Registration No. 33-11158
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 11
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, 1997 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 24, 1997.
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION ON PROSPECTUS
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<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
39 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>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY: ADMINISTERED BY:
Allianz Life Insurance Company Allianz Life ValueLife
of North America Service Center
1750 Hennepin Avenue 2323 Bryan Street
Minneapolis, MN 55403 Dallas, TX 75201
(800) 542-5427 or
P.O. Box 219066
Dallas, TX 75221
(800) 525-7330
This Prospectus describes a flexible premium variable life insurance policy
("Policy") offered by Allianz Life Insurance Company of North America
("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 the Fixed Account or Allianz
Life Variable Account A ("Variable Account"), a separate account of the Company.
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, seventeen of which are currently available in connection
with the Policy: the Money Market Fund, the High Income Fund, the Templeton
Global Income Securities Fund, the U.S. Government Securities Fund, the Growth
and Income Fund, the Income Securities Fund, the Mutual Shares Securities Fund,
the Real Estate Securities Fund, the Rising Dividends Fund, the Templeton Global
Asset Allocation Fund, the Utility Equity Fund, the Natural Resources Securities
Fund, the Small Cap Fund, the Templeton Developing Markets Equity Fund, the
Templeton Global Growth Fund, the Templeton International Equity Fund, and the
Templeton Pacific Growth Fund. Prior to May 1, 1997, the Natural Resources
Securities Fund was known as the Precious Metals 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.
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN
ANY STATE, COUNTRY, OR JURISDICTION IN WHICH THE OFFERING IS UNAUTHORIZED. NO
SALES REPRESENTATIVE, DEALER OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS.
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, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
----
DEFINITIONS.................................... 1
SUMMARY........................................ 2
THE COMPANY.................................... 4
THE VARIABLE ACCOUNT........................... 4
FRANKLIN VALUEMARK FUNDS....................... 4
General...................................... 5
Substitution of Securities................... 5
PREMIUM PAYMENTS............................... 5
General...................................... 5
Planned Periodic Premiums.................... 5
Unscheduled Premiums......................... 6
Grace Period................................. 6
Reinstatement................................ 6
Allocation of Premium........................ 7
Dollar Cost Averaging........................ 7
DEDUCTIONS AND CHARGES......................... 8
Mortality and Expense Risk Charge............ 8
Administrative Charges....................... 8
Insurance Risk Charges....................... 8
Charges for Additional Benefit
Riders.................................... 9
Surrender Charges............................ 9
Partial Surrender Fee........................ 10
Premium Taxes................................ 10
Transfer Fee................................. 10
Income Tax Charge............................ 10
Fund Annual Expenses......................... 11
DEATH BENEFIT.................................. 12
Death Benefit................................ 12
Change in Death Benefit...................... 12
Change in Face Amount........................ 12
Face Amount Increase...................... 12
Face Amount Decrease...................... 13
Guaranteed Death Benefit Rider............... 13
Accelerated Benefit Rider.................... 14
POLICY ACCOUNT, CASH VALUE, NET CASH VALUE,
TRANSFER RIGHTS AND SURRENDERS............... 14
Policy Account............................... 14
Method of Determining
Sub-Account Values........................ 14
Cash Value, Net Cash Value................... 14
Transfer Rights.............................. 14
PAGE
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Partial Surrenders........................... 15
Full Surrenders.............................. 16
LOAN PROVISIONS................................ 16
Policy Loans................................. 16
Loan Interest Charged........................ 16
Loan Limit................................... 17
Security..................................... 17
Restrictions on Making Loans................. 17
Repaying Policy Debt......................... 17
Limit on Policy Debt......................... 17
OWNERSHIP...................................... 17
Transfer of Ownership........................ 18
Assignment................................... 18
BENEFICIARY PROVISIONS......................... 18
DELAY OF PAYMENTS.............................. 18
MANAGEMENT OF THE COMPANY...................... 19
TAX STATUS..................................... 20
Introduction................................. 20
Diversification.............................. 20
Tax Treatment of the Policy.................. 21
Policy Proceeds.............................. 21
Tax Treatment of Loans and Surrenders........ 21
Multiple Policies............................ 22
Tax Treatment of Assignments................. 22
Qualified Plans.............................. 22
VARIABLE ACCOUNT VOTING
PRIVILEGES................................... 23
Disregard of Voting Instructions............. 23
DISTRIBUTION OF THE POLICY..................... 23
REPORTS TO OWNERS.............................. 23
LEGAL PROCEEDINGS.............................. 24
EXPERTS........................................ 24
LEGAL OPINIONS................................. 24
FINANCIAL STATEMENTS........................... 24
APPENDIX A -- ILLUSTRATION OF
POLICY VALUES................................ 77
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DEFINITIONS
Annual Guaranteed Coverage Premium. The Annual Guaranteed Coverage Premium is
equal to twelve times the Guaranteed Coverage Premium.
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.
Guaranteed Coverage Premium. The Guaranteed Coverage Premium is a monthly target
premium amount which will vary by the issue age, sex, and underwriting
classification of the Insured as well as the amount and type of coverage
involved. There is a distinct Guaranteed Coverage Premium for the base policy
(death benefit) as well as each rider attached to the base policy.
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.
Surrender Charge Premium. The Surrender Charge Premium is equal to the Annual
Guaranteed Coverage Premium for the base policy death benefit coverage of a
standard mortality risk. The Surrender Charge Premium will vary with the issue
age, sex, and smoking classification of the Insured as well as the face amount
of the base policy.
Total Guaranteed Coverage Premium. The Total Guaranteed Coverage Premium is the
sum of the Guaranteed Coverage Premium of the base policy and the Guaranteed
Coverage Premium of any riders attached to the base policy. During the first ten
years after the policy is issued the Total Guaranteed Coverage Premium is used
in the calculation of the Minimum Required Premium to keep the policy in force.
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".
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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 may
change the death benefit option which was selected.
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. These charges are equal to:
a) on an annual basis, 0.15% of the average daily net assets of
each Sub-
2
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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 Charges contain: 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.
YEARS % OF SCP
----- --------
1-8.................................. 65%
9................................... 60%
10................................... 55%
11................................... 44%
12................................... 33%
13................................... 22%
14................................... 11%
15+.................................. 0%
The Surrender Charge Premium (SCP) is equal to the Annual Guaranteed
Coverage Premium for the base policy death benefit coverage of a standard
mortality risk. The SCP will vary with the issue age, sex, and smoking
classification of the Insured as well as the face amount of the base
policy.
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 managers and fund administrators for the Trust are
paid fees for their services based upon each Fund's net assets. (See
"Deductions and Charges -- Fund Annual Expenses" in this Prospectus and the
Prospectus for the Trust).
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.
3
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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. 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. The Company offers fixed and variable life
insurance and annuities, and group life, accident and health insurance.
NALAC Financial Plans, LLC 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, LLC 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
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
comprised of twenty-three Funds, seventeen of which are currently available in
connection with the Policies described in this Prospectus. The Trust is an
open-end management investment company registered under the 1940 Act. The
investment objectives of each Fund and a discussion of potential risks are 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., serves as each Fund's (except the Rising Dividends
Fund, the Templeton Global Growth Fund, the Templeton Developing Markets Equity
Fund, the Templeton Global Asset Allocation Fund and the Mutual Shares
Securities Fund) investment manager. The investment manager for the Templeton
Global Growth Fund and the Templeton Global Asset Allocation Fund is Templeton
Global Advisors Limited. The investment manager for the Templeton Developing
Markets Equity Fund is Templeton Asset Management Ltd. The investment manager
for the Mutual Shares Securities Fund is Franklin Mutual Advisers, Inc. Franklin
Advisory Services, Inc. is the investment manager for the Rising Dividends Fund.
All investment managers and subadvisers 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, 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.
4
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Franklin Templeton Services, Inc. ("Fund Administrator"), provides certain
administrative facilities and services for the Funds.
Franklin Templeton Investor Services, Inc., 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.
The following Funds are available:
FUND SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund
FUNDS SEEKING CURRENT INCOME
High Income Fund
Templeton Global Income Securities Fund
U.S. Government Securities Fund
FUNDS SEEKING GROWTH AND INCOME
Growth and Income Fund
Income Securities Fund
Mutual Shares Securities Fund
Real Estate Securities Fund
Rising Dividends Fund
Templeton Global Asset Allocation Fund
Utility Equity Fund
FUNDS SEEKING CAPITAL GROWTH
Natural Resources Securities Fund
(formerly, Precious Metals Fund)
Small Cap Fund
Templeton Developing Markets Equity Fund
Templeton Global Growth Fund
Templeton International Equity Fund
Templeton Pacific Growth Fund
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, the
substitution of shares of any Fund for another would be in the best interests of
Policy Owners 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.
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
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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:
o the Net Cash Value is not large enough to cover the monthly deduction
made on that date; and
o adjusted premium payments are less than Accumulated Guaranteed Coverage
Premiums.
Adjusted premium payments as of a Monthly Anniversary Date equal:
o total premiums the Company has received on or before that date; minus
o 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:
o the Total Guaranteed Coverage Premium; multiplied by
o 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:
o three monthly deductions; or
o 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:
o submit an application for reinstatement;
6
<PAGE>
o 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;
o pay or agree to reinstatement of any Policy Debt; and
o pay the premium required to reinstate the Policy.
The premium required to reinstate the Policy equals the total of the
following amounts:
o 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
o 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:
o it has been surrendered for its Net Cash Value; or
o the Insured's Death; or
o 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 investment options (seventeen Funds and the Fixed Account) that an
Owner may invest in at any one time. Currently, the Owner may only be invested
in a maximum of seven investment options at any one time throughout the life of
the Policy.
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 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.
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 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 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 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. The
Company does not intend to profit from any such charge. In the event there are
additional transfers, the transfer fee may be charged.
7
<PAGE>
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.
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:
o the Insurance Risk Amount for the Face Amount portion for that month;
by
o 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:
o the Death Benefit associated with that Face Amount portion; over
o 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:
o 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
8
<PAGE>
o 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:
o are in the same Face Amount band, sex, and risk classification;
o take effect when the Insureds are the same age; and
o 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.
YEARS % OF SCP
- ----- --------
1-8........................................ 65%
9......................................... 60%
10......................................... 55%
11......................................... 44%
12......................................... 33%
13......................................... 22%
14......................................... 11%
15+........................................ 0%
The Surrender Charge Premium (SCP) is equal to the Annual Guaranteed
Coverage Premium for the base policy death benefit coverage of a standard
mortality risk. The SCP will vary with the issue age, sex, and smoking
classification of the Insured as well as the face amount of the base policy.
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.
9
<PAGE>
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 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.
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.
10
<PAGE>
FUND ANNUAL EXPENSES
There are deductions from and expenses paid out of the assets of the Funds
which are summarized below. The Management and Fund Administration Fees for each
Fund are based on a percentage of that Fund's net assets. See "Franklin
Valuemark Funds" in this Prospectus and "Management" in the Trust prospectus.
The "Management and Fund Administration Fees" below include investment
advisory and other management and administrative fees not included as "Other
Expenses" that were paid to the Managers and Fund Administrators to the Trust
for the 1996 calendar year except for Funds with fee waivers/expense reductions
or newer Funds without a full year of operations as of December 31, 1996 (see
explanatory footnotes below).
<TABLE>
<CAPTION>
MANAGEMENT
AND FUND OTHER TOTAL ANNUAL
ADMINISTRATION FEES1 EXPENSES EXPENSES
--------------------- -------- --------------
<S> <C> <C> <C>
Money Market Fund2.......................................... .51% .02% .53%
Growth and Income Fund...................................... .48% .02% .50%
Natural Resources Securities Fund3.......................... .60% .05% .65%
Real Estate Securities Fund................................. .55% .02% .57%
Utility Equity Fund......................................... .47% .03% .50%
High Income Fund............................................ .52% .02% .54%
Templeton Global Income Securities Fund..................... .56% .05% .61%
Income Securities Fund...................................... .47% .03% .50%
U.S. Government Securities Fund............................. .49% .02% .51%
Rising Dividends Fund....................................... .75% .01% .76%
Templeton International Equity Fund......................... .81% .08% .89%
Templeton Pacific Growth Fund............................... .89% .10% .99%
Templeton Global Growth Fund................................ .88% .05% .93%
Templeton Developing Markets Equity Fund.................... 1.25% .24% 1.49%
Templeton Global Asset Allocation Fund...................... .80% .06% .86%
Small Cap Fund.............................................. .75% .02% .77%
Mutual Shares Securities Fund4.............................. .75% .10% .85%
- ------------------
<FN>
1 The Fund Administration Fee is a direct expense for the Templeton Global Asset
Allocation Fund and the Mutual Shares Securities Fund; other Funds pay for
similar services indirectly through the Management Fee. See "Management" in
the Trust Prospectus for further information regarding Management and Fund
Administration Fees.
2 Franklin Advisers, Inc. agreed in advance to waive a portion of its Management
Fee and to make certain payments to reduce expenses of the Money Market Fund
during 1996 and is currently continuing this arrangement in 1997. This
arrangement may be terminated at any time. With this reduction, actual
Management Fees and Total Annual Expenses of the Money Market Fund for 1996
were 0.41% and 0.43%, respectively of the average daily net assets of the
Fund.
3 Prior to May 1, 1997, the Natural Resources Securities Fund was known as the
Precious Metals Fund.
4 The Mutual Shares Securities Fund commenced operations November 8, 1996. The
expenses shown are estimated expenses for the Fund for 1997.
</FN>
</TABLE>
11
<PAGE>
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:
o the total Face Amount at the beginning of the Policy Month when the
death occurs; or
o 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:
o 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
o 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:
o the Owner must request the change in writing;
o once the Death Benefit option has been changed, it cannot be changed
again for the next three years;
o 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
o 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:
o submit an application for the increase;
o submit proof satisfactory to the Company that the Insured is an
insurable risk; and
o 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:
12
<PAGE>
o the Guaranteed Coverage Premium will be increased.
o the Monthly Administrative Charge will increase to $20 per month for
the twelve months following the increase.
o 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:
o the risk classification and the amount of the increase; and
o 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:
o the Monthly Anniversary Date on or following the day the Company
receives the Owner's request for the decrease; or
o 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:
o the total of the current Surrender Charge for the amount of each Face
Amount portion reduced; or
o 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:
o 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
o 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:
o Insured Term Rider
o Spouse Term Rider
13
<PAGE>
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. There is an administrative charge for
this benefit which is guaranteed not to exceed the lesser of $1,000 or 2% of the
benefit. This limit may vary depending on the state in which the Policy was
purchased. The current administrative charge is $150.
POLICY ACCOUNT, CASH VALUE,
NET CASH VALUE, TRANSFER RIGHTS
AND SURRENDERS
POLICY ACCOUNT
On the Issue Date, the beginning Policy Account equals:
o 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
o 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:
o the Policy Account; minus
o the Surrender Charges.
See "Deductions and Charges" regarding a description of the Surrender
Charges.
The Net Cash Value equals:
o the Cash Value; minus
o any Policy Debt.
During the Insured's life the Owner may:
o take loans based on the Cash Value;
o make Partial Surrenders; or
o 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 other 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:
14
<PAGE>
o the Company receives such request at least 30 days before that Policy
Anniversary; and
o 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.
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 is designed for professional
market timing organizations, other entities, or persons 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 surrendered. 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:
o the Death Benefit at the time the partial surrender is made; over
o the Face Amount at the time the partial surrender is made.
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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:
o the date the Company receives the Owner's written request for the
surrender; or
o 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 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:
o 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
o 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
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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:
o the Cash Value on the date the loan is made; minus
o interest for the rest of the current Policy Year; minus
o 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.
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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 ValueLife Service
Center; 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. This may be a taxable event. Owners should consult a tax adviser
should they wish to change ownership of the Policy.
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. This may be a taxable event. Owners should consult a tax adviser should
they wish to assign the Policy.
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.
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MANAGEMENT OF THE COMPANY
The directors and executive officers of the Company and their principal
occupations for the past 5 years are as follows:
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 since November 1988.
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 since June 1974.
J. Ward Hamlin Vice President -- Underwriting of the Company
since 1981.
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, St. Paul
since July 1991.
James R. Campbell Executive Vice President of Norwest Corporation
since February 1988.
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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.
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
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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
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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. However, an exchange under
Section 1035 of the Code of a life insurance policy entered into before June 21,
1988 for the Policy will not cause the Policy to be treated as a Modified
Endowment Contract if no additional premiums are paid.
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 59 1/2; (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.
Upon complete surrender or when Maturity Benefits are paid, if the amount
received plus loan indebtedness exceeds the total premiums paid that are not
treated as previously surrendered by the Policy Owner, the excess generally will
be treated as ordinary income.
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, exchanging 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 or the change of ownership of a Policy may be a
taxable event. Policy Owners should therefore consult competent tax advisers
should they wish to assign or change the Owner of 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.
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VARIABLE ACCOUNT VOTING PRIVILEGES
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 1940 Act 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 principal underwriter, NALAC
Financial Plans, LLC, 1750 Hennepin Avenue, Minneapolis, MN, a wholly-owned
subsidiary of the Company.
Commissions will be paid to broker-dealers who sell the Policies.
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
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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 the Company as of and for the year ended
December 31, 1996 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.
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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
Policy Owners 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, 1996, 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, 1996, 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 24, 1997
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements
Statements of Assets and Liabilities
December 31, 1996
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, 734,244 shares, cost $734,244...... $734,244 - - - - -
Growth and Income Fund, 97,636 shares,
cost $1,399,209...................................... - 1,713,508 - - - -
Precious Metals Fund, 9,025 shares, cost $124,945..... - - 128,968 - - -
High Income Fund, 132,515 shares, cost $1,640,698..... - - - 1,876,418 - -
Real Estate Securities Fund, 15,894 shares,
cost $262,265........................................ - - - - 352,056 -
U.S. Government Securities Fund, 69,086 shares,
cost $808,378........................................ - - - - - 930,584
------- ------- ------- --------- ------- -------
Total assets...................................... 734,244 1,713,508 128,968 1,876,418 352,056 930,584
------- ------- ------- --------- ------- -------
Liabilities:
Accrued mortality and expense risk charges............. 3,596 5,803 761 1,172 2,032 1,954
Accrued administrative charges......................... 899 1,451 190 293 508 488
------- ------- ------- ------ ------- -------
Total liabilities................................. 4,495 7,254 951 1,465 2,540 2,442
------- --------- ------- --------- ------- -------
Net assets........................................ $729,749 1,706,254 128,017 1,874,953 349,516 928,142
======= ========= ======= ========= ======= =======
Policy owners' equity (note 5).......................... $729,749 1,706,254 128,017 1,874,953 349,516 928,142
======= ========= ======= ========= ======= =======
Units outstanding...................................... 46,930 54,351 8,152 84,503 12,678 45,204
======= ======= ====== ====== ====== ======
Unit value per unit.................................... $15.550 31.393 15.704 22.188 27.568 20.532
======= ======= ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
Templeton
Utility Zero Zero Zero Global Income Income
Equity Coupon Coupon Coupon Securities Securities
Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund Fund
-------- ----------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Utility Equity Fund, 74,633 shares, cost $981,928. $1,356,822 - - - - -
Zero Coupon Fund - 2000, 23,127 shares,
cost $254,387.................................... - 351,294 - - - -
Zero Coupon Fund - 2005, 23,601 shares,
cost $273,931.................................... - - 385,881 - - -
Zero Coupon Fund - 2010, 21,890 shares,
cost $321,612.................................... - - - 356,588 - -
Templeton Global Income Securities Fund,
9,633 shares, cost $122,258...................... - - - - 131,201 -
Income Securities Fund, 50,933 shares,
cost $797,107.................................... - - - - - 876,558
--------- ------- ------- ------- ------- -------
Total assets.................................. 1,356,822 351,294 385,881 356,588 131,201 876,558
--------- ------- ------- ------- ------- -------
Liabilities:
Accrued mortality and expense risk charges......... 3,107 457 446 427 1,348 5,606
Accrued administrative charges..................... 777 114 112 107 337 1,401
-------- ------- ------- ------- ------- -------
Total liabilities............................. 3,884 571 558 534 1,685 7,007
--------- ------- ------- ------- ------- -------
Net assets.................................... $1,352,938 350,723 385,323 356,054 129,516 869,551
========= ======= ======= ======= ======= =======
Policy owners' equity (note 5)...................... $1,352,938 350,723 385,323 356,054 129,516 869,551
========= ======= ======= ======= ======= =======
Units outstanding.................................. 54,519 14,687 14,331 11,896 7,756 39,985
========= ======= ======= ======= ====== ======
Unit value per unit................................ $24.816 23.880 26.888 29.931 16.700 21.747
========= ======= ======= ======= ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
Templeton Templeton Templeton Templeton Templeton
Pacific Rising International Developing Global Global Asset
Growth Dividends Equity Markets Equity Growth Allocation
Fund Fund Fund Fund Fund Fund
------- ------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Pacific Growth Fund, 29,366 shares,
cost $404,622................................... $433,448 - - - - -
Rising Dividends Fund, 19,938 shares,
cost $245,909................................... - 307,051 - - - -
Templeton International Equity Fund,
65,914 shares, cost $887,168.................... - - 1,018,366 - - -
Templeton Developing Markets Equity Fund,
58,105 shares, cost $615,467.................... - - - 673,441 - -
Templeton Global Growth Fund, 56,624 shares,
cost $666,926................................... - - - - 781,408 -
Templeton Global Asset Allocation Fund,
30,522 shares, cost $342,910.................... - - - - - 384,273
------- ------- -------- -------- ------- --------
Total assets................................. 433,448 307,051 1,018,366 673,441 781,408 384,273
------- ------- -------- -------- ------- --------
Liabilities:
Accrued mortality and expense risk charges........ 3,884 1,712 6,685 3,436 5,213 442
Accrued administrative charges.................... 971 428 1,672 859 1,303 110
------- ------- -------- ------- ------- --------
Total liabilities............................ 4,855 2,140 8,357 4,295 6,516 552
------- ------- -------- ------- ------- --------
Net assets................................... $428,593 304,911 1,010,009 669,146 774,892 383,721
======= ======= ========= ======= ======= ========
Policy owners' equity (note 5)..................... $428,593 304,911 1,010,009 669,146 774,892 383,721
======= ======= ========= ======= ======= ========
Units outstanding................................. 27,810 19,304 60,849 59,260 58,157 30,332
======= ======= ======== ======= ======= ========
Unit value per unit............................... $15.412 15.795 16.598 11.292 13.324 12.651
======= ======= ======== ======= ======= ========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
December 31, 1996
Templeton
International Mutual Mutual
Small Capital Smaller Discovery Shares Total
Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Funds
------ ----- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Small Cap Fund, 4,285 shares, cost $52,944............... $56,568 - - - -
Capital Growth Fund, 389 shares, cost $4,560............. - 4,420 - - -
Templeton International Smaller Companies Fund,
0 shares, cost $4....................................... - - 4 - -
Mutual Discovery Securities Fund, 4,950 shares,
cost $50,000............................................ - - - 50,495 -
Mutual Shares Securities Fund, 8,275 shares,
cost $84,010............................................ - - - - 85,644
------ ----- ------ ------ ------
Total assets......................................... 56,568 4,420 4 50,495 85,644 12,989,240
------ ----- ------ ------ ------ ----------
Liabilities:
Accrued mortality and expense risk charges................ 106 2 3 22 30 48,244
Accrued administrative charges............................ 26 - 1 5 8 12,060
------ ----- ------ ------ ------ ----------
Total liabilities.................................... 132 2 4 27 38 60,304
------- ----- ------ ------ ------ ----------
Net assets........................................... $56,436 4,418 - 50,468 85,606 12,928,936
======= ===== ====== ====== ====== ==========
Policy owners' equity (note 5)............................. $56,436 4,418 - 50,468 85,606 12,928,936
======= ===== ====== ====== ====== ==========
Units outstanding......................................... 4,338 391 - 4,953 8,280 668,666
======= ====== ====== ====== ====== ==========
Unit value per unit....................................... $13.011 11.303 11.194 10.190 10.339
======= ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
Money Market Fund Growth and Income Fund Precious Metals Fund
-------------------------- -------------------- ---------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- ------- ------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 32,922 33,164 14,466 28,758 10,179 4,301 2,102 3,600 626
-------- ------- ------- ------- ------ ------ ------- ----- -----
Expenses:
Mortality and expense risk charges. 4,291 4,898 2,689 9,969 5,842 3,726 1,012 2,489 700
Administrative charges............. 1,073 1,225 672 2,492 1,460 932 253 622 175
-------- ------- ------- ------- ------ ------ ------- ----- -----
Total expenses................ 5,364 6,123 3,361 12,461 7,302 4,658 1,265 3,111 875
-------- ------- ------- ------- ------ ------ ------- ----- -----
Investment income (loss), net. 27,558 27,041 11,105 16,297 2,877 (357) 837 489 (249)
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions
on mutual funds.................. - - - 101,857 22,157 8,957 1,927 2,665 -
-------- ------- ------- ------ ------ ------ ------- ------ -----
Realized gains (losses) on sales
of investments:
Proceeds from sales............. 2,224,132 965,636 513,009 111,065 97,576 114,661 125,238 161,878 11,123
Cost of investments sold........ (2,224,132) (965,636) (513,009) (85,315) (77,218) (94,631) (110,740)(146,847) (9,528)
--------- ------- ------- ------- ------ ------ ------- ------- -----
Total realized gains (losses)
on sales of investments, net. - - - 25,750 20,358 20,030 14,498 15,031 1,595
--------- ------- ------- ------- ------ ------ ------ ------ -----
Realized gains (losses) on
investments, net............. - - - 127,607 42,515 28,987 16,425 17,696 1,595
Net change in unrealized
appreciation (depreciation)
on investments................... - - - 37,916 184,273 (45,642) (8,994) (10,144) (2,094)
--------- ------- ------- ------- ------- ------ ----- ------ -----
Total realized gains (losses)
and unrealized apprecia-
tion (depreciation) on
investments, net............. - - - 165,523 226,788 (16,655) 7,431 7,552 (499)
--------- ------- ------- ------- ------- ------ ----- ----- ----
Net increase (decrease) in net assets
from operations.................... $ 27,558 27,041 11,105 181,820 229,665 (17,012) 8,268 8,041 (748)
========= ======= ======= ======= ======= ====== ===== ===== ====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Real Estate U.S. Government
High Income Fund Securities Fund Securities Fund
---------------------- ------------------- ---------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- ------ ------ ------ ------ ----- ------- ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares...... $167,136 78,044 44,601 7,943 3,875 613 45,170 41,763 29,171
-------- ------ ------ ------ ------ ----- ------- ------ ------
Expenses:
Mortality and expense risk charges....... 12,310 7,709 6,671 1,883 833 672 4,926 3,974 3,380
Administrative charges................... 3,077 1,927 1,668 471 208 168 1,231 994 845
-------- ------ ------ ------ ------ ----- ------- ------ ------
Total expenses...................... 15,387 9,636 8,339 2,354 1,041 840 6,157 4,968 4,225
-------- ------ ------ ------ ------ ----- ------- ------ ------
Investment income (loss), net....... 151,749 68,408 36,262 5,589 2,834 (227) 39,013 36,795 24,946
Realized gains (losses) and unrealized
appreciation (depreciation) on
investments:
Realized capital gain distributions
on mutual funds................. 8,872 - 6,061 - - - - - 2,285
-------- ------ ------ ------ ------ ----- ------- ------ ------
Realized gains (losses) on sales
of investments:
Proceeds from sales................... 347,465 47,176 51,287 9,243 22,803 5,838 126,946 33,799 131,317
Cost of investments sold.............. (313,573) (39,566) (45,931) (7,263) (19,244) (4,033) (108,478) (26,326) (99,718)
-------- ------ ------ ------ ------ ----- ------- ------ ------
Total realized gains (losses) on
sales of investments, net.......... 33,892 7,610 5,356 1,980 3,559 1,805 18,468 7,473 31,599
-------- ------ ------ ------ ------ ----- ------- ------ ------
Realized gains (losses) on
investments, net................... 42,764 7,610 11,417 1,980 3,559 1,805 18,468 7,473 33,884
Net change in unrealized appreciation
(depreciation) on investments.......... 26,432 122,964 (81,774) 58,343 14,488 759 (37,068) 56,173 (91,983)
-------- ------ ------ ------ ------ ----- ------- ------ ------
Total realized gains (losses) and
unrealized appreciation (depre-
ciation) on investments, net....... 69,196 130,574 (70,357) 60,323 18,047 2,564 (18,600) 63,646 (58,099)
-------- ------ ------ ------ ------ ----- ------- ------ ------
Net increase (decrease) in net assets
from operations.......................... $220,945 198,982 (34,095) 65,912 20,881 2,337 20,413 100,441 (33,153)
======== ====== ====== ====== ====== ===== ======= ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000
----------------------- ------------------ --------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- ------ ------- ---- ------- ------ ------ ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares........ $ 75,714 70,912 44,904 - 17,379 15,282 19,213 13,993 14,292
-------- ------ ------- ---- ------- ------ ------ ------ ------
Expenses:
Mortality and expense risk charges......... 11,220 8,983 6,698 - (594) 1,529 2,212 2,179 1,769
Administrative charges..................... 2,805 2,246 1,674 - (149) 383 553 545 442
-------- ------ ------- ---- ------- ------ ------ ------ ------
Total expenses........................ 14,025 11,229 8,372 - (743) 1,912 2,765 2,724 2,211
-------- ------ ------- ---- ------- ------ ------ ------ ------
Investment income (loss), net......... 61,689 59,683 36,532 - 18,122 13,370 16,448 11,269 12,081
Realized gains (losses) and unrealized appre-
ciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds............................. - - 7,958 - 86 625 190 - 2,038
-------- ------ ------- ---- ------- ------ ------ ------ ------
Realized gains (losses) on sales
of investments:
Proceeds from sales..................... 427,719 112,297 183,473 - 273,701 4,692 9,943 3,895 14,723
Cost of investments sold................ (309,164) (88,887) (138,153) - (236,082) (3,908) (7,209) (2,731) (10,946)
-------- ------ ------- ---- ------- ------ ------ ------ ------
Total realized gains (losses) on sales
of investments, net.................. 118,555 23,410 45,320 - 37,619 784 2,734 1,164 3,777
-------- ------ ------- ---- ------- ------ ------ ------ ------
Realized gains (losses) on investments,
net.................................. 118,555 23,410 53,278 - 37,705 1,409 2,924 1,164 5,815
Net change in unrealized appreciation
(depreciation) on investments............ (93,370) 259,686 (253,440) - (37,457) (14,916) (13,736) 44,013 (41,764)
-------- ------ ------- ---- ------- ------ ------ ------ ------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net.................. 25,185 283,096 (200,162) - 248 (13,507) (10,812) 45,177 (35,949)
-------- ------ ------- ---- ------- ------ ------ ------ ------
Net increase (decrease) in net assets from
operations................................. $ 86,874 342,779 (163,630) - 18,370 (137) 5,636 56,446 (23,868)
======== ======= ======= ==== ======= ====== ====== ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Global
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Income Securities Fund
-------------------- ------------------- -------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ----- ------ -----
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares........... $19,668 12,928 11,417 8,167 3,109 7,316 7,568 2,871 494
------- ------ ------ ------ ----- ------ ----- ------ -----
Expenses:
Mortality and expense risk charges............ 2,270 2,227 1,741 1,411 916 926 745 470 129
Administrative charges........................ 568 557 435 353 229 231 186 118 32
------- ------ ------ ------ ----- ------ ----- ------ -----
Total expenses........................... 2,838 2,784 2,176 1,764 1,145 1,157 931 588 161
------- ------ ------ ------ ----- ------ ----- ------ -----
Investment income (loss), net............ 16,830 10,144 9,241 6,403 1,964 6,159 6,637 2,283 333
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds................................ - - 3,569 2,213 - 3,560 - - 204
------- ------ ------ ------ ----- ------ ----- ------ -----
Realized gains (losses) on sales of investments:
Proceeds from sales......................... 13,626 4,311 75,603 57,843 1,827 79,261 8,726 15,642 2,577
Cost of investments sold.................... (9,480) (2,816) (52,536) (50,978) (1,569) (81,331) (8,294) (15,250) (2,445)
------- ------ ------ ------ ----- ------ ----- ------ -----
Total realized gains (losses) on sales of
investments, net........................ 4,146 1,495 23,067 6,865 258 (2,070) 432 392 132
------- ------ ------ ------ ----- ------ ----- ------ -----
Realized gains (losses) on
investments, net........................ 4,146 1,495 26,636 9,078 258 1,490 432 392 336
Net change in unrealized appreciation
(depreciation) on investments............... (21,955) 68,320 (72,608) 4,806 32,162 (29,320) 2,837 6,634 (2,030)
------- ------ ------ ------ ----- ------ ----- ------ -----
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net..................... (17,809) 69,815 (45,972) 13,884 32,420 (27,830) 3,269 7,026 (1,694)
------- ------ ------ ------ ----- ------ ----- ------ -----
Net increase (decrease) in net assets from
operations................................... $ (979) 79,959 (36,731) 20,287 34,384 (21,671) 9,906 9,309 (1,361)
======= ====== ====== ====== ===== ====== ===== ====== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Investment Grade Adjustable U.S.
Intermediate Bond Fund Income Securities Fund Government Fund
------------------- -------------------- --------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares.......... $ 3,706 3,949 253 33,370 19,772 2,467 18,030 1,373 184
------- ------ --- ------ ------ ------ ------- ------ -----
Expenses:
Mortality and expense risk charges........... 366 529 169 4,656 2,265 963 740 139 27
Administrative charges....................... 91 132 42 1,164 566 241 185 35 7
------- ------ --- ------ ------ ------ ------- ------ -----
Total expenses.......................... 457 661 21 5,820 2,831 1,204 925 174 34
------- ------ --- ------ ------ ------ ------- ------ -----
Investment income (loss), net........... 3,249 3,288 42 27,550 16,941 1,263 17,105 1,199 150
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds............................... - - 36 5,550 1,592 367 - - -
------- ------ --- ------ ------ ------ ------- ------ -----
Realized gains (losses) on sales
of investments:
Proceeds from sales....................... 78,943 44,251 577 33 55,949 29,910 248,895 11,606 8,733
Cost of investments sold.................. (76,962) (43,145) (565) (30,950) (55,228) (30,339) (258,922) (11,571) (8,814)
------- ------ --- ------ ------ ------ ------- ------ -----
Total realized gains (losses) on sales of
investments, net....................... 1,981 1,106 12 2,373 721 (429) (10,027) 35 (81)
------- ------ --- ------ ------ ------ ------- ------ -----
Realized gains (losses) on investments,
net.................................... 1,981 1,106 48 7,923 2,313 (62) (10,027) 35 (81)
Net change in unrealized appreciation
(depreciation) on investments.............. (3,575) 2,630 150 37,183 47,314 (9,527) (200) 240 (98)
------- ------ --- ------ ------ ------ ------- ------ -----
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net.................... (1,594) 3,736 198 45,106 49,627 (9,589) (10,227) 275 (179)
------- ------ --- ------ ------ ------ ------- ------ -----
Net increase (decrease) in net assets from
operations................................... $ 1,655 7,024 240 72,656 66,568 (8,326) 6,878 1,474 (29)
======= ====== === ====== ====== ====== ======= ====== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Templeton
Pacific Growth Fund Rising Dividends Fund International Equity Fund
----------------------- ------------------- --------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------- ------ ------ ------ ------ ----- ------ ------ -----
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares......... $10,710 4,502 347 3,981 1,695 601 19,177 6,289 71
------- ------ ------ ------ ----- ----- ------ ------ -----
Expenses:
Mortality and expense risk charges.......... 2,726 1,485 689 1,632 587 227 6,014 2,178 323
Administrative charges...................... 682 371 172 408 147 57 1,504 545 81
------- ------ ------ ------ ----- ----- ------ ------ -----
Total expenses......................... 3,408 1,856 861 2,040 734 284 7,518 2,723 404
------- ------ ------ ------ ----- ----- ------ ------ -----
Investment income (loss), net.......... 7,302 2,646 (514) 1,941 961 317 11,659 3,566 (333)
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds.............................. 6,208 1,872 672 - - - 23,468 7,792 95
------- ------ ------ ------ ----- ----- ------ ------ -----
Realized gains (losses) on sales
of investments:
Proceeds from sales...................... 58,829 60,917 116,746 21,816 6,910 752 45,661 37,517 895
Cost of investments sold................. (52,737) (59,672)(108,205) (19,113) (6,447) (796) (41,618) (36,911) (878)
------- ------ ------- ------ ----- ----- ------ ------ -----
Total realized gains (losses) on sales of
investments, net...................... 6,092 1,245 8,541 2,703 463 (44) 4,043 606 17
------- ------ ------- ------ ----- ----- ------ ------ -----
Realized gains (losses) on investments,
net.................................. 12,300 3,117 9,213 2,703 463 (44) 27,511 8,398 112
Net change in unrealized appreciation
(depreciation) on investments............. 12,362 13,125 (24,505) 44,265 19,701 (2,053) 114,314 19,054 (3,562)
------- ------ ------- ------ ------ ----- ------- ------ -----
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net.................. 24,662 16,242 (15,292) 46,968 20,164 (2,097) 141,825 27,452 (3,450)
------- ------ ------- ------ ------ ----- ------- ------ -----
Net increase (decrease) in net assets from
operations................................. $31,964 18,888 (15,806) 48,909 21,125 (1,780) 153,484 31,018 (3,783)
======= ====== ======= ====== ====== ===== ======= ====== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Developing Templeton Templeton Global
Markets Equity Fund Global Growth Fund Asset Allocation Fund
--------------------- ------------------- ----------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ----- ------ ---- ---- ----
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares............... $ 2,914 562 - 8,202 1,137 - 228 4 -
----- ----- ---- ----- ----- ---- ------- ---- ---
Expenses:
Mortality and expense risk charges................ 2,551 3,898 3,197 3,948 1,255 65 2,065 25 -
Administrative charges............................ 638 975 799 987 314 16 516 6 -
----- ----- ---- ----- ----- ----- ----- ---- ---
Total expenses............................... 3,189 4,873 3,996 4,935 1,569 81 2,581 31 -
----- ----- ---- ----- ----- ----- ----- ---- ---
Investment income (loss), net................ (275) (4,311) (3,996) 3,267 (432) (81) (2,353) (27) -
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on
mutual funds.................................... 5,391 132 - 8,202 - - 456 - -
------ ----- ---- ----- ----- ----- ------ ---- ---
Realized gains (losses) on sales of investments:
Proceeds from sales............................. 31,363 37,410 2,518 30,853 28,814 3,901 185,620 168 -
Cost of investments sold........................ (28,760) (37,995) (2,585) (27,939) (28,227) (3,952) (173,426) (151) -
------ ------ ----- ------ ----- ----- ------- ---- ---
Total realized gains (losses) on sales of
investments, net............................ 2,603 (585) (67) 2,914 587 (51) 12,194 17 -
----- ----- ----- ----- ----- ----- ------ ---- ---
Realized gains (losses) on investments, net 7,994 (453) (67) 11,116 587 (51) 12,650 17 -
Net change in unrealized appreciation
(depreciation) on investments................... 56,503 4,422 (2,951) 91,158 23,468 (144) 41,378 (15) -
------ ----- ---- ------ ------ ----- ------ ---- ---
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net......................... 64,497 3,969 (3,018) 102,274 24,055 (195) 54,028 2 -
------ ----- ----- ------- ------ ----- ------ ---- ---
Net increase (decrease) in net assets from
operations........................................ $64,222 (342) (7,014) 105,541 23,623 (276) 51,675 (25) -
======= ===== ===== ======= ====== ==== ====== ==== ===
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton
International
Capital Smaller
Small Cap Fund Growth Fund Companies Fund
---------------- ------------ --------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ---- ---- ---- ---- ---- ------ --- ---
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares.................................. $ - - - - - - - - -
----- --- --- --- --- --- --- --- ---
Expenses:
Mortality and expense risk charges................................... 105 - - 2 - - 3 - -
Administrative charges............................................... 26 - - - - - 1 - -
----- --- --- --- --- --- --- --- ---
Total expenses.................................................. 131 - - 2 - - 4 - -
----- --- --- --- --- --- --- --- ---
Investment income (loss), net................................... (131) - - (2) - - (4) - -
Realized gains (losses) and unrealized appreciation (depreciation) on
investments:
Realized capital gain distributions on mutual funds................. - - - - - - - - -
----- --- --- --- --- --- --- --- ---
Realized gains (losses) on sales of investments:
Proceeds from sales................................................ 11,065 - - - - - 10,115 - -
Cost of investments sold........................................... (10,593) - - - - - (9,996) - -
------ --- --- --- --- --- ----- --- ---
Total realized gains (losses) on sales of investments,.......... 472 - - - - - 119 - -
----- --- --- --- --- --- ----- --- ---
Realized gains (losses) on investments, net..................... 472 - - - - - 119 - -
Net change in unrealized appreciation (depreciation) on investments. 3,624 - - (140) - - - - -
----- --- --- --- --- --- ----- --- ---
Total realized gains (losses) and unrealized appreciation
(depreciation) on investments, net............................. 4,096 - - (140) - - 119 - -
----- --- --- --- --- --- ----- --- ---
Net increase (decrease) in net assets from operations................. $ 3,965 - - (142) - - 115 - -
===== === === === === === ===== === ===
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Operations (cont.)
For the years ended December 31, 1996, 1995 and 1994
Mutual Discovery Mutual Shares
Securities Fund Securities Fund Total All Funds
------------- ------------- ----------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---- --- --- ---- ---- ---- ------ ------ ------
<S> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares.................... $ - - - - - - 514,679 331,100 191,406
---- --- --- ---- --- --- ------- ------- -------
Expenses:
Mortality and expense risk charges..................... 22 - - 31 - - 77,110 52,287 36,290
Administrative charges................................. 5 - - 8 - - 19,277 13,073 9,072
---- --- --- ---- --- --- -------- -------- --------
Total expenses.................................... 27 - - 39 - - 96,387 65,360 45,362
---- --- --- ---- --- --- -------- -------- --------
Investment income (loss), net..................... (27) - - (39) - - 418,292 265,740 146,044
Realized gains (losses) and unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions on mutual funds... - - - - - - 164,334 36,296 36,427
---- --- --- ---- --- --- -------- -------- --------
Realized gains (losses) on sales of investments:
Proceeds from sales.................................. - - - 717 - - 4,219,146 2,024,083 1,351,596
Cost of investments sold............................. - - - (715) - - (3,966,357) (1,901,519) (1,212,303)
---- --- --- ---- --- --- --------- --------- ---------
Total realized gains (losses) on sales of
investments, net................................. - - - 2 - - 252,789 122,564 139,293
---- --- --- ---- --- --- -------- -------- -------
Realized gains (losses) on investments, net...... - - - 2 - - 417,123 158,860 175,720
Net change in unrealized appreciation (depreciation) on
investments.......................................... 495 - - 1,634 - - 354,212 871,051 (677,502)
---- --- --- ----- --- --- -------- -------- -------
Total realized gains (losses) and unrealized
appreciation (depreciation) on investments, net.. 495 - - 1,636 - - 771,335 1,029,911 (501,782)
---- --- --- ----- --- --- --------- --------- -------
Net increase (decrease) in net assets from operations... $468 - - 1,597 - - 1,189,627 1,295,651 (355,738)
==== === === ===== === === ========= ========= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets
For the years ended December 31, 1996, 1995 and 1994
Money Market Fund Growth and Income Fund Precious Metals Fund
------------------------- ----------------------- ---------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss),
net......................... $ 27,558 27,041 11,105 16,297 2,877 (357) 837 489 (249)
Realized gains (losses) on
investments, net............ - - - 127,607 42,515 28,987 16,425 17,696 1,595
Net change in unrealized
appreciation (depreciation)
on investments.............. - - - 37,916 184,273 (45,642) (8,994) (10,144) (2,094)
--------- -------- ------- -------- -------- ------- ------- ------- ------
Net increase (decrease)
in net assets from
operations.............. 27,558 27,041 11,105 181,820 229,665 (17,012) 8,268 8,041 (748)
--------- -------- ------- -------- -------- ------- ------- ------- -------
Policy transactions (note 5):
Purchase payments............ 2,288,562 1,140,571 835,456 347,781 233,408 15,811 18,730 24,963 988
Transfers between funds...... (2,221,762) (843,539) (442,767) 289,040 111,030 97,056 (46,431) 23,956 89,216
Surrenders and terminations.. (27,431) (48,126) (101,035) (28,415) (54,886) (49,775) (7,791) (81,139) (8,168)
Policy loan transactions..... (5,692) (251) (354) 8,174 842 (35,837) (524) 282 13
Other transactions (note 2).. (13,338) (124,409) (80,760) (145,312) (92,875) (13,810) (9,019) (12,614) (2,141)
--------- -------- ------- -------- -------- ------- ------- ------- -------
Net increase (decrease)
in net assets resulting
from policy transactions 20,339 124,246 210,540 471,268 197,519 13,445 (45,035) (44,552) 79,908
--------- -------- ------- -------- -------- ------- ------- ------- -------
Increase (decrease) in net
assets........................ 47,897 151,287 221,645 653,088 427,184 (3,567) (36,767) (36,511) 79,160
Net assets at beginning of year 681,852 530,565 308,920 1,053,166 625,982 629,549 164,784 201,295 122,135
--------- ------- ------- --------- --------- ------- ------- ------- -------
Net assets at end of year...... $ 729,749 681,852 530,565 1,706,254 1,053,166 625,982 128,017 164,784 201,295
========= ======= ======= ========= ========= ======= ======= ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Real Estate U.S. Government
High Income Fund Securities Fund Securities Fund
------------------------- -------------------- ----------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net.... $ 151,749 68,408 36,262 5,589 2,834 (227) 39,013 36,795 24,946
Realized gains (losses) on
investments, net................ 42,764 7,610 11,417 1,980 3,559 1,805 18,468 7,473 33,884
Net change in unrealized
appreciation (depreciation) on
investments..................... 26,432 122,964 (81,774) 58,343 14,488 759 (37,068) 56,173 (91,983)
-------- -------- --------- ------- ------- ------ ------- ------- ------
Net increase (decrease) in
net assets from operations.. 220,945 198,982 (34,095) 65,912 20,881 2,337 20,413 100,441 (33,153)
-------- -------- --------- ------- ------- ------ ------- ------- ------
Policy transactions (note 5):
Purchase payments................ 57,851 44,935 4,791 67,454 53,203 7,592 26,467 25,128 1,041
Transfers between funds.......... 344,787 37,055 (10,182) 86,682 38,779 14,088 261,674 24,109 (111,346)
Surrenders and terminations...... (3,551) (14,331) (14,141) (1,098) (8,139) - (7,837) (18,462) -
Policy loan transactions......... 8,073 1,359 9,224 (1,340) (145) 222 (424) (2,060) (18)
Other transactions (note 2)...... (35,494) (32,177) (16,496) (27,619) (23,363) (3,248) (19,100) (16,258) (8,802)
-------- -------- --------- ------- ------- ------ ------- ------- -------
Net increase (decrease) in
net assets resulting from
policy transactions......... 371,666 36,841 (26,804) 124,079 60,335 18,654 260,780 12,457 (119,125)
-------- --------- --------- ------- ------- ------ ------- ------- -------
Increase (decrease) in net assets.. 592,611 235,823 (60,899) 189,991 81,216 20,991 281,193 112,898 (152,278)
Net assets at beginning of year.... 1,282,342 1,046,519 1,107,418 159,525 78,309 57,318 646,949 534,051 686,329
--------- --------- --------- ------- ------- ------ ------- ------- -------
Net assets at end of year.......... $1,874,953 1,282,342 1,046,519 349,516 159,525 78,309 928,142 646,949 534,051
========= ========= ========= ======= ======= ====== ======= ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000
-------------------------- ------------------- ----------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net....... $ 61,689 59,683 36,532 - 18,122 13,370 16,448 11,269 12,081
Realized gains (losses) on
investments, net................... 118,555 23,410 53,278 - 37,705 1,409 2,924 1,164 5,815
Net change in unrealized
appreciation (depreciation)
on investments..................... (93,370) 259,686 (253,440) - (37,457) (14,916) (13,736) 44,013 (41,764)
--------- ------- ------- --- ------ ------- ------ ------ -------
Net increase (decrease) in net
assets from operations........ 86,874 342,779 (163,630) - 18,370 (137) 5,636 56,446 (23,868)
--------- ------- ------- --- ------ ------- ------ ------ -------
Policy transactions (note 5):
Purchase payments................... 127,511 116,016 11,599 - - - - - -
Transfers between funds............. (163,650) 124,589 (62,456) - (270,886) - - 10,631 -
Surrenders and terminations......... (80,389) (35,449) (23,338) - - - - - (7,535)
Policy loan transactions............ (97,734) (13,309) (18,349) - - - (64) (64) (1,409)
Other transactions (note 2)......... (65,596) (62,877) (21,374) - (2,815) (3,292) (4,271) (3,831) (4,079)
--------- ------- ------ --- ------ ------- ------ ------ -------
Net increase (decrease) in net
assets resulting from policy
transactions................... (279,858) 128,970 (113,918) - (273,701) (3,292) (4,335) 6,736 (13,023)
--------- ------- ------- --- ------ ------- ------ ------ -------
Increase (decrease) in net assets..... (192,984) 471,749 (277,548) - (255,331) (3,429) 1,301 63,182 (36,891)
Net assets at beginning of year....... 1,545,922 1,074,173 1,351,721 - 255,331 258,760 349,422 286,240 323,131
--------- --------- --------- --- ------- ------- ------- ------- -------
Net assets at end of year............. $1,352,938 1,545,922 1,074,173 - - 255,331 350,723 349,422 286,240
========= ========= ========= === ======= ======= ======= ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Global
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Income Securities Fund
----------------------- ---------------------- --------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net.......... $ 16,830 10,144 9,241 6,403 1,964 6,159 6,637 2,283 333
Realized gains (losses) on investments,
net................................... 4,146 1,495 26,636 9,078 258 1,490 432 392 336
Net change in unrealized appreciation
(depreciation) on investments......... (21,955) 68,320 (72,608) 4,806 32,162 (29,320) 2,837 6,634 (2,030)
------- ------- ------- ------ ------ ------ ------- ------ ------
Net increase (decrease) in net
assets from operations............ (979) 79,959 (36,731) 20,287 34,384 (21,671) 9,906 9,309 (1,361)
------- ------- ------- ------ ------ ------ ------- ------ ------
Policy transactions (note 5):
Purchase payments...................... - - - - - - 39,862 42,908 1,813
Transfers between funds................ 57,145 - (41,224) 223,644 - (74,884) 9,506 18,457 21,778
Surrenders and terminations............ (3,894) - (28,826) - - - (2,101) (6,040) -
Policy loan transactions............... - (687) (10) (176) (169) (158) (425) (638) -
Other transactions (note 2)............ (4,109) (3,625) (3,843) (3,437) (1,657) (3,419) (16,260) (17,786) (1,388)
------- ------- ------- ------ ------ ----- ------- ------ ------
Net increase (decrease) in net
assets resulting from policy
transactions...................... 49,142 (4,312) (73,903) 220,031 (1,826) (78,461) 30,582 36,901 22,203
-------- ------- ------- ------ ------ ------ ------- ------ ------
Increase (decrease) in net assets........ 48,163 75,647 (110,634) 240,318 32,558 (100,132) 40,488 46,210 20,842
Net assets at beginning of year.......... 337,160 261,513 372,147 115,736 83,178 183,310 89,028 42,818 21,976
-------- ------- ------- ------- ------ ------- ------- ------ ------
Net assets at end of year................ $385,323 337,160 261,513 356,054 115,736 83,178 129,516 89,028 42,818
======== ======= ======= ======= ======= ======= ======= ====== ======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Investment Grade Adjustable U.S.
Intermediate Bond Fund Income Securities Fund Government Fund
-------------------- ---------------------- -----------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net................ $ 3,249 3,288 42 27,550 16,941 1,263 17,105 1,199 150
Realized gains (losses) on investments, net.. 1,981 1,106 48 7,923 2,313 (62) (10,027) 35 (81)
Net change in unrealized appreciation
(depreciation) on investments............... (3,575) 2,630 150 37,183 47,314 (9,527) (200) 240 (98)
------ ------ ------ ------ ------ ------- ------ ------ -----
Net increase (decrease) in net assets
from operations......................... 1,655 7,024 240 72,656 66,568 (8,326) 6,878 1,474 (29)
------ ------ ------ ------ ------ ------- ------ ------ -----
Policy transactions (note 5):
Purchase payments............................ 11,940 14,163 1,391 275,281 223,737 22,483 6,969 12,633 5,636
Transfers between funds...................... (72,421) 8,123 75,010 120,002 186,849 153,200 (34,766) 11,222 (2,444)
Surrenders and terminations.................. (751) (40,771) - (20,210) (14,487 - (1,178) - -
Policy loan transactions..................... - - - (4,239) (19,420 (26,076) 74 (1,764) -
Other transactions (note 2).................. (5,413) (7,440) (908) (98,005) (89,585 (7,532) (2,842) (6,127) (358)
------ ------ ------ ------ ------ ------- ------ ------ -----
Net increase (decrease) in net assets
resulting from policy transactions...... (66,645) (25,925) 75,493 272,829 287,094 142,075 (31,743) 15,964 2,834
------ ------ ------ ------- ------- ------- ------ ------ -----
Increase (decrease) in net assets.............. (64,990) (18,901) 75,733 345,485 353,662 133,749 (24,865) 17,438 2,805
Net assets at beginning of year................ 64,990 83,891 8,158 524,066 170,404 36,655 24,865 7,427 4,622
------ ------ ------ ------- ------- ------- ------ ------ -----
Net assets at end of year...................... $ - 64,990 83,891 869,551 524,066 170,404 - 24,865 7,427
====== ====== ====== ======= ======= ======= ====== ====== =====
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Templeton
Pacific Growth Fund Rising Dividends Fund International Equity Fund
---------------------- ---------------------- -----------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net....... $ 7,302 2,646 (514) 1,941 961 317 11,659 3,566 (333)
Realized gains (losses) on
investments, net................... 12,300 3,117 9,213 2,703 463 (44) 27,511 8,398 112
Net change in unrealized appreciation
(depreciation) on investments...... 12,362 13,125 (24,505) 44,265 19,701 (2,053) 114,314 19,054 (3,562)
------- ------ ------ ------ ------ ----- ------- ------ -----
Net increase (decrease) in net
assets from operations......... 31,964 18,888 (15,806) 48,909 21,125 (1,780) 153,484 31,018 (3,783)
------ ------ ------ ------ ------ ----- ------- ------ -----
Policy transactions (note 5):
Purchase payments................... 181,194 141,914 13,634 74,745 52,764 4,169 371,300 297,409 32,269
Transfers between funds............. 14,234 74,887 91,481 86,767 38,476 5,960 100,214 206,753 104,241
Surrenders and terminations......... (20,255) (10,270) - (7,693) (264) - (30,572) (9,230) -
Policy loan transactions............ (2,894) (27,456) (58,475) (1,876) - - (10,040) (1,799) 260
Other transactions (note 2)......... (73,664) (64,733) (9,022) (33,070) (19,499) (1,199) (129,653) (110,168) (8,625)
------ ------ ------ ------ ------ ----- ------- ------- ------
Net increase (decrease) in net
assets resulting from policy
transactions................... 98,615 114,342 37,618 118,873 71,477 8,930 301,249 382,965 128,145
------ ------- ------ ------ ------ ----- ------- ------- -------
Increase (decrease) in net assets..... 130,579 133,230 21,812 167,782 92,602 7,150 454,733 413,983 124,362
Net assets at beginning of year....... 298,014 164,784 142,972 137,129 44,527 37,377 555,276 141,293 16,931
------- ------- ------- ------- ------- ------ -------- ------- -------
Net assets at end of year............. $428,593 298,014 164,784 304,911 137,129 44,527 1,010,009 555,276 141,293
======= ======= ======= ======= ======= ====== ========= ======= =======
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton Templeton Templeton Global
Developing Markets Equity Fund Global Growth Fund Asset Allocation Fund
----------------------- ---------------------- ---------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ----- ------ ---- -----
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net............... $ (275) (4,311) (3,996) 3,267 (432) (81) (2,353) (27) -
Realized gains (losses) on investments, net. 7,994 (453) (67) 11,116 587 (51) 12,650 17 -
Net change in unrealized appreciation
(depreciation) on investments.............. 56,503 4,422 (2,951) 91,158 23,468 (144) 41,378 (15) -
------- ------ ------- ------ ------ ----- ------- --- ---
Net increase (decrease) in net assets
from operations........................ 64,222 (342) (7,014) 105,541 23,623 (276) 51,675 (25) -
------- ------ ------- ------- ------ ----- ----- --- ---
Policy transactions (note 5):
Purchase payments........................... 215,896 169,165 19,997 335,873 237,156 27,117 439 - -
Transfers between funds..................... 267,310 63,297 44,206 119,840 114,188 45,458 333,332 311 -
Surrenders and terminations................. (10,080) (18,763) - (12,771) (6,710) - - - -
Policy loan transactions.................... (2,638) - - (8,767) (3,177) - - - -
Other transactions (note 2)................. (73,383) (61,489) (1,238) (113,183) (83,481) (5,539) (1,945) (66) -
------- ------ ------- ------- ------- ----- ------ --- ---
Net increase (decrease) in net assets
resulting from policy transactions..... 397,105 152,210 62,965 320,992 257,976 67,036 331,826 245 -
------- ------ ------- ------- ------- ------ ------- --- ---
Increase (decrease) in net assets............. 461,327 151,868 55,951 426,533 281,599 66,760 383,501 220 -
Net assets at beginning of year............... 207,819 55,951 - 348,359 66,760 - 220 - -
------- ------- ------ ------- ------- ------ ------ --- ---
Net assets at end of year..................... $669,146 207,819 55,951 774,892 348,359 66,760 383,721 220 -
======= ======= ====== ======= ======= ====== ======= === ===
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Templeton
International
Smaller
Small Cap Fund Capital Growth Fund Companies Fund
-------------- -------------- ------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net........................................ $ (131) - - (2 - - (4) - -
Realized gains (losses) on investments, net.......................... 472 - - - - - 119 - -
Net change in unrealized appreciation (depreciation) on investments.. 3,624 - - (140) - - - - -
------ --- --- ------ --- --- ---- --- ---
Net increase (decrease) in net assets from operations............ 3,965 - - (142) - - 115 - -
------ --- --- ------ --- --- ---- --- ---
Policy transactions (note 5):
Purchase payments.................................................... 683 - - - - - - - -
Transfers between funds.............................................. 51,952 - - 4,560 - - (115) - -
Surrenders and terminations.......................................... 75 - - - - - - - -
Policy loan transactions............................................. - - - - - - - - -
Other transactions (note 2).......................................... (239) - - - - - - - -
------ --- --- ------ --- --- ---- --- ---
Net increase (decrease) in net assets resulting from policy
transactions.................................................... 52,471 - - 4,560 - - (115) - -
------ --- --- ------ --- --- ---- --- ---
Increase (decrease) in net assets...................................... 56,436 - - 4,418 - - - - -
Net assets at beginning of year........................................ - - - - - - - - -
------ --- --- ------ --- --- ---- --- ---
Net assets at end of year.............................................. $56,436 - - 4,418 - - - - -
====== === === ====== === === ==== === ===
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
===========================================================================================================================
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1996, 1995 and 1994
Mutual Discovery Mutual Shares
Securities Fund Securities Fund Total All Funds
-------------- -------------- --------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ---- -------- -------- --------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net...................... $ (27) - - (39) - - 418,292 265,740 146,044
Realized gains (losses) on investments, net........ - - - 2 - - 417,123 158,860 175,720
Net change in unrealized appreciation (depreciation)
on investment..................................... 495 - - 1,634 - - 354,212 871,051 (677,502)
------ --- --- ------ --- --- -------- -------- -------
Net increase (decrease) in net assets from
operations.................................... 468 - - 1,597 - - 1,189,627 1,295,651 (355,738)
------ --- --- ------ --- --- --------- -------- -------
Policy transactions (note 5):
Purchase payments.................................. - - - - - - 4,448,538 2,830,073 1,005,787
Transfers between funds............................ 50,000 - - 84,053 - - (34,403) (21,713) (3,609)
Surrenders and terminations........................ - - - - - - (265,942) (367,067) (232,818)
Policy loan transactions........................... - - - - - - (120,512) (68,456) (130,967)
Other transactions (note 2)........................ - - - (44) - - (874,996) (836,875) (197,073)
------ --- --- ------ --- --- -------- -------- -------
Net increase (decrease) in net assets resulting
from policy transactions...................... 50,000 - - 84,009 - - 3,152,685 1,535,962 441,320
------ --- --- ------ --- --- --------- --------- -------
Increase (decrease) in net assets.................... 50,468 - - 85,606 - - 4,342,312 2,831,613 85,582
Net assets at beginning of year...................... - - - - - - 8,586,624 5,755,011 5,669,429
------ --- --- ------ --- --- ---------- --------- ---------
Net assets at end of year............................ $50,468 - - 85,606 - - 12,928,936 8,586,624 5,755,011
====== === === ====== === === ========== ========= =========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements
December 31, 1996
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. or other of its affiliated adviser entities, 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.
The Capital Growth Fund and Templeton International Smaller Companies Fund were
added as available investment options on May 1, 1996. The Mutual Discovery
Securities Fund and Mutual Shares Securities Fund were added as available
investment options on November 8, 1996.
The Investment Grade Intermediate Bond Fund and Adjustable U.S. Government Fund
were closed on October 25, 1996 when shares of the U.S. Government Securities
Fund were substituted for all shares of both funds.
On May 1, 1995, the Equity Growth Fund name was changed to Growth and
Income Fund. The Global Income Fund name was changed to Templeton Global Income
Securities Fund on May 1, 1996.
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.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
2. Significant Accounting Policies (cont.)
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,
1996, 1995 and 1994 were $715,700, $581,193 and $123,231, 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 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, 1996, 1995 and 1994 were $28,152, $28,613 and $32,516, 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, 1996, 1995 and 1994 were $204,321, $292,695 and $64,030,
respectively.
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, 1996, 1995 and 1994,
respectively. Net transfers to the Fixed Account during the years ended
December 31, 1996, 1995 and 1994 were $34,403, $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, 1996:
<TABLE>
<CAPTION>
<S> <C>
Money Market Fund.................................$2,269,592
Growth and Income Fund............................ 699,549
Precious Metals Fund.............................. 80,133
High Income Fund.................................. 870,340
Real Estate Securities Fund....................... 139,966
U.S. Government Securities Fund................... 423,315
Utility Equity Fund............................... 200,976
Zero Coupon Fund - 2000........................... 19,311
Zero Coupon Fund - 2005........................... 76,636
Zero Coupon Fund - 2010........................... 285,255
Templeton Global Income Securities Fund........... 46,775
Investment Grade Intermediate Bond Fund........... 14,607
Income Securities Fund............................ 342,871
Adjustable U.S. Government Fund................... 233,813
Templeton Pacific Growth Fund..................... 173,362
Rising Dividends Fund............................. 143,668
Templeton International Equity Fund............... 387,255
Templeton Developing Markets Equity Fund.......... 436,775
Templeton Global Growth Fund...................... 368,252
Templeton Global Asset Allocation Fund............ 516,099
Small Cap Fund.................................... 63,537
Capital Growth Fund............................... 4,560
Templeton International Smaller Companies Fund.... 10,000
Mutual Discovery Securities Fund.................. 50,000
Mutual Shares Securities Fund..................... 84,725
</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>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
5. Policy Transactions - Unit Activity
Transactions in units for each fund for the years ended December 31, 1996, 1995
and 1994, were as follows:
<TABLE>
<CAPTION>
Growth U.S. Zero Zero
Money and Precious High Real Estate Government Utility Coupon Coupon
Market Income Metals Income Securities Securities Equity Fund - Fund -
Fund Fund Fund Fund Fund Fund Fund 1995 2000
------- ------ -------- ------ ----------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1993........ 22,430 29,140 7,933 65,065 3,265 38,612 66,241 14,511 15,249
Policy transactions:
Purchase payments............................ 59,285 751 67 265 419 62 654 - -
Transfers between funds...................... (31,325) 4,606 6,162 (637) 861 (6,440) (3,468) - -
Surrenders and terminations.................. (7,250) (2,364) (578) (869) - - (1,253) - (379)
Policy loan transactions..................... (25) (1,687) (1) 558 14 (1) (1,010) - (72)
Other transactions........................... (5,734) (651) (142) (1,002) (191) (519) (1,195) (186) (204)
------ ------ ----- ------ ------- ------ ------ ------ ------
Net increase (decrease) in
units resulting
from policy transactions............... 14,951 655 5,508 (1,685) 1,103 (6,898) (6,272) (186) (655)
------ ------ ------ ------ ------- ------ ------ ------ ------
Units outstanding at December 31, 1994........ 37,381 29,795 13,441 63,380 4,368 31,714 59,969 14,325 14,594
====== ====== ====== ====== ======= ====== ====== ====== ======
Policy transactions:
Purchase payments............................ 77,441 9,561 1,662 2,463 2,884 1,355 5,744 - -
Transfers between funds...................... (57,166) 4,664 1,698 1,925 2,056 1,281 6,185 (14,174) 458
Surrenders and terminations.................. (3,275) (2,237) (5,150) (772) (427) (965) (1,893) - -
Policy loan transactions..................... (17) 38 20 75 (7) (111) (695) - (3)
Other transactions........................... (8,596) (3,800) (840) (1,738) (1,246) (872) (3,112) (151) (175)
------ ------ ------ ------ ------- ------ ------ ------ ------
Net increase (decrease) in
units resulting
from policy transactions............... 8,387 8,226 (2,610) 1,953 3,260 688 6,229 (14,325) 280
------ ------ ------ ------ ------- ------ ------ ------ ------
Units outstanding at December 31, 1995........ 45,768 38,021 10,831 65,333 7,628 32,402 66,198 - 14,874
====== ====== ====== ====== ======= ====== ====== ====== ======
Policy transactions:
Purchase payments........................... 147,764 12,119 1,115 2,801 2,975 1,329 5,397 - -
Transfers between funds..................... (143,612) 9,962 (2,791) 17,863 3,397 12,856 (6,933) - 1
Surrenders and terminations................. (1,836) (1,005) (438) (177) (51) (400) (3,354) - -
Policy loan transactions.................... (376) 311 (29) 405 (62) (22) (4,007) - (3)
Other transactions.......................... (778) (5,057) (536) (1,722) (1,209) (961) (2,782) - (185)
------- ------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease) in
units resulting from
policy transactions.................... 1,162 16,330 (2,679) 19,170 5,050 12,802 (11,679) - (187)
------ ------ ------ ------ ------ ------ ------ ------ ------
Units outstanding at December 31, 1996........ 46,930 54,351 8,152 84,503 12,678 45,204 54,519 - 14,687
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
5. Policy Transactions - Unit Activity (cont.)
<TABLE>
<CAPTION>
Templeton
Zero Zero Global Investment Adjustable Templeton Templeton
Coupon Coupon Income Grade Income U.S. Pacific Rising International
Fund Fund Securities Intermediate Securities Government Growth Dividends Equity
- 2005 - 2010 Fund Bond Fund Fund Fund Fund Fund Fund
------ ------ -------- --------- ---------- ---------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1993.. 16,042 7,408 1,537 582 2,104 403 9,924 3,576 1,368
Policy transactions:
Purchase payments...................... - - 133 100 1,334 495 998 418 2,526
Transfers between funds................ (1,953) (3,442) 1,607 5,385 9,100 (213) 6,850 601 8,168
Surrenders and terminations............ (1,348) - - - - - - - -
Policy loan transactions............... - (7) - - (1,567) - (4,457) - 20
Other transactions..................... (182) (155) (102) (65) (457) (31) (680) (121) (679)
------ ------ ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
units resulting from policy......
transactions..................... (3,483) (3,604) 1,638 5,420 8,410 251 2,711 898 10,035
------ ------ ----- ----- ------ ----- ------ ------ ------
Units outstanding at December 31, 1994.. 12,559 3,804 3,175 6,002 10,514 654 12,635 4,474 11,403
====== ====== ===== ===== ====== ===== ====== ====== ======
Policy transactions:
Purchase payments...................... - - 2,992 963 12,397 1,060 10,718 4,625 22,647
Transfers between funds................ - - 1,333 562 10,593 966 5,757 3,323 15,984
Surrenders and terminations............ - - (416) (2,761) (783) - (779) (23) (691)
Policy loan transactions............... (30) (6) (44) - (1,137) (151) (2,141) - (130)
Other transactions..................... (147) (63) (1,239) (507) (4,970) (516) (4,868) (1,699) (8,383)
------ ------ ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
units resulting from policy......
transactions..................... (177) (69) 2,626 (1,743) 16,100 1,359 8,687 6,226 29,427
------ ------ ----- ----- ------ ----- ------- ------ ------
Units outstanding at December 31, 1995.. 12,382 3,735 5,801 4,259 26,614 2,013 21,322 10,700 40,830
====== ====== ===== ===== ====== ===== ======= ====== ======
Policy transactions:
Purchase payments...................... - - 2,551 778 13,495 553 12,100 5,400 24,859
Transfers between funds................ 2,260 8,290 609 (4,635) 5,904 (2,257) 802 6,298 6,586
Surrenders and terminations............ (149) - (138) (49) (1,004) (94) (1,318) (581) (2,070)
Policy loan transactions............... - (7) (26) - (212) 6 (189) (134) (665)
Other transactions..................... (162) (122) (1,041) (353) (4,812) (221) (4,907) (2,379) (8,691)
------ ------ ----- ----- ------ ----- ------ ------ ------
Net increase (decrease) in
units resulting from policy......
transactions..................... 1,949 8,161 1,955 (4,259) 13,371 (2,013) 6,488 8,604 20,019
------ ------ ----- ----- ------ ----- ------ ------ ------
Units outstanding at December 31, 1996.. 14,331 11,896 7,756 - 39,985 - 27,810 19,304 60,849
====== ====== ===== ===== ====== ===== ====== ====== ======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
5. Policy Transactions - Unit Activity (cont.)
<TABLE>
<CAPTION>
Templeton
Templeton Templeton Templeton International Mutual Mutual
Developing Global Global Asset Small Capital Smaller Discovery Shares Total
Markets Equity Growth Allocation Cap Growth Companies Securities Securities All
Fund Fund Fund Fund Fund Fund Fund Fund Funds
------------ ------- ---------- ----- ------ ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1993.. - - - - - - - - 305,390
Policy transactions:
Purchase payments...................... 2,054 2,721 - - - - - - 72,282
Transfers between funds................ 4,590 4,585 - - - - - - 5,037
Surrenders and terminations............ - - - - - - - - (14,041)
Policy loan transactions............... - - - - - - - - (8,235)
Other transactions..................... (545) (558) - - - - - - (13,399)
------ ------ ------ ----- ---- ---- ----- ----- ------
Net increase (decrease) in
units resulting from policy......
transactions..................... 6,099 6,748 - - - - - - 41,644
------ ------ ------ ----- ---- ---- ----- ----- -------
Units outstanding at December 31, 1994.. 6,099 6,748 - - - - - - 347,034
====== ====== ====== ===== ==== ==== ===== ===== =======
Policy transactions:
Purchase payments...................... 18,183 22,517 - - - - - - 197,212
Transfers between funds................ 6,624 11,063 27 - - - - - 3,159
Surrenders and terminations............ (2,067) (627) - - - - - - (22,866)
Policy loan transactions............... (211) (307) - - - - - - (4,857)
Other transactions..................... (6,418) (7,923) (6) - - - - - (57,269)
------ ------ ------ ----- ---- ---- ----- ----- ------
Net increase (decrease) in
units resulting from policy......
transactions..................... 16,111 24,723 21 - - - - - 115,379
------ ------ ------ ----- ---- ---- ----- ----- -------
Units outstanding at December 31, 1995.. 22,210 31,471 21 - - - - - 462,413
====== ====== ====== ===== ==== ==== ===== ===== =======
Policy transactions:
Purchase payments...................... 20,769 28,048 39 54 - - - - 282,146
Transfers between funds................ 24,526 9,880 30,441 4,297 391 - 4,953 8,284 (2,628)
Surrenders and terminations............ (952) (1,089) - 6 - - - - (14,699)
Policy loan transactions............... (251) (718) - - - - - - (5,979)
Other transactions..................... (7,042) (9,435) (169) (19) - - - (4) (52,587)
------- ----- ------ ----- ---- ---- ----- ----- ------
Net increase (decrease) in
units resulting from policy
transactions..................... 37,050 26,686 30,311 4,338 391 - 4,953 8,280 206,253
------ ------ ------ ----- ---- ---- ----- ----- -------
Units outstanding at December 31, 1996.. 59,260 58,157 30,332 4,338 391 - 4,953 8,280 668,666
====== ====== ====== ===== ==== ==== ===== ===== =======
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values
A summary of unit values and units outstanding for variable life contracts and
the expense ratios, including expenses of the underlying funds, for each of the
five years in the period ended December 31, 1996 follows.
<TABLE>
<CAPTION>
Ratio of Expenses
to Average
Units Outstanding Unit Value Net Assets Net Assets*
----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Money Market Fund
December 31,
1996........................................................... 46,930 $15.550 $ 729,749 1.18%
1995........................................................... 45,768 14.898 681,852 1.15
1994........................................................... 37,381 14.194 530,565 1.21
1993........................................................... 22,430 13.773 308,920 1.41
1992........................................................... 26,464 13.532 358,105 1.44
Growth and Income Fund
December 31,
1996........................................................... 54,351 31.393 1,706,254 1.25
1995........................................................... 38,021 27.700 1,053,166 1.27
1994........................................................... 29,795 21.010 625,982 1.29
1993........................................................... 29,140 21.604 629,549 1.33
1992........................................................... 36,756 19.733 725,302 1.37
Precious Metals Fund
December 31,
1996........................................................... 8,152 15.704 128,017 1.40
1995........................................................... 10,831 15.214 164,784 1.41
1994........................................................... 13,441 14.977 201,295 1.43
1993........................................................... 7,933 15.396 122,135 1.43
1992........................................................... 16,401 9.967 163,472 1.44
High Income Fund
December 31,
1996........................................................... 84,503 22.188 1,874,953 1.29
1995........................................................... 65,333 19.628 1,282,342 1.31
1994........................................................... 63,380 16.512 1,046,519 1.35
1993........................................................... 65,065 17.020 1,107,418 1.39
1992........................................................... 65,825 14.815 975,210 1.43
Real Estate Securities Fund
December 31,
1996........................................................... 12,678 27.568 349,516 1.32
1995........................................................... 7,628 20.913 159,525 1.34
1994........................................................... 4,368 17.928 78,309 1.37
1993........................................................... 3,265 17.556 57,318 1.42
1992........................................................... 3,450 14.862 51,275 1.44
U.S. Government Securities Fund
December 31,
1996........................................................... 45,204 20.532 928,142 1.26
1995........................................................... 32,402 19.966 646,949 1.27
1994........................................................... 31,714 16.840 534,051 1.28
1993........................................................... 38,612 17.775 686,329 1.29
1992........................................................... 39,596 16.324 646,356 1.34
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Ratio of Expenses
to Average
Units Outstanding Unit Value Net Assets Net Assets*
----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Utility Equity Fund
December 31,
1996........................................................... 54,519 $24.816 $1,352,938 1.25%
1995........................................................... 66,198 23.353 1,545,922 1.25
1994........................................................... 59,969 17.912 1,074,173 1.27
1993........................................................... 66,241 20.406 1,351,721 1.26
1992........................................................... 72,790 18.600 1,353,865 1.30
Zero Coupon Fund - 1995
December 31,
1995 1......................................................... 10,963 18.957 207,834 1.15+
1994........................................................... 14,325 17.823 255,331 1.15
1993........................................................... 14,511 17.832 258,760 1.11
1992........................................................... 14,686 16.719 245,536 1.00
Zero Coupon Fund - 2000
December 31,
1996........................................................... 14,687 23.880 350,723 1.15
1995........................................................... 14,874 23.491 349,422 1.15
1994........................................................... 14,594 19.614 286,240 1.15
1993........................................................... 15,249 21.191 323,131 1.12
1992........................................................... 15,439 18.380 283,774 1.00
Zero Coupon Fund - 2005
December 31,
1996........................................................... 14,331 26.888 385,323 1.15
1995........................................................... 12,382 27.229 337,160 1.15
1994........................................................... 12,559 20.821 261,513 1.15
1993........................................................... 16,042 23.198 372,147 1.12
1992........................................................... 17,524 19.121 335,065 1.00
Zero Coupon Fund - 2010
December 31,
1996........................................................... 11,896 29.931 356,054 1.15
1995........................................................... 3,735 30.991 115,736 1.15
1994........................................................... 3,804 21.866 83,178 1.15
1993........................................................... 7,408 24.745 183,310 1.00
1992........................................................... 3,968 19.877 78,869 1.00
Templeton Global Income Securities Fund
December 31,
1996........................................................... 7,756 16.700 129,516 1.36
1995........................................................... 5,801 15.347 89,028 1.39
1994........................................................... 3,175 13.483 42,818 1.46
1993........................................................... 1,537 14.297 21,976 1.48
1992........................................................... 1,562 12.346 19,280 1.42
Investment Grade Intermediate Bond Fund
December 31,
1996 2......................................................... 4,699 15.617 73,376 1.35+
1995........................................................... 4,259 15.260 64,990 1.36
1994........................................................... 6,002 13.978 83,891 1.38
1993........................................................... 582 14.017 8,158 1.41
1992........................................................... 588 13.009 7,652 1.43
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Ratio of Expenses
to Average
Units Outstanding Unit Value Net Assets Net Assets*
----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Income Securities Fund
December 31,
1996........................................................... 39,985 $21.747 $ 869,551 1.25%
1995........................................................... 26,614 19.691 524,066 1.26
1994........................................................... 10,514 16.208 170,404 1.29
1993........................................................... 2,104 17.423 36,655 1.31
1992........................................................... 1,598 14.799 23,648 1.42
Adjustable U.S. Government Fund
December 31,
1996 2......................................................... 18,047 12.873 232,322 1.34+
1995........................................................... 2,013 12.352 24,865 1.34
1994........................................................... 654 11.374 7,427 1.32
1993........................................................... 403 11.481 4,622 1.33
1992........................................................... 410 11.170 4,577 1.35
Templeton Pacific Growth Fund
December 31,
1996........................................................... 27,810 15.412 428,593 1.74
1995........................................................... 21,322 13.977 298,014 1.76
1994........................................................... 12,635 13.042 164,784 1.82
1993........................................................... 9,924 14.407 142,972 1.89
1992 3......................................................... 586 9.816 5,750 2.06+
Rising Dividends Fund
December 31,
1996........................................................... 19,304 15.795 304,911 1.51
1995........................................................... 10,700 12.816 137,129 1.53
1994........................................................... 4,474 9.952 44,527 1.55
1993........................................................... 3,576 10.453 37,377 1.54
1992 3......................................................... 1,899 10.909 20,717 1.42+
Templeton International Equity Fund
December 31,
1996........................................................... 60,849 16.598 1,010,009 1.64
1995........................................................... 40,830 13.600 555,276 1.67
1994........................................................... 11,403 12.390 141,293 1.74
1993........................................................... 1,368 12.375 16,931 1.87
1992 3......................................................... - 9.697 - 2.52+
Templeton Developing Markets Equity Fund
December 31,
1996........................................................... 59,260 11.292 669,146 2.24
1995........................................................... 22,210 9.357 207,819 2.16
1994 4......................................................... 6,099 9.173 55,951 2.28+
Templeton Global Growth Fund
December 31,
1996........................................................... 58,157 13.324 774,892 1.68
1995........................................................... 31,471 11.069 348,359 1.72
1994 4......................................................... 6,748 9.894 66,760 1.89+
Templeton Global Asset Allocation Fund
December 31,
1996........................................................... 30,332 12.651 383,721 1.61
1995 5......................................................... 21 10.637 220 1.65+
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
================================================================================
Notes to Financial Statements (cont.)
December 31, 1996
6. Unit Values (cont.)
<TABLE>
<CAPTION>
Ratio of Expenses
to Average
Units Outstanding Unit Value Net Assets Net Assets*
----------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Small Cap Fund
December 31,
1996........................................................... 4,338 $13.011 $ 56,436 1.52%
1995 6......................................................... - 10.157 - 1.65+
Capital Growth Fund
December 31,
1996 7......................................................... 391 11.303 4,418 1.52+
Templeton International Smaller Companies Fund
December 31,
1996 7......................................................... - 11.194 - 1.53+
Mutual Discovery Securities Fund
December 31,
1996 8......................................................... 4,953 10.190 50,468 2.12+
Mutual Shares Securities Fund
December 31,
1996 8......................................................... 8,280 10.339 85,606 1.75+
<FN>
*For the year ended December 31, including the effect of the expenses of the
underlying funds.
+Annualized.
1Period from January 1, 1995 to December 15, 1995 (fund closure).
2Period from January 1, 1996 to October 25, 1996 (fund closure).
3Period from January 27, 1992 (fund commencement) to December 31, 1992.
4Period from July 1, 1994 (fund commencement) to December 31, 1994.
5Period from May 1, 1995 (fund commencement) to December 31, 1995.
6Period from November 1, 1995 (fund commencement) to December 31, 1995.
7Period from May 1, 1996 (fund commencement) to December 31, 1996.
8Period from November 8, 1996 (fund commencement) to December 31, 1996.
</FN>
</TABLE>
ALLIANZ LIFE INSURANCE
COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1996 and 1995
<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, 1996 and 1995, 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, 1996. 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, 1996
and 1995, and the results of their operations, changes in stockholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1996, 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.
KPMG Peat Marwick LLP
February 4, 1997
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(in thousands)
Assets 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments:
Fixed maturities, at market $ 2,768,306 2,549,598
Equity securities, at market 327,834 254,458
Mortgage loans on real estate 245,559 203,128
Real estate, at cost 34,129 8,806
Investment in real estate partnerships, at equity 10,695 11,975
Certificates of deposit and short-term securities 204,972 31,501
Policy loans 103,708 104,184
Other long-term investments 124 650
- ---------------------------------------------------------------------------------------------------------------------
Total investments 3,695,327 3,164,300
Cash 37,992 36,449
Accrued investment income 36,130 36,858
Receivables (net of allowance for uncollectible
accounts of $4,630 in 1996 and $7,697 in 1995) 155,278 124,700
Reinsurance receivable:
Funds held on deposit 1,101,716 1,060,566
Recoverable on future policy benefit reserves 48,909 43,248
Recoverable on unpaid claims 142,199 109,075
Receivable on paid claims 18,240 22,172
Prepaid insurance premiums 4,840 4,078
Home office property and equipment (net of accumulated
depreciation of $20,090 in 1996 and $21,256 in 1995) 9,590 8,790
Deferred acquisition costs 863,338 826,994
Federal income tax recoverable 12,455 3,947
Other assets 11,622 11,048
- ---------------------------------------------------------------------------------------------------------------------
Assets, exclusive of separate account assets 6,137,636 5,452,225
Separate account assets 9,520,561 8,402,003
- ---------------------------------------------------------------------------------------------------------------------
Total assets $ 15,658,197 13,854,228
=====================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Balance Sheets, continued
December 31, 1996 and 1995
(in thousands)
1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities:
Future policy benefit reserves:
Life $ 1,204,633 1,088,964
Annuity 2,879,221 2,601,943
Policy and contract claims 438,824 371,898
Unearned premiums 32,176 34,181
Reinsurance payable 96,857 72,838
Deferred income taxes 150,760 140,174
Accrued expenses 84,254 66,779
Commissions due and accrued 37,103 22,979
Other policyholder funds 52,267 82,138
Other liabilities 147,364 19,137
- ---------------------------------------------------------------------------------------------------------------------
Liabilities, exclusive of separate account liabilities 5,123,459 4,501,031
Separate account liabilities 9,520,561 8,402,003
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 14,644,020 12,903,034
- ---------------------------------------------------------------------------------------------------------------------
Stockholder's equity:
Common stock, $1 par value, 20 million 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 25,000 25,000
Additional paid-in capital 407,088 407,088
Net unrealized gain on investments
net of deferred federal income taxes 102,637 139,204
Net unrealized Canadian currency loss (3,473) (3,455)
Retained earnings 462,925 363,357
- ---------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 1,014,177 951,194
Commitments and contingencies (notes 6 and 11)
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $ 15,658,197 13,854,228
=====================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 284,084 257,647 234,295
Other life policy considerations 85,747 93,158 92,254
Annuity considerations 170,656 147,112 120,240
Accident and health premiums 603,230 527,059 547,508
- ----------------------------------------------------------------------------------------------------------------------------------
Total premiums and considerations 1,143,717 1,024,976 994,297
Premiums ceded 277,163 223,226 244,208
- ----------------------------------------------------------------------------------------------------------------------------------
Net premiums and considerations 866,554 801,750 750,089
Investment income, net 222,622 201,158 181,291
Realized investment gains, net 28,561 29,202 829
Other 6,193 10,140 12,703
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue 1,123,930 1,042,250 944,912
- ----------------------------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Life insurance benefits 281,441 268,163 254,326
Annuity benefits 153,238 145,636 131,793
Accident and health insurance benefits 434,793 374,743 379,122
- ----------------------------------------------------------------------------------------------------------------------------------
Total benefits 869,472 788,542 765,241
Benefit recoveries 249,552 210,702 212,144
- ----------------------------------------------------------------------------------------------------------------------------------
Net benefits 619,920 577,840 553,097
Commissions and other agent compensation 267,714 233,939 313,715
General and administrative expenses 99,018 115,419 111,116
Taxes, licenses and fees 19,959 17,672 22,514
Increase in deferred acquisition costs, net (36,344) (28,552) (132,090)
Minority interest in income of consolidated
subsidiary 0 (30) (66)
- ----------------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 970,267 916,288 868,286
- ----------------------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes 153,663 125,962 76,626
- ----------------------------------------------------------------------------------------------------------------------------------
Income tax expense:
Current 21,936 12,993 5,098
Deferred 30,559 25,772 16,053
- ----------------------------------------------------------------------------------------------------------------------------------
Total income tax expense 52,495 38,765 21,151
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 101,168 87,197 55,475
==================================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Stockholder's Equity
Years ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<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 25,000 40,000 0
Issuance of stock during the year 0 0 40,000
Redemption of stock during the year 0 (15,000) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 25,000 25,000 40,000
- ----------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital:
Balance at beginning of year 407,088 406,494 401,304
Additional contribution from parent 0 594 5,190
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 407,088 407,088 406,494
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments:
Balance at beginning of year 139,204 (62,073) 9,071
Cumulative effect of implementation of Statement
No. 115, net of deferred federal income taxes 0 0 74,866
Net unrealized gain on securities transferred
from held-to-maturity to available-for-sale
classification, net of deferred federal income taxes 0 1,789 0
Net unrealized gain (loss) during the year,
net of deferred federal income taxes (36,567) 199,488 (146,010)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 102,637 139,204 (62,073)
- ----------------------------------------------------------------------------------------------------------------------------------
Net unrealized Canadian currency loss:
Balance at beginning of year (3,455) (3,787) (2,708)
Net unrealized gain (loss) during the year,
net of deferred federal income taxes (18) 332 (1,079)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (3,473) (3,455) (3,787)
- ----------------------------------------------------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of year 363,357 278,811 223,749
Net income 101,168 87,197 55,475
Cash dividend to stockholder (1,600) (2,651) (413)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 462,925 363,357 278,811
- ----------------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity $ 1,014,177 951,194 679,445
==================================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Cash Flows
December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net income $ 101,168 87,197 55,475
- -----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash used in operating activities:
Realized gains on investments (28,561) (29,202) (829)
Deferred federal income tax expense 30,559 25,772 16,053
Charges to policy account balances (84,069) (120,254) (125,488)
Interest credited to policy account balances 166,766 169,151 150,490
Change in:
Accrued investment income 728 (2,072) (764)
Receivables (30,578) (13,300) 12,040
Reinsurance receivables (119,384) (190,953) (93,453)
Deferred acquisition costs (36,344) (28,552) (132,090)
Future policy benefit reserves 76,478 66,932 20,791
Policy and contract claims
and other policyholder funds 37,055 25,116 25,072
Unearned premiums (2,005) (6,195) (1,194)
Reinsurance payable 24,019 (8,669) 19,779
Current tax recoverable (8,508) (153) (6,255)
Accrued expenses and other liabilities 15,506 17,365 7,556
Commissions due and accrued 14,124 (1,211) 3,316
Depreciation and amortization (25,874) (23,391) (11,498)
Other, net (1,568) 916 (86)
- -----------------------------------------------------------------------------------------------------------
Total adjustments 28,344 (118,700) (116,560)
- -----------------------------------------------------------------------------------------------------------
Net cash used in operating activities 129,512 (31,503) (61,085)
- -----------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows used in operating activities 129,512 (31,503) (61,085)
Cash flows used in investing activities:
Purchase of fixed maturities, at market $ (1,324,676) (1,533,290) (928,532)
Purchase of equity securities (137,304) (166,701) (145,267)
Purchase of real estate (26,980) 0 0
Funding of mortgage loans (70,265) (66,301) (64,808)
Sale of fixed maturities, at market 1,043,748 1,242,988 791,659
Matured or redeemed fixed maturities, at amortized cost 0 7,022 4,342
Matured fixed maturities, at market 2,711 38,991 32,508
Sale of equity securities 122,788 97,619 150,347
Sale of real estate 4,324 0 0
Repayment of mortgage loans 23,317 25,563 28,206
Purchase of minority interest's shares in subsidiary 0 (7,903) 0
Net change in certificates of deposit and
short-term securities (173,471) 123,806 (96,344)
Change in liability related to
reverse repurchase transactions 130,196 (58,150) 58,150
Other 2,090 (2,851) (6,699)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (403,522) (299,207) (176,438)
- ------------------------------------------------------------------------------------------------------------------------
Cash flows used in financing activities:
Policyholders' deposits to account balances $ 592,670 553,699 526,918
Policyholders' withdrawals from account balances (368,490) (291,102) (235,309)
Change in assets held under reinsurance agreements 52,973 36,354 (59,349)
Net change in mortgage notes payable 0 (1,049) (39)
Additional paid-in capital from parent 0 594 5,190
Preferred stock transactions 0 (15,000) 40,000
Cash dividends paid (1,600) (2,651) (413)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities 275,553 280,845 276,998
- ------------------------------------------------------------------------------------------------------------------------
Net change in cash 1,543 (49,865) 39,475
Cash at beginning of year 36,449 86,314 46,839
- ------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 37,992 36,449 86,314
========================================================================================================================
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(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 1996 gross premium volume, 14%,
64% and 22% 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 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 subsidiary, Preferred Life
Insurance Company of New York and other less significant subsidiaries have been
consolidated. All significant intercompany balances and transactions have been
eliminated in consolidation.
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>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
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 ACQUISTION 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 1996,
1995 and 1994 were $137,618, $117,782 and $108,676, 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, 1996 and 1995.
POLICY AND CONTRACT CLAIMS
Policy and contract claims represent an estimate of claims and claim adjustment
expenses 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>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
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. At January 1, 1994, 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 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, 1996 and 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, 1996 and 1995, investments with a carrying value of $102,361
and $37,879, respectively, were held on deposit with various insurance
departments and in other trusts 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 may
cause estimates of fair values to differ from the amounts presented herein.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
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 account assets were determined using the market value of
the investments held in segregated fund accounts. Fair values of separate
account 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
In 1996, the Company adopted 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. No adjustments were made to the consolidated
financial statements upon adoption of this pronouncement.
ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED
In June 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. In December 1996, the FASB issued
SFAS No. 127, Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125, which defers the effective date of certain paragraphs of SFAS
No. 125 that are applicable to the Company. The Statements which address
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, is to be applied prospectively. Earlier or
retroactive application is not permitted. As a result of SFAS No. 127, the
Company will adopt SFAS No. 125 at January 1, 1998. Adoption of these
pronouncements is not expected to have a significant impact on the consolidated
financial statements.
RECLASSIFICATIONS
Certain 1995 balances have been reclassified to conform to the 1996
presentation.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(2) INVESTMENTS
<TABLE>
<CAPTION>
Investments at December 31, 1996 consist of:
Amount
Amortized Estimated shown on
cost fair balance
or cost value sheet
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
U.S. Government $ 620,236 645,264 645,264
States and political subdivisions 419 424 424
Foreign government 304,589 309,394 309,394
Public utilities 6,466 7,041 7,041
Corporate securities 1,025,189 1,040,322 1,040,322
Mortgage backed securities 669,181 687,054 687,054
Collateralized mortgage obligations 78,331 78,807 78,807
- --------------------------------------------------------------------------------------------------------
Total fixed maturities $ 2,704,411 2,768,306 2,768,306
- --------------------------------------------------------------------------------------------------------
Equity securities:
Common stocks:
Public utilities 4,941 5,087 5,087
Banks, trusts and insurance
companies 8,132 10,528 10,528
Industrial and miscellaneous 211,520 301,691 301,691
Nonredeemable preferred stocks 9,496 10,528 10,528
- --------------------------------------------------------------------------------------------------------
Total equity securities $ 234,089 327,834 327,834
- --------------------------------------------------------------------------------------------------------
Other investments:
Mortgage loans on real estate 245,559 XXXXXXXXX 245,559
Real estate:
Investment properties 34,129 XXXXXXXXX 34,129
Partnerships 10,695 XXXXXXXXX 10,695
Certificates of deposit and
short term securities 204,972 XXXXXXXXX 204,972
Policy loans 103,708 XXXXXXXXX 103,708
Other long term investments 124 XXXXXXXXX 124
- --------------------------------------------------------------------------------------------------------
Total other investments $ 599,187 XXXXXXXXX 599,187
- --------------------------------------------------------------------------------------------------------
Total investments $ 3,537,687 XXXXXXXXX 3,695,327
========================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
At December 31, 1996 and 1995, the amortized cost, gross unrealized gains, gross
unrealized losses and estimated fair values of available-for-sale securities are
as follows:
Amortized Gross Gross Estimated
cost unrealized unrealized fair
or cost gains losses value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996:
U.S. Government 620,236 25,954 926 645,264
States and political subdivisions 419 5 0 424
Foreign government 304,589 6,090 1,285 309,394
Public utilities 6,466 575 0 7,041
Corporate securities 1,025,189 24,137 9,004 1,040,322
Mortgage backed securities 669,181 18,444 571 687,054
Collateralized mortgage obligations 78,331 995 519 78,807
- ---------------------------------------------------------------------------------------------------
Total fixed maturities 2,704,411 76,200 12,305 2,768,306
Equity securities 234,089 98,711 4,966 327,834
- ---------------------------------------------------------------------------------------------------
Total $ 2,938,500 174,911 17,271 3,096,140
===================================================================================================
1995:
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
===================================================================================================
</TABLE>
The changes in unrealized gains (losses) on fixed maturities available-for-sale
securities were $(97,973), $261,471 and $(214,245) in each of the years ended
December 31, 1996, 1995, 1994 and the change in unrealized losses on
held-to-maturity securities was $(8,783) for the year ended December 31, 1994.
The changes in unrealized gains (losses) in equity investments, which include
common stocks and nonredeemable preferred stocks, and other investments were
$40,895, $48,186 and $(9,587) for the years ended December 31, 1996, 1995 and
1994, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of fixed maturities at December 31,
1996, 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>
Due in one year or less $ 4,523 4,689
Due after one year through five years 337,770 347,854
Due after five years through ten years 1,261,874 1,287,172
Due after ten years 352,732 362,730
Mortgage backed securities 747,512 765,861
- --------------------------------------------------------------------------------
Totals $ 2,704,411 2,768,306
================================================================================
</TABLE>
Gross gains of $43,696, $41,962 and $26,848 and gross losses of $16,834, $14,607
and $26,805 were realized on sales of available-for-sale securities in 1996,
1995 and 1994, respectively; related taxes were $9,402, $9,574 and $715 in 1996,
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.
<TABLE>
<CAPTION>
Net realized investment gains (losses) for the respective years ended December
31 are summarized as follows:
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities, at market $ 8,897 21,877 (2,712)
Equity securities 17,964 5,478 2,745
Mortgage loans (1,129) (687) (1,667)
Real estate 3,104 2,530 2,067
Other (275) 4 396
- --------------------------------------------------------------------------------
Net gains before taxes 28,561 29,202 829
Tax expense on net realized gains 9,996 10,218 352
- --------------------------------------------------------------------------------
Net gains after taxes $ 18,565 18,984 477
================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
In 1995, in conjunction with an expanded marketing agreement, the Company
provided an unrelated insurance company with $30,000 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 an approximate 10% equity ownership in the
unrelated company. The Company has no intention of converting the debenture in
the near term.
During 1996 and 1995, 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, 1996, mortgage backed securities underlying the agreements were
carried at a market value of $124,281 and other liabilities included $130,196
for funds received under these agreements. As of December 31, 1995 there were no
outstanding amounts under the Company's dollar roll program. Average balances
outstanding were $83,602 and $67,735 and weighted average interest rates were
7.5% and 7.4% during 1996 and 1995, respectively. The maximum balance
outstanding during 1996 was $130,196.
During 1996 and 1995, the Company participated in a securities lending program
administered by AZOA's investment division. 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, 1996 and 1995.
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. There were no impaired loans held by the Company as of December 31,
1996. Below is a summary of impaired mortgage loans as of December 31, 1995.
<TABLE>
<CAPTION>
Impaired Impaired Total
mortgage loans mortgage loans impaired
with a related without a related mortgage
allowance allowance loans
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995:
Balance $ 9,210 8,541 17,751
Related allowance 3,580 3,580
- ----------------------------------------------------------------------------------------
Balance, net of allowance $ 5,630 8,541 14,171
========================================================================================
Below is a summary of interest income on impaired mortgage loans.
1996 1995
- -----------------------------------------------------------------------------------------------
Average principal balance of impaired mortgage loans $ 9,835 19,671
Total interest income on impaired mortgage loans 557 1,100
Interest income on impaired mortgage loans recorded on a cash basis 557 1,100
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
The valuation allowances at December 31, 1996, 1995 and 1994 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, 1996:
Mortgage loans $ 10,487 0 0 3,208 7,279
- ----------------------------------------------------------------------------------------------------------
Total valuation allowance $ 10,487 0 0 3,208 7,279
==========================================================================================================
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
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Major categories of net investment income for the respective years ended
December 31 are:
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest:
Fixed maturities, at amortized cost $ 0 6,284 6,966
Fixed maturities, at market 178,664 158,421 141,611
Mortgage loans 19,267 16,125 13,706
Policy loans 7,013 6,688 6,329
Short-term investments 10,688 7,182 3,012
Dividends:
Preferred stock 818 581 495
Common stock 4,527 3,204 2,673
Rental income on real estate 3,161 2,781 3,135
Interest on assets held by reinsurers 9,709 10,445 10,470
Other 2,183 833 577
- --------------------------------------------------------------------------------
Total investment income 236,030 212,544 188,974
Investment expenses 13,408 11,386 7,683
- --------------------------------------------------------------------------------
Net investment income $ 222,622 201,158 181,291
================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(3) SUMMARY TABLE OF FAIR VALUE DISCLOSURES
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Financial assets
- ----------------
Fixed maturities, at market:
U.S. Government $ 645,264 645,264 867,793 867,793
States and political subdivisions 424 424 481 481
Foreign governments 309,394 309,394 265,797 265,797
Public utilities 7,041 7,041 36,728 36,728
Corporate securities 1,040,322 1,040,322 747,609 747,609
Mortgage backed securities 687,054 687,054 548,182 548,182
Collateralized mortgage obligations 78,807 78,807 83,008 83,008
Equity securities 327,834 327,834 254,458 254,458
Mortgage loans 245,559 252,825 203,128 212,766
Short term investments 204,972 204,972 31,501 31,501
Policy loans 103,708 103,708 104,184 104,184
Other long term investments 124 124 650 650
Receivables 155,278 155,278 124,700 124,700
Separate accounts assets 9,520,561 9,520,561 8,402,003 8,402,003
Financial liabilities
- ---------------------
Investment contracts 3,297,973 2,747,914 3,063,100 2,542,260
Separate account liabilities 9,520,561 9,324,358 8,402,003 8,181,725
- --------------------------------------------------------------------------------------------------------------------
<FN>
See Note 1 "Summary of Significant Accounting Policies" for description of the
methods and significant assumptions used to estimate fair values.
</FN>
</TABLE>
(4) RECEIVABLES
<TABLE>
<CAPTION>
Receivables at December 31 consist of the following:
1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Premiums due $ 125,216 83,695
Agents balances 5,523 7,236
Related party receivables 2,099 922
Reinsurance commission receivable 7,515 16,693
Scholarship enrollment fees 8,025 6,822
Due from administrators 3,244 6,149
Other 3,656 3,183
- -------------------------------------------------------------------------
Total receivables $ 155,278 124,700
=========================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(5) 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, 1996 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 $14,348, $18,858 and $11,149 in
1996, 1995 and 1994, respectively, is summarized as follows:
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance
recoverables of $99,292, $96,090 and $86,551 $ 191,804 185,028 170,123
Incurred related to:
Current year 271,308 242,024 230,995
Prior years (11,642) (9,163) (7,290)
- --------------------------------------------------------------------------------------------------------
Total incurred 259,666 232,861 223,705
- --------------------------------------------------------------------------------------------------------
Paid related to:
Current year 107,842 100,165 82,338
Prior years 127,032 125,920 126,462
- --------------------------------------------------------------------------------------------------------
Total paid 234,874 226,085 208,800
- --------------------------------------------------------------------------------------------------------
Balance at December 31, net of reinsurance
recoverables of $114,230, $99,292 and $96,090 $ 216,596 191,804 185,028
========================================================================================================
</TABLE>
Due to lower than anticipated losses related to prior years, the provision for
claims and claim adjustment expenses decreased.
(6) 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, 1996 are $53,036, $799,499
and $248,389 recoverable from three insurers who, as of December 31, 1996, 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.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
<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, 1996:
Life insurance In force $ 37,527,994 44,073,247 6,126,541 75,474,700 58.4%
- -----------------------------------------------------------------------------------------------------------------
Premiums:
Life insurance 235,837 133,994 37,986 331,845 40.4%
Annuities 169,503 1,153 12,769 157,887 0.7%
Accident and health insurance 396,051 207,179 226,408 376,822 55.0%
- -----------------------------------------------------------------------------------------------------------------
Total premiums 801,391 342,326 277,163 866,554 39.5%
=================================================================================================================
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%
=================================================================================================================
</TABLE>
Of the amounts ceded to others, the Company ceded life insurance inforce of
$381,381, $182,638 and $86,055 in 1996, 1995 and 1994, respectively, and life
insurance premiums earned of $1,293, $641 and $203 in 1996, 1995 and 1994,
respectively, to its ultimate parent Allianz Aktiengesellshaft. The Company also
ceded accident and health premiums earned to Allianz Aktiengesellshaft of
$1,922, $(7,520) and $12,256 in 1996, 1995 and 1994.
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 $1,279 and $930 as of December 31, 1996 and 1995, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(7) INCOME TAXES
INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Total income tax expense (benefit) for the years ended December 31 are as
follows:
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense attributable to operations:
Current tax expenses $ 21,936 12,993 5,098
Deferred tax (benefit) expense 30,559 25,772 16,053
- ------------------------------------------------------------------------------------------------------
Total income tax expense attributable to operations $ 52,495 38,765 21,151
Income tax effect on equity:
Income tax allocated to stockholder's equity:
Adoption of SFAS No. 115 0 0 40,312
Attributable to unrealized gains and losses
for the year (19,967) 108,559 (79,201)
- ------------------------------------------------------------------------------------------------------
Total income tax effect on equity $ 32,528 147,324 (17,738)
======================================================================================================
</TABLE>
COMPONENTS OF INCOME TAX EXPENSE
<TABLE>
<CAPTION>
Income tax expense computed at the statutory rate of 35% in 1996, 1995 and 1994,
varies from tax expense reported in the Consolidated Statements of Income for
the respective years ended December 31 as follows:
1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense computed at the statutory rate $ 53,782 44,087 26,819
Dividends received deductions and tax-exempt interest (650) (5,430) (3,967)
Foreign tax (2,723) (464) (79)
Interest on tax deficiency 261 408 (716)
Other 1,824 164 (906)
- ---------------------------------------------------------------------------------------------------
Income tax expense as reported $ 52,494 38,765 21,151
===================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
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:
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Provision for post retirement benefits $ 2,024 1,936
Allowance for uncollectible accounts 1,256 2,283
Policy reserves 158,131 175,963
- ----------------------------------------------------------------------
Total deferred tax assets 161,411 180,182
- ----------------------------------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs 240,906 234,393
Net unrealized gain 53,008 72,975
Other 18,257 12,988
- ----------------------------------------------------------------------
Total deferred tax liabilities 312,171 320,356
- ----------------------------------------------------------------------
Net deferred tax liability $ 150,760 140,174
======================================================================
</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, 1996 and 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 post-1990 separate return taxable
income or tax. Income taxes paid by the Company were $30,946, $14,865 and
$15,162 in 1996, 1995 and 1994, respectively. At December 31, 1996 and 1995 the
Company had a tax recoverable from AZOA of $11,599 and $3,257, respectively and
a recoverable from Revenue Canada Taxation of $856 and $690, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(8) 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, 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.
Included in the mortgage loans are properties originally foreclosed upon by the
Company of which the balances at December 31, 1995 was $1,650.
The Company reimbursed AZOA $86, $738 and $817 in 1996, 1995 and 1994,
respectively, for certain administrative services performed. The Company's
liability to AZOA was $0 and $528 at December 31, 1996 and 1995, respectively.
AZOA's investment division manages the Company's investment portfolio. The
Company paid AZOA $1,657, $1,024 and $1,285 in 1996, 1995 and 1994,
respectively, for investment advisory fees. The Company's liability to AZOA was
$543 and $377 at December 31, 1996 and 1995, respectively.
The Company shares a data center with affiliated insurance companies. Usage
charges paid to the data center by the Company were $3,275, $3,752 and $4,228 in
1996, 1995 and 1994, respectively. The Company's liability for data center
charges was $58 and $337 at December 31, 1996 and 1995, respectively.
The Company has 200 million authorized 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 1994, the Company issued 25 millions shares of Series A preferred stock with
a dividend rate of 6.4% to AZOA for $25,000 and 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.
As of December 31, 1996, the Company sold to AZOA, without recourse, two
receivables due from third parties amounting to $6,600. The Company recognized a
loss of $416 resulting from these sales.
In 1995 and 1994, AZOA contributed additional capital to the Company of $594 and
$5,190, respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(9) 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 $808, $860 and $918 in 1996, 1995 and 1994,
respectively.
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 1996, 1995 and 1994 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
$1,105, $1,188 and $1,266 in 1996, 1995 and 1994, respectively, toward planned
contributions.
In 1995, the Company discontinued support of its individual agency field force
and suspended contributions to the agents' asset accumulation plan as of January
1, 1996. Prior to this event, the Company matched 100% of eligible agents'
contributions up to a maximum of 3% of a participant's compensation and accepted
participant's pretax or after tax contributions up to 10% of participant's
compensation. 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 $0, $118 and $386 in 1996, 1995 and 1994, respectively.
The Company provides certain postretirement benefits to employees who retired on
or before December 31, 1988 or who were hired before December 31, 1988 and who
have at least ten years of service when they reach age 55. The Company's plan
obligation at December 31, 1996 and 1995 was $5,783 and $5,532, respectively,
and the liability is included in "Other liabilities" in the accompanying balance
sheet.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(10) 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 or vary in determining statutory policyholders'
surplus and net gain from operations. These items include, among others,
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 equity Net income
-------------------------- -------------------------------------
1996 1995 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statutory basis $ 384,989 299,186 67,995 11,565 6,895
Adjustments:
Change in reserve basis (199,566) (211,678) 13,324 (43,642) (109,473)
Deferred acquisition costs 863,338 826,994 36,344 28,552 132,090
Net deferred taxes (150,760) (140,174) (30,559) (25,772) (16,053)
Statutory asset valuation reserve 133,564 100,462 0 0 0
Statutory interest maintenance reserve 26,342 25,061 1,183 8,756 (4,768)
Modified coinsurance reinsurance (113,743) (119,178) 5,435 104,222 44,920
Unrealized gains on investments 64,928 163,237 0 0 0
Nonadmitted assets 7,121 1,471 0 0 0
Other (2,036) 5,813 7,446 3,516 1,864
- -------------------------------------------------------------------------------------------------------------------
As reported in the accompanying
consolidated financial statements $ 1,014,177 951,194 101,168 87,197 55,475
===================================================================================================================
</TABLE>
The Company is required to meet minimum statutory capital and surplus
requirements. The Company's statutory capital and surplus as of December 31,
1996 and 1995 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 1996 and 1995, respectively, the Company paid
to AZOA dividends, on preferred stock only, in the amount of $1,600 and $2,651,
respectively. Dividends of $61,439 could be paid in 1997 without prior approval
of the Commissioner of Commerce.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
REGULATORY RISK BASED CAPITAL
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)
------------------------- -------------------------------------
Company action level 2 (or 2.5 with negative trends)
Regulatory action level 1.5
Authorized control level 1
Mandatory control level 0.7
The Company met the minimum risk-based capital requirements as of December 31,
1996 and 1995.
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.
STATE EXAMINATION
Preferred Life is currently under routine examination by the New York State
Department of Insurance. No matters of significance or adjustments to Preferred
Life's statutory financial statements have been brought to management's
attention as a result of this examination.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(11) 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
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.
(12) 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:
1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $ (3,455) (3,787) (2,708)
- -------------------------------------------------------------------------------------------------------
Aggregate adjustment for the period resulting from
translation adjustments (28) 511 (1,659)
Amount of income tax benefit (expense)
for period related to aggregate adjustment 10 (179) 580
- -------------------------------------------------------------------------------------------------------
Net aggregate translation included in equity (18) 332 (1,079)
- -------------------------------------------------------------------------------------------------------
Ending amount of cumulative translation adjustments $ (3,473) (3,455) (3,787)
=======================================================================================================
Canadian foreign exchange rate at end of year 0.7297 0.7329 0.7129
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
December 31, 1996, 1995 and 1994
(in thousands)
(13) SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
The following table summarizes certain financial information by line of business
for 1996, 1995 and 1994:
As of December 31 For the year ended December 31
------------------------------------------ -------------------------------------------------------------------
Future Benefits, Net
policy Other Premium claims change
benefits, policy revenue losses, in
Deferred losses, claims and other Net and policy
policy claims and contract invest- settle- acquisi- Other Premiums
acquistion and loss Unearned benefits consider- ment ment tion operating written
costs expense premiums payable ations income expenses costs (a) expenses (b)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996:
Life $ 175,608 1,204,633 5,502 62,369 331,845 89,049 258,221 4,308 103,352
Annuities 672,797 2,879,221 0 1,859 157,887 113,537 105,335 (43,283) 161,002
Accident and health 14,933 0 26,674 374,596 376,822 20,036 256,364 2,631 122,337
- -----------------------------------------------------------------------------------------------------------------------------------
$ 863,338 4,083,854 32,176 438,824 866,554 222,622 619,920 (36,344) 386,691
===================================================================================================================================
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
===================================================================================================================================
<FN>
(a) See note 1 for total gross amortization.
(b) Premiums written are not applicable for life insurance companies.
</FN>
</TABLE>
<PAGE>
APPENDIX A
ILLUSTRATION OF POLICY VALUES
The following tables illustrate how Policy Account values, Cash Values and
death benefits of a Policy change based on 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 1996 weighted by Sub-Account
value as of 12/31/96). 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 1996 weighted by Sub-Account value as of
12/31/96. The Sub-Accounts 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.
<PAGE>
<TABLE>
<CAPTION>
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
CURRENT VALUES
---------------------------------------------------------------------------------
VALUES PROJECTED AT VALUES PROJECTED AT VALUES PROJECTED AT
0.00% 6.00% 12.00%
------------------------ ------------------------ ---------------------------
END ACCUM NET NET NET NET NET NET
OF ANNUAL @ 5.00% POLICY CASH DEATH POLICY CASH DEATH POLICY CASH DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT
- ---- --- ------- ------- ------- ------ ------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 757 35 100,000 813 91 100,000 870 148 100,000
2 36 1,200 2,583 1,674 892 100,000 1,839 1,058 100,000 2,012 1,230 100,000
3 37 1,200 3,972 2,571 1,730 100,000 2,906 2,064 100,000 3,268 2,426 100,000
4 38 1,200 5,431 3,451 2,599 100,000 4,014 3,162 100,000 4,648 3,796 100,000
5 39 1,200 6,962 4,311 3,491 100,000 5,167 4,346 100,000 6,166 5,346 100,000
6 40 1,200 8,570 5,150 4,379 100,000 6,361 5,590 100,000 7,833 7,062 100,000
7 41 1,200 10,259 5,976 5,256 100,000 7,609 6,889 100,000 9,674 8,954 100,000
8 42 1,200 12,032 6,782 6,112 100,000 8,905 8,235 100,000 11,700 11,029 100,000
9 43 1,200 13,893 7,571 6,983 100,000 10,255 9,667 100,000 13,933 13,345 100,000
10 44 1,200 15,848 8,344 7,838 100,000 11,662 11,156 100,000 16,397 15,891 100,000
15 49 1,200 27,189 11,878 11,878 100,000 19,549 19,549 100,000 33,037 33,037 100,000
20 54 1,200 41,633 14,589 14,589 100,000 28,863 28,863 100,000 60,110 60,110 100,000
25 59 1,200 60,136 16,575 16,575 100,000 40,923 40,923 100,000 107,474 107,474 144,015
30 64 1,200 83,713 16,742 16,742 100,000 55,606 55,606 100,000 186,157 186,157 227,112
35 69 1,200 113,804 13,754 13,754 100,000 73,953 73,953 100,000 316,137 316,137 366,719
<FN>
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 NET 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.
</FN>
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
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
GUARANTEED VALUES
----------------------------------------------------------------------------------
VALUES PROJECTED AT VALUES PROJECTED AT VALUES PROJECTED AT
0.00% 6.00% 12.00%
-------------------------- ------------------------ -------------------------
END ACCUM NET NET NET NET NET NET
OF ANNUAL @ 5.00% POLICY CASH DEATH POLICY CASH DEATH POLICY CASH DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT
- ---- --- ------- ------- ------- ------ ------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 747 25 100,000 803 81 100,000 859 137 100,000
2 36 1,200 2,583 1,601 819 100,000 1,763 981 100,000 1,932 1,151 100,000
3 37 1,200 3,972 2,429 1,587 100,000 2,752 1,911 100,000 3,103 2,261 100,000
4 38 1,200 5,431 3,233 2,381 100,000 3,773 2,921 100,000 4,381 3,529 100,000
5 39 1,200 6,962 4,013 3,192 100,000 4,826 4,005 100,000 5,777 4,957 100,000
6 40 1,200 8,570 4,758 3,987 100,000 5,901 5,130 100,000 7,293 6,523 100,000
7 41 1,200 10,259 5,480 4,759 100,000 7,012 6,291 100,000 8,954 8,233 100,000
8 42 1,200 12,032 6,169 5,498 100,000 8,149 7,478 100,000 10,762 10,091 100,000
9 43 1,200 13,893 6,825 6,237 100,000 9,313 8,725 100,000 12,734 12,146 100,000
10 44 1,200 15,848 7,450 6,944 100,000 10,507 10,001 100,000 14,888 14,382 100,000
15 49 1,200 27,189 10,081 10,081 100,000 16,948 16,948 100,000 29,131 29,131 100,000
20 54 1,200 41,633 11,601 11,601 100,000 24,033 24,033 100,000 51,710 51,710 100,000
25 59 1,200 60,136 11,383 11,383 100,000 31,427 31,427 100,000 88,233 88,233 118,232
30 64 1,200 83,713 8,308 8,308 100,000 38,577 38,577 100,000 146,172 146,172 178,329
35 69 1,200 113,804 0 0 0 44,379 44,379 100,000 236,704 236,704 274,576
<FN>
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 C HARGES ARE $20.00 PER MONTH IN YEAR 1 AND
$9.00 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 NET 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. N O 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.
</FN>
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
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
CURRENT VALUES
--------------------------------------------------------------------------------------
VALUES PROJECTED AT VALUES PROJECTED AT VALUES PROJECTED AT
0.00% 6.00% 12.00%
-------------------------- -------------------------- ----------------------------
END ACCUM NET NET NET NET NET NET
OF ANNUAL @ 5.00% POLICY CASH DEATH POLICY CASH DEATH POLICY CASH DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT
- ---- --- ------- ------- ------- ------ ------- -------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 755 33 100,755 811 90 100,811 868 146 100,868
2 36 1,200 2,583 1,669 887 101,669 1,834 1,053 101,834 2,007 1,225 102,007
3 37 1,200 3,972 2,562 1,720 102,562 2,895 2,053 102,895 3,255 2,414 103,255
4 38 1,200 5,431 3,435 2,583 103,435 3,995 3,144 103,995 4,626 3,774 104,626
5 39 1,200 6,962 4,288 3,467 104,288 5,137 4,316 105,137 6,130 5,309 106,130
6 40 1,200 8,570 5,116 4,345 105,116 6,317 5,546 106,317 7,776 7,006 107,776
7 41 1,200 10,259 5,930 5,210 105,930 7,547 6,827 107,547 9,592 8,871 109,592
8 42 1,200 12,032 6,722 6,051 106,722 8,821 8,151 108,821 11,584 10,913 111,584
9 43 1,200 13,893 7,494 6,906 107,494 10,144 9,556 110,144 13,774 13,186 113,774
10 44 1,200 15,848 8,250 7,744 108,250 11,519 11,013 111,519 16,183 15,677 116,183
15 49 1,200 27,189 11,647 11,647 111,647 19,128 19,128 119,128 32,264 32,264 132,264
20 54 1,200 41,633 14,092 14,092 114,092 27,764 27,764 127,764 57,628 57,628 157,628
25 59 1,200 60,136 15,556 15,556 115,556 38,168 38,168 138,168 100,425 100,425 200,425
30 64 1,200 83,713 14,815 14,815 114,815 49,021 49,021 149,021 169,725 169,725 269,725
35 69 1,200 113,804 10,445 10,445 110,445 58,694 58,694 158,694 281,663 281,663 381,663
<FN>
CURRENT VALUES ARE BASED ON PROJECTED INTEREST RATES AND C URRENT 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 NET 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.
</FN>
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
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
GUARANTEED VALUES
-------------------------------------------------------------------------------------
VALUES PROJECTED AT VALUES PROJECTED AT VALUES PROJECTED AT
0.00% 6.00% 12.00%
-------------------------- -------------------------- --------------------------
END ACCUM NET NET NET NET NET NET
OF ANNUAL @ 5.00% POLICY CASH DEATH POLICY CASH DEATH POLICY CASH DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT
- ---- --- ------- ------- ------- ------ ------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 745 23 100,745 801 79 100,801 857 135 100,857
2 36 1,200 2,583 1,596 814 101,596 1,758 976 101,758 1,927 1,145 101,927
3 37 1,200 3,972 2,419 1,578 102,419 2,741 1,900 102,741 3,090 2,248 103,090
4 38 1,200 5,431 3,217 2,365 103,217 3,753 2,902 103,753 4,358 3,506 104,358
5 39 1,200 6,962 3,988 3,167 103,988 4,794 3,974 104,794 5,739 4,918 105,739
6 40 1,200 8,570 4,721 3,951 104,721 5,854 5,083 105,854 7,233 6,463 107,233
7 41 1,200 10,259 5,430 4,709 105,430 6,945 6,224 106,945 8,865 8,144 108,865
8 42 1,200 12,032 6,102 5,431 106,102 8,056 7,385 108,056 10,633 9,963 110,633
9 43 1,200 13,893 6,739 6,151 106,739 9,188 8,600 109,188 12,554 11,966 112,554
10 44 1,200 15,848 7,340 6,834 107,340 10,342 9,836 110,342 14,641 14,135 114,641
15 49 1,200 27,189 9,795 9,795 109,795 16,425 16,425 116,425 28,171 28,171 128,171
20 54 1,200 41,633 10,991 10,991 110,991 22,666 22,666 122,666 48,589 48,589 148,589
25 59 1,200 60,136 10,231 10,231 110,231 28,172 28,172 128,172 79,035 79,035 179,035
30 64 1,200 83,713 6,404 6,404 106,404 31,319 31,319 131,319 123,962 123,962 223,962
35 69 1,200 113,804 0 0 0 29,021 29,021 129,021 189,267 189,267 289,267
<FN>
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
$9.00 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 NET 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.
</FN>
</TABLE>
81
<PAGE>
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.
REPRESENTATION
Allianz Life Insurance Company of North America ("Company") hereby represents
that the fees and charges deducted under the Policy described in the Prospectus,
in the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred and the risks assumed by the Company.
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#
i. Individual Variable Life Insurance Policy Endorsements
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. Not Applicable
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 Post-Effective
Amendment No. 9 to Form S-6, File Nos. 33-11158 and
811-4965 as electronically filed on April 24, 1996.
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, 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 duly 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 24th day of April, 1997.
<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 04/24/97
Lowell C. Anderson President and Chief Executive Officer Date
Herbert F. Hansmeyer* Director 04/24/97
Herbert F. Hansmeyer Date
Michael P. Sullivan* Director 04/24/97
Michael P. Sullivan Date
Dr.Jerry E. Robertson* Director 04/24/97
Dr. Jerry E. Robertson Date
Dr. Gerhard Rupprecht* Director 04/24/97
Dr. Gerhard Rupprecht Date
Edward J. Bonach* Chief Financial Officer 04/24/97
Edward J. Bonach Date
Rev. Dennis J. Dease* Director 04/24/97
Rev. Dennis J. Dease Date
James R. Campbell* Director 04/24/97
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. 11
TO
FORM S-6
ALLIANZ LIFE VARIABLE ACCOUNT A
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
- ------- ----
EX-99.A1 Resolution of the Board of Directors of the Company
EX-99.A3b Selling Agreement
EX-99.A5i Individual Variable Life Insurance Policy Endorsements
EX-99.A6a Copy of Articles of Incorporation of the Company
EX-99.A6b Copy of the Bylaws of the Company
EX-99.B Opinion and Consent of Counsel
EX-99.C Consent of Actuary
EX-99.D Independent Auditors' Consent
The following resolution was adopted at a meeting of the Board of Directors of
North American Life and Casualty Company on May 31, 1985:
RESOLVED: That this company is hereby authorized to establish one or more
separate accounts in accordance with state insurance laws and to issue variable
and fixed annuity contracts and variable and fixed life insurance policies with
the reserves for such contracts and policies being segregated in such separate
accounts or in the general accounts of this company in the manner specified in
the said accounts.
RESOLVED FURTHER: That the President of the Company or such other executive
officer of this company as shall be designated by the President is hereby
authorized to designate such separate accounts as may be deemed necessary or
convenient and to register such separate accounts and those variable and fixed
annuity contracts and life insurance policies authorized hereby under such
federal securities laws as are deemed appropriate.
RESOLVED FURTHER: That the President of this company or such other executive
officer of this company as shall be designated by the President is hereby
authorized to invest such sums in any separate account established hereby as may
be deemed necessary or appropriate to comply with requirements of applicable
law.
RESOLVED FURTHER: That the President of this company and such other executive
officers of this company as may be appropriate, are hereby authorized to do any
act necessary or appropriate to carry out the intention of this resolution.
I, the undersigned, do hereby certify that I am the duly elected and qualified
Secretary and keeper of the records and corporate seal of North American Life
and Casualty Company, a corporation organized under the laws of the State of
Minnesota, and that the foregoing is a full, true and correct copy of a
resolution duly adopted at a meeting of the Board of Directors of said
Corporation, convened and held in accordance with the law and articles and
bylaws of said Corporation on the 31st day of May, 1985, and that said
resolution supersedes all resolutions previously adopted for the purpose stated
and is now in full force and effect.
Attest /s/ VICKI L. OSBAUGH /s/ ALAN A. GROVE
____________________ ____________________________
Alan A. Grove, Secretary
GENERAL AGENCY AGREEMENT
AGREEMENT between ____________________________________________________
(Broker/Dealer) and ________________________________________________ (Life Agent
or Agency) hereinafter taken together and referred to as "General Agent" and
NALAC Financial Plans, LLC ("NFP").
WITNESSETH:
WHEREAS, General Agent is itself, or is affiliated with an entity which is
registered as a broker-dealer with the Securities and Exchange Commission (the
"SEC") and which is a member of the National Association of Securities Dealers,
Inc. (the "NASD") and is also duly licensed as a life insurance a gency under
the insurance laws of the various states in which it operates; and
WHEREAS, NFP has been authorized by Allianz Life Insurance Company Of North
America and Preferred Life Insurance Company Of New York (hereinafter
collectively referred to as "Life Company" to obtain and appoint general agents
of Life Company to solicit for and sell those certain variable insurance
policies (the "Policies") which are described on the Commission Schedule which
is attached hereto and incorporated herein; and
WHEREAS, the parties desire General Agent to solicit for and sell the Policies;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
undertakings herein set forth, the parties hereby agree as follows:
1.APPOINTMENT
General Agent is hereby appointed as a general agent of Life Company for the
sale of the Policies in those states where General Agent is duly licensed to do
so and in those states where Life Company is authorized to sell such Products.
General Agent shall have no exclusive territory for the sale of the Policies.
NFP shall inform General Agent of those jurisdictions in which the Policies may
be lawfully sold.
2.AUTHORITY TO SOLICIT AND SELL
General Agent shall have the authority, pursuant to the rules and regulations of
Life Company and NFP to solicit sales of the Policies, obtain completed
applications therefor and accept premiums paid thereon. All applications for the
Policies shall be on forms duly authorized by Life Company in acc ordance with
the insurance laws and regulations of the various states in which such Policies
are sold. All such applications and premiums shall be promptly remitted to NFP
or to Life Company in accordance with the rules and regulations of NFP and Life
Company applicable to such transactions. Premiu ms are received in fiduciary
capacity by General Agent for NFP or Life Company and remittance shall not
exceed 30 days.
No solicitation for a Policy shall be made by any person associated with General
Agent unless and until such person has been duly appointed as an agent of Life
Company in accordance with applicable insurance laws and regulations. General
Agent is not authorized to solicit for the sale of the Polici es in any
jurisdiction where such product is not duly authorized to be sold.
3.AUTHORITY TO RECOMMEND APPOINTMENT OF AGENTS
General Agent is authorized to recommend to NFP those persons associated with
General Agent who are to be appointed as agents of Life Company and who are to
be authorized to solicit for the sale of the Policies in accordance herewith.
NFP shall have absolute discretion to accept or reject such reco mmendation for
the appointment of any such person as an agent for the sale of the Policies. NFP
shall also have the absolute right to terminate any such person as an agent of
Life Company.
4.TRAINING, COMPLIANCE AND LICENSING
General Agent shall have the sole responsibility for the training and
supervision of all persons appointed as agents hereunder. General Agent and all
persons associated with General Agent shall, in the solicitation and sale of the
Policies, comply with all written procedures, rules and regulations of NFP or
Life Company applicable thereto. General Agent and all persons associated with
General Agent shall use only those sales, advertising and promotional materials
which have been approved in writing by NFP.
General Agent shall have the responsibility for compliance with all laws, rules
and regulations applicable to the solicitation and sale of the Policies by
General Agent and by all persons associated with General Agent. General Agent
shall indemnify and hold NFP and Life Company harmless from any li ability
(including but not limited to costs of defense and attorney's fees) arising from
any act or omission of General Agent or of any affiliate of General Agent, or of
any officer, director, employee of General Agent or of sales persons associated
with General Agent.
General Agent, its affiliates, its officers, directors, employees, and sales
personnel, shall obtain and maintain all licenses, registrations, and
appointments required by any law, regulation, or other requirement of the SEC,
the NASD, or of any jurisdiction where the Policies are to be sold.
5.COMPENSATION
General Agent shall receive commissions on premiums on all Policies issued as a
result of applications obtained by it and accepted by Life Company. Commissions
payable hereunder are specified in the Commission Schedule which is attached
hereto and incorporated herein. Such Commission Schedule may b e amended or
modified at any time by NFP without notice. Any such amendment or modification
shall apply only to applications for Policies which are obtained by General
Agent after the date of such modification or amendment.
In the event an application or premium payment is rejected by NFP or Life
Company or if a premium is refunded to a purchaser and General Agent has
received compensation on the amount so rejected or refunded, General Agent shall
promptly repay such compensation to NFP. Also, repayment of commission may apply
to surrenders within twelve months of premium payment. Such commission
repayments are specified in the Commission Schedule. If such repayment is not
promptly made, NFP may, at its option, deduct such amount from any future
payments due General Agent or may otherwise institute proceedings against
General Agent to recover such amounts.
6.AFFILIATED ENTITY
In the event General Agent utilizes an affiliated entity to satisfy
broker-dealer requirements pursuant to permission granted by a no-action letter
issued by the SEC, such affiliated broker-dealer shall countersign this
Agreement and shall be duly bound hereby.
7.ENTIRE AGREEMENT
This Agreement is the complete and exclusive statement of the agreement between
the parties as to the subject matter hereof which supersedes all proposals or
agreements, oral or written, and all other communications or letters of intent
between the parties related to the subject matter of this Agre ement.
8.MODIFICATION OF AGREEMENT
This Agreement can only be modified by a written agreement duly signed by the
persons authorized to sign agreements on behalf of the parties. Variance from
the terms or conditions of this Agreement or any order or other written
notifications will be of no effect.
9.SEPARABILITY OF PROVISIONS
If any provision or provisions of this Agreement shall be held to be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or be impaired thereby.
10.ASSIGNMENT
This Agreement and the rights, duties, and obligations of the parties hereto
shall not be assignable by either party hereto without the prior written consent
of the other, and any purported assignment shall be void.
11.WAIVER
No waiver by either party of any default by the other in the performance of any
promise, term, or condition of this Agreement shall be construed to be a waiver
by such party of any other or subsequent default in performance of the same or
any other covenant, promise, term, or condition hereof. No p rior transactions
or dealings between the parties shall be deemed to establish any custom or usage
waiving or modifying any provision hereof.
12.NOTIFICATION OF CLAIMS, DEMANDS, OR ACTIONS
Each party hereto shall promptly notify the other in writing of any claims,
demands, or actions having any bearing on this Agreement.
13.PERFORMANCE IN ACCORDANCE WITH LAW
Each party agrees to perform its obligation hereunder in accordance with all
applicable laws, rules, and regulations now or hereafter in effect.
14.BINDING AGREEMENT
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, their successors, and permitted assigns.
15.ACTS BEYOND THE CONTROL OF THE PARTIES
No liability shall result to either party, nor shall either party be deemed to
be in default hereunder, as a result of delay in its performance or from its
non-performance hereunder caused by circumstances beyond its control, including
but not limited to: act of God, act of war, riot, epidemic, fir e, flood, or
other disaster, or act of government. Nevertheless, the party shall be required
to be diligent in attempting to remove such cause or causes.
16.RELATIONSHIP OF THE PARTIES
Each of the parties will act as an independent contractor under the terms of
this Agreement and neither is now, or in the future, an agent, or a legal
representative of the other for any purposes. Neither party has any right or
authority to supervise or control the activities of the other party's e mployees
in connection with the performance of this Agreement or to assign or create any
application of any kind, express, or implied, on behalf of the other party or to
bind it in any way, to accept any services of process upon it or to receive any
notice of any nature whatsoever on its behalf.
17.ARBITRATION
Any controversy relating to this Agreement shall be determined by arbitration in
the City of Minneapolis, Minnesota, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. All parties agree to
be bound by the results of this arbitration; judgment upon the aware so rendered
may be entered and enforced in any court of competent jurisdiction.
18.TERMINATION
This agreement shall automatically terminate upon breach by either party or any
of the terms and conditions hereof, or upon the dissolution, bankruptcy, or
insolvency of either party. This Agreement may be terminated by either party at
any time upon written notice. Termination shall not affect Ge neral Agent's
right to any compensation earned on premiums received and accepted by Life
Company prior to the effective date of such termination.
19.GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Minnesota.
20.CAPTIONS
Captions contained in this Agreement are for reference purposes only and do not
constitute part of this Agreement.
21.NOTICE
All notices which are required to be given or submitted pursuant to this
Agreement shall be in writing and shall be deemed given when deposited with the
United States Postal Service, postage prepaid, registered or certified mail,
return receipt requested, to the last address of record of the party being
notified which is maintained by the other party in the ordinary course of
business.
IN WITNESS WHEREOF, the parties have executed this Agreement in Minneapolis,
Minnesota on _______________________, 19 _____.
GENERAL AGENT:
___________________________________________
Name of Broker Dealer
By ________________________________________
___________________________________________
Print Name and Title
___________________________________________
Name of Life Agent of Agency
By ________________________________________
___________________________________________
Name and Title
NALAC FINANCIAL PLANS, LLC
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
By _____________________________
________________________________
Name and Title
[ALLIANZ LOGO]
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
ACCIDENTAL DEATH RIDER
This rider provides extra benefits if the Insured has an accident that results
in his or her death. The extra benefit is based on the BENEFIT AMOUNT for this
rider shown on the Coverage Page of the policy. The amount of the extra benefit
depends on the type of accident.
- --------------------------------------------------------------------------------
AMOUNT OF THE BENEFIT
We will pay the Benefit Amount when we receive proof of the Insured's death from
an accidental bodily injury. This injury must be the sole and direct cause of
death. Death must occur:
- - within 120 days after the injury; and
- - while this rider is in effect
- --------------------------------------------------------------------------------
COMMON CARRIER ACCIDENT
The benefit will be 2 times the Benefit Amount if the injury causing death
occurs while the Insured is a fare-paying passenger in a licensed, public
transportation vehicle operated by a common carrier. If the vehicle is an
aircraft, it must be a commercial passenger aircraft on a regularly scheduled
flight and route.
This benefit will be in addition to any other benefits payable under the policy.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
INJURIES WE WILL NOT COVER
There will be no benefits if death results directly or indirectly from:
- - intentionally self-inflicted injuries, or suicide, while either sane
or insane; or
- - any act or incident of war, declared or not; or
- - descent from an aircraft in flight; or travel in an aircraft as a
pilot, crew member or other person having duties in the aircraft.
- --------------------------------------------------------------------------------
OUR RIGHT TO EXAMINE THE BODY
We have the right to examine the Insured's body after his or her death. We can
require an autopsy, at our expense, except as prohibited by law.
- --------------------------------------------------------------------------------
WHEN THIS RIDER TERMINATES
This rider terminates upon the earlier of:
- - the policy anniversary on or following the Insured's 65th birthday; or
- - the date the policy terminates.
The Owner may terminate this rider on any monthly anniversary date by making a
written request accompanied by the policy.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTIONS
Monthly deductions for this rider are shown on the Coverage Page of the policy.
- --------------------------------------------------------------------------------
THE CONTRACT
This rider is part of the policy to which it is attached. We have issued this
rider in exchange for the application and the payment of premiums. The premium
for this rider is shown on page 3 of the policy. While this rider is in effect,
premiums are due according to the terms of the policy. Any premium we receive
for this rider after it has terminated will be refunded.
All policy provisions apply to this rider except for any which are in conflict
with the provisions of this rider.
The LIMITATIONS ON CONTESTING THE POLICY provision applies to this rider except
the period for contest will run from the effective date of this rider if
different from the Issue Date of the policy.
- --------------------------------------------------------------------------------
The issue date of this rider if different from the Issue Date of the policy is
This rider is signed for Allianz Life Insurance Company of North America by
/S/Lowell C. Anderson /S/Alan A. Grove
President Secretary
ADR-VUL
RIDER PROVIDING OPTIONS TO BUY MORE INSURANCE
- --------------------------------------------------------------------------------
More insurance can be bought on certain option dates without medical
examinations or other proof that the Insured is still an acceptable risk.
- --------------------------------------------------------------------------------
OPTION DATES
More insurance can be bought on any regular option date. Or an alternate option
may be substituted for the last available regular option. The table below shows
the number of options this rider provides based on the Insured's age when this
rider is issued.
REGULAR OPTION DATES. There will be a regular option date on each rider
anniversary that occurs while the Insured is at the age shown.
<TABLE>
<CAPTION>
Insured's Age When Total Number Regular Option Dates
This Rider of Options (Rider Anniversary at
Is Issued Available Insured's Age):
- ---------------------- ----------------------- ------------------------
<S> <C> <C>
22 or younger 6 25 28 31 34 37 40
23 6 26 29 32 35 38 41
24 6 27 30 33 36 39 42
25 5 28 31 34 37 40
26 5 29 32 35 38 41
27 5 30 33 36 39 42
28 4 31 34 37 40
29 4 32 35 38 41
30 4 33 36 39 42
31 3 34 37 40
32 3 35 38 41
33 3 36 39 42
34 2 37 40
35 2 38 41
36 2 39 42
37 1 40
38 1 41
39 1 42
</TABLE>
ALTERNATE OPTION DATES
A family event alternate option is available on the day any of these events
occurs:
- - The Insured's marriage. The marriage must result from a marriage ceremony
conducted by a third person with legal authority to do so.
- - The birth of each of the Insured's children. Multiple births provide multiple
options. For instance, two options would be available upon the birth of
twins.
- - The Insured's legal adoption of a child. The option day is the day the
adoption becomes final.
Also, a home purchase alternate option is available when real estate is bought
as the Insured's principle residence.
And a career achievement alternate option is available on the date:
- - the Insured is awarded a Masters or Doctoral degree from a school
accredited by its Regional Association for Schools and Colleges; or
- - the Insured begins a required period of residence of practice as a medical
doctor, dentist, osteopath or veterinarian.
No more than one home purchase option nor one career achievement option may be
used.
Except for the birth of the Insured's children, no more than one alternate
option may be used per calendar year.
The event creating the alternate option must occur on or before the last
available regular option date. We can require satisfactory proof that such event
has occurred.
HOW TO USE THE OPTIONS
While this rider is in effect, each option allows the purchase of a new life
insurance policy. We require a written application and payment of the new
policy's first premium:
- - on or within 60 days BEFORE a regular option date.
- - within 90 days AFTER an alternate option date.
- --------------------------------------------------------------------------------
ABOUT THE NEW POLICIES
TYPE OF POLICY. The new policy can be any non-participating insurance policy we
offer on the option date. But the policy must have a level face amount and level
guaranteed premium. By LEVEL, we mean the face amount and guaranteed premium do
not change while the policy is in effect. A non-renewable term policy may only
be selected on a regular option date.
TERM RIDER. If this policy includes a level or decreasing term rider the new
policy may, at the Owner's option, contain a level or decreasing term rider. The
initial amount of the term rider cannot be more than the new policy's face
amount or the initial amount of the term rider attached to this policy,
whichever is less.
AMOUNT. The new policy with term rider can have any initial amount from $20,000
up to the benefit amount shown for this rider on the Coverage Page of this
policy. But we will not issue a new policy if the face amount would be less than
our then minimum issue amount for the plan selected.
PREMIUM RATE. The premium for the new policy will be at our rate on the option
date for the Insured's age on that date. The general risk classification for the
new policy will be the same as for this policy, as shown on the Coverage Page.
But our consent is needed for a preferred risk or non-smoker classification.
POLICY PROVISIONS. Each new policy takes effect on the day we receive the
completed application and first premium at our Dallas office. The suicide
provision in the new policy will be effective from the new policy's issue date.
The provision on contesting the new policy will be effective from this rider's
issue date. The new policy will contain any exclusions that apply to this
policy.
ACCIDENTAL DEATH BENEFIT RIDER. If this policy includes benefits for accidental
death, the new policy may, at the Owner's option, contain the same benefits. The
amount of such benefits in the new policy cannot be more than the new policy's
face amount or the amount of such benefits in this policy, whichever is less.
And in no event can the total accidental death benefit issued under our policies
on the Insured's life exceed our then maximum limits.
DISABILITY BENEFIT RIDER. If this policy includes a benefit that credits
payments to the policy during the Insured's total disability, the new policy
may, at the Owner's option, contain the same benefit. The amount of the monthly
disability benefit provided by the rider on the new policy cannot be larger than
9% of the annual premium for the new policy. And in no event can the total
amount of monthly disability benefits provided by disability benefit riders
issued under our policies on the Insured's life exceed our then maximum limits.
The benefit in the new policy will not apply for a disability resulting from an
injury which occurs or a disease which starts before the new policy's Issue
Date. But the benefit will apply if under the new policy:
- - premiums are payable until the new policy's Maturity Date; and
- - if premiums are paid until maturity, the guaranteed cash value will not equal
or exceed the new policy's face amount until the policy anniversary on or
following the Insured's 95th birthday.
OTHER RIDERS. Except for the term, accidental death benefit and disability
benefit riders as described above, our consent is needed to add other riders to
the new policy.
- --------------------------------------------------------------------------------
TEMPORARY TERM INSURANCE ON ALTERNATE OPTION DATES
While this rider is in effect, we will provide temporary term insurance on the
Insured's life for 90 days starting from each alternate option date. This term
insurance is paid if the Insured dies during the 90-day period and the alternate
option was available but not used. The amount of term insurance equals the
benefit amount shown for this rider on the Coverage Page of this policy.
- --------------------------------------------------------------------------------
WHEN THIS RIDER TERMINATES
This rider terminates at midnight on the last available regular option date.
This rider will terminate before then if any of the following occurs sooner:
- - the total number of available options is used;
- - the plan or face amount of this policy is changed; or
- - the policy terminates.
The Owner may terminate this rider on any monthly anniversary date by sending us
a written request together with the policy.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTIONS
Monthly deductions for this rider are shown on the Coverage Page of the policy.
- --------------------------------------------------------------------------------
THE CONTRACT
This rider is part of the policy to which it is attached. We have issued this
rider in exchange for the application for it and the payment of premiums. The
premium for this rider is shown on the Coverage Page of the policy. While this
rider is in effect, premiums are due according to the terms of the policy. Any
premium we receive for this rider after it has terminated will be refunded.
All policy provisions apply to this rider except for any which are in conflict
with the provisions of this rider.
The LIMITATIONS ON CONTESTING THE POLICY provision applies to this rider except
the period for contest will run from the Issue Date of this rider if different
from the Issue Date of the policy.
- --------------------------------------------------------------------------------
The issue Date of this rider if different from the Issue Date of the policy is
This rider is signed for Allianz Life Insurance Company of North America by
/S/Lowell C. Anderson /S/Alan A. Grove
President Secretary
GIO-VUL
SPOUSE'S TERM LIFE INSURANCE RIDER
- --------------------------------------------------------------------------------
In this rider, the INSURED means the person Insured under the policy as named on
the Coverage Page of the policy. The INSURED SPOUSE is the Spouse named in the
application for this rider.
- --------------------------------------------------------------------------------
THE BENEFIT WE WILL PAY
If the Insured Spouse dies while this rider is in force, we will pay the
beneficiary of this rider the benefit amount shown for this rider on the
Coverage Page of the policy when we receive proof of the death. Payment of this
benefit is subject to the terms of this rider.
This benefit will be in addition to any other benefits payable under the policy.
- --------------------------------------------------------------------------------
WHEN THIS RIDER TERMINATES
This rider terminates upon the earliest of:
- - the expiration date for this rider (the rider anniversary on or following the
Insured spouse's 95th birthday or the Maturity Date of the policy, if
earlier); or
- - the date this rider is exchanged for a whole life, universal life, variable
universal life or endowment insurance policy on the life of the Insured
Spouse; or
- - the date of the Insured Spouse's death; or
- - the date the policy terminates.
The Owner may cancel this rider on any monthly anniversary date by sending us a
written request accompanied by the policy.
- --------------------------------------------------------------------------------
THE BENEFICIARY
The Insured is the beneficiary of this rider if no other beneficiary is named.
If no beneficiary is living when the Insured Spouse dies, the beneficiary will
be the Insured Spouse's estate.
- --------------------------------------------------------------------------------
RIGHT TO EXCHANGE FOR WHOLE LIFE, UNIVERSAL LIFE, VARIABLE UNIVERSAL LIFE,
OR ENDOWMENT INSURANCE
This rider may be exchanged for a whole life, universal life, variable universal
life or endowment insurance policy on the life of the Insured Spouse without
evidence of insurability, subject to the following terms.
- --------------------------------------------------------------------------------
REQUIREMENTS TO EXCHANGE THE INSURANCE UNDER THIS RIDER
The exchange may be made on the earlier of:
- - any time before the Insured Spouse reaches age 81; or
- - within 31 days after the date the policy and this rider terminates as a result
of the Insured's death or maturity of the policy.
If the Insured spouse dies within the 31 day period for making an exchange after
the Insured's death or the maturity of the policy before an exchange has been
made, we will pay the benefit amount for this rider.
Except for an exchange after the Insured's death or maturity of the policy, the
policy and this rider must be in effect on the date of the exchange, but they
may not be in effect under the Grace Period provision. We must receive a written
request for the exchange and the first premium for the new policy within 31 days
of the date of the exchange. The Insured Spouse must be alive on both the day
the request is made and the day the exchange takes effect. Coverage under this
rider terminates when the exchange is made.
- --------------------------------------------------------------------------------
ABOUT THE NEW POLICY
The new policy may be any whole life, universal life, variable universal life or
endowment insurance policy that we issue at the time of the exchange. At least
one plan of insurance will be available under this right of exchange. The new
policy may be for any amount up to the benefit amount for this rider. But we are
not required to issue a new policy if the face amount would be less than our
minimum issue amount for the plan selected.
The Issue Date of the new policy will be the date the exchange is made. The
issue age under the new policy will be based on the Insured Spouse's age at that
time. The risk classification for the new policy will be the same as shown for
this rider on the Coverage Page of this policy. Premiums for the new policy will
be based on premium rates we are using when the exchange is made.
The periods specified for applying the SUICIDE and LIMITATIONS ON CONTESTING THE
POLICY provisions in the new policy will run from the issue date of this rider.
If we agree, a disability benefit rider and an accidental death benefit rider
can be added to the new policy. Adding these riders will be subject to our
requirements at the time of the exchange.
- --------------------------------------------------------------------------------
EARLIER ISSUE DATE
An issue date that is earlier than the date the exchange is made can be selected
for the new policy. But the date chosen cannot be earlier than this rider's
issue date. Any exchange on this basis is subject to our approval and the
requirements and payments we may determine.
- --------------------------------------------------------------------------------
OTHER PROVISIONS
SUICIDE
If the Insured Spouse commits suicide, while sane or insane, within two years
from the issue date of this rider, the only benefit we will pay under this rider
will be the total premiums paid for the rider. If the law of the state where
this rider is delivered provides a shorter period, that law will govern.
We will pay this benefit in one sum to the beneficiary under this rider. This
rider will then terminate.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTIONS
To determine the monthly deduction for each month of coverage provided under
this rider we multiply:
- - the benefit amount for this rider shown on the Coverage Page of the
policy; by
- - the cost of insurance for spouse's insurance coverage for that month.
The cost of insurance rate for spouse's insurance coverage for a rider month
equals the sum of:
- - the standard cost of insurance rate for that month from the table of standard
cost of insurance rates for spouse's insurance coverage declared by our Board
of Directors (the declared standard cost of insurance rate for spouse's
insurance coverage); and
- - an appropriate additional rate for any extra mortality risk classification
that applies to the Insured spouse as shown on the Coverage Page of the
policy.
The additional rate for any rider month for an extra mortality risk
classification equals the amount of extra mortality that the risk classification
represents for that month.
The total cost of insurance rate for Spouse's insurance coverage for a rider
month will be uniform for all Insured Spouses of the same issue age, sex and
risk classification whose riders have been in force the same length of time.
We may change the declared standard cost of insurance rates for spouse's
insurance coverage from time to time based on our expectations as to future
mortality experience. Any change we make will apply to all riders in the same
risk classification.
The declared standard cost of insurance rates for Spouse's insurance coverage
for each rider month will not be more than the amounts shown in the table below.
The table is based on the Insured Spouse's age last birthday at the beginning of
each rider year (attained age), the Insured Spouse's sex, and whether or not the
Insured Spouse has qualified for the non-smoker classification.
<TABLE>
<CAPTION>
Table of Guaranteed Maximum Standard Monthly Cost of Insurance Rates per $1,000
of Spouse's Insurance Coverage
FEMALE MALE
ATT. STANDARD STANDARD
AGE NON-SMO. STANDARD NON-SMO. STANDARD
- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
15 .07 .12
16 .08 .13
17 .08 .14
18 .08 .15
19 .09 .16
20 .08 .10 .14 .19
21 .09 .10 .14 .19
22 .09 .10 .14 .19
23 .09 .10 .13 .19
24 .09 .11 .13 .18
25 .09 .11 .13 .18
26 .09 .11 .12 .17
27 .10 .12 .12 .17
28 .10 .12 .12 .17
29 .10 .13 .12 .17
30 .10 .13 .12 .18
31 .11 .14 .12 .18
32 .11 .14 .13 .19
33 .12 .15 .13 .20
34 .12 .16 .14 .21
35 .13 .17 .14 .23
36 .13 .18 .15 .24
37 .14 .20 .16 .26
38 .16 .22 .17 .29
39 .17 .24 .18 .31
40 .18 .26 .20 .35
41 .20 .29 .21 .38
42 .21 .32 .23 .42
43 .23 .34 .25 .45
44 .24 .37 .27 .50
FEMALE MALE
ATT. STANDARD STANDARD
AGE NON-SMO. STANDARD NON-SMO. STANDARD
- ------- -------- -------- -------- --------
45 .26 .40 .29 .55
46 .28 .43 .31 .60
47 .29 .46 .34 .64
48 .31 .49 .36 .71
49 .34 .53 .39 .77
50 .36 .57 .43 .84
51 .39 .61 .47 .92
52 .42 .65 .51 1.00
53 .46 .71 .57 1.11
54 .49 .76 .62 1.22
55 .53 .81 .69 1.33
56 .57 .87 .76 1.46
57 .61 .92 .83 1.59
58 .65 .97 .92 1.73
59 .69 1.02 1.01 1.87
60 .74 1.09 1.12 2.04
61 .80 1.16 1.23 2.23
62 .88 1.27 1.37 2.45
63 .97 1.39 1.52 2.68
64 1.08 1.53 1.69 2.95
65 1.20 1.68 1.88 3.22
66 1.32 1.83 2.08 3.51
67 1.44 1.97 2.29 3.82
68 1.57 2.12 2.53 4.14
69 1.71 2.28 2.80 4.49
70 1.88 2.47 3.10 4.88
71 2.08 2.71 3.44 5.31
72 2.33 3.01 3.84 5.81
73 2.64 3.36 4.29 6.37
74 2.98 3.77 4.79 6.98
75 3.38 4.21 5.33 7.64
76 3.80 4.69 5.91 8.32
77 4.26 5.19 6.51 9.01
78 4.76 5.73 7.15 9.71
79 5.32 6.31 7.85 10.45
80 5.96 6.97 8.62 11.26
81 6.70 7.73 9.50 12.15
82 7.56 8.60 10.50 13.16
83 8.55 9.61 11.63 14.26
84 9.65 10.73 12.86 15.43
85 10.86 11.93 14.18 16.62
86 12.17 13.21 15.57 17.80
87 13.59 14.57 17.00 19.04
88 15.13 16.01 18.49 20.35
89 16.79 17.53 20.04 21.01
90 18.61 19.26 21.69 23.03
91 20.64 21.16 23.49 24.47
92 22.97 23.32 25.50 26.17
93 25.80 25.94 27.96 28.41
94 29.59 29.59 31.38 31.56
</TABLE>
THE CONTRACT
This rider is part of the policy to which it is attached. We have issued this
rider in exchange for the information provided in the application for it and the
payment of premiums.
The premiums for this rider are shown on the Coverage Page of the policy. While
this rider is in effect, premiums are due according to the terms of the policy.
All policy provisions apply to this rider, except for any which are in conflict
with the provisions of this rider.
The REINSTATEMENT provision of the policy applies to this rider. But the
requirement for proof of insurability applies to the Insured Spouse, and it is
based on the risk classification shown for this rider on the Coverage Page of
the policy. Any additional premium required to reinstate this rider with the
policy must be paid with the premium paid to reinstate the policy. This rider
can not be reinstated:
- - if the policy is not reinstated; or
- - after the Insured Spouse's death; or
- - after the expiration date for this rider.
The LIMITATIONS ON CONTESTING THE POLICY provision of the policy applies to this
rider. But it applies to misrepresentations concerning the insured Spouse in the
application for this rider. And the period for contesting this rider will run
from the issue date of this rider, if different from the issue date of the
policy.
The MISSTATEMENT OF AGE OR SEX and MISSTATEMENT OF TOBACCO USE provisions of the
policy apply to this rider. But they apply to misstatements concerning
the Insured Spouse in the application for this rider. Any adjusted benefit
for this rider will be based on the last monthly deduction made for this rider.
If the Insured Spouse dies while this rider is in effect during a grace period,
we will deduct the premium that would have been required to keep the policy from
terminating at the end of the grace period, as described in the policy, from the
death benefit. We will credit the amount we deduct to the Policy Account as of
the date we receive proof of the Insured spouse's death.
- --------------------------------------------------------------------------------
The Issue Date of this rider if different from the Issue Date of the policy is
This rider is signed for Allianz Life Insurance Company of North America by
/S/Lowell C. Anderson /S/Alan A. Grove
President Secretary
STR-VUL
SPOUSE DISABILITY BENEFIT RIDER
- --------------------------------------------------------------------------------
During the Insured Spouse's total disability, we will credit payments to the
Policy Account subject to the terms of this rider. We will credit these
payments on each monthly anniversary date. The payments will be allocated to the
sub-accounts of the Variable Account and to the Fixed Account according to the
premium allocation percentages then in effect.
- --------------------------------------------------------------------------------
MEANING OF TOTAL DISABILITY
For a disability to be a total disability, it must:
- - result from bodily injury or disease;
- - start while this rider is in effect;
- - continue for at least 4 months; and
- - prevent the Insured Spouse from working at an occupation for compensation
or profit.
For the first 24 months of disability, OCCUPATION means the Insured spouse's
occupation when disability started. Afterwards, it is any occupation for which
he or she is reasonably suited by education, training or experience.
The phrase PREVENT THE INSURED SPOUSE FROM WORKING means the inability of the
Insured Spouse to perform the substantial and material duties of an
occupation.
- --------------------------------------------------------------------------------
PERMANENT LOSS
The following are considered total disabilities as soon as they happen. They
need not prevent the Insured Spouse from working.
- - permanent and total loss of sight of both eyes.
- - permanent and total loss of use of both hands or both feet.
- - permanent and total loss of use of one hand and one foot.
- - permanent and total loss of sight of one eye and of use of either one
hand or one foot.
- --------------------------------------------------------------------------------
HOW TO MAKE A CLAIM FOR BENEFITS
Send written notice of the Insured Spouse's total disability to our Dallas
office. Before any payment is credited, proof of total disability must be
received at our Dallas office:
- - while the policy and this rider are in effect;
- - during the Insured Spouse's lifetime;
- - while the total disability continues; and
- - before the policy anniversary on or following the Insured Spouse's
60th birthday.
- --------------------------------------------------------------------------------
THE PAYMENT AMOUNT WE WILL CREDIT
The Monthly Payment Amount we will credit under this rider is shown on the
Coverage Page of the policy. We will credit the Monthly Payment Amount on each
monthly anniversary date during the Insured Spouse's total disability.
- --------------------------------------------------------------------------------
WHEN WE WILL START TO CREDIT PAYMENTS
We will start to credit payments when we receive proof of the Insured Spouse's
total disability. The payments will be credited from the next monthly
anniversary date after the Insured Spouse's total disability started.
But we will not credit payments for more than 4 months prior to the date we
receive notice of any total disability.
If the Insured Spouse suffers a PERMANENT LOSS, we will credit the Monthly
Payment Amount beginning the next monthly anniversary date after the total
disability started.
If a disability must continue for at least 4 months to be considered a total
disability, payments for the first 4 months of the disability will be credited
at the end of that period. Afterwards, payments will be credited monthly.
- --------------------------------------------------------------------------------
HOW LONG WE WILL CREDIT PAYMENTS
As long as the total disability continues, we will credit payments until the
date the policy terminates.
- --------------------------------------------------------------------------------
DISABILITIES FOR WHICH WE WILL NOT CREDIT PAYMENTS
We will not credit payments if disability results from:
- - a bodily injury received or a disease contracted while this rider is
not in effect; or
- - intentionally self-inflicted injuries; or
- - descent from any aircraft while in flight; or
- - any act or incident of war, declared or not.
However, no claims for disability (as defined in this rider) commencing after
two years from the Issue Date of this rider will be reduced or denied on the
ground that a disease or physical condition has existed prior to the effective
date of this rider.
- --------------------------------------------------------------------------------
RECOVERY FROM DISABILITY
Before crediting any payment, we may require proof that the Insured Spouse is
still disabled. If proof is not given when requested, no further payments will
be credited. After 2 full years of disability, we will not require proof more
often than once a year.
No further payments will be credited if the Insured Spouse returns to work at an
occupation, unless he or she has suffered one of the losses listed under
PERMANENT LOSS above.
- --------------------------------------------------------------------------------
WHEN THIS RIDER TERMINATES
This rider terminates upon the earlier of:
- - the policy anniversary on or following the Insured Spouse's 60th
birthday; or
- - the date the policy terminates.
The Owner may terminate this rider on any monthly anniversary date by making a
written request accompanied by the policy. After this rider terminates, we will
still consider claims for any disability that starts before this rider
terminates. But we must receive notice of any such disability within 5 months
after the rider terminates.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTIONS
Monthly deductions for this rider are shown on the Coverage Page of the policy.
- --------------------------------------------------------------------------------
THE CONTRACT
This rider is part of the policy to which it is attached. We have issued this
rider in exchange for the application for it and the payment of premiums. The
premium for this rider is shown on the Coverage Page of the policy. While this
rider is in effect, premiums are due according to the terms of the policy. Any
premium we receive for this rider after it has terminated will be refunded.
All policy provisions apply to this rider except for any which are in conflict
with provisions of this rider.
The LIMITATIONS ON CONTESTING THE POLICY provision applies to this rider except
the period for contest will run from the effective date of this rider if
different from the Issue Date of the policy.
- --------------------------------------------------------------------------------
The issue date of this rider if different from the Issue Date of the policy is
This rider is signed for Allianz Life Insurance Company of North America by
/S/Lowell C. Anderson /S/Alan A. Grove
President Secretary
SDBR-VUL
CHILDREN'S TERM LIFE INSURANCE RIDER
- --------------------------------------------------------------------------------
In this rider, the INSURED means the person insured under the policy as named on
the Coverage Page of the policy.
- --------------------------------------------------------------------------------
THE BENEFITS WE WILL PAY
If an Insured Child dies while this rider is in force, we will pay the
beneficiary of this rider the benefit amount shown for this rider on the
Coverage Page of the policy when we receive proof of the death. We will pay the
benefit amount on the death of each insured child. Payment of this benefit is
subject to the terms of this rider.
These benefits will be in addition to any other benefits payable under the
policy.
- --------------------------------------------------------------------------------
INSURED CHILDREN
An INSURED CHILD is any child of the Insured under age 21 named in the
application for this rider. Any legally adopted child of the Insured or any
stepchild who lives with the Insured and the Insured's spouse at least six
months each year may also be an Insured Child.
Any child born to or legally adopted by the Insured after the date of the
application will also become an Insured Child once he or she is 14 days old, but
only if:
- - the policy and this rider are in effect when the child is born or
adopted; and
- - the child is under the age of 18 when adopted.
Any child who becomes a stepchild of the Insured after the date of the
application will also be an Insured Child, but only if:
- - the policy and this rider are in effect when the child becomes a
stepchild of the Insured;
- - the child is under the age of 18 when he or she becomes a stepchild of
the Insured;
- - at the time the child becomes a stepchild of the Insured, the child will be
living with the Insured and the Insured's spouse at least six months each
year.
Any child who ceases to be a stepchild of the Insured will no longer be an
Insured Child (unless he or she is adopted by the Insured).
The insurance on each Insured Child will expire on the rider anniversary on or
following his or her 21st birthday.
- --------------------------------------------------------------------------------
WHEN THIS RIDER TERMINATES
This rider terminates when the policy terminates.
The owner may cancel this rider on any monthly anniversary date by sending us a
written request accompanied by the policy.
- --------------------------------------------------------------------------------
THE BENEFICIARY
The Insured is the beneficiary of this rider if no other beneficiary is named.
If no beneficiary is living when an Insured Child dies, the beneficiary will be
the estate of the Insured Child on whose death a benefit is being paid.
- --------------------------------------------------------------------------------
RIGHT TO EXCHANGE FOR WHOLE LIFE, UNIVERSAL LIFE, VARIABLE UNIVERSAL LIFE OR
ENDOWMENT INSURANCE
The insurance on each Insured Child may be exchanged for a whole life, universal
life, variable universal life or endowment insurance policy on that child's life
without evidence of insurability, subject to the following terms.
- --------------------------------------------------------------------------------
REQUIREMENTS TO EXCHANGE AN INSURED CHILD'S INSURANCE
The insurance on each Insured Child may be exchanged any time before the child
ceases to be an Insured Child under this rider. The policy and this rider must
be in effect on the date of the exchange, but they may not be in effect under
the Grace Period provision. We must receive a written request for the exchange
and the first premium for the new policy within 31 days of the date of the
exchange. the Insured Child whose insurance is exchanged must be alive on both
the day the request is made and the day the exchange takes effect. Once the
insurance on the Insured Child has been exchanged, that child will no longer be
an Insured Child under this rider, and the coverage for that child under this
rider will terminate.
- --------------------------------------------------------------------------------
ABOUT THE NEW POLICY
The new policy may be any whole life, universal life, variable universal life or
endowment insurance policy that we issue at the time of the exchange. Except for
an exchange by a 21 year old Insured Child or an exchange upon the Insured's
death, the new policy may be for any amount up to the benefit amount for this
rider. But we are not required to issue a new policy on the plan selected if the
face amount would be less than our minimum issue amount for the plan selected.
However, regardless of minimum issue requirements, we will offer at least one
plan of insurance under this right of exchange.
The issue date of the new policy will be the date the exchange is made. the
issue age under the new policy will be based on the Insured Child's age at that
time. The risk classification for the new policy will be the same as shown for
this rider on the Coverage Page of this policy. Premiums for the new policy will
be based on premium rates we are using when the exchange is made.
The periods specified for applying the SUICIDE and LIMITATIONS ON CONTESTING THE
POLICY provisions in the new policy will run from the issue date of this rider.
If we agree, a disability benefit rider and an accidental death rider can be
added to the new policy. Adding these riders will be subject to our requirements
at the time of the exchange.
EXCHANGE BY A 21 YEAR OLD INSURED CHILD. The insurance on each Insured Child may
be exchanged on the rider anniversary on or following his or her 21st birthday,
or within 31 days afterwards. In this case the new policy may be for any amount
up to the lesser of $50,000 or five times the benefit amount for this rider. If
an Insured Child dies during the 31 day period for making an exchange before an
exchange has been made, we will pay the benefit amount for this rider.
EXCHANGE UPON THE INSURED'S DEATH. The insurance on each Insured Child may be
exchanged within 31 days after the date the policy and this rider terminates as
a result of the Insured's death. In this case the new policies may be for any
amount up to the lesser of $50,000 or five times the benefit amount for this
rider. If an Insured Child dies during the 31 day period for making an exchange
before an exchange has been made, we will pay the benefit amount for this rider.
- --------------------------------------------------------------------------------
EARLIER ISSUE DATE
An issue date that is earlier than the date the exchange is made can be selected
for the new policy. But the date chosen cannot be earlier than this rider's
issue date. Any exchange on this basi s is subject to our approval and the
requirements and payments we may determine.
- --------------------------------------------------------------------------------
OTHER PROVISIONS
SUICIDE
If an Insured Child commits suicide, while sane or insane, within two years from
the issue date of this rider, the only benefit we will pay under this rider for
that child's death will be an amount equal to the total premiums paid for this
rider. We will pay this benefit in one sum to the beneficiary of this rider. If
the law of the state where this rider is delivered provides a shorter period,
that law will govern.
- --------------------------------------------------------------------------------
MISSTATEMENT OF AGE
If a child's age is misstated in the application for this rider, we will use the
child's correct age to determine if he or she is an Insured Child.
- --------------------------------------------------------------------------------
MONTHLY DEDUCTIONS
Monthly deductions for this rider are shown on the Coverage Page of the policy.
- --------------------------------------------------------------------------------
THE CONTRACT
This rider is part of the policy to which it is attached. We have issued this
rider in exchange for the information provided in the application for it and the
payment of premiums.
The premiums for this rider are shown on the Coverage Page of the policy. While
this rider is in effect, premiums are due according to the terms of the policy.
All policy provisions apply to this rider, except for any which are in conflict
with the provisions of this rider.
The REINSTATEMENT provision of the policy applies to this rider. But the
requirement for proof of insurability applies to each person who would be an
Insured Child at the time of the reinstatement, and it is based on the risk
classification shown for this rider on the Coverage Page of the policy. Any
additional premium required to reinstate this rider with the policy must be paid
with the premium paid to reinstate the policy. This rider can not be reinstated
if the policy is not reinstated.
If this rider is reinstated, it will not cover any death that occurs between the
date it terminated and the date it is reinstated.
The LIMITATIONS ON CONTESTING THE POLICY provision of the policy applies to this
rider. But it applies separately to misrepresentations concerning each child
named in the application for this rider. And the period for contesting coverage
for a child under this rider will run from the issue date of this rider, if
different from the issue date of the policy.
If an Insured Child dies while this rider is in effect during a grace period, we
will deduct the premium that would have been required to keep the policy from
terminating at the end of the grace period, as described in the policy, from the
death benefit. We will credit the amount we deduct to the Policy Account as of
the date we receive proof of the Insured Child's death.
- --------------------------------------------------------------------------------
The issue date of this rider if different from the Issue Date of the policy is
This rider is signed for Allianz Life Insurance Company of North America by
/S/Lowell C. Anderson /S/Alan A. Grove
President Secretary
CTR-VUL
AMENDED ARTICLES OF INCORPORATION
OF
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
1750 HENNEPIN AVENUE
MINNEAPOLIS, MINNESOTA
(Amended as of March 31, 1993)
* * * * * * * *
ARTICLE I
The name of the corporation shall be Allianz Life Insurance Company of North
America. The principal office and place for the transaction of its business
shall be in the City of Minneapolis, Minnesota.
ARTICLE II
The corporation shall have the power to do any and all of the kinds of insurance
business specified in clauses (4) and (5)(a) of Section 60A.06, Subdivision 1,
of the Minnesota Statutes Annotated and any amendments to such clauses or
provisions in substitute therefore which may be hereafter adopted together with
any kind or kinds of business to the extent necessarily or properly incidental
to the kinds of insurance business which the corporation is so authorized to do.
In furtherance of the foregoing, and not in limitation thereof, the corporation
shall have the power:
1. To make contracts of life and endowment insurance, to grant, purchase, or
dispose of annuities or endowments of any kinds; and in such contracts or in
contracts supplemental thereto to provide for additional benefits in event
of death of the insured by accidental means, total and permanent disability
of the insured, or specific dismemberment or disablement suffered by the
insured.
2. To insure against loss or damage by the sickness, bodily injury or death by
accident of the assured or his dependents.
3. To acquire and carry on all or any part of the business or property of any
corporation engaged in a business similar to that authorized to be conducted
by this corporation and to merge or consolidate with any corporation with
which this corporation shall be authorized to merge or consolidate under the
laws of the State of Minnesota.
4. To acquire, own, hold, buy, sell, lease, mortgage, and in every other manner
deal in real and personal property of every kind and description, wherever
situated, including the shares of stock, bonds, debentures, notes, evidences
of indebtedness, and other securities, contracts, or obligations of any
corporation or corporations, association or associations, domestic or
foreign, and to pay therefore other assets of the corporation, stocks,
bonds, or other evidences of indebtedness or securities of this or any other
corporation.
5. To make such investments, borrow such money, own such property, as may now
or hereafter be permitted to insurance companies under the laws of the State
of Minnesota.
The corporation shall also have the general rights, powers and privileges of a
corporation, as the same now or hereafter are declared by the laws of the State
of Minnesota and any and all other rights, powers and privileges now or
hereafter granted by the laws relating to insurance adopted by the State of
Minnesota or any law or laws of the State of Minnesota applicable to stock life
insurance companies having power to do the kinds of business hereinabove
referred to.
The business of the corporation shall be transacted on the stock plan.
ARTICLE III
The management of the corporation shall be exercised by the Board of Directors
and by such committee, officers, employees, and agents as the Board may
authorize, elect, or appoint. The Board of Directors shall consist of not less
than three (3) nor more than twenty (20) directors in number, the exact number
of directors to be fixed by a resolution to be adopted at any annual meeting of
stockholders or at any special meeting called for that purpose. The number of
directors shall remain as so fixed until changed by the stockholders at any
annual meeting or at any special meeting called for that purpose.
At each annual meeting of the stockholders, Directors shall be elected for a
term of one year. Directors need not be residents of the State of Minnesota.
A director of the corporation shall not be personally liable to the corporation
or its stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for breach of the director's duty of loyalty
to the Company or its shareholders; or (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law; or
(iii) for acts prohibited under Section 300.60 of the Minnesota Statutes; or
(iv) under Subdivision 2 and 3 of Section 300.64 of the Minnesota Statutes; or
(v) for any transaction from which the director derived an improper personal
benefit; or (vi) for any act or omission
occurring prior to the effective date of this amendment. This amendment to the
Articles of Incorporation shall be effective immediately but shall not apply to
or have any effect on the liability or alleged liability of any director or the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
ARTICLE IV
The total authorized capital of the corporation shall be $20,000,000 and shall
be evidenced by 20,000,000 common shares at a par value of one dollar each. The
holders of shares of this corporation shall not have any preemptive or
preferential right of subscription to any of the shares of the corporation, and
the sale of said shares and the terms and conditions of such sale shall be as
authorized and determined by the Board of Directors.
Voting by the holders of common shares in this corporation for the election of
directors shall not be cumulative.
ARTICLE V
In addition to the contingent and accrued contract liabilities of the
corporation, the maximum indebtedness to which it shall be subject at any one
time shall not exceed one-billion dollars ($1,000,000,000).
ARTICLE VI
The duration of the corporation shall be perpetual.
BYLAWS
OF
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
1750 HENNEPIN AVENUE
MINNEAPOLIS, MINNESOTA
(AMENDED AS OF MARCH 31, 1993)
*********************
ARTICLE I. OFFICES
The principal office of the corporation in the State of Minnesota shall be
located in the City of Minneapolis, County of Hennepin. The corporation may have
such other offices, either within or without the State of Minnesota, as the
Board of Directors may designate or as the business of the corporation may
require from time to time.
ARTICLE II. STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders shall be held
on the first Tuesday after the first Monday of the month of May in each year, at
the hour of ten o'clock a.m., or at such other time on such other day as shall
be fixed by the Board of Directors, for the purpose of electing Directors and
for the transaction of such other business as may come before the meeting. If
the election of Directors shall not be held on the day designated herein for any
annual meeting of the stockholders, or at any adjournment thereof, the Board of
Directors shall cause the election of Directors to be held at a special meeting
of the stockholders as soon thereafter as conveniently may be.
If a majority of the shares entitled to be voted shall not be represented at any
meeting of stockholders, the stockholders entitled to vote there, present in
person or represented by proxy, shall have the power to adjourn the meeting,
from time to time, without notice other than announcement at the meeting until
the requisite amount of voting stock shall be represented. Any business may be
transacted which might have been transacted at the meeting as originally
notified. The stockholders, upon the vote of majority of the shares of stock
entitled to be voted, shall have the power to recess or adjourn the meeting from
time to time, without notice other than announcement at the meeting.
Section 2. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statue, may be called by
the Chief Executive Officer or by the Board of Directors, and shall be called by
the Chief Executive Officer at the request of the holders of not less than
one-tenth of all outstanding shares of the corporation entitled to vote at the
meeting.
Section 3. Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Minnesota, as the place of meeting for any
annual meeting or for any special meeting called by the Board of Directors. If
no designation is made, or if a special meeting be otherwise called, the place
of meeting shall be the principal office of the corporation in the State of
Minnesota.
Section 4. Notice of Meeting. Written notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose for which the meeting
is called, shall, unless otherwise prescribed by statue, be delivered not less
than ten (10) nor more than fifty (50) days before the date of the meeting,
either personally or by mail, by or at the direction of the Chief Executive
Officer, or the Secretary, or the office or other persons calling the meeting,
to each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.
Section 5. Closing of Transfer Books or Fixing of Record Date. The Board of
Directors may fix a time not less than twenty (20) days preceding the date of
any meeting of stockholders, any dividend payment date or any date for the
allotment of rights, during which the books of the corporation will be closed
against transfer of stocks. In lieu of providing against transfer of stocks
aforesaid, the Board of Directors may fix a date not less than twenty (20) days
preceding the date of any meeting of stockholders, any dividend payment date or
any date for the allotment of rights, as a record date for the determination of
the stockholders entitled to notice of any to vote at such meeting, or entitled
to receive such dividend or rights, as the case may be.
Section 6. Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of stockholders.
Section 7. Proxies. At all meetings of stockholders, a stockholder may vote in
person or by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting.
Section 8. Voting of Shares. Each outstanding share shall be entitled to one
vote upon each matter submitted to a vote at a meeting of stockholders.
Section 9. Voting of Shares by Certain Holders. Shares standing in the name of
another corporation may be voted by such officer, agent or proxy as the Bylaws
of such corporation may prescribe, or, in the above of such provision, as the
Board of Directors of such other corporation may determine.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the corporation shall be
managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The Board of Directors shall
consist of not less than three (3) nor more than twenty (20) directors in
number, the exact number of Directors to be fixed by a resolution to be adopted
at the annual meeting of stockholders or by a special meeting called for that
purpose.
At each annual meeting, Directors shall be elected for a term of one year and
until their successors shall have been elected and qualified. Directors need not
be residents of the State of Minnesota.
Section 3. Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this Bylaw immediately after, and at the same
place as, the annual meeting of stockholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Minnesota, for the holding of additional regular meetings without other
notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chief Executive Officer or any two Directors.
The person or persons authorized to call special meetings of the Board of
Directors may fix and place, either within or without the State of Minnesota, as
the place for holding any special meeting of the Board of Directors called by
them.
Section 5. Notice. Notice of any special meeting shall be given personally or by
telephoning or telegraphing each Director a notice at least two days in advance
of the day when the meeting is to be held. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Waiver of notice of any meeting shall be in writing and may
be given before or after a meeting. A Director's attendance at a meeting without
protesting prior thereto or at its commencement the lack of notice to him shall
constitute waiver of such notice.
Section 6. Quorum. A majority of the members of the entire Board of Directors
shall constitute a quorum for the transaction of business, but if less than such
majority is present at a meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.
Section 7. Vacancies. Any vacancy occurring on the Board of Directors may be
filled by the affirmative vote of a majority of the remaining Directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be a Director until his successor is elected for the unexpired
term at the next annual meeting of stockholders.
Section 8. Committees. The Board of Directors may, by resolution or resolutions
passed by a majority of the whole Board, designate one or more committees, in
addition to the Executive Committee and the Finance Committee, each committee to
consist of two or more of the Directors of the corporation, which to the extent
provided in said resolutions, or in the Bylaws, shall have and may have and may
exercise, the powers of the Board of Directors in the management of the business
and affairs of the corporation, and may have the power to authorize the seal of
the corporation to be affixed to all papers which may require it. Such committee
or committees shall have such name or names as may be stated in these Bylaws, or
as may be determined from time to time, by resolutions adopted by the Board of
Directors. All committees shall keep regular minutes of their proceedings.
Vacancies in any committee shall be filled by the Board of Directors. All such
reports shall be rendered not later than at the second meeting of the Executive
Committee or the Board of Directors, as the case may be, next succeeding the
action of any such committee. The committee shall fix its own rules of
procedure, and shall meet where and as provided by such rules, or by resolution
of the Board of Directors.
Section 9. Retirement. No person shall serve as a Director of the Company beyond
the meeting of the Board of Directors next following his seventieth (70)
birthday. At such meeting next following his seventieth birthday, such Director
shall submit his resignation from the Board of Directors, which resignation
shall be accepted by the Board of Directors.
Section 10. General Powers. In addition to the powers and authorities by these
Bylaws expressly conferred upon it, the Board may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation, or by these Bylaws directed or required to be
exercised or done by the stockholders.
ARTICLE IV. OFFICERS
Section 1. Number. The executive officers of the corporation shall be the
Chairman of the Board of Directors, the Chief Executive Officer, the Chief
Operating Officer, a President, one or more Divisional Presidents, Chief
Financial Officer, Executive Vice Presidents, Senior Vice Presidents, Vice
President and Second Vice Presidents (the number of such Vice Presidents to be
determined by the Board of Directors), a Secretary, and a Treasurer. The
Chairman of the Board of Directors, the Chief Executive Officer and the Chief
Operating Officer shall be selected from among the members of the Board of
Directors. At their discretion, the Board of Directors may decline to
designate a Chairman of the Board of Directors. Such other executive officer as
may be deemed necessary may be elected by the Board of Directors. Any two or
more officers may be held by the same person.
Section 2. Election and Term of Office. The executive officers of the
corporation to be elected by the Board of Directors shall be elected annually at
the first meeting of the Board of Directors held after each annual meeting of
stockholders. If the election of executive officers shall not be held at such
meeting, such election shall be held as soon thereafter as conveniently may be.
Each executive officer shall hold office until his successor shall have been
duly elected and qualified
Section 3. Appointive Officer. The Chief Executive Officer, subject to the
approval of the Board of Directors, may appoint one or more Assistant Vice
Presidents, and such additional appointive officers as may be designated by the
Chief Executive Officer and approved by the Board.
Section 4. Removal. An executive officer may be removed either for or without
cause by a majority vote of the Board of Directors present at any meeting of the
Board.
Section 5. Vacancies A vacancy in any executive office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 6. Chairman of the Board. The Chairman of the Board of Directors shall
preside at all meetings of the Board of Directors, and shall perform such other
duties as may be assigned to him by the Board. In the event the Board of
Directors has not designated a Chairman of the Board of Directors, or in the
event the Chairman of the Board of Directors is not present, the Chief Executive
Officer shall preside at any such meeting of the Board of Directors.
Section 7. Chief Executive Officer. The Chief Executive Officer shall be elected
from among the members of the Board of Directors, and subject to the control of
the Board of Directors, shall have responsibility for the overall operations of
the corporation. He shall, when present, preside at all meetings of the
stockholders and, in general, carry out such duties as may be prescribed by the
Board of Directors from time to time.
Section 8. Chief Operating Officer. The Chief Operating Officer shall be elected
from among the members of the Board of Directors and shall report to the Chief
Executive Officer. He shall have responsibility for the day-to-day operations of
the corporation and such other duties as may be prescribed by the Chief
Executive Officer or by the Board of Directors from time to time.
Section 9. President. The President shall be elected from among the members of
the Board of Directors. In general , the President shall perform such duties as
may be prescribed by the Chief Executive Officer or by the Board of Directors
from time to time.
Section 10. Divisional President. The Divisional President, or in the event
there may be more than one Divisional President, the Divisional Presidents,
shall perform such duties as may be prescribed by the President, Chief Executive
Officer, or Board of Directors, but shall generally be responsible for the
management of one of the corporation's divisions.
Section 11. Chief Financial Officer. The Chief Financial Officer shall have
supervision over the financial affairs of the corporation and shall perform such
other duties and have such other powers as may from time to time be assigned by
the President, Chief Executive Officer, or Board of Directors.
Section 12. Executive Vice President. The Executive Vice President or in the
event there be more than one Executive Vice President, the Executive Vice
Presidents, shall generally assist the President in the management of the
corporation.
Section 13. Senior Vice Presidents, Vice Presidents and Second Vice Presidents.
The Senior Presidents, Vice Presidents and Second Vice Presidents shall perform
such duties as may be assigned to them by the Chief Executive Officer, the Chief
Operating Officer, or the Board of Directors.
Section 14. Secretary. The Secretary shall keep the minute books and seal of the
corporation, record the minutes of the meetings of the stockholders and the
Board of Directors, and, in general, perform all duties and have all powers
incident to the office of Secretary, and perform such other duties and have such
other powers as from time to time may be assigned to him by these Bylaws, or by
the Board of Directors, or the Chief Executive Officer.
Section 15. Treasurer. The Treasurer shall have supervision over the funds,
securities, receipts and disbursements of the corporation, and, in general,
perform all duties and have all powers incident to the office of Treasurer, and
perform such other duties and have such other powers as from time to time may be
assigned to him by these Bylaws, or by the Board of Directors, or by the Chief
Executive Officer.
Section 16. Compensation. The executive officers and the appointive officers
shall receive such salary or compensation as may be determined by the Board of
Directors. The Board of Directors may delegate to any executive officer the
power to determine salaries or other compensation of any officer appointed in
accordance with Section 3 of ARTICLE IV.
Section 17. Surety Bonds. In case the Board of Directors shall so require, any
officer or agent or the corporation shall execute to the corporation a bond in
such sum and with such surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the corporation,
including responsibility for negligence and for the accounting of all property,
funds or securities of the corporation which may come into his hands.
ARTICLE V. EXECUTIVE COMMITTEE
The Board of Directors, by resolution adopted by a majority of the full Board,
may designate three or more of its members, of which Committee the Chief
Executive Officer shall be a member, to constitute an Executive Committee. The
Board of Directors shall designate a member of the Committee to serve as
Chairman of the Committee. The designation of such Committee and the delegation
thereto of authority shall not operate to relieve the Board of Directors, or
members thereof, of any responsibility imposed by law. Between meetings of the
Board of Directors, it shall have, and may exercise all of the authority of the
Board with the exception of such limitations as may be imposed by the Board or
by the laws of the State of Minnesota. All actions of the Executive Committee
shall be reported to the Board of Directors. All such reports shall be rendered
no later than at the second meeting of the Board of Directors next succeeding
such action of the Executive Committee.
ARTICLE VI. FINANCE COMMITTEE
The Board of Directors, by resolution adopted by a majority of the full Board,
may designate three or more of its members, of whom the Chief Executive Officer
shall be one, to constitute a Finance Committee. The Board of Directors may also
elect from their number one or more alternate members of the Finance Committee
to serve at the meetings of the Committee in the absence of any regular member
or members, and, in case more than one alternate is elected, shall designate at
the time of election the priorities as between them. Vacancies in the Finance
Committee shall be filled by the Board of Directors.
The Finance Committee shall exercise general control and supervision of the
financial affairs and accounts of the corporation. It shall supervise all
investments and loans of the company, including investments in real estate,
policy loans, real estate mortgage loans and investments in housing company
securities. Directly or through such regulations as it may establish, it shall
authorize or approve the making of all investments or loans and all sales or
such investments or loans.
ARTICLE VII. CERTIFICATES FOR SHARE AND THEIR TRANSFER
Section 1. Certificate for Shares. Certificates representing shares of the
corporation shall be in such form as shall be determined by the Board of
Directors. Such Certificates shall be signed by the Chief Executive Officer and
by the Secretary or an Assistant Secretary and sealed with the corporate seal or
facsimile thereof. The signatures of such officers upon a certificate may be
facsimiles if the certificate is manually signed on behalf of the transfer agent
and a registrar, other than the corporation itself or one of its employees. Each
certificate for share shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued therefore upon such
terms and indemnity to the corporation as the Board of Directors may prescribe.
In the event any officer's signature or facsimile signature shall appear on any
certificate and such officer shall have ceased to be such officer prior to the
issue of such certificate, such certificate shall be a valid certificate and
may, nevertheless, be issued and delivered.
Section 2. Transfer of Shares. Transfer of shares of the corporation shall be
made only on the stock transfer books of the corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE VIII. EXECUTION OF INSTRUMENTS
All documents, instruments or writings of any nature shall be signed, executed,
verified, acknowledged and delivered by such officers, agents or employees of
the corporation, or any one of them, and in such manner, as from time to time
may be determined by the Board of Directors.
ARTICLE IX. DIVIDENDS
Dividends shall be declared and paid only out of funds available therefor at
such times and in such amounts as the Board of Directors may determine.
ARTICLE X. CORPORATE SEAL
The seal of the corporation shall be in the form of a circle and shall bear the
name of the corporation and the words "Corporate Seal."
ARTICLE XI. INDEMNIFICATION
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 therein.
BYLAWS CERTIFICATION
I, the undersigned, do hereby certify that I am the duly elected and qualified
Secretary and keeper of the records and corporate seal of Allianz Life Insurance
Company of North America, a corporation organized under the laws of the State of
Minnesota, and that the foregoing is a full, true and correct copy of the
amended Bylaws, duly adopted at the Special Meeting of the Stockholders of said
corporation, convened and held in accordance with the laws and articles and
bylaws of said corporation on the 12th day of February, 1993, and that said
Bylaws supersede all Bylaws previously adopted for the purpose stated and are in
full force and effect.
/s/ ALAN A. GROVE
_________________
Alan A. Grove, Secretary
Allianz Life Insurance Company of North America
(Corporate Seal)
STATE OF MINNESOTA
County of Hennepin
Subscribed and sworn to before me, a Notary Public, in Minneapolis, Minnesota,
this 16th day of March, 1993.
/s/ TINA ERICKSON
______________________
Notary Public
County of Hennepin, State of Minnesota
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 18, 1997
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
Dear Sir or Madam:
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 Variable Account A is a unit investment trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"),
and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of premium payments made by a Policy Owner pursuant
to a Policy issued in accordance with the Prospectus contained in
the Registration Statement and upon compliance with applicable law, such
a Policy 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 22, 1997
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 of Allianz Life Insurance Company of North America and
Policy Owners of Allianz Life Variable Account A:
We consent to the use of our report, dated January 24, 1997, on the financial
statements of Allianz Life Variable Account A and our report dated February 4,
1997, 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 24, 1997
