation
of $690 and a payable to Revenue Canada Taxation of $1,301, respectively.
(9) RELATED PARTY TRANSACTIONS
In November 1995, the Company purchased the 400 non-voting common shares in
its subsidiary, Canadian American Financial Corporation from AZOA for $7,903.
The acquisition of the shares increased the Company's equity ownership in both
voting and non-voting common stock to 100%.
As of December 31, 1995 and 1994, Allianz Real Estate (AzRE), a wholly owned
subsidiary of AZOA, owned 100% of the stock or was a limited partner of
certain entities whose assets include mortgage loans issued by the Company
amounting to $6,245 and $12,100, respectively. Included in the mortgage loans
are properties originally foreclosed upon by the Company of which the balances
at December 31, 1995 and 1994 are $1,650 and $4,575, respectively.
Allianz Investment Corporation (AIC) manages the Company's investment
portfolio. The Company paid AIC $1,024, $1,285 and $1,207 in 1995, 1994 and
1993, respectively, for investment advisory fees. The Company's liability to
AIC was $377 and $0 at December 31, 1995 and 1994, respectively.
The Company shares a data center with affiliated insurance companies. Usage
charges paid to the data center by the Company were $3,752, $4,228 and $4,715
in 1995, 1994 and 1993, respectively. The Company's liability for data center
charges was $337 and $457 at December 31, 1995 and 1994, respectively.
The Company reimbursed AZOA $738, $817 and $339 in 1995, 1994 and 1993,
respectively, for certain administrative services performed. The Company's
liability to AZOA was $528 and $264 at December 31, 1995 and 1994,
respectively.
In June 1994, the Company authorized 200 million shares of preferred stock
with a par value of $1 per share. This preferred stock is issuable in series
with the number of shares, redemption rights and dividend rate designated by
the Board of Directors for each series. Dividends are cumulative at a rate
reflective of prevailing market conditions at time of issue and are payable
semiannually. Dividend payments are restricted by provisions in State of
Minnesota statutes. In June 1994, the Company issued 25 millions shares of
Series A preferred stock with a dividend rate of 6.4% to AZOA for $25,000. In
December 1994, the Company issued 15 millions shares of Series B preferred
stock with a dividend rate of 6.95% to AZOA for $15,000. In December 1995,
the Company redeemed and canceled the 15 million shares of Series B preferred
stock issued to AZOA. There are currently 25 million shares of Series A
preferred stock issued and outstanding.
In 1995 and 1994, AZOA contributed additional capital to the Company of $594
and $5,190, respectively.
(10) EMPLOYEE BENEFIT PLANS
The Company participates in the Allianz Primary Retirement Plan (Primary
Retirement Plan), a defined contribution plan. The Company makes
contributions to a money purchase pension plan on behalf of eligible
participants. All employees, excluding agents, are eligible to participate in
the Primary Retirement Plan after two years of service. The contributions are
based on a percentage of the participant's salary with the participants being
100% vested upon eligibility. It is the Company's policy to fund the plan
costs as accrued. Total pension contributions were $860, $918 and $1,363 in
1995, 1994 and 1993, respectively.
<PAGE>
The Company participates in the Allianz Asset Accumulation Plan (Allianz
Plan), a defined contribution plan sponsored by AZOA. Under the Allianz Plan
provisions, the Company will match from 50% to 100% of eligible employees'
contributions up to a maximum of 6% of a participant's compensation. The
total Company match for 1995, 1994 and 1993 Plan participants was 100%. All
employees, excluding agents, are eligible to participate after one year of
service and are fully vested in the Company's matching contribution after
three years of service. The Allianz Plan will accept participants' pretax or
after-tax contributions up to 15% of the participant's compensation. It is the
Company's policy to fund the Allianz Plan costs as accrued. The Company has
accrued $1,188, $1,266 and $1,270 in 1995, 1994 and 1993, respectively, toward
planned contributions.
The Company sponsors an asset accumulation plan for field agents. Under the
Plan provisions, the Company will match 100% of eligible agents' contributions
up to a maximum of 3% of a participant's compensation. The Plan accepts
participant's pretax or after tax contributions up to 10% of participant's
compensation. It is the Company's policy to fund the Plan costs as accrued.
In 1995, the Company discontinued support of its individual agency field force
and suspended contributions to the Plan as of January 1, 1996. Also during
1995, participation in the Plan decreased significantly resulting in a partial
plan termination whereby participants as of January 1, 1995 became fully
vested in the Plan. The Company has no intention to fully terminate the Plan
in the near term. Total Company contributions to the Plan were $118, $386 and
$319 in 1995, 1994 and 1993, respectively.
The Company adopted SFAS No. 106, effective January 1, 1993 which requires
benefits paid to retirees, other than pension benefits, to be accrued. The
transition obligation associated with this adoption was $4,006, which is net
of a $2,064 tax benefit. The Company's current plan obligation is $5,532 and
the liability is included in "Other liabilities" in the accompanying balance
sheet.
(11) STATUTORY FINANCIAL DATA AND DIVIDEND RESTRICTIONS
Statutory accounting is directed toward insurer solvency and protection of
policyholders. Accordingly, certain items recorded in financial statements
prepared under GAAP are excluded in determining statutory policyholders'
surplus. These items include, among other, deferred acquisition costs,
furniture and fixtures, accident and health premiums receivable which are more
than 90 days past due, deferred taxes and undeclared dividends to
policyholders. Additionally, future life policy and annuity benefit reserves
calculated for statutory accounting do not include provisions for withdrawals.
<TABLE>
<CAPTION>
The differences between stockholder's equity and net income reported in accordance with statutory
accounting practices and the accompanying consolidated financial statements as of and for the year ended
December 31 are as follows:
Stockholder's Stockholder's Net Net Net
equity equity Income Income Income
--------------- -------------- -------- --------- ---------
1995 1994 1995 1994 1993
--------------- -------------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statutory basis $ 299,186 294,334 11,565 6,895 657
Adjustments:
Change in reserve basis (211,678) (339,283) (43,642) (109,473) (138,864)
Deferred acquisition costs 826,994 798,442 28,552 132,090 253,240
Net deferred taxes (140,174) (5,807) (25,772) (16,053) 6,496
Statutory asset valuation reserve 100,462 59,169 0 0 0
Statutory interest maintenance reserve 25,061 16,305 8,756 (4,768) 11,178
Modified coinsurance reinsurance (119,178) (51,947) 104,222 44,920 (75,611)
<PAGE>
Unrealized gains (losses) on investments 163,237 (99,408) 0 0 0
Nonadmitted assets 1,471 2,302 0 0 0
Cumulative effect of accounting changes 0 0 0 0 26,875
Other 5,813 5,338 3,516 1,864 (461)
--------------- -------------- -------- --------- ---------
As reported in the accompanying
consolidated financial statements $ 951,194 679,445 87,197 55,475 83,510
=============== ============== ======== ========= =========
</TABLE>
The Company is required to meet minimum statutory capital and surplus
requirements. The Company's statutory capital and surplus as of December 31,
1995 and 1994 was in compliance with these requirements. The maximum amount
of dividends which can be paid by Minnesota insurance companies to
stockholders without prior approval of the Commissioner of Commerce is subject
to restrictions relating to statutory earned surplus, also known as unassigned
funds. Unassigned funds are determined in accordance with the accounting
procedures and practices governing preparation of the statutory annual
statement, minus 25% of earned surplus attributable to unrealized capital
gains. In accordance with Minnesota Statutes, the Company may declare and pay
from its surplus, cash dividends of not more than the greater of 10% of its
beginning of the year statutory surplus in any year, or the net gain from
operations of the insurer, not including realized gains, for the 12-month
period ending the 31st day of the next preceding year. In 1995 and 1994,
respectively, the Company paid dividends on preferred stock in the amount of
$2,651 and $413, respectively to AZOA. Dividends of $23,433 could be paid in
1996 without prior approval of the Commissioner of Commerce.
REGULATORY RISK BASED CAPITAL
<TABLE>
<CAPTION>
An insurance enterprise's state of domicile imposes minimum risk-based capital
requirements that were developed by the National Association of Insurance
Commissioners (NAIC). 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.
Regulatory compliance is determined by a ratio of an enterprise's regulatory
total adjusted capital to its authorized control level risk-based capital, as
defined by the NAIC. Enterprises below specific triggerpoints or ratios are
classified within certain levels, each of which requires specified corrective
action. The levels and ratios are as follows:
Ratio of total adjusted capital to
authorized control level risk-based
Regulatory Event Capital (less than or equal to)
- ------------------------ ------------------------------------
<S> <C>
Company action level 2 (or 2.5 with negative trends)
Regulatory action level 1.5
Authorized control level 1
Mandatory control level 0.7
</TABLE>
The Company met the minimum risk-based capital requirements for the years
ended December 31, 1995 and 1994.
<PAGE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company is required to file annual statements with insurance regulatory
authorities which are prepared on an accounting basis prescribed or permitted
by such authorities. Currently, prescribed statutory accounting practices
include state laws, regulations, and general administrative rules, as well as
a variety of publications of the NAIC. Permitted statutory accounting
practices encompass all accounting practices that are not prescribed; such
practices differ from state to state, may differ from company to company
within a state, and may change in the future. The NAIC currently has a
project underway to codify statutory accounting practices, the result of which
is expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project will likely change the definition of
what comprises prescribed versus permitted statutory accounting practices, and
may result in changes to existing accounting policies insurance enterprises
use to prepare their statutory financial statements. The Company does not
currently use permitted statutory accounting practices which have a
significant impact on its statutory financial statements.
(12) COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in various pending or threatened
legal proceedings arising from the conduct of their business. In the opinion
of management, the ultimate resolution of such litigation will not have a
material adverse effect on the consolidated financial position of the Company.
The Company is contingently liable for possible future assessments under
regulatory requirements pertaining to insolvencies and impairments of
unaffiliated insurance companies. Provision has been made for assessments
currently received and assessments anticipated for known insolvencies.
(13) FOREIGN CURRENCY TRANSLATION
<TABLE>
<CAPTION>
The net assets of the Company's foreign operations are translated into U.S.
dollars using exchange rates in effect at each year end. Translation adjustments
arising from differences in exchange rates from period to period are included in
the accumulated foreign currency translation adjustment reported as a separate
component of stockholder's equity. An analysis of this account for the respective
years ended December 31 follows:
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $(3,787) (2,708) (1,835)
-------- ------- -------
Aggregate adjustment for the period resulting from
translation adjustments 511 (1,659) (1,746)
Amount of income tax benefit for period related to
aggregate adjustment (179) 580 873
-------- ------- -------
Net aggregate translation included in equity 332 (1,079) (873)
-------- ------- -------
Ending amount of cumulative translation adjustments $(3,455) (3,787) (2,708)
======== ======= =======
Canadian foreign exchange rate at end of year 0.7329 0.7129 0.7554
</TABLE>
<PAGE>
(14) SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
The following table summarizes certain financial information by line of business for 1995, 1994 and 1993:
As of December 31 For the year ended December 31
--------- --------- -------- -------- --------- ------- --------- --------- --------- ---------
Amortiz-
Future Premium Benefits, ation
policy Other revenue claims of
Deferred benefits, policy and losses, deferred
policy losses, claims other Net and policy
acquis- claims and contract invest- settle- acquis- Other Premiums
ition and loss Unearned benefits consider- ment ment ition operating written
costs expense premiums payable ations income expenses costs (a) expenses (b)
--------- --------- -------- -------- --------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995:
Life $ 179,915 1,088,964 5,493 62,660 310,514 83,741 239,287 8,475 124,415
Annuities 629,515 2,601,943 0 580 136,736 98,214 89,321 (34,235) 137,000
Accident
and health 17,564 0 28,688 308,658 354,500 19,203 249,232 (2,792) 105,615
--------- --------- -------- -------- --------- ------- --------- --------- ---------
$ 826,994 3,690,907 34,181 371,898 801,750 201,158 577,840 (28,552) 367,030
========= ========= ======== ======== ========= ======= ========= ========= =========
1994:
Life $ 188,390 1,022,537 6,012 63,728 290,971 78,100 228,383 6,889 114,767
Annuities 595,280 2,304,560 0 360 113,434 86,168 88,100 (140,776) 210,933
Accident
and health 14,772 0 34,364 291,323 345,684 17,023 236,614 1,797 121,645
--------- --------- -------- -------- --------- ------- --------- --------- ---------
$ 798,442 3,327,097 40,376 355,411 750,089 181,291 553,097 (132,090) 447,345
========= ========= ======== ======== ========= ======= ========= ========= =========
1993:
Life $ 195,279 989,309 7,389 57,763 263,397 80,422 206,157 (10,925) 186,457
Annuities 454,504 1,986,801 0 578 62,950 78,674 86,227 (243,113) 191,783
Accident
and health 16,569 0 34,181 264,583 354,837 15,735 241,443 804 154,493
--------- --------- -------- -------- --------- ------- --------- --------- ---------
$ 666,352 2,976,110 41,570 322,924 681,184 174,831 533,827 (253,234) 532,733
========= ========= ======== ======== ========= ======= ========= ========= =========
</TABLE>
(a) Represents the net change in deferred policy acquisition cost reported in
the income statement.
(b) Premiums written are not applicable for life insurance companies.
<PAGE>
APPENDIX A
ILLUSTRATION OF POLICY VALUES
The following tables illustrate how Policy Account values, Cash Values and
death benefits of a Policy change with the investment experience of the
Sub-Accounts. The illustrations are hypothetical and may not be used to
project or predict investment results. The Policy Account values, Cash Values
and death benefits in the tables take into account all charges and deductions
against the Policy. These tables assume that the cost of insurance rates for
the Policy are based on the current and guaranteed rates appropriate to the
class indicated. These tables also assume that a level annual premium of
$1,200 was paid. These tables all assume that the Insured is in the most
favorable male risk status, i.e., Non-Smoker. For Insureds who are classified
as Smoker or less favorable risk status, the cost of insurance will be greater
and thus Policy values will be less given the same assumed hypothetical gross
annual investment rates of return. The cost of insurance will be less and
thus Policy values will be greater for female Insureds of comparable risk
status. Some states require that the Policies contain tables based upon
unisex rates.
Gross investment returns of 0%, 6% and 12% are assumed to be level for all
years shown. The values would be different if the rates of return averaged
0%, 6% and 12% over the period of years but fluctuated above and below those
averages during individual years.
The values shown reflect the fact that the net investment return of the
Sub-Accounts is lower than the gross investment return on the assets held in
the Funds because of the charges levied against the Sub-Accounts. The daily
investment advisory fee is assumed to be equivalent to an annual rate of 0.69%
of the net assets of the Funds of the Trust (which is the average of the
investment advisory fees assessed the Trust in 1995 weighted by Sub-Account
value as of 12/31/95). The values also assume that each Fund of the Trust
will incur expenses annually which are assumed to be 0.06% of the average net
assets of the Fund. This is the average in 1995 weighted by Sub-Account value
as of 12/31/95. The Sub-Account will be assessed for mortality and expense
risks at a guaranteed annual rate not to exceed 0.90% (the current annual rate
is 0.60%) of the average daily net assets of the Sub-Account and for
administrative expenses at an annual rate of 0.15% of the average daily net
assets of the Sub-Account. After taking these expenses and charges into
consideration, the illustrated gross annual investment rates of 0%, 6% and 12%
are equivalent to net rates of -1.49%, 4.42% and 10.33%.
The Company deducts an insurance risk premium for a Policy Month from the
Policy Account values. The insurance risk premium rate is based on the sex
(where permitted by state law), attained age and rate class of the Insured.
Upon request, the Company will provide a comparable illustration based upon
the attained age, sex (where permitted by state law) and rate class of the
proposed Insured and for the face amount or premium requested.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
VARIABLE UNIVERSAL LIFE
PREPARED FOR: CLIENT INITIAL DEATH BENEFIT: $100,000
ISSUE AGE: 35, NON-SMOKER ANNUAL PREMIUM: $1,200.00
SEX: MALE INITIAL DEATH BENEFIT OPTION: A
<TABLE>
<CAPTION>
CURRENT VALUES
VALUES PROJECTED AT 0.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
- --- --- ------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 757 35 100,000
2 36 1,200 2,583 1,674 892 100,000
3 37 1,200 3,972 2,571 1,730 100,000
4 38 1,200 5,431 3,451 2,599 100,000
5 39 1,200 6,962 4,311 3,491 100,000
6 40 1,200 8,570 5,150 4,379 100,000
7 41 1,200 10,259 5,976 5,256 100,000
8 42 1,200 12,032 6,782 6,112 100,000
9 43 1,200 13,893 7,571 6,983 100,000
10 44 1,200 15,848 8,344 7,838 100,000
15 49 1,200 27,189 11,878 11,878 100,000
20 54 1,200 41,633 14,589 14,589 100,000
25 59 1,200 60,136 16,575 16,575 100,000
30 64 1,200 83,713 16,742 16,742 100,000
35 69 1,200 113,804 13,754 13,754 100,000
</TABLE>
<TABLE>
<CAPTION>
CURRENT VALUES
VALUES PROJECTED AT 6.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
- --- --- ------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 813 91 100,000
2 36 1,200 2,583 1,839 1,058 100,000
3 37 1,200 3,972 2,906 2,064 100,000
4 38 1,200 5,431 4,014 3,162 100,000
5 39 1,200 6,962 5,167 4,346 100,000
6 40 1,200 8,570 6,361 5,590 100,000
7 41 1,200 10,259 7,609 6,889 100,000
8 42 1,200 12,032 8,905 8,235 100,000
9 43 1,200 13,893 10,255 9,667 100,000
10 44 1,200 15,848 11,662 11,156 100,000
15 49 1,200 27,189 19,549 19,549 100,000
20 54 1,200 41,633 28,863 28,863 100,000
25 59 1,200 60,136 40,923 40,923 100,000
30 64 1,200 83,713 55,606 55,606 100,000
35 69 1,200 113,804 73,953 73,953 100,000
</TABLE>
<TABLE>
<CAPTION>
CURRENT VALUES
VALUES PROJECTED AT 12.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
- --- --- ------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 870 148 100,000
2 36 1,200 2,583 2,012 1,230 100,000
3 37 1,200 3,972 3,268 2,426 100,000
4 38 1,200 5,431 4,648 3,796 100,000
5 39 1,200 6,962 6,166 5,346 100,000
6 40 1,200 8,570 7,833 7,062 100,000
7 41 1,200 10,259 9,674 8,954 100,000
8 42 1,200 12,032 11,700 11,029 100,000
9 43 1,200 13,893 13,933 13,345 100,000
10 44 1,200 15,848 16,397 15,891 100,000
15 49 1,200 27,189 33,037 33,037 100,000
20 54 1,200 41,633 60,110 60,110 100,000
25 59 1,200 60,136 107,474 107,474 144,015
30 64 1,200 83,713 186,157 186,157 227,112
35 69 1,200 113,804 316,137 316,137 366,719
</TABLE>
CURRENT VALUES ARE BASED ON PROJECTED INTEREST RATES AND CURRENT EXPENSES AND
COST OF INSURANCE CHARGES NOW IN EFFECT, WHICH ARE SUBJECT TO CHANGE. THE
CURRENT MONTHLY EXPENSE CHARGES ARE $20.00 PER MONTH IN YEAR 1 AND $5.00 PER
MONTH THEREAFTER.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN IN
THIS ILLUSTRATION ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY THE OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT THAN THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS
CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
VARIABLE UNIVERSAL LIFE
PREPARED FOR: CLIENT INITIAL DEATH BENEFIT: $100,000
ISSUE AGE: 35, NON-SMOKER ANNUAL PREMIUM: $1,200.00
SEX: MALE INITIAL DEATH BENEFIT OPTION: A
<TABLE>
<CAPTION>
GUARANTEED VALUES
VALUES PROJECTED AT 0.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
- --- --- ------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 747 25 100,000
2 36 1,200 2,583 1,601 819 100,000
3 37 1,200 3,972 2,429 1,587 100,000
4 38 1,200 5,431 3,233 2,381 100,000
5 39 1,200 6,962 4,013 3,192 100,000
6 40 1,200 8,570 4,758 3,987 100,000
7 41 1,200 10,259 5,480 4,759 100,000
8 42 1,200 12,032 6,169 5,498 100,000
9 43 1,200 13,893 6,825 6,237 100,000
10 44 1,200 15,848 7,450 6,944 100,000
15 49 1,200 27,189 10,081 10,081 100,000
20 54 1,200 41,633 11,601 11,601 100,000
25 59 1,200 60,136 11,383 11,383 100,000
30 64 1,200 83,713 8,308 8,308 100,000
35 69 1,200 113,804 0 0 0
</TABLE>
<TABLE>
<CAPTION>
GUARANTEED VALUES
VALUES PROJECTED AT 6.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
- --- --- ------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 803 81 100,000
2 36 1,200 2,583 1,763 981 100,000
3 37 1,200 3,972 2,752 1,911 100,000
4 38 1,200 5,431 3,773 2,921 100,000
5 39 1,200 6,962 4,826 4,005 100,000
6 40 1,200 8,570 5,901 5,130 100,000
7 41 1,200 10,259 7,012 6,291 100,000
8 42 1,200 12,032 8,149 7,478 100,000
9 43 1,200 13,893 9,313 8,725 100,000
10 44 1,200 15,848 10,507 10,001 100,000
15 49 1,200 27,189 16,948 16,948 100,000
20 54 1,200 41,633 24,033 24,033 100,000
25 59 1,200 60,136 31,427 31,427 100,000
30 64 1,200 83,713 38,577 38,577 100,000
35 69 1,200 113,804 44,379 44,379 100,000
</TABLE>
<TABLE>
<CAPTION>
GUARANTEED VALUES
VALUES PROJECTED AT 12.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
- --- --- ------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 859 137 100,000
2 36 1,200 2,583 1,932 1,151 100,000
3 37 1,200 3,972 3,103 2,261 100,000
4 38 1,200 5,431 4,381 3,529 100,000
5 39 1,200 6,962 5,777 4,957 100,000
6 40 1,200 8,570 7,293 6,523 100,000
7 41 1,200 10,259 8,954 8,233 100,000
8 42 1,200 12,032 10,762 10,091 100,000
9 43 1,200 13,893 12,734 12,146 100,000
10 44 1,200 15,848 14,888 14,382 100,000
15 49 1,200 27,189 29,131 29,131 100,000
20 54 1,200 41,633 51,710 51,710 100,000
25 59 1,200 60,136 88,233 88,233 118,232
30 64 1,200 83,713 146,172 146,172 178,329
35 69 1,200 113,804 236,704 236,704 274,576
</TABLE>
CURRENT VALUES ARE BASED ON PROJECTED INTEREST RATES AND CURRENT EXPENSES AND
COST OF INSURANCE CHARGES NOW IN EFFECT, WHICH ARE SUBJECT TO CHANGE. THE
CURRENT MONTHLY EXPENSE CHARGES ARE $20.00 PER MONTH IN YEAR 1 AND $5.00 PER
MONTH THEREAFTER.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN IN
THIS ILLUSTRATION ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY THE OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT THAN THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS
CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
VARIABLE UNIVERSAL LIFE
PREPARED FOR: CLIENT INITIAL DEATH BENEFIT: $100,000
ISSUE AGE: 35, NON-SMOKER ANNUAL PREMIUM: $1,200.00
SEX: MALE INITIAL DEATH BENEFIT OPTION: B
<TABLE>
<CAPTION>
CURRENT VALUES
VALUES PROJECTED AT 0.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 755 33 100,755
2 36 1,200 2,583 1,669 887 101,669
3 37 1,200 3,972 2,562 1,720 102,562
4 38 1,200 5,431 3,435 2,583 103,435
5 39 1,200 6,962 4,288 3,467 104,288
6 40 1,200 8,570 5,116 4,345 105,116
7 41 1,200 10,259 5,930 5,210 105,930
8 42 1,200 12,032 6,722 6,051 106,722
9 43 1,200 13,893 7,494 6,906 107,494
10 44 1,200 15,848 8,250 7,744 108,250
15 49 1,200 27,189 11,647 11,647 111,647
20 54 1,200 41,633 14,092 14,092 114,092
25 59 1,200 60,136 15,556 15,556 115,556
30 64 1,200 83,713 14,815 14,815 114,815
35 69 1,200 113,804 10,445 10,445 110,445
</TABLE>
<TABLE>
<CAPTION>
CURRENT VALUES
VALUES PROJECTED AT 6.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 811 90 100,811
2 36 1,200 2,583 1,834 1,053 101,834
3 37 1,200 3,972 2,895 2,053 102,895
4 38 1,200 5,431 3,995 3,144 103,995
5 39 1,200 6,962 5,137 4,316 105,137
6 40 1,200 8,570 6,317 5,546 106,317
7 41 1,200 10,259 7,547 6,827 107,547
8 42 1,200 12,032 8,821 8,151 108,821
9 43 1,200 13,893 10,144 9,556 110,144
10 44 1,200 15,848 11,519 11,013 111,519
15 49 1,200 27,189 19,128 19,128 119,128
20 54 1,200 41,633 27,764 27,764 127,764
25 59 1,200 60,136 38,168 38,168 138,168
30 64 1,200 83,713 49,021 49,021 149,021
35 69 1,200 113,804 58,694 58,694 158,694
</TABLE>
<TABLE>
<CAPTION>
CURRENT VALUES
VALUES PROJECTED AT 12.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 868 146 100,868
2 36 1,200 2,583 2,007 1,225 102,007
3 37 1,200 3,972 3,255 2,414 103,255
4 38 1,200 5,431 4,626 3,774 104,626
5 39 1,200 6,962 6,130 5,309 106,130
6 40 1,200 8,570 7,776 7,006 107,776
7 41 1,200 10,259 9,592 8,871 109,592
8 42 1,200 12,032 11,584 10,913 111,584
9 43 1,200 13,893 13,774 13,186 113,774
10 44 1,200 15,848 16,183 15,677 116,183
15 49 1,200 27,189 32,264 32,264 132,264
20 54 1,200 41,633 57,628 57,628 157,628
25 59 1,200 60,136 100,425 100,425 200,425
30 64 1,200 83,713 169,725 169,725 269,725
35 69 1,200 113,804 281,663 281,663 381,663
</TABLE>
CURRENT VALUES ARE BASED ON PROJECTED INTEREST RATES AND CURRENT EXPENSES AND
COST OF INSURANCE CHARGES NOW IN EFFECT, WHICH ARE SUBJECT TO CHANGE. THE
CURRENT MONTHLY EXPENSE CHARGES ARE $20.00 PER MONTH IN YEAR 1 AND $5.00 PER
MONTH THEREAFTER.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN IN
THIS ILLUSTRATION ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY THE OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT THAN THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS
CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
VARIABLE UNIVERSAL LIFE
PREPARED FOR: CLIENT INITIAL DEATH BENEFIT: $100,000
ISSUE AGE: 35, NON-SMOKER ANNUAL PREMIUM: $1,200.00
SEX: MALE INITIAL DEATH BENEFIT OPTION: B
<TABLE>
<CAPTION>
GUARANTEED VALUES
VALUES PROJECTED AT 0.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 745 23 100,745
2 36 1,200 2,583 1,596 814 101,596
3 37 1,200 3,972 2,419 1,578 102,419
4 38 1,200 5,431 3,217 2,365 103,217
5 39 1,200 6,962 3,988 3,167 103,988
6 40 1,200 8,570 4,721 3,951 104,721
7 41 1,200 10,259 5,430 4,709 105,430
8 42 1,200 12,032 6,102 5,431 106,102
9 43 1,200 13,893 6,739 6,151 106,739
10 44 1,200 15,848 7,340 6,834 107,340
15 49 1,200 27,189 9,795 9,795 109,795
20 54 1,200 41,633 10,991 10,991 110,991
25 59 1,200 60,136 10,231 10,231 110,231
30 64 1,200 83,713 6,404 6,404 106,404
35 69 1,200 113,804 0 0 0
</TABLE>
<TABLE>
<CAPTION>
GUARANTEED VALUES
VALUES PROJECTED AT 6.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 801 79 100,801
2 36 1,200 2,583 1,758 976 101,758
3 37 1,200 3,972 2,741 1,900 102,741
4 38 1,200 5,431 3,753 2,902 103,753
5 39 1,200 6,962 4,794 3,974 104,794
6 40 1,200 8,570 5,854 5,083 105,854
7 41 1,200 10,259 6,945 6,224 106,945
8 42 1,200 12,032 8,056 7,385 108,056
9 43 1,200 13,893 9,188 8,600 109,188
10 44 1,200 15,848 10,342 9,836 110,342
15 49 1,200 27,189 16,425 16,425 116,425
20 54 1,200 41,633 22,666 22,666 122,666
25 59 1,200 60,136 28,172 28,172 128,172
30 64 1,200 83,713 31,319 31,319 131,319
35 69 1,200 113,804 29,021 29,021 129,021
</TABLE>
<TABLE>
<CAPTION>
GUARANTEED VALUES
VALUES PROJECTED AT 12.00%
------- --------- ----------
END ACCUM
OF ANNUAL @ 5.00% POLICY NET CASH NET DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 857 135 100,857
2 36 1,200 2,583 1,927 1,145 101,927
3 37 1,200 3,972 3,090 2,248 103,090
4 38 1,200 5,431 4,358 3,506 104,358
5 39 1,200 6,962 5,739 4,918 105,739
6 40 1,200 8,570 7,233 6,463 107,233
7 41 1,200 10,259 8,865 8,144 108,865
8 42 1,200 12,032 10,633 9,963 110,633
9 43 1,200 13,893 12,554 11,966 112,554
10 44 1,200 15,848 14,641 14,135 114,641
15 49 1,200 27,189 28,171 28,171 128,171
20 54 1,200 41,633 48,589 48,589 148,589
25 59 1,200 60,136 79,035 79,035 179,035
30 64 1,200 83,713 123,962 123,962 223,962
35 69 1,200 113,804 189,267 189,267 289,267
</TABLE>
CURRENT VALUES ARE BASED ON PROJECTED INTEREST RATES AND CURRENT EXPENSES AND
COST OF INSURANCE CHARGES NOW IN EFFECT, WHICH ARE SUBJECT TO CHANGE. THE
CURRENT MONTHLY EXPENSE CHARGES ARE $20.00 PER MONTH IN YEAR 1 AND $5.00 PER
MONTH THEREAFTER.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN IN
THIS ILLUSTRATION ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY THE OWNER, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A
POLICY WOULD BE DIFFERENT THAN THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS
CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
PART II
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission theretofore or hereafter duly adopted pursuant to
authority conferred in that section.
INDEMNIFICATION
The Bylaws of the Company provide that:
Each person (and the heirs, executors, and administrators of such person) made
or threatened to be made a party to any action, civil or criminal, by reason
of being or having been a director, officer , or employee of the
corporation (or by reason of serving any other organization at the
request of the corporation) shall be indemnified to the extent
permitted by the laws of the State of Minnesota, and in the manner
prescribed therin .
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted for directors and officers
or controlling persons of the Company pursuant to the foregoing,
or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and , therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the Policies issued by the Variable
Account, the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Prospectus consisting of 83 pages
Representations
The signatures
The following exhibits:
A. Copies of all exhibits required by paragraph A of instructions
for Exhibits in Form N-8B-2.
1. Resolution of the Board of Directors of the Company*
2. Not Applicable
3. a. Principal Underwriter Agreement*
3. b. Selling Agreement***
4. Not Applicable
5. Individual Variable Life Insurance Policy
6. a. Copy of Articles of Incorporation of the Company*
6. b. Copy of the Bylaws of the Company*
7. Not Applicable
8. Not Applicable
9. a. Administrative Agreement (filed confidentially)**
9. b. Form of Fund Participation Agreement
10. Application for Individual Variable Life Insurance
Policy
12. Memorandum of Exchange Rights*
13. Powers of Attorney
27. Financial Data Schedule
B. Opinion and Consent of Counsel
C. Consent of Actuary
D. Independent Auditors' Consent
* Incorporated by reference to Registrant's Form N-8B-2
** Incorporated by reference to Registrant's Pre-Effective
Amendment No. 1
*** Incorporated by reference to Registrant's Pre-Effective
Amendment No. 2
# Incorporated by reference to Registrant's Post-Effective
Amendment No.3 to Form S-6, File Nos. 33-11158 and 811-4965
as filed on October 27, 1995.
**** Incorporated by reference to Registrant's Post-Effective
Amendment No.4 to Registrant's Form S-6, File Nos.
33-11158 and 811-4965
## Incorporated by reference to Registrant's Post-Effective
Amendment No.10 to Form S-6, File Nos. 33-15464 and 811-4965
as filed on April 30,1993
### Incorporated by reference to Registrant's Post-Effective
Amendment No.6 to Form S-6, File Nos. 33-11158 and 811-4965
as filed on February 15,1994
#### Incorporated by reference to Registrant's Post-Effective
Amendment No.7 to Form S-6, File Nos. 33-11158 and
811-4965 as filed on April 25, 1994.
REPRESENTATIONS
1. Registrant represents that Section (b)(13)(iii)(F) of Rule
6e-3(T) is being relied on.
2. Registrant represents that the level of the risk charge is
within the range of industry practice for comparable flexible
contracts.
3. Registrant represents that it has analyzed the risk charge
taking into consideration such facts as current charge levels,
potential adverse mortality, the manner in which charges are
imposed, the markets in which the Policy will be offered and
anticipated sales and lapse rates.
Registrant also represents that a memorandum has been prepared
in connection with the analysis of the risk charge as set forth
above. Registrant undertakes to keep and make available to the
Commission on request a copy of the memorandum.
4. Registrant represents that the Company has concluded that there
is a reasonable likelihood that the distribution financing
arrangements of the Variable Account will benefit the Variable
Account and policyholders and will keep and make available to
the Commission on request a memorandum setting forth the basis
for this representation.
5. Registrant represents that the Variable Account will invest
only in management investment companies which have undertaken
to have a Board of Directors, a majority of whom are not
interested persons of the Company, formulate and approve any
plan under Rule 12b_1 to finance distribution expenses.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and it has caused this Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized in the City
of Minneapolis and State of Minnesota, on this 17th day of April, 1996 .
<TABLE>
<CAPTION>
<S> <C>
ALLIANZ LIFE
VARIABLE ACCOUNT A
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /S/ ALAN A. GROVE
______________________________
Alan A. Grove
Attest:/S/ MICHAEL T. WESTERMEYER
____________________________
Michael T. Westermeyer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature and Title
<S> <C> <C>
Lowell C. Anderson* Chairman of the Board 04/17/96
- ----------------------
President and Chief Executive Officer ________
Lowell C. Anderson Date
Herbert F. Hansmeyer* Director 04/17/96
- ----------------------
________
Herbert F. Hansmeyer Date
Michael P. Sullivan* Director 04/17/96
- ----------------------
________
Michael P. Sullivan Date
Dr.Jerry E. Robertson* Director 04/17/96
- ----------------------
________
Dr. Jerry E. Robertson Date
Dr. Gerhard Rupprecht* Director 04/17/96
- ----------------------
________
Dr. Gerhard Rupprecht Date
Edward J. Bonach* Chief Financial Officer 04/17/96
- ----------------------
________
Edward J. Bonach Date
Rev. Dennis J. Dease* Director 04/17/96
- ----------------------
________
Rev. Dennis J. Dease Date
James R. Campbell* Director 04/17/96
- ----------------------
________
James R. Campbell Date
</TABLE>
*By Power of Attorney
By:/S/ ALAN A. GROVE
________________________________
Alan A. Grove
Attorney-in-Fact
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 9
TO
FORM S-6
ALLIANZ LIFE VARIABLE ACCOUNT A
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
_______ ____
EX-99.A5 Individual Variable Life Insurance Policy
EX-99.A9b Form of Fund Participation Agreement
EX-99.A10 Application for Individual Variable Life
Insurance Policy
EX-99.A13 Powers of Attorney
EX-99.B Opinion and Consent of Counsel
EX-99.C Consent of Actuary
EX-99.D Independent Auditors' Consent
EX-27 Financial Data Schedule
<TABLE>
<CAPTION>
<S> <C>
(Allianz Logo) ALLIANZ LIFE INSURANCE COMPANY OF
NORTH AMERICA
Home Office: Minneapolis, Minnesota
Individual Division:
P.O. Box 500, Dallas, Texas 75221
Toll Free #800-525-7330
A Stock Company
</TABLE>
BENEFITS WE WILL PAY
We will pay the benefits provided by this policy when:
- - we receive proof of the Insured's death while this policy is in force: or
- - this policy is surrendered for its Net Cash Value; or
- - this policy matures.
Payment of any benefits and all other rights are subject to the terms of
this policy.
RIGHT TO EXAMINE POLICY
This policy may be canceled by returning it with a written request for
cancellation to our Dallas office by the later of: (a) the 20th day after the
Owner receives it; or (b) the 45th day after the application was signed. If
this is done, we will refund any premium paid.
This policy is signed for Allianz Life Insurance Company of North America by
/s/ Lowell C. Anderson /s/ Alan A. Grove
President Secretary
THIS POLICY IS A LEGAL CONTRACT BETWEEN THE COMPANY AND THE OWNER. PLEASE
READ IT CAREFULLY. WE WANT YOU TO UNDERSTAND THE COVERAGE IT PROVIDES.
VUL. A flexible premium variable life insurance policy with adjustable Death
Benefit. Insurance is payable at the Insured's death prior to the Maturity
Date and prior to termination of coverage. Values provided by this policy are
based on declared interest rates, and on the investment experience of the
Variable Account which is set forth on the Coverage Page. They are not
guaranteed as to dollar amount. The Cash Value is payable on the Maturity
Date if the Insured is living. This is a non-participating policy.
POLICY NUMBER SPECIMEN
INSURED JOHN DOE
OWNER JOHN DOE
TABLE OF CONTENTS
Coverage Page
General Definitions (Part 1)
Ownership of the Policy (Part 2)
Beneficiaries (Part 3)
Payment of Policy Benefits (Part 4)
Premium Payments (Part 5)
Continuing the Policy in Force; Termination of Coverage (Part 6)
The Policy Account (Part 7)
Investment Options (Part 8)
The Variable Account (Part 9)
Cash Values (Part 10)
Policy Loans (Part 11)
Other Provisions (Part 12)
Payment Options (Following Part 12)
Where to Find it (Inside Back Cover)
_________________________________________________________________________
COVERAGE PAGE
This page contains the facts and figures for the coverage this policy
provides. Refer to this page as necessary when reading this policy.
_________________________________________________________________________
POLICY, RIDERS, ANNUAL PREMIUM
Initial Guaranteed
Face Amount Coverage Premium
Policy without Riders $100,000 $53.91 (monthly)
Additional Benefit Riders NONE
TOTAL GUARANTEED COVERAGE PREMIUM $53.91
TOTAL GUARANTEED DEATH BENEFIT PREMIUM
INITIAL PREMIUM $1,448.22
PLANNED
PERIODIC PREMIUM $1,448.22 MODE: ANNUAL
RISK CLASSIFICATION ISSUE DATE
Standard-Nonsmoker March 1, 1993
POLICY NUMBER ISSUE AGE
Specimen 35
THE INSURED INITIAL FACE AMOUNT
John Doe $100,000
THE OWNER MATURITY DATE
John Doe March 1, 2053
GUARANTEED INTEREST RATE ON FIXED ACCOUNT (See Part 6):
3.5% FOR ALL POLICY YEARS
PREFERRED LOAN INTEREST RATE (See Part 9): VARIABLE
NON-PREFERRED INTEREST RATE (See Part 9): VARIABLE
MINIMUM FACE AMOUNT (See Part 4 and Part 10): $25,000
MINIMUM FACE AMOUNT INCREASE (See Part 4): $25,000
DEATH BENEFIT OPTION (See Part 4): OPTION A
MINIMUM TRANSFER AMOUNT (See Part 8): $500
MINIMUM PARTIAL SURRENDER AMOUNT (See Part 10): $500
EXPENSE CHARGES AND FEES
ADMINISTRATIVE CHARGE: .00041096% daily, of amounts in the sub-accounts
of the Variable Account
plus
$20.00 per month first year, and
$5.00 per month, thereafter (current practice)
$9.00 per month, thereafter (guaranteed maximum)
MORTALITY AND EXPENSE RISK CHARGE:
.00164384% daily (current),
.00246575% daily (guaranteed), of amounts in the
sub-accounts of the Variable Account.
CHARGE FOR PREMIUM TAXES:
2.5% of each premium payment, subtracted from
each premium payment.
PARTIAL SURRENDER CHARGE (See Part 10):
Lesser of 25 or 2% of the Partial Surrender
Amount (50 maximum), plus a portion of the
Surrender Charge.
TRANSFER FEE:
First 12 transfers of amounts are free each
policy year. Prescheduled automatic dollar cost
averaging transfers are not counted. The fee or
each additional transfer is the lesser of 25 or
2% of the amount transferred.
ELIGIBLE FUNDS:
The Variable Account is divided into sub-ccounts
with each sub-account invested as follows:
<TABLE>
<CAPTION>
FRANKLIN VALUEMARK FUNDS
<S> <C>
Money Market Fund Templeton International Equity Fund
Growth and Income Fund Templeton Global Growth Fund
Real Estate Securities Fund Precious Metals Fund
Investment Grade Intermediate Bond Fund Utility Equity Fund
Income Securities Fund Global Income Fund
U.S. Government Securities Fund Rising Dividends Fund
Templeton Pacific Growth Fund Adjustable U.S. Government Fund
Templeton Developing Markets Equity Fund High Income Fund
Templeton Global Asset Allocation Fund
</TABLE>
ALLOCATION SCHEDULE ON THE ISSUE DATE
PREMIUMS
FIXED ACCOUNT 0%
VARIABLE ACCOUNT
GLOBAL INCOME 50%
PACIFIC GROWTH 50%
SURRENDER CHARGES
In policy years 1 through 15 the full surrender charge is as described below.
The applicable surrender charge in any month is the full surrender charge
adjusted for any surrender charges previously paid, but not less than zero.
In all policy years after the fifteenth policy year, the surrender charge is
zero.
The full surrender charge in any policy month during policy years 1 through 15
is the lesser of the amount shown below in the maximum surrender charge table
or an amount equal to A plus B as defined below. Between two policy
anniversaries, the maximum surrender charge is an interpolation of the values
from those anniversaries, for the initial face amount and for each face amount
increase.
A is equal to the sum of (1) and (2) where:
(1) equals 30% of the first $647 of premiums paid;
(2) equals 5% of cumulative premiums paid in excess of $647.
B is equal to $5.00 per thousand dollars of Initial Face Amount.
<TABLE>
<CAPTION>
MAXIMUM SURRENDER CHARGE TABLE
Policy Surrender Charge Policy Surrender Charge
Year at End of Year Year at End of Year
- ------ ---------------- ---------- ----------------
<S> <C> <C> <C>
1 921.00 9 588.00
2 921.00 10 506.00
3 921.00 11 385.00
4 871.00 12 264.00
5 821.00 13 142.00
6 771.00 14 71.00
7 721.00 15 & after 0.00
8 671.00
</TABLE>
If the face amount of insurance is reduced at any time in the first 15 policy
years, a prorata portion of the Surrender Charge will be deducted from the
Policy Account. See Part 3 for a description of this charge.
______________________________________________________________________________
<TABLE>
<CAPTION>
SURRENDER CHARGE FACTORS FOR FACE AMOUNT INCREASES
Number of Years after Monthly
Anniversary Date When Face Amount Surrender Charge Factor
Increase Takes Effect at End of Year
- --------------------------------- -----------------------
<S> <C>
0 5.00
1 5.00
2 5.00
3 5.00
4 4.50
5 4.00
6 3.50
7 3.00
8 2.50
9 2.00
10 1.50
11 1.00
12 .50
13 & after 0.00
</TABLE>
_____________________________________________________________________________
PART 1. GENERAL DEFINITIONS
The Company identifies or defines here some of the terms used throughout this
contract. There are other terms which are explained or defined in other parts
of the contract.
BENEFICIARY, CONTINGENT BENEFICIARY
The person or persons who will receive any death benefit proceeds. The
Primary Beneficiary and Contingent Beneficiary, if any, are named in the
application. The Contingent Beneficiary, if any, will become the Beneficiary
should the Primary Beneficiary die prior to the death of the Insured.
CASH VALUE
The policy Account minus the Surrender Charge. Surrender Charges are
described on the Cover Page.
COMPANY
Allianz Life Insurance Company of North America.
DEATH BENEFIT
The amount to be paid to the Beneficiary upon the death of the Insured.
INSURANCE RISK AMOUNT
The excess of the Death Benefit over the Policy Account.
INSURED
The person whose life is covered by this policy. The Insured is named on the
Coverage Page.
ISSUE DATE
The date when the Insured's life is covered under this policy. The issue Date
is shown on the Coverage Page.
MATURITY BENEFIT
An amount equal to the Policy Account less any outstanding Policy Debt. This
amount will be paid to the Owner on the Maturity Date.
MATURITY DATE
The last date to which premiums can be paid and coverage continued under this
policy.
NET CASH VALUE
The Cash Value minus any Policy Debt.
OWNER
The person having all rights under this policy. The Owner as of the Issue
Date is named on the Coverage Page.
POLICY ACCOUNT
The sum of the amounts in the Fixed Account and in the sub-accounts of the
Variable Account under this plan.
POLICY DEBT
The total of any outstanding loans made on the policy, including interest paid
in advance for the current Policy Year.
POLICY MONTH
The first Policy Month starts on the Issue Date. Future Policy Months start
on the same day in each subsequent month, known as a Monthly Anniversary Date.
POLICY YEAR, POLICY ANNIVERSARY
The first Policy Year starts on the Issue Date. Future Policy Years start on
the same day and month in each subsequent year, known as a Policy Anniversary.
REALLOCATION DATE
The date 30 days after the policy is released to an active status in the
Company's processing system.
SURRENDER CHARGE
Described on the Coverage Page.
________________________________________________________________________
PART 2. OWNERSHIP OF THE POLICY
The Owner, as of the date we issue this policy (Issue Date), is named on the
Coverage Page. The Owner may be the Insured or someone other than the
Insured. If another person has become the Owner after the Issue Date, we will
have a record of such change at our Dallas office.
During the Insured's life, the Owner may exercise any rights and receive all
benefits described in this policy.
TRANSFER OF OWNERSHIP
The owner may transfer ownership of this policy. We will not be responsible
for any payment we make or other action we take before a copy of the written
transfer is received at our Dallas office. We are not responsible for the
validity of the transfer. We may require the policy to record the transfer.
The new Owner takes the policy subject to all Policy Debt. Policy Loans are
discussed in Part 11.
USE OF THE POLICY AS SECURITY
This policy may be used as collateral security for a loan or other obligation.
This is not a transfer of ownership. The person (bank or other lender) to
whom the policy is given as security does not become the Owner. We will not
be responsible for any payment we make or other action we take before a copy
of the security agreement is received at our Dallas office. We are not
responsible for the validity of the security agreement.
________________________________________________________________________
PART 3. BENEFICIARIES
We will pay any Death Benefit proceeds to the Primary Beneficiary. Contingent
Beneficiaries may be named to receive the proceeds if the Primary Beneficiary
dies before the Insured. If no named Beneficiary is living when the Insured
dies, the proceeds will be paid to the Owner or the Owner's estate.
Primary and Contingent Beneficiaries are as named in the application, unless
changed by the Owner.
CHANGE OF BENEFICIARIES
The Beneficiaries may be changed by the Owner at any time during the Insured's
life. To change a Beneficiary, a written request must be made to our Dallas
office. We may require the policy to record the change. The request will
take effect when signed, subject to any action we take before receiving it.
IRREVOCABLE BENEFICIARIES
One or more Irrevocable Beneficiaries may be named. An Irrevocable
Beneficiary is one whose rights cannot be reduced or destroyed without his or
her consent.
PROCEEDS TO MINORS
If a Beneficiary is a minor, we will make payment to the guardian of his or
her estate. We may require proof of age of any Beneficiary.
PROTECTING THE PROCEEDS FROM THE CLAIMS OF CREDITORS
Proceeds payable to a Beneficiary will be free from the claims of creditors,
to the extent allowed by law.
________________________________________________________________________
PART 4. PAYMENT OF POLICY BENEFITS
We will pay the benefits under this policy if it is still in force upon the
earliest of:
- - the death of the Insured; or
- - the date the Owner surrenders the policy for its Net Cash Value; or
- - the Maturity Date shown on the Coverage Page.
This policy will terminate once the benefits become payable.
The MATURITY DATE is the last date to which premiums can be paid and coverage
continued under this policy. If the Insured is alive on the Maturity Date and
this policy is still in force, we will pay a maturity benefit as described
under Maturity Benefit below. If the Insured dies before the Maturity Date
while this policy is in force, we will pay a Death Benefit as described under
Death Benefit below. Coverage will not continue to the Maturity Date if
premiums paid and interest credited are not sufficient to keep the policy in
force until the Maturity Date.
The proceeds may be taken in a lump sum or applied under one of our payment
options. (Our payment options are described in the section following Part
12.) If the proceeds are applied under a payment options, we will issue a new
contract (payment contract). The date benefits become payable under this
policy will be used as the effective date of the payment contract.
DEATH BENEFIT
The amount of the Death Benefit depends on the total Face Amount, the Policy
Account on the date of the Insured's death and the Death Benefit option,
Option A or Option B, in effect at that time.
The total Face Amount is the sum of all of the Face Amount portions. The
initial Face Amount and each Face Amount increase still in effect are Face
Amount portions. The Initial Face Amount and the Death Benefit option in
effect are Face Amount portions. The Initial Face Amount and the Death
Benefit option in effect on the Issue Date are shown on the Coverage Page.
OPTION A. The amount of the Death Benefit under Option A is the greater of:
- - the total Face Amount at the beginning of the policy month when the death
occurs; or
- - the Policy Account on the date of death multiplied by the applicable factor
from the Table of Death Benefit Factors below.
OPTION B. The amount of the Death Benefit under Option B is the greater of;
- - the total Face Amount at the beginning of the policy month when the death
occurs plus the Policy Account on the date of death or
- - the Policy Account on the date of death multiplied by the applicable factor
from the Table of Death Benefit Factors below.
<TABLE>
<CAPTION>
TABLE OF DEATH BENEFIT FACTORS
This table is based on the Insured's age last birthday at the beginning of
the policy year (attained age).
Att Age DBF Att Age DBF Att Age DBF Att Age DBF Att Age DBF Att Age DBF
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 below 2.50 50 1.85 60 1.30 70 1.15 80 1.05 90 1.05
41 2.43 51 1.78 61 1.28 71 1.13 81 1.05 91 1.04
42 2.36 52 1.71 62 1.26 72 1.11 82 1.05 92 1.03
43 2.29 53 1.64 63 1.24 73 1.09 83 1.05 93 1.02
44 2.22 54 1.57 64 1.22 74 1.07 84 1.05 94 1.01
45 2.15 55 1.50 65 1.20 75 1.05 85 1.05
46 2.09 56 1.46 66 1.19 76 1.05 86 1.05
47 2.03 57 1.42 67 1.18 77 1.05 87 1.05
48 1.97 58 1.38 68 1.17 78 1.05 88 1.05
49 1.91 59 1.34 69 1.16 79 1.05 89 1.05
</TABLE>
SUICIDE. If the Insured commits suicide, while sane or insane, within two
years from the Issue Date, the amount of the Death Benefit under either Option
A or Option B will be equal to the total premiums paid, less any Partial
Surrenders and any Policy Debt. If the Insured commits suicide, while sane or
insane, within two years from the effective date of a Face Amount increase,
the amount of the Death Benefit will not include the Face Amount increase.
But it will include a return of the monthly insurance risk charges for the
increase and any expense charges we have made for the increase. If the law of
the state where this policy is delivered provides a shorter period, that law
will govern.
We will pay any Death Benefit proceeds to the Beneficiary as described in Part
3. The proceeds may be taken in a lump sum or applied under one of our
payment options. During the Insured's life or within 60 days after the
Insured's death, the Owner can choose how the proceeds will be paid. The
Owner can also limit the Beneficiary's right to withdraw money under a payment
option. A Beneficiary can choose how the proceeds will be paid if the Owner
has not done so within 60 days after the Insured's death.
CHANGE IN DEATH BENEFIT OPTION
The Owner may change the Death Benefit option after this policy has been in
force for at least one year, subject to the following requirements:
- - the Owner must request the change in writing;
- - once the Death Benefit option has been changed, it cannot be changed again
for the next three years;
- - if Death Benefit Option A is to be changed to Option B, the Owner must
submit proof satisfactory to us that the Insured is still insurable at the
risk classification that applies for the Initial Face Amount as shown on the
Coverage Page. The Face Amount will not change; and
- - if Death Benefit Option B is changed to Option A, the Face Amount will be
increased by an amount equal to the Policy Account on the date of the change.
The risk classification for the last Face Amount portion to go into effect
which is still in force will apply to the Face Amount increase. This increase
will not result in any increase in premiums, expense charges or Surrender
Charges.
Any change in Death Benefit option will take effect on the monthly anniversary
date on or following the date we approve the request for the change.
CHANGE IN FACE AMOUNT
The Owner may change the Face Amount of this policy on any monthly anniversary
date after the policy has been in force at least one year, subject to the
following requirements. Once the Face Amount has been changed, it cannot be
changed again for the next twelve months.
FACE AMOUNT INCREASE. To increase the Face Amount the Owner must:
- - submit an application for the increase;
- - submit proof satisfactory to us that the Insured is an insurable risk; and
- - pay any additional premium which is required.
The Face Amount can only be increased before the Insured reaches age 81. Each
Face Amount increase must be at least as large as the Minimum Face Amount
Increase shown on the Coverage Page. A Face Amount increase will take effect
on the monthly anniversary date on or following the day we approve the
application for the increase.
The risk classification that applies for any Face Amount increase may be
different from the risk classification that applies for the Initial Face
Amount.
The following changes will be made to reflect the increase:
- - The Guaranteed Coverage Premium will be increased.
- - The Monthly Administrative Charge will increase to 20.00 per month for the
twelve months following the increase.
- - Additional Surrender Charges equal to the Face Amount increase (in 1,000's)
multiplied by the Surrender Charge Factors shown on page 4 will apply for 13
years following the increase.
We will furnish a supplement to the Coverage Page that shows:
- - the risk classification and the amount of the increase; and
- - the values for the changes described above.
FACE AMOUNT DECREASE. The Owner must request in writing any decrease in the
Face Amount. The decrease will take effect on the later of:
- - the monthly anniversary date on or following the day we receive the Owner's
request for the decrease; or
- - the monthly anniversary date one year after the last change in Face Amount
was made.
A Face Amount decrease will be used to reduce any previous Face Amount
increases which are then in effect starting with the latest increase and
continuing in the reverse order in which the increases were made. If any
portion of the decrease is left after all Face Amount increases have been
reduced, it will be used to reduce the Initial Face Amount. We will not
permit a Face Amount decrease that would reduce the Initial Face Amount below
the minimum Face Amount shown on the Coverage Page.
The Guaranteed Coverage Premium will be reduced to reflect the Face Amount
decrease. The new Guaranteed Coverage Premium will be shown on a supplement
to the Coverage Page.
We will deduct a charge from the Policy Account when the Face Amount is
decreased. The maximum charge we will deduct each time the Face Amount is
decreased is the lesser of:
- - the total of the current Surrender Charge for the amount of each Face Amount
portion reduced; or
- - the Policy Account when the decrease is made.
The charge will be deducted for each Face Amount portion reduced, starting
with the charge for the first Face Amount portion reduced, and continuing in
the same order in which the reductions are made until the charge is completely
deducted.
Future Surrender Charges will be reduced proportionately for any charges
deducted. After the Face Amount is decreased, the Surrender Charges for each
Face Amount portion for which a charge is deducted will be equal to the
Surrender Charges shown for that Face Amount portion on the Coverage Page, or
in the supplement to the Coverage Page, multiplied by the ratio of:
- - the amount of the Surrender Charge in effect for the Face Amount portion at
the time the charge is deducted minus the amount of the charge deducted for
the Face Amount portion; divided by
- - the amount of the Surrender Charge in effect for the Face Amount portion at
the time the charge is deducted.
LIMITATION ON CHANGES
We reserve the right to decline to make any change that we determine would
cause this policy to fail to qualify as life insurance under applicable tax
law as interpreted by us.
SURRENDER BENEFIT
In Part 10 we describe the benefit if the Owner surrenders this policy for its
Net Cash Value. If this policy is surrendered, the Owner can receive the
proceeds in a lump sum or apply them under one of our payment options. If the
proceeds are to be applied under a payment option, we must receive written
notice when the policy is surrendered.
MATURITY BENEFIT
The amount of the benefit if this policy is in force on the Maturity Date is
the Policy Account (Part 7) at that time. We will pay any maturity benefit
proceeds to the Owner. The Owner can receive the proceeds in a lump sum or
apply them under one of our payment options.
DEDUCTION OF POLICY DEBT FROM BENEFITS
If there is any Policy Debt (Part 11) outstanding when benefits become
payable, we will deduct it from the amount of the benefit otherwise payable.
________________________________________________________________________
PART 5. PREMIUM PAYMENTS
The initial premium for this policy, shown on the Coverage Page, is due before
we deliver the policy. Premium payments may be made at our Dallas office.
The premium payments required to continue this policy in force are described
in Part 6.
PLANNED PERIODIC PREMIUMS. Planned periodic premiums may be paid annually,
semi-annually, quarterly or monthly. The planned periodic premium and the
payment interval in effect on the Issue Date are shown on the Coverage Page.
The Owner may change the amount and frequency of premiums. We have the right
to limit the amount of any increase. Each premium after the initial premium
must be at least 25.00. We may increase this minimum limit 90 days after we
send the Owner written notice of such increase.
UNSCHEDULED PREMIUMS. Additional unscheduled premium payments can be made at
any time while this policy is in force. We have the right to limit the number
and amount of such premium payments.
In order to preserve the favorable tax status of this policy:
- - we may limit the amount of premiums paid; and
- - we may return any premiums that exceed the limits under the tax laws of the
United States and the state where this policy is delivered.
________________________________________________________________________
PART 6. CONTINUING THE POLICY IN FORCE; TERMINATION OF COVERAGE
The policy will continue in force each month as long as the Net Cash Value on
the monthly anniversary date at the beginning of that month is large enough to
cover the monthly deduction made for that month. (In Part 7 we describe the
monthly deductions. In Part 10 we describe the Net Cash Value.)
During the first 10 policy years, the Net Cash Value at the beginning of a
policy month may not be large enough to continue this policy in force for that
month. This policy will still continue in force for that month if adjusted
premium payments as of the monthly anniversary date at the beginning of that
month are not less than Accumulated Guaranteed Coverage Premiums as of that
monthly anniversary date as described below.
TERMINATION. This policy will terminate on the earliest of the following
dates:
- - the date the Owner surrenders the policy for it Net Cash Value (Part 10); or
- - the date the policy terminates because total Policy Debt exceeds the limit
on Policy Debt (Part 11); or
- - the date of the Insured's death; or
- - the Maturity Date; or
- - the end of a 61 day grace period, as described below.
GRACE PERIOD
During the first 10 policy years, a grace period begins on the monthly
anniversary date when:
- - the Net Cash Value is not large enough to cover the monthly deduction made
on that date; and
- - adjusted premium payments are less than accumulated Guaranteed Coverage
Premiums.
Adjusted premium payments as of a monthly anniversary date equal:
- - total premiums we have received on or before that date; minus
- - any Partial Surrenders the Owner has made on or before that date (Part 10),
and any Policy Debt.
Accumulated Guaranteed Coverage Premiums as of a monthly anniversary date
equal:
- - the Total Guaranteed coverage Premium; multiplied by
- - one plus the number of months this policy has been in force as of that
monthly anniversary date.
If the same Total Guaranteed Coverage Premium has not been in effect every
month during this period, Accumulated Guaranteed Coverage Premiums will be
based on the different premiums that were in effect and the number of months
for which each applied.
After the first 10 Policy Years, a grace period begins on the monthly
anniversary date when the Net Cash Value is not large enough to cover the
monthly deduction made on that date.
We will continue this policy in effect for 61 days after a grace period
begins. If the Insured dies during a grace period, we will deduct the premium
that would have been required to keep this policy from terminating at the end
of the grace period, as described below, from the amount we would otherwise
pay.
TERMINATION AT END OF GRACE PERIOD
This policy will terminate without value at the end of a grace period unless
we receive a premium large enough to keep the policy from terminating at the
end of that grace period, as described below, before the grace period ends.
This premium must also meet our minimum premium requirements as described in
Part 5.
During the first 10 Policy Years, the premium required to keep this policy
from terminating at the end of a grace period equals the lesser of:
- - three monthly deductions; or
- - Accumulated Guaranteed Coverage Premiums for the monthly anniversary date
when the grace period began minus adjusted premium payments as of that date.
After the first 10 Policy Years, the premium required to keep this policy from
terminating at the end of a grace period equals three monthly deductions.
We will notify the Owner and any Assignee of record in writing at least 31
days before a grace period ends. The notice will show how much must be paid
to keep this policy from terminating at the end of that grace period. We will
send the notice to the Owner's and Assignee's last known addresses we have on
file.
HOW TO REINSTATE THIS POLICY
This policy may be reinstated (coverage restored) any time within five years
after it has terminated at the end of a grace period. To reinstate this
policy the Owner must:
- - submit an application for reinstatement;
- - submit proof satisfactory to us that the Insured is still insurable at the
risk classification that applies for the latest Face Amount portion then in
effect;
- - pay or agree to reinstatement of any Policy Debt; and
- - pay the premium required to reinstate the policy, as described below.
The premium required to reinstate the policy equals the total of the following
amounts:
- - the amounts that would have been required for this policy to continue in
force without entering a grace period for each month during the grace period
at the end of which it terminated; and
- - the amount that will be required for this policy to continue in force
without entering a grace period for the next 3 months after the reinstatement
date.
The reinstatement date will be the monthly anniversary date on or following
the day we approve the application for reinstatement. The Policy Account on
the reinstatement date will be equal to the Policy Account on the monthly
anniversary date when the grace period ended. The Surrender Charge on the
monthly anniversary date when the grace period ended.
This policy may not be reinstated after:
- - it has been surrendered for its Net Cash Value; or
- - the Insured's Death; or
- - the Maturity Date.
______________________________________________________________________________
PART 7. THE POLICY ACCOUNT
While this policy is in force, this is how we determine the Policy Account.
On the Issue Date the beginning Policy Account equals:
- - the first premium paid less any premium expense charges shown on the
Coverage Page; minus
- - the monthly deduction for the first policy month.
After the Issue Date the Policy Account equals the sum of the amounts in the
Fixed Account and in the sub-accounts of the Variable Account under this
policy.
MONTHLY DEDUCTIONS
At the beginning of each policy month we make a deduction from the Policy
Account.
The monthly deduction for a policy month equals the sum of:
- - the monthly expense charges shown on the Coverage Page and any supplements;
- - the charge for any additional benefit riders for the month; and
- - the insurance risk charge for that month.
CHARGES FOR ADDITIONAL BENEFIT RIDERS. The amount of the charge, if any, each
month for additional benefit riders is calculated as described in the riders
and shown on the Coverage Page of this policy.
INSURANCE RISK CHARGES. The Insurance risk charge for each policy month equals
the total of the insurance risk charges for that month for each Face Amount
portion then in effect. To determine the insurance risk charge for a Face
Amount portion for a policy month we multiply:
- - the Insurance Risk Amount for the Face Amount portion for that month divided
by one thousand; by
- - the cost of insurance rate per one thousand that applies to the Face Amount
portion for that month.
The Insurance Risk Amount for a Face Amount portion for a policy month equals
the excess of:
- - the Death Benefit associated with the Face Amount portion; over
- - the amount of the beginning Policy Account, before the monthly deduction for
the month is subtracted, applied to reduce the risk amount for that Face
Amount portion.
If Death Benefit Option B is in effect, the beginning Policy Account is
attributed to the Initial Face Amount in determining the Death Benefit
associated with each Face Amount portion.
The amount of the Death Benefit based on the beginning Policy Account may
exceed the sum of the Face Amount portions and any beginning Policy Account
attributed to the Initial Face Amount. The excess will be attributed to the
most recent Face Amount portion then in effect in determining the Death
Benefit associated with each Face Amount portion.
The beginning Policy Account is applied, first, to reduce the risk amount for
the Initial Face Amount. Any beginning Policy Account in excess of the
Initial Face Amount is then applied to reduce the risk amount for the first
Face Amount increase portion in an amount up to that Face Amount portion.
Remainders are successively applied to reduce the risk amount for the
following Face Amount increase portions in the order of the increases until
the entire Policy Account has been applied.
The cost of insurance rate for a Face Amount portion for a policy month equals
the sum of:
- - the standard cost of insurance rate for that month from the table of
standard cost of insurance rates declared by our Board of Directors (the
declared standard cost of insurance rate); and
- - an additional rate for any extra mortality risk classification that applies
for the Face Amount portion as shown on the Coverage Page, or the supplement
to the Coverage Page if the Face Amount has been changed.
The additional rate for an extra mortality risk classification for any policy
month equals the amount of extra mortality that the risk classification
represents for that month.
The total cost of insurance rate for a policy month will be uniform for all
Face Amount portions that:
- - are in the same Face Amount band, sex, and risk classification;
- - take effect when the Insureds are the same age; and
- - have been in force the same length of time.
We may change the declared cost of insurance rates from time to time based on
our expectations as to future cost elements such as: investment earnings,
mortality, persistency, expenses, and taxes. Any change we make will apply to
all Face Amount portions in the same risk classification.
The declared standard cost of insurance rates for each policy month will not
be more than the amount shown in the table below. The table is based on the
Insured's age last birthday at the beginning of each year (attained age), the
Insured's sex and whether or not the Insured has qualified for the non-smoker
classification. For the Initial Face Amount, the Insured's attained age is
determined at the beginning of each policy year. For each Face Amount
increase, attained age is determined at the beginning of each year measured
from the date the increase took effect
<TABLE>
<CAPTION>
Table of Guaranteed Maximum Standard Monthly Cost of Insurance Rates per 1,000
Insurance Risk Amount
MALE MALE FEMALE FEMALE
MALE* FEMALE* Standard Standard Standard Standard
Att Age Standard Standard Att Age Non-Smo Smoker Non-Smo Smoker
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.22 0.16 20 0.14 0.19 0.08 0.10
1 0.09 0.07 21 0.14 0.19 0.09 0.10
2 0.08 0.07 22 0.14 0.19 0.09 0.10
3 0.08 0.06 23 0.13 0.19 0.09 0.10
4 0.08 0.06 24 0.13 0.18 0.09 0.11
5 0.07 0.06 25 0.13 0.18 0.09 0.11
6 0.07 0.06 26 0.12 0.17 0.09 0.11
7 0.06 0.06 27 0.12 0.17 0.10 0.12
8 0.06 0.06 28 0.12 0.17 0.10 0.12
9 0.06 0.06 29 0.12 0.17 0.10 0.13
10 0.06 0.06 30 0.12 0.18 0.10 0.13
11 0.07 0.06 31 0.12 0.18 0.11 0.14
12 0.08 0.06 32 0.13 0.19 0.11 0.14
13 0.09 0.06 33 0.13 0.20 0.12 0.15
14 0.10 0.07 34 0.14 0.21 0.12 0.16
15 0.12 0.07 35 0.14 0.23 0.13 0.17
16 0.13 0.08 36 0.15 0.24 0.13 0.18
17 0.14 0.08 37 0.16 0.26 0.14 0.20
18 0.15 0.08 38 0.17 0.29 0.16 0.22
19 0.16 0.09 39 0.18 0.31 0.17 0.24
40 0.20 0.35 0.18 0.26
41 0.21 0.38 0.20 0.29
42 0.23 0.42 0.21 0.32
43 0.25 0.45 0.23 0.34
44 0.27 0.50 0.24 0.37
45 0.29 0.55 0.26 0.40
46 0.31 0.60 0.28 0.43
47 0.34 0.64 0.29 0.46
48 0.36 0.71 0.31 0.49
49 0.39 0.77 0.34 0.53
50 0.43 0.84 0.36 0.57
51 0.47 0.92 0.39 0.61
52 0.51 1.00 0.42 0.65
53 0.57 1.11 0.46 0.71
54 0.62 1.22 0.49 0.76
55 0.69 1.33 0.53 0.81
56 0.76 1.46 0.57 0.87
57 0.83 1.59 0.61 0.92
58 0.92 1.73 0.65 0.97
59 1.01 1.87 0.69 1.02
</TABLE>
<TABLE>
<CAPTION>
MALE MALE* FEMALE FEMALE*
Standard Standard Standard Standard
Att Age Non-Smo Smoker Non-Smo Smoker
<S> <C> <C> <C> <C>
60 1.12 2.04 0.74 1.09
61 1.23 2.23 0.80 1.16
62 1.37 2.45 0.88 1.27
63 1.52 2.68 0.97 1.39
64 1.69 2.95 1.08 1.53
65 1.88 3.22 1.20 1.68
66 2.08 3.51 1.32 1.83
67 2.29 3.82 1.44 1.97
68 2.53 4.14 4.57 2.12
69 2.80 4.49 1.71 2.28
70 3.10 4.88 1.88 2.47
71 3.44 5.31 2.08 2.71
72 3.84 5.81 2.33 3.01
73 4.29 6.37 2.64 3.36
74 4.79 6.98 2.98 3.77
75 5.33 7.64 3.38 4.21
76 5.91 8.32 3.80 4.69
77 6.51 9.01 4.26 5.19
78 7.15 9.71 4.76 5.73
79 7.85 10.45 5.32 6.31
80 8.62 11.26 5.96 6.97
81 9.50 12.15 6.70 7.73
82 10.50 13.16 7.56 8.60
83 11.63 14.26 8.55 9.61
84 12.86 15.43 9.65 10.73
85 14.18 16.62 10.86 11.93
86 15.57 17.80 12.17 13.21
87 17.00 19.04 13.59 14.57
88 18.49 20.35 15.13 16.01
89 20.04 21.01 16.79 17.53
90 21.69 23.03 18.61 19.26
91 23.49 24.47 20.64 21.16
92 35.50 26.17 22.97 23.32
93 27.96 28.41 25.80 25.94
94 31.38 31.56 29.59 29.59
95 36.80 36.80 35.37 35.37
</TABLE>
RECLASSIFICATION. Shortly before the insured attains age 20, we will notify
the owner that the insured will be reclassified. We will include any forms we
need to process the reclassification. For the insured to be classified as a
non-smoker, we will require satisfactory evidence that the insured meets our
requirements for the non-smoker classification. If the insured qualifies for
the non-smoker classification, non-smoker cost of insurance rates will apply
for policy years beginning on and after the date of approval. If the insured
does not qualify for the non-smoker classification or we do not receive the
completed reclassification forms, smoker cost of insurance rates will apply
for policy years beginning at age 20.
OTHER DEDUCTIONS
The following other deductions from the Policy Account are made as they occur:
- - a pro rata portion of the Surrender Charge for a Face Amount decrease as
described under Change in Face Amount in Part 4;and
- - the amount deducted for a Partial Surrender as described under Partial
Surrenders in Part 10; and
- - the amount deducted for certain transfers as
described under Transfers in Part 8.
________________________________________________________________________
PART 8. INVESTMENT OPTIONS
ALLOCATIONS
This policy provides investment options for the amount in the Policy Account.
Amounts put into the Policy Account are allocated to the subaccounts of the
Variable Account and to the unloaned portion of the Fixed Account at the
Owner's direction. The initial premium allocation percentages are indicated
in the application for this policy, a copy of which is attached. These
percentages will also apply to subsequent premium allocations until the Owner
changes them.
Allocation percentages must be zero or a whole number not greater than 100.
The sum of the premium allocation percentages must equal 100.
We reserve the right to limit the number of sub-account allocations in effect
at any one time.
Such allocation percentages may be changed by written notice to our Dallas
office.
The monthly deduction will be made based on the proportions that the unloaned
values in the Fixed Account and in the sub-accounts of the Variable Account
bear to the total unloaned value in the Policy Account.
Any premium received prior to the Reallocation Date will be allocated to the
sub-account invested in the Money Market Fund.
On the Reallocation Date, the amounts in the Money Market Fund sub-account
will be allocated to the sub-accounts of the Variable Account and to the
unloaned portion of the Fixed Account according to the allocation percentages
shown on the application for this policy.
TRANSFERS
At the Owner's request we will transfer amounts from the value in any
sub-account of the Variable Account to one or more of the sub-accounts of the
Variable Account or to the Fixed Account. The minimum amount that we will
transfer from the value in a sub-account of the Variable Account on any date
is the lesser of the Minimum Transfer Amount shown on the Coverage Page or the
value in that sub-account on that date. The Owner may ask us to transfer on
any Policy Anniversary an amount from the unloaned value in the Fixed Account
to one or more sub-accounts of the Variable Account. However, we will make
such a transfer only if:
- - we receive such request at least 30 days before that Policy Anniversary; and
- - the amount requested is not more than the greater of 25% of the unloaned
value in the Fixed Account on that anniversary of the Minimum transfer Amount
shown on the Coverage Page.
In no event will we transfer more than such unloaned value. The minimum
amount that we will transfer from the value in the Fixed Account on any Policy
Anniversary is the lesser of the Minimum Transfer Amount shown on the Coverage
Page or the unloaned value in the Fixed Account on that date.
Twelve transfers may be made in a policy year without charge. We may charge a
transfer fee for additional transfers in a policy year as shown on the
Coverage Page. The Owner may tell us how much of each expense charge is to
come from the unloaned value in the Fixed Account and from the values in each
sub-accounts of the Variable Account. If the Owner does not tell us, we will
make the expense charge based on the proportions that the unloaned value in
the Fixed Account and in the sub-accounts of the Variable Account bear to the
total unloaned value in the Policy Account.
The Owner must make all such requests in writing to our Dallas office. A
transfer will take effect on the date we receive it at our Dallas office,
except that a transfer request from the Fixed Account will be made as of the
Policy Anniversary following the date we receive such request.
POLICY ACCOUNT
The amount in the Policy Account at any time is equal to the sum of the
amounts then in the Fixed Account and in the sub-accounts of the Variable
Account under this policy.
The amount in the Fixed Account at any time is equal to the amount allocated
and transferred to it under this policy, plus the interest credited to it,
minus amounts deducted, transferred, and withdrawn from it under this policy.
We will credit the amount in the Fixed Account with interest at effective
annual rates we determine. The rates may be different for unloaned values,
the value of any Preferred Debt, and the value of any Non-Preferred Debt (Part
11). For the value of any Preferred Debt, the interest we credit will not be
less than the Preferred Loan interest rate less 1 1/2%. Such rates will be
determined in advance of the policy month for which they apply. Such
effective annual interest rates will not be less than 3 1/2%.
At the end of each policy month we will credit interest on amounts in the
Fixed Account as follows:
- - on amounts that remain in the Fixed Account for the entire policy month,
from the beginning to the end of the month;
- - on amounts allocated to the Fixed Account during the policy month that are
net premium payments or loan re-payments, from the date we receive them to the
end of the policy month;
- - on amounts transferred to the Fixed Account during the policy month, from
the date of the transfer to the end of the policy month; and
- - on amounts deducted or withdrawn from the Fixed Account during the policy
month, from the beginning of the policy month to the date of the deduction or
Surrender.
________________________________________________________________________
PART 9. THE VARIABLE ACCOUNT
GENERAL DESCRIPTION
The name of the Variable Account is Allianz Life Variable Account A. The
assets of the Variable Account are our property but are not chargeable with
the liabilities arising out of any other business we may conduct, except to
the extent that the assets of the Variable Account exceed the liabilities of
the Variable Account arising under the policies supported by the Variable
Account.
The assets of the Variable Account are segregated by Eligible Funds and where
appropriate by portfolios within each Eligible Fund, thus establishing a
series of sub-accounts within the Variable Account.
We may, from time to time, add additional Eligible Funds or portfolios. In
such event, you may be permitted to select from these other Eligible Funds or
portfolios limited by the terms and conditions we may impose on such
transactions.
We may also substitute other Eligible Funds or portfolios. The investment
policy of the Variable Account will not be changed without approval pursuant
to the insurance laws of the State of Minnesota. If required, approval of or
change of any investment policy will be filed with the Insurance Department of
the state where this policy is delivered.
VALUATION OF ASSETS
Assets of Eligible Funds within sub-accounts will be valued at their net asset
value on each Valuation Date.
METHOD OF DETERMINING SUB-ACCOUNT VALUES
Sub-account values will fluctuate in accordance with the underlying Eligible
Fund or Eligible Fund portfolio. In order to determine sub-account values, we
utilize sub-account valuation units. The value of a unit applicable during
any Valuation Period is determined at the end of that period.
When we first purchased assets of an Eligible Fund for a sub-account, each
sub-account valuation unit was valued at $10. The value of a unit within each
sub-account on any Valuation Date thereafter is determined by dividing (a) by
(b), where:
- - (a) is equal to:
1. the total value of the net assets in the sub-account; minus
2. the daily Mortality and Expense Risk Charge shown on the Coverage Page;
minus
3. the daily charge for administrative expense shown on the coverage Page;
plus or minus
4. a charge or credit for any tax provision established for the sub-account.
(b) is the total number of units applicable to that sub-account at the end
of the Valuation Period.
A valuation unit may increase or decrease in value from Valuation Date to
Valuation Date.
________________________________________________________________________
PART 10. CASH VALUES
The Cash Value equals:
- - the Policy Account; minus
- - the Surrender Charge.
The Surrender Charges for each policy year are shown on the Coverage Page and
any supplements.
The Surrender Charge at any time during the first policy year equals the
Surrender Charge at the end of the year. The Surrender Charge during any
subsequent policy year will be calculated based on end of the year Surrender
Charges and the portion of the year that has been completed.
When this policy terminates, the Policy Account may be less than the Surrender
Charge. If so, the Owner will not have to pay the difference to us. If this
policy is reinstated, the Surrender Charge will also be reinstated as
described in Part 6.
The Net Cash Value equals:
- - the Cash Value; minus
- - any Policy Debt (Part 11).
During the Insured's life the Owner may:
- - take loans based on the Cash Value, as explained in Part 11;
- - make Partial Surrenders as explained below; and
- - surrender this policy for its Net Cash Value, as explained below.
PARTIAL SURRENDERS
The Owner may make a Partial Surrender from the Net Cash Value at any time
during the Insured's life and before the policy has terminated. The Minimum
Partial Surrender Amount is shown on the Coverage Page. The Partial Surrender
may not exceed the Net Cash Value, less $300.
We will make a Surrender Charge when a Partial Surrender is made. The maximum
Surrender Charge we will make is the lesser of $50 or 2% of the Partial
Surrender Amount plus a portion of the Surrender Charge equal to:
- - the percentage of the Cash Value being withdrawn; multiplied by
- - the Surrender Charge then in effect.
A Partial Surrender that does not exceed 10% of the Net Cash Value may be made
once each policy year without incurring a Surrender Charge.
When a Partial Surrender is made, the amount of the Partial Surrender and the
Surrender Charge, if any, will be deducted from the Policy Account. Future
Surrender Charges will also be reduced proportionately for any Surrender
Charge made.
The Owner may tell us how much of each Partial Surrender and Surrender Charge
is to come from the unloaned value in the Fixed Account and from values in
each of the sub-accounts of a Variable Account. If the Owner does not tell
us, or we cannot make the Surrender on the basis of the Owner's directions, we
will make the Surrender based on the proportions that the unloaned value of
the Fixed Account and in the sub-accounts of the Variable Account bear to the
total unloaned value in the Policy Account.
The Face Amount will be reduced if Death Benefit Option A is in effect when a
Partial Surrender is made. Such a reduction will be equal to the amount of
the Partial Surrender minus the excess, if any, of:
- - the Death Benefit at the time the Partial Surrender is made; over
- - the Face Amount at the time the Partial Surrender is made.
But if the amount of the Partial Surrender is less than or equal to the excess
described above, the Face Amount will not be reduced.
Any Face Amount reduction will be used first to reduce any Face Amount
increases then in effect starting with the latest increase and continuing in
the reverse order in which the increases were made. If any of the reduction
is left after all Face Amount increases have been reduced, it will be used to
reduce the Initial Face Amount.
We will not permit a Partial Surrender that would reduce the Face Amount below
the minimum Face Amount shown on the Coverage Page.
We may limit the number of Partial Surrenders in a policy year, but this limit
will not be less than one.
SURRENDERING THE POLICY FOR ITS NET CASH VALUE
The Owner may surrender this policy and receive the Net Cash Value anytime
during the Insured's life and before the policy has terminated.
The surrender will take effect on the later of:
- - the date we receive the Owner's written request for the surrender value; or
- - the date the Owner requests, in writing, for the surrender to take effect.
This policy and all coverage under it will terminate at 12:01 a.m. at our
Dallas office on the date the surrender takes effect.
________________________________________________________________________
PART 11. POLICY LOANS
We will loan money to the Owner at the loan interest rate we establish for
each year during which the loan is outstanding. The request by the Owner for
a loan must be made in writing, to our Dallas office.
The Policy Loan will be divided into two parts, the Preferred Loan and the
Non-Preferred Loan. A Preferred Loan may be made not more than once per
policy year, beginning the later of the tenth Policy Anniversary or the Policy
Anniversary following the Insured's 60th birthday. No more than 10% of the
Cash Value of the policy at the time of the loan may be made as a Preferred
Loan. Any portion of a loan that is not a Preferred Loan is a Non-Preferred
Loan.
The Policy Loan must be allocated to the Fixed Account. If the Policy Loan
requested exceeds the unloaned balance in the Fixed Account, a transfer of
values from the sub-accounts of the Variable Account to the Fixed Account will
be made, if such values are available. These values will be determined at the
time of the request for transfer. If the Owner does not indicate the
proportions of the sub-accounts to be transferred, we will make the transfers
based on the proportions that the values in the sub-accounts of the Variable
Account bear to the total unloaned value in the Policy Account.
LOAN INTEREST CHARGED
There may be a lower declared loan interest rate each year for the Preferred
Loan than for the Non-Preferred Loan. We will determine the loan interest
rates for a policy year at least 60 days before the policy year begins. The
maximum annual loan interest rates we will use for Preferred and Non-Preferred
Loans for a policy (the maximum allowable rate) are the greater of:
- - the guaranteed interest rate for the Fixed Account shown on the Coverage
Page for a policy year plus 1%; or
- - MOODY'S CORPORATE BOND YIELD AVERAGE, MONTHLY AVERAGE CORPORATES as
published by Moody's Investors Service, Inc., for the calendar month ending
two months before the date on which the loan interest rate is determined.
If MOODY'S CORPORATE BOND YIELD AVERAGE, MONTHLY AVERAGE CORPORATES is no
longer published on a timely basis, we will use a substantially similar
average approved by the insurance department in the state where this policy
was delivered to determine the maximum allowable rate.
If the maximum allowable rate for a policy year is at least 1/2% lower than
the loan interest rate in effect for the previous policy year, we will
decrease the loan interest rate to not more than the maximum allowable rate.
If the maximum allowable rate for a policy year is at least 1/2% higher than
either loan interest rate in effect for the previous policy year, we may
increase either loan interest rate to not more than the maximum allowable
rate.
We will not use a loan interest rate for any policy year that exceeds 15%.
We will notify the Owner as to the Preferred Loan and Non-Preferred Loan
interest rates that apply at the time a new loan is made or when any Policy
Debt is reinstated.
If either loan interest rate that applied to an existing Policy Loan is
increased, we will notify the Owner in writing at least 30 days before the new
rate takes effect.
When a loan is made, interest for the rest of the current policy year must be
paid in advance. If interest is not paid when due, it will be added to the
Policy Debt and allocated to the Fixed Account. The accumulation of Preferred
Loans, together with interest on such loans is the Preferred Debt. The
accumulation of Non-Preferred Loans, together with interest on such loans, is
the Non-Preferred Debt. Total Policy Debt is the sum of the Preferred Debt
and the Non-Preferred Debt, and equals the total outstanding loan with
interest. If the Total Policy Debt (including interest in advance) exceeds
the Fixed Account, we will transfer values from the sub-accounts of the
Variable Account to the Fixed Account, if such values are available, based on
the proportion that each sub-account value bears to the total value of the
sub-accounts of the Variable Account. The unpaid interest will then be
treated as part of the Policy Debt and will bear interest at the applicable
loan rates.
LOAN LIMIT
A loan may be for any amount which does not exceed the loan limit.
The loan limit equals:
- - the Cash Value on the date the loan is made; minus
- - interest for the rest of the current policy year; minus
- - any existing Policy Debt.
SECURITY
This policy will be the only security for the loan.
RESTRICTIONS ON MAKING LOANS
Loans will not be available during a grace period or after the Insured dies.
REPAYING POLICY DEBT
The Policy Debt, or any part, may be repaid at any time as long as this policy
is in force. We have the right to not accept partial loan repayments for
amounts less than 50. Any Policy Debt outstanding will be deducted before any
benefit proceeds are paid or applied under a payment option.
Repayments will be applied first to the Non-Preferred Debt Account, and then
to the Preferred Debt Account, unless the Owner specifies differently.
Repayments will be allocated to the Fixed Account and to the sub-accounts of
the Variable Account based on the premium allocation schedule then in effect,
unless a different allocation is requested.
When there is Policy Debt outstanding, any payments received will be applied
first as a repayment of debt, rather than as premium, unless we are instructed
otherwise.
LIMIT ON POLICY DEBT
Total Policy Debt must not exceed the Cash Value.
If Total Policy Debt, adjusted for any unearned loan interest ever equals or
exceeds the Cash Value, we can terminate the policy. The policy will
terminate 61 days after we have mailed written notice to the Owner and to
anyone who is relying on the policy as collateral security as shown on our
records. Notice will be sent to the last known addresses we have on file.
________________________________________________________________________
PART 12. OTHER PROVISIONS
This part contains important general provisions.
THE CONTRACT
The Policy, the application and any attached riders and endorsements
constitute the complete agreement between the Owner and us. We have issued
the policy in exchange for the information provided in the application and the
payment of premiums.
Any change in the terms of our policy must be made in writing. Only our
President or Secretary is authorized to change or waive the terms of the
policy. No agent or other person has authority to waive a complete answer to
any question in the application, change or waive any terms of the policy, or
waive any of our other rights or requirements.
LIMITATIONS ON CONTESTING THE POLICY
We consider statements made in the application by the applicant to be
representations and not warranties. We may contest any Face Amount portion of
this policy if we rely on a material misrepresentation in the application for
issue or reinstatement of that Face Amount portion, a copy of which was
attached to the policy when issued, or was mailed to the Owner when the policy
was reinstated or when the Face Amount was increased.
We may not contest any Face Amount portion after it has been in effect during
the Insured's lifetime for two years from its effective date or from the
effective date of reinstatement. Afterwards, we can only contest for not
paying premiums.
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex is misstated in the application, the benefits for
this policy and any additional benefit riders will be adjusted. The adjusted
benefits for the policy will be the insurance risk amount which the last
monthly deduction made would have provided for the Insured's correct age and
sex plus the Net Cash Value. The adjusted benefits for any additional benefit
rider will be those which the last monthly deduction made would have provided
for the Insured's correct age and sex.
MISSTATEMENT OF TOBACCO USE
If the answers in the application concerning use of tobacco by the Insured are
not correct, the benefits for this policy and any additional benefit riders
will be adjusted. The adjusted benefits for the policy will be the insurance
risk amount which the last monthly deduction made would have provided if the
correct answers had been given, plus the Net Cash Value. The adjusted
benefits for any additional benefit rider will be the amount the last monthly
deduction made would have provided if the correct answers had been given.
BASIS USED FOR CALCULATIONS
The guaranteed maximum standard monthly cost of insurance rates are based on
the 1980 Commissioner's Standard Ordinary Smoker and Non-Smoker, Male and
Female Mortality Tables (age last birthday), as appropriate.
Minimum cash values are calculated according to the standard nonforfeiture
law. The calculations are based on the 1980 Commissioner's Standard Ordinary
Smoker and Non-smoker, Male and Female Mortality Tables (age last birthday),
as appropriate, and the guaranteed interest rate shown on the Coverage Page.
All policy values meet the standard non-forfeiture law requirements.
A detailed statement of our computation method for all values and reserves has
been filed with the insurance department of the state where this policy is
delivered. All values and reserves are equal to or greater than those
required by the laws of such state.
DELAY OF PAYMENTS
We will make any payments or loans under this policy within 7 business days of
a request received in good order. We reserve the right to postpone any type
of payment from the Variable Account for any period when:
1. The New York Stock Exchange is closed for other than customary weekend and
holiday closings;
2. trading on the Exchange is restricted;
3. an emergency exists as a result of which it is not reasonably practicable
to dispose of securities held in the Variable Account or determine their
value; or
4. the Securities and Exchange Commission so permits delay for the protection
of security holders.
The applicable rules of the Securities and Exchange Commission will govern as
to whether the condition in (2) or (3) exist.
CHANGE OF PLAN
The Owner may exchange this policy for a similar one on another plan of
insurance. Any such change of plan is subject to our approval and the
requirements and payment we may determine.
ANNUAL REPORT
For each policy year we will send the Owner a report for this policy that
shows
- - the current Death Benefit;
- - the value in the Fixed Account;
- - the number of units, the unit value and the total value in each of the
sub-accounts of a Variable Account;
- - the Cash Value;
- - any outstanding policy loan with the current loan interest rate;
- - the premiums paid; and
- - policy transactions for the year.
For the sub-accounts of a Variable Account it will show;
- - the dollar amount of each transaction;
- - the number of units involving in the transaction; and
- - the unit value on the date of the transaction.
The report will also show such other information as may be required by the
insurance supervisory official of the jurisdiction in which this policy is
delivered.
________________________________________________________________________
THE PAYMENT OPTIONS
THE INTEREST OPTIONS
Proceeds held under the Interest Options will earn interest from the effective
date of the payment contract. Interest will be at the rate we declare each
year. We guarantee the interest rate will not be less than a 3% effective
annual rate.
The right to withdraw money under the Interest Options will be as agreed upon
when the option is selected.
1(a) INTEREST ACCUMULATION. The proceeds will be left to grow with compound
interest for a period of not more than 25 years.
1(b) INTEREST INCOME. The proceeds will be left to earn interest for a period
of not more than 25 years. We will pay interest at the end of each month.
Quarterly, semi-annual or annual interest payments may be selected instead
with our approval.
THE INSTALLMENT INCOME OPTIONS
We will pay monthly income for a selected term or amount. The first payment
is due on the effective date of the payment contract. Quarterly, semi-annual
or annual payments can be selected instead of monthly payments with our
approval.
The right to withdraw money under the Installment Income Options will be as
agreed upon when the option is elected.
2(a) INCOME FOR A SELECTED TERM. We will make equal monthly payments for the
number of years selected (up to 30 years). We guarantee the monthly payments
for each $1000 of proceeds applied will not be less than those shown in the
table below. This table is based on interest guaranteed at a 3% effective
annual rate.
<TABLE>
<CAPTION>
INSTALLMENT INCOME PAYMENTS FOR A SELECTED TERM
MONTHLY MONTHLY MONTHLY
YEARS INCOME YEARS INCOME YEARS INCOME
<S> <C> <C> <C> <C> <C>
1 84.47 11 8.86 21 5.32
2 42.86 12 8.24 22 5.15
3 28.99 13 7.71 23 4.99
4 22.06 14 7.26 24 4.84
5 17.91 15 6.87 25 4.71
6 15.14 16 6.53 26 4.59
7 13.16 17 6.23 27 4.48
8 11.68 18 5.96 28 4.37
9 10.53 19 5.73 29 4.27
10 9.61 20 5.51 30 4.18
</TABLE>
2(b) INCOME OF A SELECTED AMOUNT. We will make equal monthly payments of an
amount selected. Payments will continue until the proceeds, including
interest, have been paid. We guarantee interest at a 3% effective annual
rate.
THE LIFE INCOME AND LIFE AND SURVIVOR INCOME OPTIONS
LIFE INCOME. Payments depend on the life if a named person. We will pay
monthly income to the named person for the certain period selected, and then
for as long as the named person is alive. The first payment is due on the
effective date of the payment contract. Quarterly, semi-annual or annual
payments can be selected instead of monthly payments with our approval.
3(a) PAYMENTS FOR LIFE ONLY. We will make equal monthly payments for the
lifetime of the named person. Payments will stop when he or she dies.
3(b) PAYMENTS FOR AT LEAST 10 YEARS. We will make equal monthly payments for
10 years and then for as long as the named person is alive.
3(c) PAYMENTS FOR AT LEAST 20 YEARS. We will make equal monthly payments for
20 years and then for as long as the named person is alive.
3(d) INSTALLMENT REFUND (PAYMENT OF THE AMOUNT APPLIED IS CERTAIN). We will
make equal monthly payments until we have paid the amount applied and then for
as long as the named person is alive.
LIFE AND SURVIVOR INCOME (PAYMENTS CONTINUE TO SURVIVOR). Each payment
depends on the lives of two named persons. The first payment is due on the
effective date of the payment contract.
4. LIFE AND SURVIVOR INCOME, 10 YEARS CERTAIN. We will make monthly payments
to the named persons jointly for 10 years. Then, full payments will continue
as long as either named person is alive. Quarterly, semi-annual or annual
payments can be selected instead of monthly payments with our approval.
The money applied under a Life Income Option or the Life and Survivor Income
Option cannot be withdrawn once payments begin.
TABLE OF GUARANTEED MONTHLY INCOME RATES FOR LIFE INCOME AND LIFE AND
SURVIVOR INCOME PAYMENT OPTIONS
(Income rates for male payees; Life and survivor income rates for
payees of the same age and opposite sex)
We guarantee the monthly income payments for each 1,000 of proceeds applied
under one of the Life Income Options or the Life and Survivor Income Option
will not be less than shown in the table below. This table is based on the
age (last birthday) on the effective date of the payment contract of the named
person or persons whose life payments depend upon. The values shown for the
Life Income Options are for payment contracts which depend on the life of a
male named person. The values shown for the Life and Survivor Income Options
are for payment contracts which depend on the lives of two name persons who
are the same age and opposite sex. We may require proof of a named person's
date of birth. This table is based on interest guaranteed at a 3 1/2%
effective annual rate.
We will furnish upon request the minimum income rates that apply for a payment
contract which depends on:
- - the life of a female named person; or
- - the lives of two named persons who are not the same age or who are the same
sex; or
- - the life if a named person or two named persons who are not classified
according to sex.
<TABLE>
<CAPTION>
OPTION:
3 (a) 3 (b) 3 (c) 3 (d) 4
10 yrs. 20 yrs.
Life Only Certain & Life Certain & Life Install. Refund Life & Survivor
Age
<S> <C> <C> <C> <C> <C>
25* 3.08 3.08 3.07 3.06 2.92
26 3.10 3.09 3.09 3.08 2.93
27 3.11 3.11 3.10 3.09 2.94
28 3.13 3.13 3.12 3.11 2.95
29 3.15 3.15 3.14 3.13 2.96
30 3.17 3.17 3.16 3.15 2.97
31 3.19 3.19 3.18 3.17 2.99
32 3.21 6.21 3.20 3.19 3.00
33 3.24 3.23 3.22 3.21 3.01
34 3.26 3.26 3.24 3.25 3.03
35 3.29 3.28 3.27 3.25 3.04
36 3.31 3.31 3.29 3.28 3.06
37 3.34 3.34 3.32 3.30 3.07
38 3.37 3.37 3.35 3.33 3.09
39 3.41 3.40 3.38 3.36 3.11
40 3.44 3.43 3.41 3.38 3.13
41 3.48 3.47 3.44 3.42 3.15
42 3.51 3.50 3.47 3.45 3.17
43 3.55 3.54 3.51 3.48 3.20
44 3.60 3.58 3.54 3.51 3.22
45 3.64 3.63 3.58 3.55 3.25
46 3.69 3.67 3.62 3.59 3.27
47 3.73 3.72 3.66 3.63 3.3
48 3.79 3.76 3.70 3.67 3.33
49 3.84 3.81 3.75 3.71 3.36
50 3.89 3.87 3.79 3.75 3.40
51 3.95 3.92 3.84 3.80 3.43
52 4.02 3.98 3.89 3.85 3.47
53 4.08 4.05 3.94 3.90 3.51
54 4.15 4.11 3.99 3.95 3.55
<FN>
*Age 25 and below
</TABLE>
<TABLE>
<CAPTION>
TABLE OF GUARANTEED MONTHLY INCOME RATES FOR LIFE INCOME AND LIFE AND SURVIVOR INCOME
PAYMENT OPTIONS (CONT.)
OPTION:
3 (a) 3 (b) 3 (c) 3 (d) 4
10 yrs. 20 yrs.
Life Only Certain & Life Certain & Life Install. Refund Life & Survivor
Age
<S> <C> <C> <C> <C> <C>
55 4.23 4.18 4.05 4.01 3.59
56 4.30 4.25 4.10 4.07 3.64
57 4.39 4.33 4.16 4.13 3.69
58 4.47 4.41 4.22 4.20 3.74
59 4.57 4.50 4.28 4.27 3.80
60 4.67 4.59 4.34 4.34 3.86
61 4.78 4.69 4.41 4.42 3.92
62 4.89 4.79 4.47 4.50 3.99
63 5.02 4.89 4.53 4.59 4.07
64 5.15 5.01 4.60 4.69 4.14
65 5.29 5.13 4.66 4.79 4.23
66 5.44 5.25 4.72 4.89 4.31
67 5.61 5.38 4.78 5.00 4.41
68 5.78 5.51 4.85 5.12 4.51
69 5.97 5.65 4.90 5.24 4.62
70 6.16 5.80 4.96 5.36 4.74
71 6.37 5.95 5.01 5.49 4.86
72 6.60 6.10 5.06 5.62 5.00
73 6.84 6.26 5.11 5.75 5.15
74 7.09 6.43 5.15 5.88 5.30
75 7.37 6.59 5.19 6.01 5.47
76 7.66 6.76 5.22 6.13 5.65
77 7.98 6.93 5.26 6.26 5.85
78 8.31 7.10 5.28 6.28 6.06
79 8.68 7.27 5.31 6.49 6.29
80 9.06 7.43 5.33 6.59 6.53
81 9.48 7.60 5.34 6.69 6.79
82 9.92 7.76 5.36 6.77 7.08
83 10.39 7.91 5.37 6.85 7.38
84* 10.90 8.05 5.38 6.92 7.71
<FN>
*Age 84 and above
</TABLE>
TABLE OF GUARANTEED MONTHLY INCOME RATES FOR LIFE INCOME AND LIFE AND SURVIVOR
INCOME PAYMENT OPTIONS
(Income rates for female payees; Life and survivor income rates for payees of
the same age and opposite sex)
We guarantee the monthly income payments for each $1,000 of proceeds applied
under one of the Life Income Options or the Life and Survivor Income Option
will not be less than shown in the table below. This table is based on the
age (last birthday) on the effective date of the payment contract of the named
person or persons whose life payments depend upon. The values shown for the
Life Income Options are for payment contracts which depend on the life of a
female named person. The values shown for the Life and Survivor Income
Options are for payment contracts which depend on the lives of two name
persons who are the same age and opposite sex. We may require proof of a
named person's date of birth. This table is based on interest guaranteed at a
3 1/2% effective annual rate.
We will furnish upon request the minimum income rates that apply for a payment
contract which depends on:
the life of a male named person; or
the lives of two named persons who are not the same age or who are the same
sex; or
the life if a named person or two named persons who are not classified
according to sex.
<TABLE>
<CAPTION>
OPTION:
3 (a) 3 (b) 3 (c) 3 (d) 4
10 yrs. 20 yrs.
Life Only Certain & Life Certain & Life Install. Refund Life & Survivor
Age
<S> <C> <C> <C> <C> <C>
25* 2.99 2.99 2.99 2.98 2.92
26 3.00 3.00 3.00 2.99 2.93
27 3.01 3.01 3.01 3.01 2.94
28 3.03 3.03 3.02 3.02 2.95
29 3.04 3.04 3.04 3.03 2.96
30 3.06 3.05 3.05 3.05 2.97
31 3.07 3.07 3.07 3.06 2.99
32 3.09 3.09 3.08 3.08 3.00
33 3.11 3.10 3.10 3.09 3.01
34 3.12 3.12 3.12 3.11 3.03
35 3.14 3.14 3.14 3.13 3.04
36 3.16 3.16 3.16 3.15 3.06
37 3.19 3.18 3.18 3.17 3.07
38 3.21 3.21 3.20 3.19 3.09
39 3.23 3.23 3.22 3.21 3.11
40 3.26 3.26 3.25 3.23 3.13
41 3.29 3.28 3.27 3.26 3.15
42 3.31 3.31 3.30 3.28 3.17
43 3.34 3.34 3.32 3.31 3.20
44 3.37 3.37 3.35 3.34 3.22
45 3.41 3.40 3.38 3.37 3.25
46 3.44 3.44 3.42 3.40 3.27
47 3.48 3.47 3.45 3.43 3.30
48 3.52 3.51 3.48 3.46 3.33
49 3.56 3.55 3.52 3.50 3.36
50 3.60 3.59 3.56 3.53 3.40
51 3.65 3.64 3.60 3.57 3.43
52 3.69 3.68 3.64 3.61 3.47
53 3.75 3.73 3.69 3.65 3.51
54 3.80 3.78 3.73 3.70 3.55
<FN>
*Age 25 and below
</TABLE>
<TABLE>
<CAPTION>
OPTION:
3 (a) 3 (b) 3 (c) 3 (d) 4
10 yrs. 20 yrs.
Life Only Certain & Life Certain & Life Install. Refund Life & Survivor
Age
<S> <C> <C> <C> <C> <C>
55 3.86 3.84 3.78 3.74 3.59
56 3.92 3.90 3.83 3.79 3.64
57 3.98 3.96 3.88 3.84 3.69
58 4.05 4.02 3.94 3.90 3.75
59 4.12 4.09 3.99 3.95 3.80
60 4.20 4.16 4.05 4.01 3.86
61 4.28 4.24 4.11 4.08 3.92
62 4.37 4.32 4.18 4.14 3.99
63 4.46 4.41 4.24 4.21 4.07
64 4.56 4.50 4.31 4.29 4.14
65 4.67 4.60 4.38 4.37 4.23
66 4.78 4.70 4.44 4.46 4.31
67 4.90 4.81 4.51 4.55 4.41
68 5.04 4.92 4.58 4.65 4.51
69 5.18 5.05 4.66 4.75 4.62
70 5.33 5.18 4.72 4.86 4.74
71 5.50 5.32 4.79 4.98 4.86
72 5.68 5.47 4.86 5.11 5.00
73 5.87 5.62 4.92 5.24 5.15
74 6.08 5.78 4.98 5.38 5.30
75 6.31 5.95 5.04 5.52 5.47
76 6.55 6.12 5.09 5.67 5.65
77 6.82 6.30 5.14 5.81 5.85
78 7.10 6.48 5.18 5.96 6.06
79 7.41 6.67 5.22 6.10 6.29
80 7.75 6.86 5.25 6.23 6.53
81 8.11 7.05 5.28 6.36 6.79
82 8.50 7.24 5.30 6.48 7.08
83 8.92 7.43 5.33 6.59 7.38
84* 9.38 7.61 5.34 6.69 7.71
<FN>
*Age 84 and above
</TABLE>
MORE INFORMATION ABOUT OUR PAYMENT OPTIONS
OTHER SELECTIONS. We may agree to other Installment Income, Life Income or
Life and Survivor Income options. A person receiving benefits under a payment
option may transfer any withdrawal value to another available option.
RIGHT TO INCREASE MONTHLY INCOME. A person who is applying proceeds from this
contract under a payment option may make an extra contribution to increase the
income he or she will receive. We will use the same rates as are used for the
proceeds to determine the additional income the extra contribution will
provide. We may make a charge which will not exceed 2% of the extra
contribution plus any premium tax required. We may limit the extra
contribution to an amount equal to the proceeds.
AMOUNTS TOO SMALL. If income payments would be less than 20, we may change
the frequency of payments or pay the proceeds in cash. Amounts less than
5,000 may not be applied under any payment option except interest
Accumulation, unless we agree.
AUTOMATIC CANCELLATION. A previous election of a payment option for death
benefits will be canceled if:
- - ownership of this contract is transferred; or
- - the beneficiary is changed
PAYMENTS TO MINORS. While a person named to receive benefits is a minor, we
will make all payments to the guardian of his or her estate. We may require
proof of age of any such person.
PAYMENT AFTER ALL PERSONS RECEIVING BENEFITS DIE. If all persons receiving
benefits under a payment contract die, we will make a single payment of any
amount still due. The single payment will be:
- - any money we are holding under an Interest Option; or
- - the present value of any unpaid installments under an Installment Income
Option; or
- - the present value of any remaining certain period payments under a Life
Income Option of the Life and Survivor Income Option.
The owner may name a person to receive the single payment. The person
receiving benefits can name someone if the owner did not. If no one has been
named, the payment will be made to the estate of the person receiving
benefits.
________________________________________________________________________
WHERE TO FIND IT
additional surrender charges
anniversaries
annual reports
basis of calculations
beneficiaries
cash surrender benefit
cash value
contesting the policy
coverage page
death benefit options
decrease in face amount
grace period
guaranteed coverage premium
guaranteed interest rate
guaranteed monthly cost of insurance rates
increase in face amount
increase in guaranteed coverage premium
interest rates
loans
maturity benefit
maturity date
misstatement of age or sex
misstatement of tobacco use
monthly deductions
monthly expense charges
ownership
partial surrenders
policy dates
policy debt
premium payments
reinstating the policy
suicide
surrender charge factors for face amount increases
table of death benefit factors
termination of coverage
transferring the policy
use of policy as collateral security
______________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C>
(Allianz Logo) ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Home Office: Minneapolis, Minnesota
Individual Division:
P.O. Box 500, Dallas, Texas 75221
A Stock Company
</TABLE>
______________________________________________________________________________
VUL. A flexible premium variable life insurance policy with adjustable Death
Benefit. Insurance is payable at the Insured's death prior to the Maturity
Date and prior to termination of coverage. Values provided by this policy are
based on declared interest rates, and on the investment experience of the
Variable Account which is set forth on the coverage Page. They are not
guaranteed as to dollar amount. The Cash Value is payable on the Maturity
Date if the Insured is living. This is a non-participating policy.
PARTICIPATION AGREEMENT
Between
FRANKLIN VALUEMARK FUNDS
and
NORTH AMERICAN LIFE AND CASUALTY COMPANY
THIS AGREEMENT, effective the 1st day of January, 1990 by and between North
American Life and Casualty Company, a Minnesota corporation (hereinafter the
"Company") on its own behalf and on behalf of one or more segregated asset
accounts of the Company or its affiliates (hereinafter the "Account"), and
Franklin Valuemark Funds, a Massachusetts business trust (hereinafter the
"Trust").
WHEREAS, the Trust engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by the Company
and its affiliates (hereinafter the "Company"); and
WHEREAS, the beneficial Interest in the Trust is divided into several series of
shares, each designated a "Fund" and each representing the interests in a
particular managed pool of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission, dated September 7, 1989 (File No. 812-7303), granting the Company
and variable annuity and variable life insurance separate accounts exemptions
from certain provisions of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and certain Rules thereunder, to the extent
necessary to permit shares of the Trust to be sold to and held by variable
annuity and variable life insurance separate accounts of the Company
(hereinafter the "Mixed Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment company
under the 1940 Act and its shares are registered under the Securities Act of
1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the company has registered or will register certain variable annuity
and/or life insurance contracts under the 1933 Act (hereinafter "Contracts");
and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable contracts
(the Contract(s) and the Account(s) covered by this Agreement, and the
corresponding Funds covered by this Agreement in which the Account(s) invest,
are specified in Schedule A attached hereto as may be modified from time to
time); and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares in the Fund on behalf of the Account to
fund the Contracts;
NOW, THEREFORE, in consideration or their mutual promises, the Trust and the
Company agree as follows:
ARTICLE 1. SALE OF TRUST SHARES
1.1 The Trust agrees to sell to the company those shares of the Trust which the
Account orders, executing such orders on a daily basis at the net value next
computed after receipt by the Trust or its designee of the order for the shares
of the Trust. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust received notice
of such order by 9:30 a.m. New York time on the next following business day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Trust calculates its net asset value pursuant to
the rules of the Securities and Exchange Commission.
1.2. The Trust agrees to make Trust shares available for the duration or this
Agreement for purchase at the applicable net asset value per share by the
Company and its Account on those days on which the Trust calculates its net
asset value pursuant to rules of the Securities and Exchange Commission and the
Trust shall use reasonable efforts to calculate such net asset value on each day
on which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (hereinafter the "Trustees") may
refuse to sell shares of any Funds to any person, or suspend or terminate the
offering of shares of any Fund if such action is required by law or regulatory
authorities having jurisdiction or is, in the sole discretion of the Trustees
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Fund.
1.3. The Trust agrees that shares of the Trust will be sold only to the Company
and their separate accounts. No shares of any Fund will be sold to the general
public.
1.4. The Trust agrees to redeem for cash, on the Company's request, any full or
fractional shares of the Trust held by the Company, executing such requests on a
daily basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section 1.4,
the Company shall be the designee of the Trust for receipt of requests for
redemption and receipt by such designee shall constitute receipt by the Trust
provided that the Trust receives notice of such request for redemption by 9:30
a.m. New York time on the next following Business Day.
1.5. The company shall pay for the Trust shares on the next Business Day after
an order to purchase shares is made in accordance with the provisions of Section
1.1 hereof. Payment shall be in federal funds transmitted by wire or by a credit
for any shares redeemed.
1.6. Issuance and transfer of the Trust's shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Shares
ordered from the Trust will be recorded in an appropriate title for the Account
or the appropriate subaccount of the Account.
1.7. The Trust shall furnish same day notice (by wire or telephone followed by
written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Trust's shares. The Company hereby elects to
receive all such dividends and distributions as are payable on the Fund shares
in additional shares of that Fund. The Company reserves the right to revoke this
election and to receive all such dividends and distributions in cash. The Trust
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.8. The Trust shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 6:30 p.m. New York time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act (or exempt therefrom), that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws and that the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established the Account as a segregated asset account under Minnesota law and
has registered or, prior to any issuance or sale of the Contracts, will register
the Account as a unit investment trust in accordance with the provisions of the
1940 Act (unless exempt therefrom) to serve as a segregated investment account
for the Contracts.
2.2. The Trust represents and warrants that Trust shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with the laws or Massachusetts and all applicable federal
and state securities laws and that the Trust is and shall remain registered
under the 1940 Act. The Trust shall amend the Registration Statement for its
shares under the 1933 Act and the 1940 Act from time to time as required in
order to affect the continuous offering of its shares. The Trust shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust.
2.3. The Trust represents that the Trust is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, (the
"Code") and that every effort will be made to maintain such qualifications
(under Subchapter M or any successor or similar provision) and that the Trust
will notify the Company immediately upon having a reasonable basis for believing
that the Trust has ceased to so qualify or that the Trust might not so qualify
in the future.
2.4. The Trust undertakes to have a Board of Trustees, a majority of whom are
not interested persons of the Trust, formulate and approve of any plan under
Rule 12b-1 to finance distribution expenses.
2.5. The Trust represents that it will sell and distribute the Trust shares in
accordance with all applicable state and federal securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly existing
under the laws of the State of Massachusetts and that it does and will comply
with the 1940 Act.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. The Trust shall provide the Company (at the Trust's expense) with as many
copies of the Trust's current prospectus as the Company may reasonably request.
If requested by the Company in lieu thereof, the Trust shall provide such
documentation (including a final "camera ready" copy of the new prospectus as
set in type at the Trust's expense) and other assistance as is reasonably
necessary in order for the Company once a year (or more frequently if the
prospectus for the Trust is supplemented or amended) to have the prospectus for
the Contracts and the Trust's prospectus printed together in one document (such
printing to be at the Trust's expense).
3.2. The Trust's prospectus shall state that the Statement of Additional
Information for the Trust is available from the Trust. The Trust, at its
expense, shall print and provide such Statement free of charge to the Company
and to any owner of a contract or prospective owner who requests such Statement.
3.3. The Trust, at its expense, shall provide the Company with copies of its
proxy material, reports to stockholders and other communications to stockholders
in such quantity as the Company shall reasonably require for distributing to
Contract owners.
3.4. If and to the extent required by law (or the Mixed Funding Exemptive Order)
the Company shall:
1. solicit voting instructions from contract owners;
2. vote the Trust shares in accordance with instructions received from Contract
owners; and
3. vote Trust shares for which no instructions have been received in the same
proportion as Trust shares of such Fund for which instructions have been
received;
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges or
variable contract owners. The Company reserves the right to vote Trust shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Company shall be responsible, with the guidance and assistance of
the Trust, assuring that each of their separate account participating in the
Trust calculates voting privileges in a manner consistent with the standards set
forth on Schedule B attached hereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the Trust or
its designee, each piece of sales literature or other promotional material in
which the Trust, its investment adviser or underwriter is named, a reasonable
time prior to its use. No such material shall be used if the Trust or its
designee object to such use within 15 Business Days after receipt of such
material.
4.2. The Company shall not give any information or make any representations or
statements on behalf of the Trust or concerning the Trust in connection with the
sale of the Contracts other than the information or representations contained in
the registration statement or prospectus for the Trust shares, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports or proxy statements for the Trust, or in sales literature
or other promotional material approved by the Trust or its designee except with
the permission of the Trust.
4.3. The Trust shall furnish, or shall cause to be furnished, to the Company or
its designee, each piece of sales literature or other promotional material in
which the Company and/or its separate account(s), is named a reasonable time
prior to its use. No such material shall be used if the Company or its designee
object to such use within 15 Business Days after receipt or such material.
4.4. The Trust shall not give any information or make any representations on
behalf of the Company or concerning the Company, the Account, or the Contracts
other than information or representations contained in a registration statement
or prospectus for the Contracts, as such registration statement and prospectus
may be amended or supplemented from time to time, or in reports for the Account
approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Trust will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the Trust or its shares, prior to or
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities. The Trust shall also
promptly inform the Company of the results or any examination by the Securities
and Exchange Commission (or other regulatory authorities), and shall provide the
Company with a copy of any "deficiency letter" or other correspondence or
written report regarding any such examination.
4.6. For purposes of this Article IV, the phrase "sales literature or other
promotional material" means advertisements (such as material published, or
designed for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboard),
and sales literature (such as brochures, circulars, market letters and form
letters), distributed or made generally available to customers or the public.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no Fee or other compensation to the Company under this
Agreement, and the Company shall pay no fee or other compensation to the Trust.
5.2. All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Trust, in accordance with
applicable state laws prior to their sale. The Trust shall bear the expenses for
the cost of registration and qualification of the Trust's shares, preparation
and filing of the Trust's prospectus and registration statement, proxy materials
and reports, setting the prospectus in type, setting in type and printing the
proxy materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by federal or state law, and all taxes on the issuance or
transfer of the Trust's shares.
5.3. The Trust shall bear the expenses of printing and distributing the Trust's
prospectus to owners of Contracts issued by the Company and or distributing the
Trust's proxy materials and reports to such Contract owners.
5.4. In the event the Trust adds one or more additional Funds and the Company
desires to make such Funds available to its Contract owners as an underlying
investment medium, a new Schedule A or an amendment to this Agreement shall be
executed by the parties authorizing the issuance of shares or the new Funds to
the Account.
ARTICLE VI. DIVERSIFICATION
6.1. The Trust represents, and warrants that the Trust will at all times invest
its assets in such a manner as to ensure that the Contracts will be treated as
annuity, endowment, or life insurance contracts under the code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Trust will at all times comply with Section 817(h) of the Code and the
Regulations Section 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulation.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Trust (the "Board") will monitor the Trust for
the existence of any material irreconcilable conflict between the interest of
the Contract owners of all separate accounts investing in the Trust. A material
irreconcilable conflict may arise for a variety of reasons, including: (a) an
Action by any state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no action or interpretive letter or any similar
action by insurance, tax or securities regulatory authorities (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Fund are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions or Contract owners. The Board shall promptly inform the
Company to determine that a material irreconcilable conflict exists and the
implications thereof.
7.2. If it is determined by a majority of the Board, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall, at its expense, and to the extent reasonably practicable (as
determined by a majority or the disinterested Trustees) take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1) withdrawing the assets, allocable to some or all of the separate
accounts from the Trust or any Fund and reinvesting such assets in a different
investment medium, including (but not limited to) another Fund of the Trust, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity Contract owners or life insurance Contract
owners) that votes in favor of such Segregation, or offering to the affected
Contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.3. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the Account's
investment in the Trust and terminate this Agreement within six months after the
Board informs the Company in writing that it has determined that such decision
has created an irreconcilable material conflict, provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Trust shall continue to accept and implement orders by the Company
for the purchase and redemption of shares of the Trust.
7.4. For purposes of Section 7.2 though 7.4 of this Agreement, a majority of the
disinterested members of the Board shall determine whether or not any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Trust be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.2 to establish a new funding
medium for the Contracts, if an offer to do so has been declined by vote of a
majority or Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination, provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
ARTICLE VIII.INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Trust and each of
its Trustees and officers and each person, if any, who controls the Trust within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares or the Contracts and:
1. arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the Registration Statement or
prospectus for the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any indemnified Party if such
statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the Company
by or on behalf of the Trust for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
2. arise out of or as a result of statements or representations (other than
statements or representations contained in the Registration Statement,
prospectus or sales literature of the Trust not supplied by the Company, or
persons under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of the
Contracts or Trust Shares; or
3. arise out of any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement, prospectus, or sales literature
of the Trust or any amendment thereof or supplement thereto or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon information furnished to
the Trust by or on behalf of the company; or
4. arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company,
except to the extent provided in Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Trust,
whichever is applicable.
8.1(c) The Company shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the Company in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon such indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will be not
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.l(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust Shares or the Contracts or the operation of
the Trust and the Indemnified Parties will provide the Company with all relevant
information and documents requested by the Company. For purposes of this Section
8.1(d), the "commencement" of proceedings shall include any informal or formal
communications from the Securities and Exchange Commission or its staff (or the
receipt of information from any other persons or entities) indicating that
enforcement action by said Commission or staff may be contemplated or
forthcoming.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws or Minnesota.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934 and 1940
Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Mixed Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate with respect to one, some, or all Funds for
one, some, or all Contracts or Accounts:
1. at the option of any party upon six month's advance written notice to the
other parties;
2. at the option of the Company to the extent that shares of Funds are not
reasonably available to meet the requirements of the Contracts or are not
appropriate funding vehicles for the Contracts, as determined by the
Company reasonably and in good faith. Prompt notice of the election to
terminate for such cause and an explanation or such cause shall be
furnished by the Company; or
3. as provided in Article VII.
10.2. The notice shall specify the Fund(s) and Contract(s) or Account(s) as to
which the Agreement is to be terminated.
10.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 1O.1 (a) may be exercised for cause
or for no cause.
10.4. Effect of Termination. Notwithstanding any termination of this Agreement,
the Trust shall at the option of the Company, continue to make available
additional shares of the Trust pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the existing contracts shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.4 shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to the Trust: Deborah Gatzek, Vice President
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, California 94404
If to the Company: Mr. Robert S. James, President-Financial Markets
North American Life and Casualty Company 1750 Hennepin
Avenue
Minneapolis, Minnesota 55403
ARTICLE XII. MISCELLANEOUS
12.1. Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as it may come into the public domain.
12.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
12.4. If any provision or this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.5. The Schedules attached hereto, as modified from time to time, are
incorporated herein by reference and are part of this Agreement.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitations the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
IN WITNESS WHEREOF, each of the parties has cause this Agreement to be executed
in its name and on its behalf by its duly authorized representative and its seal
to be hereunder affixed hereto as or the date specified below.
Company:
By two authorized officers,
By: /s/Robert S. James
Title: President, Financial Markets Division
Date: 5/24/92
By: /s/Michael T. Westermeyer
Title: Second Vice President and Senior Counsel
Date: 5/20/92
Trust:
By its authorized officers,
By: /s/Deborah Gatzek
Title: Secretary
Date: 3/31/92
SCHEDULE A
Franklin Valuemark Funds (Trust) is a diversified, open-end management
investment company consisting of the following separate Funds:
Adjustable U.S. Government Fund Equity Growth Fund Global Income Fund High
Income Fund Income Securities Fund Investment Grade Intermediate Bond Fund
Money Market Fund Precious Metals Funds Real Estate Securities Fund U.S.
Government Securities Fund Utility Equity Fund Zero Coupon Fund - 1995
Zero Coupon Fund - 2000 Zero Coupon Fund - 2005 Zero Coupon Fund - 2010
Effective March 1, 1992:
Rising Dividend Fund
International Equity Fund
Pacific Growth Fund
Amendment to Participation Agreement
Effective as of the dates specified below, Allianz Life Insurance Company of
North America, formerly known as North American Life and Casualty Company, a
Minnesota corporation, and Franklin Valuemark Funds, a Massachussetts business
trust, hereby amend Schedule A of their Participation Agreement effective
January 1, 1990, by adding the following language to the bottom of the list of
the Funds which make up the Franklin Valuemark Funds:
"Effective March 15, 1994:
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund"
"Effective May 1, 1995:
Templeton Global Asset Allocation Fund"
IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be executed
in its name and on its behalf by its duly authorized representatives as of the
date specified below.
Allianz Life Insurance Company of North America
By: /s/James P. Kelso
James P. Kelso
Title: Vice President,
Variable Products
Date: 6/30/95
Franklin Valuemark Funds
By: /s/Karen L. Skidmore
Karen L. Skidmore
Title: Assistant Vice President
& Assistant Secretary
Date: 6/16/95
Amendment to Participation Agreement
Effective as of the dates specified below, Allianz Life Insurance Company of
North America, formerly known as North American Life and Casualty Company, a
Minnesota corporation, and Franklin Valuemark Funds, a Massachussetts business
trust, hereby amend Schedule A of their Participation Agreement effective
January 1, 1990, by adding the following language to the bottom of the list of
the Funds which make up the Franklin Valuemark Funds:
"Effective November 1, 1995:
Small Cap Fund"
IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representatives
as of the date specified below.
Allianz Life Insurance Company of North America
By: /s/James P. Kelso
James P. Kelso
Title: Vice President,
Variable Products
Franklin Valuemark Funds
By: /s/Karen L. Skidmore
Karen L. Skidmore
Title: Assistant Vice President
& Assistant Secretary
Amendment to Participation Agreement
Effective as of the dates specified below, Allianz Life Insurance Company of
North America, formerly known as North American Life and Casualty Company, a
Minnesota corporation, and Franklin Valuemark Funds, a Massachussetts business
trust, hereby amend Schedule A of their Participation Agreement effective
January 1, 1990, by adding the following language to the bottom of the list of
the Funds which make up the Franklin Valuemark Funds:
"Effective May 1, 1996:
Capital Growth Fund
Templeton International Smaller Companies Fund"
IN WITNESS WHEREOF, each of the Parties has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representatives
as of the date specified below.
Allianz Life Insurance Company of North America
By: /s/James P. Kelso
James P. Kelso
Title: Vice President,
Variable Products
Franklin Valuemark Funds
By: /s/Karen L. Skidmore
Karen L. Skidmore
Title: Assistant Vice President
& Assistant Secretary
<TABLE>
<CAPTION>
<S> <C> <C>
FOR COMPANY FOR COMPANY USE ONLY
ENDORSEMENT ONLY
ALLIANZ LIFE LOGO (NOT APPLICABLE IN C.W.A. $_____________
Allianz Life Insurance PENNSYLVANIA,
Company of North WEST VIRGINIA OR __Cash __Money Order
America KENTUCKY) __Check
Policy Number_________
</TABLE>
APPLICATION FOR:
__LIFE INSURANCE ___EXERCISE OF GUARANTEED INSURABILITY OPTION
________________________________________________________________________
SECTION 1 - THE PROPOSED INSURED
________________________________________________________________________
__Married __Divorced __Single __Widowed US Citizen? __Yes __No
Sex __Male __Female
1.Full Legal Name (First,Middle,Last) Birth State Birth Date Age
Driver's License #
2.Social Security # or tax I.D. Home Telephone # Business Telephone #
Preferred Time To Call
__AM __PM
3.Residence Address City State Zip How long?
4.Employer's Name and Address Occupation Job Title How Long?
________________________________________________________________________
SECTION 2 - POLICY INFORMATION AND OPTIONAL BENEFITS (SHOW ONLY
RATEBOOK PREMIUMS IN THIS SECTION)
________________________________________________________________________
1.Plan of Insurance 2.Policy's Face Amount 3.Insured's Term Rider Amt.
4.Death Benefit Option __ A __ B
5.Rate Class, if applicable __Smoker __Non Smoker __Juvenile
<TABLE>
<CAPTION>
Benefit/Rider
Amount Annual Premium
<S> <C> <C>
6.ANNUAL PREMIUM FOR $________________
BASE COVERAGE only:
7.OPTIONAL COVERAGE
REQUESTING (check
and fill in amounts)
__Disability Benefit
Rider ______ Units $________________
__Spouse Disability
Benefit Rider ______ Units $________________
__Accidental Death
Benefit $________________ $________________
__Guaranteed Death
Benefit $________________
__Options to Buy More
Insurance $________________ $________________
__Term Insurance Rider $________________ $________________
__Spouse's Term Rider
__ Smoker $________________ $________________
__ Non-Smoker $________________ $________________
__Children's Term
Rider $________________ $________________
__Living Benefit
Rider
__Extended Maturity
Option
__Business Exchange
Rider $________________
__Other_______________ $________________ $________________
8.TOTAL ANNUAL
RATEBOOK PREMIUM $________________
</TABLE>
9. Other Instructions:__________________________________________________
________________________________________________________________________
________________________________________________________________________
F13-002
________________________________________________________________________
SECTION III - ALLOCATION OF PREMIUMS
________________________________________________________________________
CHOOSE AN ALLOCATION OF PREMIUM PAYMENTS TO THE FIXED ACCOUNT AND/OR UP
TO SEVEN (7) FUNDS FROM ALLIANZ LIFE VARIABLE ACCOUNT A. USE WHOLE
PERCENTAGES ONLY.
<TABLE>
<CAPTION>
<S> <C>
__Fixed Account __High Income Fund
__Adjustable U.S. Government Fund __U.S. Gov't Securities Fund
__Investment Grade Interm. Bond Fd __Other
__Equity Growth Fund __Rising Dividends Fund
__Global Income Securities Fund __Utility Equity Fund
__Income Securities Fund
__Other
__International Equity Fund
__Money Market Fund
__Pacific Growth Fund __Other
__Precious Metals Fund __Other
__Real Estate Securities Fund __TOTAL (MUST EQUAL 100%)
</TABLE>
ALLOCATION TO MONEY MARKET SUB-ACCOUNT - As described in the Prospectus
for the Variable Universal Life Policy, initial premiums will be
allocated to the Money Market Sub-account. On the Reallocation Date,
the amount in the Money Market Sub-account will be allocated to the Sub-
accounts of the Variable Account and the unloaned portion of the Fixed
Accounts according to the allocation percentage selected. The
Reallocation Date is the date 30 days after the Policy is released to an
active status in the Company's processing.
________________________________________________________________________
SECTION IV - DOLLAR COST AVERAGING
________________________________________________________________________
PLEASE DOLLAR COST AVERAGE $__________ ($12,000 MINIMUM) OVER A _____
MONTH PERIOD (12 MONTHS MINIMUM, 36 MONTHS MAXIMUM, $1000 MINIMUM
TRANSFER).
<TABLE>
<CAPTION>
<S> <C>
__Fixed Account __High Income Fund
__Adjustable U.S. Government Fund __U.S. Gov't Securities Fund
__Investment Grade Interm Bond Fund __Other
__Equity Growth Fund __Rising Dividends Fund
__Global Income Securities Fund __Utility Equity Fund
__Income Securities Fund
__Other
__International Equity Fund
__Money Market Fund
__Pacific Growth Fund __Other
__Precious Metals Fund __Other
__Real Estate Securities Fund __TOTAL (MUST EQUAL 100%)
</TABLE>
________________________________________________________________________
SECTION V - TELEPHONE/TRANSFERS/EXCHANGES
________________________________________________________________________
YES NO
I/We hereby elect to make transfers by telephone. __ __
If there are Joint Owners, unless we inform the Company to
the contrary, instructions can be accepted from either one
of us. I/We understand that the Company will use reasonable
procedures to confirm that instructions communicated by
telephone are genuine and that the Company may be liable for
any losses due to unauthorized or fraudulent instructions.
I/We understand that the Company tape records all telephone
instructions.
________________________________________________________________________
SECTION VI - SUITABILITY
________________________________________________________________________
YES NO
A. Did you receive copies of the applicable prospectus(es)? __ __
B. Do you understand that for variable insurance the death __ __
benefit, cash value, and duration of coverage may
increase or decrease based on the investment experience
of the underlying sub-accounts.
C. Do you believe that the insurance selected will meet
your financial objectives? __ __
________________________________________________________________________
CONFIRM STATEMENTS AND PROXIES TO: __Owner __Insured __Other:_______
________________________________________________________________________
________________________________________________________________________
SECTION VII - OWNER IF OTHER THAN PROPOSED INSURED
________________________________________________________________________
COMPLETE ONLY IF POLICYHOLDER IS OTHER THAN THE PROPOSED INSURED
NAME RELATIONSHIP TO INSURED SOCIAL SECURITY # or Tax ID
Address Home Phone Business Phone
Premium Notices sent to Owner unless otherwise requested. Specify the
Name and Address.
________________________________________________________________________
SECTION VIII - SELECT METHOD OF PAYMENT AND WRITE IN PREMIUM AMOUNT
________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C> <C>
__Monthly PAC $_______ __Semi-Annually $_____ __Government
__Quarterly $_______ __List Bill $_____ Allotment $_______
__Annually $_______ __Military
__Civil Service
</TABLE>
1.Start billing on _______________ for __Ratebook Premium __Flexible
(Month,Year) Bill Amount
$___________
2.Amount Enclosed With Application $_________.
3.Other Instructions:___________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
SECTION IX - BENEFICIARY FOR PROPOSED INSURED
________________________________________________________________________
1.Primary Beneficiary, Relationship, 2.Contingent Beneficiary,
Date of Birth, Address Relationship, Date of Birth,
Address
<TABLE>
<CAPTION>
3.Check appropriate box if applicable to Beneficiary
Designations shown above.
PRIMARY ONLY CONTINGENT ONLY
<S> <C>
__Corporation, its successors or __Corporation, its successors or
assigns assigns
__Partnership, or its assigns __Partnership, or its assigns
__All lawful children of the __All lawful children of the
Proposed Insured (including any Proposed Insured (including any
named above). named above).
__All lawful children born to or
adopted under the marriage of the
Proposed Insured and the primary
beneficiary.
</TABLE>
3.Survival Clause: __Yes __No - If any beneficiary dies within ___days
after the Proposed Insured's death, any death benefit will be paid as
if such beneficiary had died before the Proposed Insured (not
effective unless both the box is checked and the number of days is
inserted).
________________________________________________________________________
SECTION X - OTHER PROPOSED INSUREDS
________________________________________________________________________
1.SPOUSE RIDER (STR)
Name Age Date of Birth Sex Occupation
2.CHILD TERM RIDER (CTR)
Names Age Date of Birth Sex Height Weight
3.BENEFICIARY DESIGNATION FOR: __STR __CTR
<TABLE>
<CAPTION>
<S> <C>
Primary, Relationship, Contingent, Relationship,
Date of Birth, Address Date of Birth, Address
Primary, Relationship Contingent, Relationship
Date of Birth, Address Date of Birth, Address
</TABLE>
________________________________________________________________________
SECTION XI - REPLACEMENTS
________________________________________________________________________
COMPLETION OF THIS SECTION IS MANDATORY FOR ALL APPLICATIONS.
1.Is this application for insurance to replace or change any life
insurance or annuities in force with this or any other company? __ Yes
__No. If "Yes," list each policy to be replaced, give the name and
address of company(ies) and complete the appropriate state required
replacement forms.
Company: Address:
2.Is this a 1035 Exchange? __Yes __No. If "Yes," complete form
F00-561.
________________________________________________________________________
SECTION XII - EXERCISE OF A GUARANTEED INSURABILITY OPTION
________________________________________________________________________
COMPLETE PAGES 1-4, AND 7-8 IF AMOUNT, BENEFITS/RIDERS ARE GUARANTEED.
IF AMOUNT, BENEFITS/RIDERS ARE NOT GUARANTEED, OR IF COVERAGE IS BEING
APPLIED FOR ON ANOTHER FAMILY MEMBER, ALSO COMPLETE PAGES 5 AND 6.
1.Exercise of option under policy number _____________.
__Regular Option __Alternate Option
2.Insurance is being applied for on:
__original insured __insured's spouse __insured's children
3. If this is an alternate option, check the event that applies:
__Marriage (spouse's name and marriage date)__________________________
__Birth of Child (child's name and birth date)________________________
__Adoption of Child (adopted child's name and adoption date)__________
__Other (specify event and date of event)_____________________________
4.Is the proposed insured disabled or receiving disability benefits?
__Yes __No
________________________________________________________________________
SECTION XIII - LIFE INSURANCE IN FORCE OR APPLIED FOR
ON ALL PROPOSED INSUREDS
________________________________________________________________________
IF "NONE" INDICATE. USE SEPARATE SHEET IF SPACE IS INSUFFICIENT.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Company Basic Amount Accidental Death
Amount
</TABLE>
________________________________________________________________________
SECTION XIV - UNDERWRITING INFORMATION
________________________________________________________________________
COMPLETE FOR ALL PERSONS PROPOSED FOR INSURANCE
1.HAS ANY PERSON PROPOSED FOR INSURANCE: YES NO
a.Any intention of travel or residence outside the United
States or Canada? __ __
b.Been a pilot or crew member during the past three years
or have any intention of becoming a pilot, student pilot
or crew member in any type of aircraft? __ __
If answered "yes," complete "Aviation and Hazardous Sports
Questionnaire."
c.Had a driver's license revoked or suspended or been
convicted of a moving traffic violation within the past
three years? __ __
If answered "yes," give appropriate date and nature of each
violation and the driver's license number under Number 15
below.
d.Been convicted of a felony? __ __
e.Participated in, or contemplated participating in activities
involving: Aeronautics (including hang-gliding, soaring, sky-
diving, ballooning); powered racing or competitive vehicles
(including motorcycles, automobiles and motor boats); skin
or scuba diving, mountain climbing, rodeos, or competitive
skiing? __ __
If answered "yes," complete "Aviation and Hazardous Sports
Questionnaire."
2.IS ANY PERSON PROPOSED FOR INSURANCE:
a.A current user of tobacco in any form? __ __
b.If cigarette smoker, how many packs per day?_______ __ __
c.A past tobacco user? __ __
d.Date of last tobacco use (Mo./Yr.)___________ __ __
3.HAS ANY PERSON PROPOSED FOR INSURANCE EVER APPLIED FOR OR
EVER RECEIVED BENEFITS BECAUSE OF ACCIDENT, SICKNESS OR
DISABILITY? __ __
4.HAS ANY PERSON PROPOSED FOR INSURANCE:
a.Ever used marijuana, cocaine, amphetamines, barbiturates,
hallucinogenic agents, or narcotics other than on a
prescription basis? __ __
b.Ever received counseling or treatment for use of alcohol
or drugs? __ __
5.HAS ANY PERSON PROPOSED FOR INSURANCE EVER BEEN DIAGNOSED AS
HAVING OR TREATED BY A MEMBER OF THE MEDICAL PROFESSION FOR:
a.Diabetes, thyroid or glandular disorder? __ __
b.Epilepsy, convulsions or fainting spells, nervousness, or
mental disorder, or any disease of the brain, or nervous
system, psychiatric, psychological or emotional problems
or disturbance, paralysis or stroke? __ __
c.Heart trouble, rheumatic fever, chest pains, shortness of
breath, palpitations, heart attack, or heart murmur? __ __
d.Varicose veins, phlebitis, or any disease of the circulatory
system? __ __
e.Allergies, anemia, or other blood or lymph disease or
disorder, immunodeficiency disorder, chronic or recurrent
infection, or AIDS? __ __
f.Tuberculosis, asthma, emphysema, bronchitis, shortness of
breath or any lung disease or respiratory disorder? __ __
g.Ulcers, colitis, jaundice, hernia, any disease of the
gastrointestinal system including the stomach, intestines,
liver, gall bladder, pancreas or esophagus? __ __
h.Sugar, albumin or blood in the urine, venereal disease, or
any disease of the kidneys, bladder, or genito-urinary
organs? __ __
i.Arthritis, rheumatism or any injury or disease of the bones,
joints, muscles, back or spine? __ __
j.Any disease of the skin? __ __
k.Any disease or disorder of the eyes, ears, nose or throat? __ __
l.Cancer, tumor, or growth of any kind? __ __
m.Problems with prostate, reproductive organs, breasts or
pregnancy? __ __
6.HAS ANY PERSON PROPOSED FOR INSURANCE EVER HAD OR BEEN ADVISED
TO HAVE ANY SURGICAL OPERATION, TREATMENT OR TEST; OR ARE THEY
USING ANY MEDICATION OR DRUGS? __ __
7.HAS ANY PERSON PROPOSED FOR INSURANCE EVER BEEN UNDER
OBSERVATION OR TREATMENT IN ANY HOSPITAL, CLINIC OR MEDICAL
FACILITY? __ __
8.HAS ANY PERSON PROPOSED FOR INSURANCE EVER HAD AN X-RAY,
ELECTROCARDIOGRAM, OR OTHER MEDICAL TEST? __ __
9.HAS ANY PERSON PROPOSED FOR INSURANCE WITHIN THE LAST 10 YEARS:
a.Had any illness, disease, or injury that is not included in
your other answers? __ __
b.Consulted or been examined or treated by any physician or
practitioner not named in connection with your other
answers? __ __
10.DOES ANY PERSON PROPOSED FOR INSURANCE NOW HAVE ANY SICKNESS
OR PHYSICAL PROBLEM? __ __
11.a.HAS THE WEIGHT OF ANY PERSON PROPOSED FOR INSURANCE
CHANGED BY MORE THAN 10 POUNDS IN THE LAST YEAR? __ __
b.Proposed Insured's Height______ Weight______
c.Spouse or Payor's Height_______ Weight______
12.IS ANY PERSON PROPOSED FOR INSURANCE PREGNANT? __ __
13.HAS ANY PROPOSED INSURED'S PARENT, BROTHER OR SISTER EVER
HAD HEART DISEASE, DIABETES, CANCER, KIDNEY DISEASE,
NEUROMUSCULAR OR MENTAL ILLNESS BEFORE AGE 60? __ __
14.DETAILS OF EACH PROPOSED INSURED'S PERSONAL PHYSICIAN (USE
#15 IF NECESSARY).
Name:
Address:
Date last seen: Reason:
Name:
Address:
Date last seen: Reason:
<TABLE>
<CAPTION>
15.GIVE DETAILS TO ANY OF THE "YES" ANSWERS. USE A SEPARATE SHEET IF
SPACE IS INSUFFICIENT.
<S> <C> <C> <C> <C> <C>
NAME QUES. # DATE DETAILS DURATION NAME/
ADDRESS OF
PHYSICIAN/
HOSPITAL
</TABLE>
TEMPORARY INSURANCE AGREEMENT (TIA) HEALTH QUESTIONS YES NO
16.HAS(HAVE) THE PERSON(S) LISTED AS PROPOSED INSURED(S) IN
SECTIONS I AND XI OF THIS APPLICATION:
a.within the PAST 90 DAYS, been admitted to a hospital or
other medical facility, been advised to be admitted, or
had surgery performed or recommended? __ __
b.within the PAST 90 DAYS, been treated for heart trouble,
stroke, or cancer, or had such treatment recommended by
a physician or other medical practitioner? __ __
If either of the above questions is answered YES with respect to the
Primary Insured, no agent of Allianz Life Insurance Company of North
America is authorized to accept money and no insurance will take effect
under the TIA. If either of the above questions is answered YES with
respect to any other proposed insured(s), no insurance will take effect
under the TIA for that(those) individual(s).
Name(s) of individual(s) to which any Yes answer applies and who does
not qualify for temporary insurance:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
SECTION XV - THE APPLICANT'S STATEMENT AND AUTHORIZATION
________________________________________________________________________
To the best of my knowledge and belief, the statements and answers in
this application are complete, true and correctly recorded. Any
required medical examinations or additional questionnaires are part of
this application.
By accepting the policy issued on this application, I agree to the terms
of that policy as written; and any corrections or changes made by
Allianz Life Insurance Company of North America and noted in the section
"FOR COMPANY ENDORSEMENT ONLY." (Except, if the laws or regulations of
the State where this application is made require written agreement, no
change in amount, class, plan or benefits will be effective unless I
agree in writing. This is the law in Maryland.)
Except for any coverage provided under a Temporary Insurance Agreement,
I understand that Allianz Life Insurance Company of North America will
not be responsible to provide insurance applied for until a policy is
issued and actually delivered to me; and at the time of delivery, each
person's health is as stated in this application; and the first premium
is actually paid.
AUTHORIZATION TO OBTAIN AND DISCLOSE INFORMATION:
North America to obtain medical and other information on me or my minor
children. This is true for its reinsurers also. This includes
information about drugs, alcohol and mental illness. This information
may be used to evaluate an application for life insurance. It may also
be used to evaluate a claim for benefits.
This information can be released by my (his/her) doctors. This includes
medical practitioners and pharmacists. It can also be released by
medical and related facilities. This includes hospitals, clinics, and
facilities run by the Veteran's Administration. Information can also
be released by the sources listed below:
(1)insurers: (2)reinsurers; (3)Medical Information Bureau, Inc. (MIB);
(4)employers; and (5)consumer reporting agencies (CRA).
All of the sources mentioned above can give this information to a CRA
acting for Allianz Life Insurance Company of North America. This is not
true for MIB.
Allianz Life Insurance Company of North America can give this
information to reinsurers. It can give it to the MIB. It can also
give it to other insurers. This is true only if I have applied or apply
to them for insurance. Allianz Life Insurance Company of North America
can also give it to persons doing services for it. This is true only if
it is in connection with my (his/her) application or claim.
This authorization shall be valid for 26 months from the date shown
below. I will be given a copy of this if I ask for it. A copy of this
shall be as valid as the original.
I have been given a copy of the "NOTICE OF INSURANCE INFORMATION
PRACTICES."
I would like to be interviewed if an investigative consumer report will
be made. __Yes __No
TAXPAYER IDENTIFICATION NUMBER
(This information required by IRS Code Section 3406)
Enter Tax Identification Social Security Number Employer
Number and sign below: Identification
Number
__ Check if you are subject to backup withholding under the provisions
of section 3406 (a) (1) (c) of the Internal Revenue Code.
CERTIFICATION - Under penalties of perjury, I certify that (1) the
number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me); AND (2) I am not
subject to backup withholding either because I have not been notified by
the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding, or I am exempt from backup withholding.
Certification Instructions - You must cross out item (2) above if you
have been notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your
tax return.
<TABLE>
<CAPTION>
<S> <C>
_________________________________ _________________________________
Date Signed At City and State Witness(Agent's Signature)
_________________________________ _________________________________
Signature of Proposed Insured Signature of Proposed Insured
Spouse(if insurance applied for) (Parent or Legal Guardian should
sign if child is under 18 years
of age)
_________________________________ _________________________________
Signature of Child Signature of Applicant
(if insurance applied for on child (if other than proposed insured)
18 years of age or older)
_________________________________
Signature of Child
(if insurance applied for on child
18 years of age or older)
</TABLE>
________________________________________________________________________
SECTION XVI - AGENT'S STATEMENT
________________________________________________________________________
1.How long have you known any of the proposed insureds?_____________
2.Did you see all proposed insureds in person? __Yes __No. Are you
related to any proposed insured? __Yes __No If "yes," relationship
______________________
3.Is the insurance being applied for to replace or change any insurance
or annuities in force with this or any other company? __Yes __No. If
"yes," give name of the company.______________________________________
Have the appropriate state replacement forms been completed? __Yes
No__
4.To your knowledge, has any proposed insured used tobacco within the
past 12 months? __Yes __No
5.What underwriting requirements have been or will be completed? __Exam
__Blood Study __EKG
6.If premium payment was taken with the application, give amount.
$_____________
7.Primary Purpose of Insurance: Business: __Deferred Comp. __Buy/Sell
__Key Person __Split Dollar __Business Loan __Executive Bonus
__Other____________________________________
Personal: __Single Need __Multiple Need __Estate Liquidity __Gift
__Other____________________________________
8.Reference: Provide name and address of personal acquaintance for
reference, identification etc.________________________________________
______________________________________________________________________
Application Reviewed by (name and title)________________________________
I CERTIFY that I personally secured this application and recommend the
proposed insureds for insurance. Also, that I asked each question and
recorded each answer exactly as given.
Agents to receive commissions must sign below:
________________________________________________________________________
Region No. Agency No. Agent No. MSN Agent's Signature Phone Number
( )
Agent's Printed Name License #
Region No. Agency No. Agent No. MSN Agent's Signature Phone Number
( )
Agent's Printed Name License #
Region No. Agency No. Agent No. MSN Agent's Signature Phone Number
( )
Agent's Printed Name License #
________________________________________________________________________
Additional Instructions:________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
TEMPORARY INSURANCE AGREEMENT (TIA) APPLICANT'S COPY
________________________________________________________________________
COMPLETE AND GIVE COPY TO APPLICANT IF PREMIUM PAYMENT COLLECTED.
OTHERWISE DO NOT DETACH.
Allianz Life Insurance Company of North America
Home Office: 1750 Hennepin / Minneapolis, Minnesota 55403-2195
Individual Division: Post Office Box 500, Dallas, Texas 75221
NOTICE TO APPLICANT - PLEASE READ THIS AGREEMENT CAREFULLY. THE
INFORMATION IT CONTAINS IS IMPORTANT TO YOU. THE MAXIMUM AMOUNT OF
COVERAGE UNDER THIS AND ALL OTHER TEMPORARY INSURANCE AGREEMENTS WILL
NOT BE MORE THAN $250,000 FOR ANY PERSON TO BE INSURED. THE MAXIMUM
PERIOD OF COVERAGE UNDER THIS AGREEMENT IS 60 DAYS. MAKE ALL PREMIUM
CHECKS PAYABLE TO THE COMPANY. DO NOT MAKE CHECK PAYABLE TO THE AGENT
OR LEAVE PAYEE BLANK.
CONDITIONS FOR TEMPORARY INSURANCE. Allianz Life Insurance Company of
North America will provide limited temporary life insurance under the
terms of this agreement if advance payment of an amount equivalent to
at least one month's premium has been paid to the agent in exchange for
this agreement. Coverage will begin on the date of this agreement on
those individuals proposed for insurance in the application, except for
any person who answers YES to any of the TIA health questions on page 6
of this application.
TOTAL BENEFIT LIMITATION. If the above conditions have been satisfied
and any proposed insured dies while this temporary insurance is in
effect, the Company will pay to the designated beneficiary who would
have received payment under the policy applied for, the LESSER of:
(1) the amount of death benefits applied for on that proposed insured
in the application INCLUDING any accidental or supplemental death
benefits; LESS any existing insurance with the Company that is being
reissued, exchanged or converted in connection with the application or
(2) $250,000. This total benefit limit applies to all insurance applied
for under: (1) this and any other current applications to the Company
and (2) any other Temporary Insurance Agreements with the Company.
DATE INSURANCE TERMINATES. Temporary life insurance terminates
automatically on the earliest of the following dates:
1.60 days from the date of this agreement;
2.the date coverage starts under the policy applied for;
3.the date a policy, other than as applied for, is accepted or
rejected by the applicant; or
4.the date the Company delivers the application, either by personal
notification or upon mailing of notice and refund of premium to the
applicant's address as stated in the application.
SPECIAL LIMITATIONS. IT IS UNDERSTOOD AND AGREED AS FOLLOWS:
1.No one is authorized to accept money and no insurance will take
effect: (a) on proposed insureds under 15 days of age or over age 70
(last birthday) on the date of this agreement; or (b) when the amount
applied for on any proposed insured exceeds $250,000.
2.Fraud or material misrepresentations in the application invalidate
this agreement and the Company's only liability is for refund of any
payment made.
3.If any proposed insured dies by suicide, the Company's liability under
this agreement is limited to a refund of any payment made.
4.No insurance will take effect under this agreement if the check or
draft submitted as payment is not honored by the bank.
5.No one but the President or Secretary may change or waive the terms of
this agreement.
6.If the application is declined or withdrawn, the Company will
immediately refund the advance payment shown above. In no event will
insurance under this agreement and under the policy issued on the
application be effective at the same time.
AGREEMENT AND SIGNATURES. I(We) have received and read this agreement
and declare that the answers to the TIA Health Questions on page 6 of
the application are true to the best of my(our) knowledge and belief.
I(We) understand and agree to all of the terms of this agreement.
Dated at___________________________ this______ day of_____________, 19__
___________________________________ ____________________________________
Agent's Signature Signature of Proposed Insured
(Parent or Legal Guardian should
also sign if child is under
18 years of age
___________________________________
Signature of Applicant(if other
than proposed insured)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Gerhard Rupprecht, a
Director of Allianz Life Insurance Company of North America (ALLIANZ LIFE),
a corporation duly organized under the laws of the State of Minnesota, do
hereby appoint Lowell C. Anderson, each individually as my attorney and
agent, for me, and in my name as a Director of ALLIANZ LIFE on behalf of
ALLIANZ LIFE or otherwise, with full power to execute, deliver and file with
the Securities and Exchange Commission all documents required for
registration of a security under the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, and to do and perform each
and every act that said attorney may deem necessary or advisable to comply
with the intent of the aforesaid Acts.
WITNESS my hand and seal this 11th day of November, 1995.
WITNESS:
<TABLE>
<CAPTION>
<C> <S>
_____________________________ _____________________________
Dr. Gerhard Rupprecht
</TABLE>
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Reverend Dennis Dease, a
Director of Allianz Life Insurance Company of North America (ALLIANZ LIFE), a
corporation duly organized under the laws of the State of Minnesota, do hereby
appoint Lowell C. Anderson and Alan A. Grove, each individually as my attorney
and agent, for me, and in my name as a Director of ALLIANZ LIFE on behalf of
ALLIANZ LIFE or otherwise, with full power to execute, deliver, and file with
the Securities and Exchange Commission all documents required for registration
of a security under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to do and perform each and every act that
said attorney may deem necessary or advisable to comply with the intent of the
aforesaid Acts.
WITNESS my hand and seal this 26 day of March, 1996.
WITNESS:
/s/ Cathleen B. Barrett /s/ Dennis Dease
_______________________ _________________________
Rev. Dennis Dease
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, James R. Campbell, a Director of
Allianz Life Insurance Company of North America (ALLIANZ LIFE), a corporation
duly organized under the laws of the State of Minnesota, do hereby appoint
Lowell C. Anderson and Alan A. Grove, each individually as my attorney and
agent, for me, and in my name as a Director of ALLIANZ LIFE on behalf of
ALLIANZ LIFE or otherwise, with full power to execute, deliver, and file with
the Securities and Exchange Commission all documents required for registration
of a security under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, and to do and perform each and every act that
said attorney may deem necessary or advisable to comply with the intent of the
aforesaid Acts.
WITNESS my hand and seal this 26 day of March, 1996.
WITNESS:
/s/ Connie Knowles /s/ James R. Campbell
_______________________ _________________________
James R. Campbell
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 19, 1996
Board of Directors
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
RE: Opinion and Consent of Counsel - Allianz Life Variable Account A
----------------------------------------------------------------
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended, of a Registration Statement on Form S-6 for the Individual
Flexible Premium Variable Life Insurance Policies to be issued by Allianz Life
Insurance Company of North America and its separate account, Allianz Life
Variable Account A.
We are of the following opinions:
1. Allianz Life Insurance Company of North America is a valid and existing
stock life insurance company of the state of Minnesota.
2. Allianz Life Variable Account A is a separate investment account of
Allianz Life Insurance Company of North America created and validly existing
pursuant to the Minnesota Insurance Laws and the Regulations thereunder.
3. Upon the acceptance of premium payments made by an Owner pursuant to a
Policy issued in accordance with the Prospectus contained in the Registration
Statement and upon compliance with applicable law, such an Owner will have a
legally-issued, fully-paid, non-assessable contractual interest under such
Policy.
You may use this opinion letter, or copy hereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Prospectus which forms a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By:/S/LYNN KORMAN STONE
_______________________________
Lynn Korman Stone
Allianz Life Insurance Company of North America [Allianz Logo]
Jack L. Baumer, FSA, MAAA
Manager
Variable Products Actuarial
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
Telephone: (612) 337-6180
Telefax: (612) 337-6136
April 4, 1996
The Board of Directors
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
CONSENT OF ACTUARY
I hereby consent to the inclusion of the Illustrations of Policy Values
contained in Appendix A in a Registration Statement Form S-6 registering
Flexible Premium Variable Life Insurance Policies. The illustrations have
been prepared in accordance with standard actuarial principles and reflect
the operation of the Policy by taking into account all charges under the
Policy and in the underlying fund, and are shown for the male, non-smoker
risk classification.
Sincerely,
/s/Jack L. Baumer
Jack L. Baumer, FSA, MAAA
JLB:rar
KPMG Peat Marwick LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors
Allianz Life Insurance Company of North America:
We consent to the use of our report, dated January 22, 1996, on the financial
statements of Allianz Life Variable Account A and our report dated February 6,
1996, on the consolidated financial statements of Allianz Life Insurance
Company of North America and subsidiaries included herein and to the reference
to our Firm under the heading "EXPERTS".
KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 19, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000808468
<NAME> ALLIANZ LIFE VARIABLE ACCOUNT A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 7,100,518
<INVESTMENTS-AT-VALUE> 8,660,064
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,660,064
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,440
<TOTAL-LIABILITIES> 73,440
<SENIOR-EQUITY> 4,562,697
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 462,413
<SHARES-COMMON-PRIOR> 347,034
<ACCUMULATED-NII-CURRENT> 1,590,278
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 807,238
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,626,411
<NET-ASSETS> 8,586,624
<DIVIDEND-INCOME> 331,100
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 65,360
<NET-INVESTMENT-INCOME> 265,740
<REALIZED-GAINS-CURRENT> 158,860
<APPREC-INCREASE-CURRENT> 871,051
<NET-CHANGE-FROM-OPS> 1,295,651
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84,992
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,831,613
<ACCUMULATED-NII-PRIOR> 1,324,538
<ACCUMULATED-GAINS-PRIOR> 648,378
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 65,360
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 65,360
<AVERAGE-NET-ASSETS> 7,170,818
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>