Registration Nos. 33-15464
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 19
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
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(Name of Depositor)
1750 Hennepin Avenue, Minneapolis, MN 55403-2195
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(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 Single 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, 1998 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.
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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<S> <C>
N-8B-2 Item Caption in Prospectus
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
</TABLE>
CROSS REFERENCE TO ITEMS REQUIRED (cont'd)
BY FORM N-8B-2
<TABLE>
<CAPTION>
<S> <C>
N-8B-2 Item Caption in Prospectus
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
</TABLE>
CROSS REFERENCE TO ITEMS REQUIRED (cont'd)
BY FORM N-8B-2
<TABLE>
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<S> <C>
N-8B-2 Item Caption in Prospectus
49 Not Applicable
50 Not Applicable
51 The Company
52 Franklin Valuemark Funds
53 Tax Status
54 Financial Statements
55 Not Applicable
</TABLE>
SINGLE-PREMIUM VARIABLE LIFE INSURANCE POLICY
Issued By:
Allianz Life Insurance Company
of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
(800) 542-5427
Administered By:
Valuemark Service Center
300 Berwyn Park, P.O. Box 3031
Berwyn, PA 19312
(800) 624-0197
This Prospectus describes a single-premium variable life insurance policy
("Policy" or "Valuemark Life") 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 Allianz Life Variable Account A
("Variable Account"), a separate account of the Company. The Variable Account
invests in shares of Franklin Valuemark Funds (the "Trust"). The following
Portfolios are available: the Capital Growth Fund, the Global Health Care
Securities Fund, the Global Utilities Securities Fund, the Growth and Income
Fund, the High Income Fund, the Income Securities Fund, the Money Market Fund,
the Mutual Discovery Securities Fund, the Mutual Shares Securities Fund, the
Natural Resources Securities Fund, the Real Estate Securities Fund, the Rising
Dividends Fund, the Small Cap Fund, the Templeton Developing Markets Equity
Fund, the Templeton Global Asset Allocation Fund, the Templeton Global Growth
Fund, the Templeton Global Income Securities Fund, the Templeton International
Equity Fund, the Templeton International Smaller Companies Fund, the Templeton
Pacific Growth Fund, the U.S. Government Securities Fund, the Value Securities
Fund and the Zero Coupon Funds - 2000, 2005, and 2010. Prior to May 1, 1998, the
Global Utilities Securities Fund was known as the Utility Equity Fund. IN
CALIFORNIA, THE GLOBAL HEALTH CARE SECURITIES FUND AND THE VALUE SECURITIES FUND
ARE NOT AVAILABLE UNTIL APPROVED BY THE CALIFORNIA INSURANCE DEPARTMENT. (CHECK
WITH YOUR REGISTERED REPRESENTATIVE REGARDING AVAILABILITY.) See "Highlights"
and "Federal Tax Status" for a discussion of owner control of the underlying
investments in a variable life policy.
It may not be advantageous to purchase the Policy as a replacement for another
type of life insurance.
The Policy's single-premium requirement is such that Policies issued on or after
June 21, 1988 are modified endowment contracts. However, if the Policy is funded
by an exchange under IRC Section 1035 and the previous Policy was issued prior
to June 21, 1988, then the Policy may not be deemed to be a modified endowment
contract. Loan proceeds and/or surrenders from modified endowment contracts are
fully taxable to the extent of income in the Policy and may be subject to an
additional 10% federal income tax penalty. (See "Federal Tax Status.")
The Company assesses a sales load through the Deferred Issue Charge. (See
"Deductions and Charges".)
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. In the State of Oregon, all references to "Franklin
Valuemark(R) Life" refer to "Valuemark Life."
Dated: May 1, 1998
Table of Contents Page
DEFINITIONS ...................................... 3
SUMMARY .......................................... 3
THE COMPANY ...................................... 5
THE VARIABLE ACCOUNT ............................. 6
FRANKLIN VALUEMARK FUNDS ......................... 6
General ......................................... 7
Substitution of Securities ...................... 7
PREMIUM PAYMENTS ................................. 7
Single-Premium .................................. 7
Grace Period .................................... 7
Reinstatement ................................... 7
Allocation of Premium ........................... 8
DEDUCTIONS AND CHARGES ........................... 8
Mortality and Expense Risk Charge ............... 8
Administrative Charge ........................... 8
Cost of Insurance ............................... 8
Deferred Issue Charge ........................... 9
Income Tax Charge ............................... 9
Transfer Fee .................................... 9
Trust Annual Expenses ........................... 10
DEATH BENEFIT .................................... 11
Death Benefit ................................... 11
Variable Insurance Amount ...................... 11
Guaranteed Death Benefit ........................ 11
POLICY VALUE, CASH SURRENDER
VALUE AND TRANSFER RIGHTS ....................... 11
Policy Value .................................... 11
Method of Determining
Policy Sub-Account Values ...................... 11
Cash Surrender Value ............................ 11
Transfer Rights ................................. 12
LOAN PROVISIONS .................................. 12
Policy Loan ..................................... 12
Effect of a Loan ................................ 12
Payment of Interest, Loan Repayment
and Policy Lapsation ........................... 13
OWNERSHIP ........................................ 13
Owner ........................................... 13
Transfer of Ownership ........................... 13
Assignment ...................................... 13
BENEFICIARY PROVISIONS ........................... 13
Beneficiary ..................................... 13
Change of Beneficiary ........................... 13
Death of Beneficiary ............................ 14
DELAY OF PAYMENTS ................................ 14
MANAGEMENT OF THE COMPANY ........................ 14
ADMINISTRATION OF THE POLICIES ................... 15
FEDERAL TAX STATUS ............................... 15
Introduction .................................... 15
Diversification ................................. 15
Tax Treatment of the Policy ..................... 16
Policy Proceeds ................................. 16
Tax Treatment of Loans and Surrenders ........... 16
Multiple Policies ............................... 17
Tax Treatment of Assignments..................... 17
Qualified Plans ................................. 17
VARIABLE ACCOUNT VOTING
PRIVILEGES ...................................... 18
Disregard of Voting Instructions ................ 18
DISTRIBUTION OF THE POLICY ....................... 18
REPORTS TO OWNERS ................................ 18
LEGAL PROCEEDINGS ................................ 19
EXPERTS .......................................... 19
LEGAL OPINIONS ................................... 19
FINANCIAL STATEMENTS ............................. 19
APPENDIX A
Illustration of Policy Values ................... 109
APPENDIX B
Table of Net Single-Premium Factors ............. 116
<PAGE>
Definitions
ATTAINED AGE - Age last birthday as of the most recent Policy Anniversary.
BENEFICIARY, CONTINGENT BENEFICIARY - The person or persons who will receive any
death benefit. The Contingent Beneficiary, if any, will become the Beneficiary
should the Beneficiary die prior to the date of death of the Insured.
CASH SURRENDER VALUE - The Policy Value less the sum of the uncollected portion
of any Deductions or accrued Deductions and any Indebtedness.
DEDUCTIONS - Charges levied by the Company in connection with the Policy.
ELIGIBLE PORTFOLIOS - Those investments available under the Policy (referred to
in the Policy as "Eligible Funds").
GENERAL ACCOUNT - The general investment account of the Company which contains
all of the Company's assets, except for the Variable Account and other separate
accounts.
GUARANTEED DEATH BENEFIT - The Company guarantees that the Policy will remain in
force regardless of investment experience, unless the Indebtedness exceeds the
Policy Value less uncollected Deductions. If there is no Indebtedness, the
Policy cannot lapse even if the Policy Value is $0.
INDEBTEDNESS - The amount of any existing Policy loans plus the pro-rata portion
of any accrued interest.
INSURED - The person whose life is covered by the Policy.
ISSUE AGE - Attained Age on the Policy Date.
ISSUE DATE - The month, day and year that underwriting is completed and the
Company issues the Policy.
LOAN ACCOUNT - That portion of the Company's General Account that contains
Policy Values attributable to Policy loans.
OWNER, JOINT OWNER, CONTINGENT OWNER - The Owner is the person having all rights
under the Policy. Joint Owners are two or more natural persons who own the
Policy equally with a right of survivorship. The Contingent Owner is the person
or persons who will own the Policy following the Owner's death or upon the death
of all the Joint Owners.
POLICY DATE - The date when the Insured's life is covered under the Policy.
POLICY PROCESSING DATE - The Policy Date and the same day of the month as the
Policy Date at the end of each successive 3-month period, (or, if that day
should fall on a day beyond the end of any month, then the first day of the next
month). The Policy Processing Date is when the Company deducts charges and
recalculates the death benefit.
POLICY PROCESSING PERIOD - A period of time commencing on any Policy Processing
Date and ending on the day preceding the next Policy Processing Date.
POLICY SUB-ACCOUNT (referred to in the Policy as "Sub-Account") - A segment of
the Variable Account. Each Policy Sub-Account is invested in shares of a
Portfolio of an Eligible Investment.
POLICY VALUE (referred to in the Policy as "Account Value") - The sum of the
Policy Sub-Account values and the Loan Account value attributable to the Policy.
POLICY YEAR, POLICY ANNIVERSARY - The first Policy Year starts on the Policy
Date. Future Policy Years start on the same month and day in each subsequent
year, known as a Policy Anniversary.
SERVICE OFFICE - The Company's Valuemark Service Center shown on the cover page.
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."
Summary
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The Policy
The Policy is a single-premium variable life insurance policy. Upon acceptance,
the premium is allocated to the Variable Account. During the Free-Look Period,
the premium will be allocated to the Money Market Sub-Account (see "Free-Look
Period").
The Policy provides life insurance coverage on the Insured. The Company
guarantees that the Policy will remain in force regardless of investment
experience, unless Indebtedness exceeds the Policy Value less the uncollected
Deductions. If there is no Indebtedness, the Policy cannot lapse even if the
Policy Value is $0.
While the Policy is in force, the Policy Value and, under certain circumstances,
the death benefit, will vary with the investment experience of the Variable
Account. However, as long as the Policy is in force without loan, the death
benefit will never be less than the face amount of insurance at issue.
During the life of the Insured, the Owner can surrender the Policy for the Cash
Surrender Value. The Company does not guarantee any minimum Cash Surrender
Value.
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 (the
"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. For a further discussion,
see "Federal Tax Status - Tax Treatment of the Policy."
Limitations on Surrenders and Loans
The Code alters the tax treatment accorded to loans and certain distributions
from life insurance policies which are deemed to be "modified endowment
contracts."
The Policy's single-premium requirement is such that Policies issued on or after
June 21, 1988 are modified endowment contracts. However, if the Policy is funded
by an exchange under IRC Section 1035 and the previous Policy was issued prior
to June 21, 1988, then the Policy may not be deemed to be a modified endowment
contract.
For modified endowment contracts, partial or full 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 will also be
subject to an additional 10% federal income tax penalty applied to the income.
The penalty shall not, however, apply to any distribution: (1) made on or after
the date on which the taxpayer reaches age 591/2; (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. Policy Owners should consult a tax adviser regarding the
possible tax consequences of loans and/or surrenders from the Policy. (See
"Federal Tax Status - Tax Treatment of Loans and Surrenders.")
The Code further provides that multiple modified endowment contracts which are
issued within a calendar year period to the same policy 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.
For Policies issued prior to June 21, 1988, material modification of the Policy
may result in the Policy being deemed to be a modified endowment contract.
Policy Owners should seek competent tax advice on the tax consequences of
purchasing additional Policies, taking loans, surrendering any Policy issued, or
making any material modification to their Policies. (See "Federal Tax Status".)
The cost of insurance charge is based upon the Commissioners 1980 standard
ordinary male and female, smoker and non-smoker mortality tables ("1980 CSO
Table"). The maximum rate is 100% of the 1980 CSO Table and the current rate is
approximately 75% of the 1980 CSO Table. Until the Massachusetts Insurance
Department approves a new application, different rates may apply to policies
issued in Massachusetts if simplified/jet underwriting is utilized.
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 Policy Sub-Accounts. Each of the Policy Sub-Accounts is invested
solely in the shares of one of the Portfolios 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
investment 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 "Federal Tax Status - Diversification.")
Deductions and Charges
The Company makes certain Deductions from the assets of the Variable Account and
the Policy Value. These Deductions are made for mortality and expense risks, for
premium taxes, for Policy issue costs, for administrative expenses, for sales
charges and for providing life insurance protection.
Mortality and Expense Risk Charge - This risk charge is equal, on an annual
basis, to 0.60% of the average daily net assets of each Policy Sub-Account and
is deducted on each Valuation Date from the Policy Sub-Account.
Administrative Charge - This charge is equal, on an annual basis, to 0.15% of
the average daily net assets of each Policy Sub-Account and is deducted on each
Valuation Date from the Policy Sub-Account.
Deferred Issue Charge - When the single-premium is received by the Company, a
Deferred Issue Charge is accrued. It is for premium taxes (2.5% of the
single-premium), sales charge (4.0% of the single-premium) and Policy issue
charge (0.5% of the single-premium). For Policies issued in the state of
California only, the Deferred Issue Charge is for premium taxes (2.35% of the
single-premium); sales charge (4.15% of the single-premium); and Policy issue
charge (0.5% of the single-premium). This charge is deducted in ten equal annual
deductions on succeeding Policy Anniversaries for the first ten Policy Years. If
the Policy is surrendered before the full amount is deducted, the uncollected
portion of this charge will be deducted from the Policy Value.
Cost of Insurance - On each Policy Processing Date, the Company deducts from the
Policy Value the cost of insurance for the past Policy Processing Period. This
charge provides death benefit protection for the period.
Transfer Fee - Under certain circumstances, there may be assessed a transfer fee
when an Owner transfers values from one Policy Sub-Account to another (see
"Transfer Fee").
Trust Annual Expenses - The Managers and Portfolio Administrators for the Trust
are paid fees for their services based upon each Portfolio's net assets. (See
"Deductions and Charges - Trust Annual Expenses" in this Prospectus and the
Prospectus for the Trust.)
Surrenders
The Owner may surrender the Policy for its Cash Surrender Value at any time.
(See "Policy Value, Cash Surrender Value and Transfer Rights.")
Free-Look Period
The Policy may be returned within 10 days after it is received (or for a longer
period in states where required) ("Free-Look Period"). In states where required,
the Policy may be returned on the later of 45 days from the date on the
application or 10 days from the date of receipt of the Policy. It can be mailed
or delivered to either the Company or the agent who sold it. Return of the
Policy by mail is effective on being postmarked, properly addressed and postage
prepaid. The returned Policy will be treated as if the Company had never issued
it. The Company will promptly refund the greater of the Policy Value as of the
date the Company received the Policy or the premium paid. Any amounts refunded
by the Company will include all Policy fees and charges, including charges
assessed against the Variable Account assets. The Company will allocate monies
to the Money Market Sub-Account until the expiration of the Free-Look Period.
Upon the expiration of the Free-Look Period, the Policy Sub-Account value of the
Money Market Sub-Account will be allocated to the Policy Sub-Account(s) in
accordance with the selection made by the Owner.
Exchange Provisions
The Policy may be exchanged for a policy with benefits that do not vary with the
investment results of a separate account. The exchange must be elected within 24
months from the Issue Date. No evidence of insurability will be required as long
as the benefits under the new policy are equal to or less than the benefits
under the Policy at the time of exchange.
The Company
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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.
Administration for the Policy is provided at the Company's Service Office:
Valuemark Service Center, 300 Berwyn Park, P.O. Box 3031, Berwyn, Pennsylvania
19312, (800) 624-0197.
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 Policy Sub-Accounts with the assets of each
Policy Sub-Account invested in one Portfolio of Franklin Valuemark Funds.
Franklin Valuemark Funds
- --------------------------------------------------------------------------------
Each of the Policy Sub-Accounts of the Variable Account is invested solely in
the shares of one of the Portfolios of Franklin Valuemark Funds ("Trust"). The
Trust is an open-end management investment company registered under the 1940
Act. The investment objectives of each Portfolio and a discussion of potential
risks are found in the accompanying prospectus for the Trust, which is included
with this Prospectus. IN CALIFORNIA, THE GLOBAL HEALTH CARE SECURITIES FUND AND
THE VALUE SECURITIES FUND ARE NOT AVAILABLE UNTIL APPROVED BY THE CALIFORNIA
INSURANCE DEPARTMENT. (CHECK WITH YOUR REGISTERED REPRESENTATIVE REGARDING
AVAILABILITY.)
PURCHASERS SHOULD READ THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS FOR THE
TRUST CAREFULLY BEFORE INVESTING.
Investment managers for each Portfolio are listed in the table below and are as
follows: Franklin Advisers, Inc. (FA), Franklin Advisory Services, Inc. (FAS),
Franklin Mutual Advisers, Inc. (FMA), Templeton Asset Management Ltd. (TAM),
Templeton Global Advisors Limited (TGA), and Templeton Investment Counsel, Inc.
(TIC). Certain managers have retained one or more affiliated subadvisers.
The following is a list of the Portfolios available under the Policy:
<TABLE>
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Available Investment
Portfolios Managers
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PORTFOLIO SEEKING STABILITY
OF PRINCIPAL AND INCOME
Money Market Fund .......................... FA
PORTFOLIOS SEEKING
CURRENT INCOME
High Income Fund ........................... FA
Templeton Global Income
Securities Fund ........................... FA
U.S. Government Securities Fund ............ FA
Zero Coupon Funds -
2000, 2005, 2010 .......................... FA
PORTFOLIOS SEEKING
GROWTH AND INCOME
Global Utilities Securities Fund
(formerly, Utility Equity Fund) ........... FA
Growth and Income Fund ..................... FA
Income Securities Fund ..................... FA
Mutual Shares Securities Fund .............. FMA
Real Estate Securities Fund ................ FA
Rising Dividends Fund ...................... FAS
Templeton Global Asset
Allocation Fund ........................... TGA
Value Securities Fund ...................... FAS
PORTFOLIOS SEEKING
CAPITAL GROWTH
Capital Growth Fund ........................ FA
Global Health Care Securities Fund ......... FA
Mutual Discovery Securities Fund ........... FMA
Natural Resources Securities Fund .......... FA
Small Cap Fund ............................. FA
Templeton Developing Markets
Equity Fund ............................... TAM
Templeton Global Growth Fund ............... TGA
Templeton International Equity Fund ........ FA
Templeton International Smaller
Companies Fund ............................ TIC
Templeton Pacific Growth Fund .............. FA
</TABLE>
- --------------------------------------------------------------------------------
General
There is no assurance that the investment objectives of any of the Portfolios
will be met. Owners bear the complete investment risk for Policy Values
allocated to a Policy Sub-Account.
Additional Portfolios and/or additional Eligible Portfolios 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 (See "Premium Payments - Allocation
of Premium").
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
The Company may substitute one of the Portfolios Owners have selected with
another Portfolio. The Company would not do this without the prior approval of
the Securities and Exchange Commission. The Company will give Owners notice of
its intention to do this.
Premium Payments
- --------------------------------------------------------------------------------
Single-Premium
The single-premium is due on the Policy Date. Before the Policy will take
effect, the application and the premium must be in good order as determined by
the Company's administrative rules. The minimum single-premium which the Company
will accept is $20,000. Neither the Variable Account nor the Trust is designed
for professional market timing organizations, other entities, or persons using
programmed, large or frequent transfers.
Grace Period
The Policy will lapse if the total Indebtedness exceeds the Policy Value less
the uncollected Deductions. If there is no Indebtedness, the Policy cannot lapse
even if the Policy Value equals $0. If the Policy lapses, a grace period of 31
days shall be allowed for the Owner to repay the loan by at least an amount
which provides sufficient Cash Surrender Value to keep the Policy in force for
three Policy Processing Periods. If such loan repayment is not made by the end
of the grace period, the Policy will lapse and all coverage under the Policy
will terminate without value. The Company will mail the notice that the grace
period is in effect to the Owner and any assignee of record to the last known
addresses. The Policy will continue in force during the grace period. If the
Insured dies during the grace period, the death benefit will be the death
benefit in effect immediately prior to the start of the grace period less any
accrued Deductions and less any Indebtedness.
Reinstatement
Subject to the following conditions, the Policy may be reinstated during the
lifetime of the Insured, unless it was surrendered for cash. The requirements
for reinstatement are:
1. the Service Office must receive a properly executed application for
reinstatement;
2. evidence of insurability satisfactory to the Company must be submitted;
3. a minimum premium sufficient to keep the Policy in force for three Policy
Processing Periods must be paid; and
4. any Indebtedness must be paid.
The Policy Date of a reinstated Policy will be the Policy Processing Date on or
next following the date the Company approves the reinstatement application.
For those states that allow it, the suicide and incontestability provisions will
apply from the Policy Date of reinstatement. Otherwise, the suicide and
incontestability provisions will only apply from the initial Policy Date. If the
Policy has been in force for two years during the lifetime of the Insured, it
will be contestable only as to statements made in the reinstatement application.
Allocation of Premium
The premium is allocated to one or more of the Policy Sub-Accounts of the
Variable Account. During the Free-Look Period, the single-premium is allocated
to the Money Market Sub-Account.
At the end of the Free-Look Period, the Policy Value will be allocated to one or
more of the Policy Sub-Accounts in accordance with the premium allocation on
record. This allocation is not deemed to be a transfer subject to the transfer
fee provision (see "Transfer Fee"). The Company reserves the right to limit the
number of allocations that an Owner can have at any one time. Currently, the
Owner may be invested in up to ten Policy Sub-Accounts initially, and at any one
time throughout the life of the policy.
Deductions and Charges
The 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 Policy
Sub-Account on each Valuation Date. This risk charge is equal, on an annual
basis, to 0.60% of the average daily net assets of the Policy 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 Policies and the Variable
Account. The Company expects to profit from this charge.
Administrative Charge
The Company deducts an Administrative Charge from each Policy Sub-Account on
each Valuation Date. This risk charge is equal, on an annual basis, to 0.15% of
the average daily net assets of the Policy Sub-Account. 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 Policy 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.
Cost of Insurance
On each Policy Processing Date, the Company deducts a charge for the Cost of
Insurance for the past Policy Processing Period. This charge is deducted from
the Policy Value and provides death benefit protection for the Policy Processing
Period.
This charge is deducted from each Policy Sub-Account in the same proportion that
the Policy Value in the Policy Sub-Account bears to the non-loaned Policy Value.
The current cost of insurance for a Policy Processing Period is:
1. the current cost of insurance rate, multiplied by
2. the net amount at risk for the Policy Processing Period.
The Company intends to use a current cost of insurance rate which may vary from
time to time. The current rate is approximately 75% of the Commissioners
Standard 1980 Ordinary Male and Female, Smoker and Non-smoker Mortality Tables
("1980 CSO Table"). The current rate varies according to the age of the Insured.
The cost of insurance rate will never be more than the guaranteed maximum cost
of insurance rates. The guaranteed maximum cost of insurance rates vary by sex
(in states where permitted), Attained Age and underwriting class. The guaranteed
maximum cost of insurance rates are shown in the Policy Schedule and are equal
to 100% of the 1980 CSO Table. Owners will be notified of any change, prior to
implementation, in the current rates to be charged.
In Massachusetts, the cost of insurance rates may be higher if a different
method of underwriting is used (jet/simplified) until the Massachusetts
Insurance Department approves a new application.
The net amount at risk is approximately equal to the death benefit minus the sum
of the Cash Surrender Value and the Loan Account Value attributable to the
Policy.
Insurance underwriting is designed to group applicants of the same age and sex
(in states where permitted) into classifications which can be expected to
produce mortality experience consistent with the actuarial structure for that
class.
Deferred Issue Charge
When the single-premium is received at the Company, a Deferred Issue Charge of
7% is accrued. The Company deducts this charge in ten equal annual deductions of
..7% on succeeding Policy Anniversaries for the first ten Policy Years. If the
Owner surrenders the Policy before the full amount is deducted, the uncollected
portion of this charge is deducted from the Policy Value. The Deferred Issue
Charge is for premium taxes (2.5% of the single-premium); sales charge (4.0% of
the single-premium); and Policy issue charge (0.5% of the single-premium), which
equals a total deferred issue charge of 7.0%. For policies issued in the state
of California only, the Deferred Issue Charge is for premium taxes (2.35% of the
single-premium); sales charge (4.15% of the single-premium); and Policy issue
charge (0.5% of the single-premium), which equals a total deferred issue charge
of 7.0%.
Premium Taxes - Most states and certain jurisdictions, such as cities and
counties, tax premium payments. Premium taxes vary from state to state and are
generally in the range of 2% to 3%. This charge does not apply in states that
have no premium tax.
Sales Charge - This sales charge reimburses the Company for expenses incurred in
connection with the promotion, sale and distribution of the Policy. This charge
from the single-premium is not expected to cover the distribution costs. To the
extent that this charge is insufficient to cover the distribution costs, the
Company may make up the difference from the general assets of the Company
including the profit it expects from the Mortality and Expense Risk Charge.
Policy Issue Charge - This charge is designed to cover the administrative
expenses incurred in connection with issuing a Policy. Such expenses include
initial underwriting review, medical examinations, inspection reports, attending
physicians' statements, insurance underwriting costs, Policy issuance costs,
establishing permanent Policy records, preparation of illustrations, preparation
of riders and the initial confirmation of the transaction.
Income Tax Charge
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the Policy Sub-Accounts of the
Variable Account. The Company reserves the right to assess a charge for such
taxes against the Policy Sub-Accounts if the Company determines that such taxes
will be incurred.
Transfer Fee
Currently, the Company permits twelve transfers per Policy Year without the
imposition of any charge. For transfers in excess of that number the Company
currently charges $25 per transfer (or 2% of the amount transferred, if less).
The transfer fee at any given time will not be set at a level greater than its
cost and will contain no element of profit.
<TABLE>
<CAPTION>
Trust Annual Expenses
There are deductions from and expenses paid out of the assets of the Portfolios which are summarized below. The Management and
Portfolio Administration Fees for each Portfolio are based on a percentage of that Portfolio's net assets. See "Franklin Valuemark
Funds" in this Prospectus and "Management" in the Trust prospectus.
The "Management and Portfolio Administration Fees" below include investment advisory and other management and administrative fees
not included as "Other Expenses" that were paid to the Managers and Portfolio Administrators to the Trust for the 1997 calendar
year except for Portfolios with fee waivers or newer Portfolios without a full year of operations as of December 31, 1997 (see
explanatory footnotes below).
Management
and Portfolio Other Total Annual
Administration Fees1 Expenses Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Growth Fund ................................................... .75% .02% .77%
Global Health Care Securities Fund2 ................................... .75% .11% .86%
Global Utilities Securities Fund3 ..................................... .47% .03% .50%
Growth and Income Fund ................................................ .47% .02% .49%
High Income Fund ...................................................... .50% .03% .53%
Income Securities Fund ................................................ .47% .03% .50%
Money Market Fund4 .................................................... .51% .02% .53%
Mutual Discovery Securities Fund ...................................... .80% .26% 1.06%
Mutual Shares Securities Fund ......................................... .60% .20% .80%
Natural Resources Securities Fund ..................................... .62% .07% .69%
Real Estate Securities Fund ........................................... .51% .03% .54%
Rising Dividends Fund ................................................. .72% .02% .74%
Small Cap Fund ........................................................ .75% .02% .77%
Templeton Developing Markets Equity Fund .............................. 1.25% .17% 1.42%
Templeton Global Asset Allocation Fund ................................ .65% .29% .94%
Templeton Global Growth Fund .......................................... .83% .05% .88%
Templeton Global Income Securities Fund ............................... .56% .06% .62%
Templeton International Equity Fund ................................... .80% .09% .89%
Templeton International Smaller Companies Fund ........................ .85% .21% 1.06%
Templeton Pacific Growth Fund ......................................... .92% .11% 1.03%
U.S. Government Securities Fund ....................................... .48% .02% .50%
Value Securities Fund2 ................................................ .75% .06% .81%
Zero Coupon Fund - 20005 .............................................. .37% .03% .40%
Zero Coupon Fund - 20055 .............................................. .37% .03% .40%
Zero Coupon Fund - 20105 .............................................. .37% .03% .40%
<FN>
1The Portfolio Administration Fee is a direct expense for the Global Health Care Securities Fund, the Mutual Discovery Securities
Fund, the Mutual Shares Securities Fund, the Templeton Global Asset Allocation Fund, the Templeton International Smaller Companies
Fund, and the Value Securities Fund; other Portfolios pay for similar services indirectly through the Management Fee. See the
Franklin Valuemark Funds prospectus for further information regarding these fees.
2The Global Health Care Securities Fund and the Value Securities Fund commenced operations May 1, 1998. The expenses shown above
for these Portfolios are therefore estimated for 1998.
3Prior to May 1, 1998, the Global Utilities Securities Fund was known as the Utility Equity Fund.
4Franklin Advisers, Inc. agreed in advance to waive a portion of its Management Fee and to pay certain expenses of the Money
Market Fund during 1997. It is currently continuing this arrangement in 1998. This arrangement may be terminated at any time. With
this reduction, the Portfolio's actual total annual expenses for 1997 were 0.45% of the average daily net assets of the Portfolio.
5Although not obligated to, Franklin Advisers, Inc. has agreed in advance to waive a portion of its Management Fees and to pay
certain expenses of the three Zero Coupon Funds through at least December 31, 1998 so that the total expenses of each Zero Coupon
Fund will not exceed 0.40% of each Portfolio's net assets. Absent the management fee waivers, for the year ended December 31,
1997, the Total Annual Expenses and Management and Portfolio Administration Fees would have been as follows: Zero Coupon Fund -
2000, .63% and .60%; Zero Coupon Fund - 2005, .65% and .62%; and Zero Coupon Fund - 2010, .65% and .62%. There were no expense
reimbursements during 1997 for the Zero Coupon Funds.
</FN>
</TABLE>
Death Benefit
- --------------------------------------------------------------------------------
Death Benefit
The death benefit is the greater of the face amount at the Policy Date or the
variable insurance amount as of the date the Service Office receives proof of
death of the Insured. The death benefit will be paid to the Beneficiary upon
receipt of due proof of the Insured's death. The amount payable will be the
death benefit reduced by any Indebtedness and any accrued Deductions, and
increased by amounts due from riders. Payment of the death benefit may be
delayed pending receipt of any applicable tax consents and/or forms from a
state.
Variable Insurance Amount
The variable insurance amount on the Policy Date equals the face amount.
Thereafter, the variable insurance amount will be the Policy Value less the
uncollected Deductions multiplied by the net single-premium factor for the
Insured's Attained Age and sex (in states where permitted) as of such date.
Appendix B is a Table of Net Single-Premium Factors which is also contained in
the Policy.
The amount of insurance purchased by $1.00 decreases with the age of an Insured.
Therefore, the death benefit under such a Policy will decrease unless the Policy
Value has increased during the period. Therefore, when divided into the Policy
Value, it will reduce the death benefit under such a Policy unless the Policy
Value has increased at a greater rate than the increase in the applicable net
single-premium factor.
Guaranteed Death Benefit
If there is no Indebtedness under the Policy, it will not lapse even if the
Policy Value is $0. The Policy will terminate without value, as described in the
Grace Period provision, if Indebtedness on the Policy is greater than the Policy
Value less the uncollected Deductions.
Policy Value, Cash Surrender Value
and Transfer Rights
- --------------------------------------------------------------------------------
Policy Value
On any Valuation Date, the Policy Value is equal to the sum of the Policy
Sub-Account values and the Loan Account attributable to the Policy.
Method of Determining Policy Sub-Account Values
Policy Sub-Account values will fluctuate in accordance with the investment
experience of the applicable underlying Portfolio held within the Policy
Sub-Account. In order to determine these Policy Sub-Account values, the Company
utilizes Policy 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 Portfolios were purchased for the Policy Sub-Accounts, each
Policy Sub-Account valuation unit was valued at $10. The value of a unit within
each Policy Sub-Account on any Valuation Date thereafter is determined by
dividing (a) by (b), where:
(a) is equal to:
1. total value of the net assets in the Policy Sub-Account; minus
2. the daily charge for assuming the mortality and expense risks; minus
3. the daily charge for administrative expenses; plus or minus
4. a charge or credit for any tax provision established for the Policy
Sub-Account.
and (b) is the total number of units applicable to that Policy 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 Surrender Value
The Policy may be surrendered for its Cash Surrender Value by submitting a
written request to the Service Office. The Cash Surrender Value is equal to the
Policy Value less the sum of:
1. the uncollected portion of any Deductions or accrued Deductions; and
2. any Indebtedness.
Surrendering the Policy will cancel it. There are no partial surrenders allowed
under the Policy.
This Policy is considered to be a modified endowment contract under the Code.
However, if the Policy is funded by an exchange under IRC Section 1035 and the
previous policy was issued prior to June 21, 1988, then the Policy may not be
deemed to be a modified endowment contract. Surrender payments are fully taxable
to the extent of income in the Policy and may further be subject to an
additional 10% tax penalty. The penalty shall not apply, however, to any
distribution: (a) made on or after the date on which the taxpayer reaches age
591/2; (b) which is attributable to the taxpayer becoming disabled (within the
meaning of Section 72(m)(7) of the Code); or (c) 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 or her beneficiary.
Transfer Rights
The Owner may transfer by telephone or written request non-loaned Policy Values
among the Policy Sub-Accounts subject to the following:
1. the minimum value that may be transferred from any Policy Sub-Account is $500
(or the total value if it is less than $500);
2. the deduction from the Policy Value of any transfer fee that the Company may
assess. The Company currently allows twelve (12) free transfers per Policy Year.
For additional transfers there is a $25 transfer fee (or 2% of the amount
transferred, if less);
3. any limit on the number of transfers per Policy Year that the Company may
impose. Currently the only limits are as set out in 2 above.
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 Portfolio and may be refused. Policies 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, if in the Portfolio managers' judgment, a Portfolio would be unable to
invest effectively in accordance with its investment objectives and policies, or
would otherwise potentially be adversely affected.
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 transactions.
Loan Provisions
- --------------------------------------------------------------------------------
Policy Loan
The Owner may borrow money from the Company while the Policy is in effect. The
Policy will be the only security the Company will require for the Policy loan.
The minimum loan amount is $1,000 where permitted by state law. The maximum loan
value is 90% of the Cash Surrender Value. The Company calculates the Cash
Surrender Value as of the end of the Valuation Period during which the loan
request is received in good order at the Service Office. Any existing loan will
be added to the new loan to determine the total loan.
This Policy is considered to be a modified endowment contract under the Code.
However, if the Policy is funded by an exchange under IRC Section 1035 and the
previous Policy was issued prior to June 21, 1988, then the Policy may not be
deemed to be a modified endowment contract. Loan payments are fully taxable to
the extent of income in the Policy and may further be subject to an additional
10% tax penalty. The penalty shall not apply, however, to any distribution: (a)
made on or after the date on which the taxpayer reaches age 591/2; (b) which is
attributable to the taxpayer becoming disabled (within the meaning of Section
72(m)(7) of the Code); or (c) 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 or her beneficiary.
The Code also 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 tax consequences 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 policies. Owners should
consult a tax adviser prior to purchasing more than one modified endowment
contract in any calendar year period.
Effect of a Loan
A Policy loan will result in valuation units being redeemed from the Policy
Sub-Accounts and the proceeds being transferred to the Loan Account. The Company
will pay interest on the Loan Account at an annual rate of 4.0%. If the Owner
does not specify from which Policy Sub-Account(s) the loan is to be made, the
loan will be made from the Policy Sub-Accounts in the same proportion as the
value in each Policy Sub-Account bears to the non-loaned Policy Value. A Policy
loan, whether or not repaid, will have a permanent effect on the death benefits
and Policy values, because the amount of the Policy loan will not share in the
investment results of the Policy Sub-Accounts in which it had been invested. If
not repaid, the Policy loan will reduce the amount of death benefit and Cash
Surrender Value.
Payment of Interest, Loan Repayment
and Policy Lapsation
The interest rate for a Policy loan is 4.75% annually. The interest is payable
in arrears on each Policy Anniversary for the past Policy Year. If interest is
not paid when it is due, it will be added to the Policy loan and charged the
same interest rate as the Policy loan. The additional interest will be deducted
from the Policy Sub-Accounts in the proportion that the value of each Policy
Sub-Account bears to the non-loaned Policy Value.
An Owner may repay all or part of the Policy loan at any time while the Insured
is living. The minimum permissible amount of repayment is $1,000. The repayment
will be transferred from the Loan Account to the Policy Sub-Accounts in
accordance with the Owner's instructions. If no such instructions are on record,
the repayment will be allocated in the proportion that the value of each Policy
Sub-Account bears to the non-loaned Policy Value as of the date of repayment.
If the Indebtedness exceeds the Policy Value less the uncollected Deductions,
the Company will terminate the Policy. The Company will not do this, however,
until 31 days after it mails notice of intent to terminate. The Company will
notify, at the last known address, the Owner and anyone who holds the Policy as
collateral.
Ownership
- --------------------------------------------------------------------------------
Owner
The Policy is available to Owners age 30 to 80 if the Owner is the Insured. If
the Owner is not the Insured, the Owner must be age 21 or older and the Insured
must be age 30 to 80. However, Allianz Life may, at its sole discretion, waive
the age requirement and issue Policies with the age of the Insured being other
than those stated. The Owner, any Joint Owner and any Contingent Owner are named
in the application. If more than one person is named as Owner or Contingent
Owner and the designation does not state otherwise, the Company will treat such
persons as Joint Owners with rights of survivorship. Any designations may be
changed by the Owner.
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 Service Office; and
2. any irrevocably named Beneficiary.
If the Owner dies, the Owner's rights will pass to any surviving Joint Owner(s);
otherwise to any Contingent Owner(s) then alive; otherwise to the Owner's
estate.
Transfer of Ownership
While the Insured is living, the Owner may transfer ownership of the Policy. A
written request, dated and signed by the Owner, must be sent to the Service
Office. The Company may require that the Policy be returned for an endorsement.
The transfer will take effect as of the date the request was signed.
Any transfer of ownership terminates the interest of any existing Contingent
Owner. It does not change the Beneficiary, nor transfer the Beneficiary's
interest. Any change or transfer of ownership is subject to any benefit payment
made by the Company before endorsement.
Assignment
The Owner may assign the Policy. A copy of any assignment must be filed with the
Service Office. 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 Service Office.
Beneficiary Provisions
- --------------------------------------------------------------------------------
Beneficiary
The Beneficiary and any Contingent Beneficiary are named in the application.
They may be changed by the Owner.
Change of Beneficiary
While the Insured is living, the Owner may change the Beneficiary. A written
request, dated and signed by the Owner, must be filed at the Service Office.
After the change is recorded, it will take effect as of the date the request was
signed. If the request reaches the Service Office after the Insured dies but
before any benefit payment is made, the change will be valid.
Death of Beneficiary
If all of the named Beneficiaries die prior to the Insured's death, the Company
will pay the death benefit in one sum to the Owner's estate.
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.
Management of the Company
- --------------------------------------------------------------------------------
As of December 31, 1997, the directors and executive officers of the Company and
their principal occupations for the past 5 years are as follows:
Principal Occupations
Name 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.
Michael T. Westermeyer Vice President - Corporate Legal Officer and
Secretary of the Company since April 1997. Formerly
Second Vice President, Senior Counsel and Assistant
Secretary of the Company.
Paul Howman Vice President - Underwriting of the Company since
1995.
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. Previously
Senior Vice President and Chief Actuary.
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.
Robert M. Kimmitt Partner in the law firm of Wilmer, Cutler &
Pickering. Previously, from 1993 to 1997, managing
director of Lehman Brothers.
Administration of the Policies
- --------------------------------------------------------------------------------
While the Company has primary responsibility for all administration of the
Policies and the Variable Account, it has retained the services of Delaware
Valley Financial Services, Inc. ("DVFS" or "Valuemark Service Center") pursuant
to an Administrative Agreement. Such administrative services include issuance of
the Policies and maintenance of Policy Owners' records. The Company pays all
charges and fees assessed by DVFS. DVFS serves as the administrator to various
insurance companies offering variable and fixed annuity and variable life
insurance contracts. The Company's ability to administer the Policies could be
adversely affected should DVFS elect to terminate the Agreement.
Federal 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 ("Code"), defines the term "life insurance contract" for purposes of
the Code. The Company believes that the Policies 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 imposition of federal income tax to
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 established 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 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 Portfolio of the Trust underlying the Policies
will be managed by the managers for the Trust in such a manner as to comply with
these diversification requirements. The Treasury Department has indicated that
the diversification Regulations do not provide guidance regarding the
circumstances in which Owner control of the investments of the Variable Account
will cause the Owner to be treated as the owner of the assets of the Variable
Account, thereby resulting in the loss of favorable tax treatment for the
Policy. At this time it cannot be determined whether additional guidance will be
provided and what standards may be contained in such guidance.
The amount of Owner control which may be exercised under the Policy is different
in some respects from the situations addressed in published rulings issued by
the Internal Revenue Service in which it was held that the policy owner was not
the owner of the assets of the separate account. It is unknown whether these
differences, such as the Owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the Owner to be
considered as the owner of the assets of the Variable Account.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owner being
retroactively determined to be the owner of the assets of the Variable Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Policy in an attempt to maintain favorable tax treatment.
Tax Treatment of the Policy
The Policy has been designed to comply with the definition of life insurance
contained in Section 7702 of the Code. Although some interim guidance has been
provided and proposed regulations have been issued, final regulations have not
been adopted. Section 7702 of the Code requires the use of reasonable mortality
and other expense charges. In establishing these charges, the Company has relied
on the interim guidance provided in IRS Notice 88-128 and proposed regulations
issued on July 5, 1991. Currently, there is even less guidance as to a Policy
issued on a substandard risk basis and thus it is even less clear whether a
Policy issued on such basis would meet the requirements of Section 7702 of the
Code.
While the Company has attempted to comply with Section 7702, the law in this
area is very complex and unclear. There is a risk, therefore, that the Internal
Revenue Service will not concur with the Company's interpretations of Section
7702 that were made in determining such compliance. In the event the Policy is
determined not to so comply, it would not qualify for the favorable tax
treatment usually accorded life insurance policies. Owners should consult their
tax advisers with respect to the tax consequences of purchasing the Policy.
Policy Proceeds
This Policy is considered to be a modified endowment contract under the Code.
However, if the Policy is funded by an exchange under IRC Section 1035 and the
previous Policy was issued prior to June 21, 1988, then the Policy may not be
deemed to be a modified endowment contract. Loan proceeds and/or surrender
payments from modified endowment contracts are fully taxable to the extent of
income in the Policy and may further be subject to an additional 10% federal
income tax penalty. (See "Tax Treatment of Loans and Surrenders.") Otherwise,
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 Value or Cash
Surrender Value, including increments thereon, under a Policy until surrender
thereof.
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
The Code alters the tax treatment accorded to loans and certain distributions
from life insurance policies which are deemed to be "modified endowment
contracts." The Policy's single-premium requirement is such that Policies issued
on or after June 21, 1988 are modified endowment contracts. A Policy received in
exchange for a modified endowment contract is also 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.
A Policy that was entered into prior to June 21, 1988 may be deemed to be a
modified endowment contract if it is materially changed 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 provided under a policy unless the increase is attributable to:
(1) the payment of premiums necessary to fund the lowest death benefit and
qualified additional benefits payable in the first seven policy years; or (2)
the crediting of interest or other earnings (including policyholder dividends)
with respect to such premiums.
Assuming that the Policy is treated as a modified endowment contract, 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 distribution: (1) made on or after the date on which the taxpayer reaches
age 591/2; (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 or her beneficiary. Furthermore,
only under limited circumstances will interest paid on Policy loans be tax
deductible.
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 the policy debt 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.
Owners should seek competent tax advice on the tax consequences of taking loans,
making a partial or total surrender, exchanging policies, or making any material
modifications to their Policies.
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. 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 other change of ownership of a Policy may be a
taxable event. 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.
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
Policy Value allocated to the Policy 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 Portfolio 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 Portfolio.
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 Portfolio or which varies from the general quality
and nature of investments and investment techniques used by other portfolios
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 for the Variable
Account, NALAC Financial Plans, LLC ("NFP"), 1750 Hennepin Avenue, Minneapolis,
MN 55403, a wholly-owned subsidiary of the Company. NFP has subcontracted with
Franklin Advisers, Inc. for it and/or certain of its affiliates to provide
certain marketing support services and NFP compensates these entities for their
services.
Commissions will be paid to broker-dealers who sell the Policies. Broker-dealers
will be paid commissions at the time of purchase up to 6.0% of the
single-premium. Broker-dealers are also paid a quarterly trail commission of up
to 25 basis points per year of the Policy Value after the first Policy Year. In
addition, under certain circumstances, the Company may pay certain sellers
production bonuses which will take into account, among other things, the total
premiums which have been paid under Policies associated with the broker-dealer.
In addition, the Company and Franklin Advisers, Inc. and/or its affiliates may
pay certain sellers for other services not directly related to the sale of the
Policies (such as special marketing support allowances).
Reports to Owners
- ------------------------------------------------------------------------------
The Company will send to each Owner semi-annual and annual reports of the Trust.
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 Value, the current Cash Surrender
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; (b) any transfer between Policy
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 of premium payment.
Legal Proceedings
- --------------------------------------------------------------------------------
There are no legal proceedings to which the Variable Account or the Distributor
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,
1997 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
- --------------------------------------------------------------------------------
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Policies.
Financial Statements
- --------------------------------------------------------------------------------
The consolidated financial statements of the Company that are included herein
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Policy.
ALLIANZ LIFE VARIABLE ACCOUNT A
OF
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
December 31, 1997
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Independent Auditors'Report
The Board of Directors of Allianz Life Insurance Company of North America and
Policyholders of Allianz Life Variable Account A:
We have audited the accompanying statements of assets and liabilities of the
sub-accounts of Allianz Life Variable Account A as of December 31, 1997, 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, 1997, 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 30, 1998
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
Statements of Assets and Liabilities
December 31, 1997
<TABLE>
<CAPTION>
Mutual
Capital Growth and High Income Money Discovery
Growth Income Income Securities Market Securities
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Capital Growth Fund, 7,314 shares, cost $98,842 $98,154 - - - - -
Growth and Income Fund, 110,377 shares, cost $1,721,674 - 2,319,030 - - - -
High Income Fund, 126,991 shares, cost $1,595,578 - - 1,836,297 - - -
Income Securities Fund, 64,974 shares, cost $1,045,255 - - - 1,193,580 - -
Money Market Fund, 712,297 shares, cost $712,297 - - - - 712,297 -
Mutual Discovery Securities Fund, 29,255 shares, cost $328,822 - - - - - 356,036
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 98,154 2,319,030 1,836,297 1,193,580 712,297 356,036
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 97 1,470 1,346 1,195 1,084 522
Accrued administrative charges 25 367 337 298 271 130
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 122 1,837 1,683 1,493 1,355 652
- ---------------------------------------------------------------------------------------------------------------------------
Net assets $98,032 2,317,193 1,834,614 1,192,087 710,942 355,384
===========================================================================================================================
Policy owners' equity (notes 4 and 5) $98,032 2,317,193 1,834,614 1,192,087 710,942 355,384
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1997
<TABLE>
<CAPTION>
Mutual Natural Templeton
Shares Resources Real Estate Rising Small Developing
Securities Securities Securities Dividends Cap Markets
Fund Fund Fund Fund Fund Equity Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Mutual Shares Securities Fund, 75,498 shares,
cost $866,245 $919,568 - - - - -
Natural Resources Securities Fund, 9,348 shares,
cost $127,758 - 106,663 - - - -
Real Estate Securities Fund, 25,299 shares,
cost $500,132 - - 647,660 - - -
Rising Dividends Fund, 33,345 shares, cost $502,078 - - - 656,227 - -
Small Cap Fund, 23,878 shares, cost $333,287 - - - - 359,369 -
Templeton Developing Markets Equity Fund, 61,879 shares,
cost $706,025 - - - - - 636,734
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 919,568 106,663 647,660 656,227 359,369 636,734
Liabilities:
Accrued mortality and expense risk charges 1,059 937 1,098 1,049 1,222 1,076
Accrued administrative charges 264 233 274 263 306 269
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,323 1,170 1,372 1,312 1,528 1,345
Net assets $918,245 105,493 646,288 654,915 357,841 635,389
===========================================================================================================================
Policy owners' equity (notes 4 and 5) $918,245 105,493 646,288 654,915 357,841 635,389
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1997
<TABLE>
<CAPTION>
Templeton
Templeton Templeton Templeton Templeton International Templeton
Global Asset Global Global Income International Smaller Pacific
Allocation Growth Securities Equity Companies Growth
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
Templeton Global Asset Allocation Fund,
22,777 shares, cost $259,422 $312,501 - - - - -
Templeton Global Growth Fund,
84,015 shares, cost $1,093,744 - 1,288,788 - - - -
Templeton Global Income Securities Fund,
11,761 shares, cost $150,515 - - 152,543 - - -
Templeton International Equity Fund, 89,852 shares,
cost $1,291,827 - - - 1,448,409 - -
Templeton International Smaller Companies Fund,
1,135 shares, cost $13,585 - - - - 12,510 -
Templeton Pacific Growth Fund,
31,363 shares, cost $426,406 - - - - - 291,047
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 312,501 1,288,788 152,543 1,448,409 12,510 291,047
Liabilities:
Accrued mortality and expense risk charges 554 1,141 891 1,213 32 978
Accrued administrative charges 138 285 222 303 8 244
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 692 1,426 1,113 1,516 40 1,222
Net assets $311,809 1,287,362 151,430 1,446,893 12,470 289,825
===========================================================================================================================
Policy owners' equity (notes 4 and 5) $311,809 1,287,362 151,430 1,446,893 12,470 289,825
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1997
<TABLE>
<CAPTION>
U.S. Government Utility Zero Zero Zero Total
Securities Equity Coupon Coupon Coupon All
Fund Fund Fund - 2000 Fund - 2005 Fund - 2010 Funds
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Valuemark Funds:
U.S. Government Securities Fund,
63,145 shares, cost $756,643 $878,985 - - - -
Utility Equity Fund, 78,490 shares,
cost $1,104,261 - 1,595,708 - - -
Zero Coupon Fund - 2000,
23,176 shares, cost $260,526 - - 350,879 - -
Zero Coupon Fund - 2005,
20,836 shares, cost $241,831 - - - 355,261 -
Zero Coupon Fund - 2010,
23,008 shares, cost $339,679 - - - - 410,226
- ---------------------------------------------------------------------------------------------------------------------------
Total assets 878,985 1,595,708 350,879 355,261 410,226 16,938,472
Liabilities:
Accrued mortality and expense risk charges 1,030 1,289 519 500 562 20,864
Accrued administrative charges 257 322 130 124 141 5,211
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,287 1,611 649 624 703 26,075
Net assets $877,698 1,594,097 350,230 354,637 409,523 16,912,397
- ---------------------------------------------------------------------------------------------------------------------------
Policy owners' equity (notes 4 and 5) $877,698 1,594,097 350,230 354,637 409,523 16,912,397
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Adjustable
U.S. Government Fund Capital Growth Fund Growth and Income Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $- 18,030 1,373 7 - - 61,679 28,758 10,179
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges - 740 139 96 2 - 14,386 9,969 5,842
Administrative charges - 185 35 24 - - 3,597 2,492 1,460
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses - 925 174 120 2 - 17,983 12,461 7,302
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net - 17,105 1,199 (113) (2) - 43,696 16,297 2,877
Realized gains (losses) and
unrealized appreciation (depreciation)on
investments:
Realized capital gain distributions on
mutual funds - - - - - - 59,819 101,857 22,157
investments, net - (10,027) 35 (11) - - 75,044 25,750 20,358
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net - (10,027) 35 (11) - 134,863 127,607 42,515
Net change in unrealized appreciation
(depreciation)on investments - (200) 240 (548) (140) 283,057 37,916 184,273
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net - (10,227) 275 (559)(140) - 417,920 165,523 226,788
Net increase (decrease) in net assets
from operations $- 6,878 1,474 (672)(142) - 461,616 181,820 229,665
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Investment Grade
High Income Fund Income Securities Fund Intermediate Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $153,512 167,136 78,044 71,443 33,370 19,772 - 3,706 3,949
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 12,094 12,310 7,709 7,189 4,656 2,265 - 366 529
Administrative charges 3,023 3,077 1,927 1,797 1,164 566 - 91 132
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 15,117 15,387 9,636 8,986 5,820 2,831 - 457 661
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 138,395 151,749 68,408 62,457 27,550 16,941 - 3,249 3,288
Realized gains (losses) and
unrealized appreciation (depreciation)
on investments:
Realized capital gain distributions
on mutual funds 5,036 8,872 - 15,347 5,550 1,592 - - -
Realized gains (losses) on sales
of investments, net 43,795 33,892 7,610 7,042 2,373 721 - 1,981 1,106
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 48,831 42,764 7,610 22,389 7,923 2,313 - 1,981 1,106
Net change in unrealized appreciation
(depreciation) on investments 4,999 26,432 122,964 68,874 37,183 47,314 - (3,575) 2,630
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation
(depreciation) on investments, net 53,830 69,196 130,574 91,263 45,106 49,627 - (1,594) 3,736
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $192,225 220,945 198,982 153,720 72,656 66,568 - 1,655 7,024
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Mutual Discovery Mutual Shares
Money Market Fund Securities Fund Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $35,286 32,922 33,164 40 - - 72 - -
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 4,368 4,291 4,898 1,140 22 - 2,067 31 -
Administrative charges 1,092 1,073 1,225 285 5 - 517 8 -
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 5,460 5,364 6,123 1,425 27 - 2,584 39 -
Investment income (loss), net 29,826 27,558 27,041 (1,385) (27) - (2,512) (39) -
Realized gains (losses) and unrealized
appreciation (depreciation)
on investments:
Realized capital gain distributions on
mutual funds - - - - - - - - -
Realized gains (losses) on sales of
investments, net - - - 166 - - 2,034 2 -
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net - - - 166 - - 2,034 2 -
Net change in unrealized appreciation (depreciation)
on investments - - - 26,719 495 - 51,689 1,634 -
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net - - - 26,885 495 - 53,723 1,636 -
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $29,826 27,558 27,041 25,500 468 - 51,211 1,597 -
============================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Natural Resources Securities Fund Real Estate Securities Fund Rising Dividends Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $1,844 2,102 3,600 12,965 7,943 3,875 5,990 3,981 1,695
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 416 1,012 2,489 3,466 1,883 833 3,657 1,632 587
Administrative charges 104 253 622 867 471 208 914 408 147
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 520 1,265 3,111 4,333 2,354 1,041 4,571 2,040 734
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 1,324 837 489 8,632 5,589 2,834 1,419 1,941 961
Realized gains (losses) and
unrealized appreciation (depreciation)
on investments:
Realized capital gain distributions
on mutual funds - 1,927 2,665 6,191 - - 10,229 - -
Realized gains (losses) on sales of
investments, net (1,936) 14,498 15,031 17,125 1,980 3,559 18,073 2,703 463
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net (1,936) 16,425 17,696 23,316 1,980 3,559 28,302 2,703 463
Net change in unrealized appreciation
(depreciation) on investments (25,118) (8,994) (10,144) 57,737 58,343 14,488 93,007 44,265 19,701
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net (27,054) 7,431 7,552 81,053 60,323 18,047 121,309 46,968 20,164
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ($25,730) 8,268 8,041 89,685 65,912 20,881 122,728 48,909 21,125
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Templeton Developing Markets Templeton Global
Small Cap Fund Equity Fund Asset Allocation Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $384 - - 10,159 2,914 562 7,863 228 4
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 1,277 105 - 3,802 2,551 3,898 2,512 2,065 25
Administrative charges 319 26 - 950 638 975 628 516 6
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 1,596 131 - 4,752 3,189 4,873 3,140 2,581 31
- ---------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net (1,212) (131) - 5,407 (275) (4,311) 4,723 (2,353) (27)
Realized gains (losses) and unrealized
appreciation (depreciation)
on investments:
Realized capital gain distributions
on mutual funds 4,546 - - 16,114 5,391 132 2,268 456 -
Realized gains (losses) on sales of
investments, net 2,723 472 - 1,960 2,603 (585) 23,197 12,194 17
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 7,269 472 - 18,074 7,994 (453) 25,465 12,650 17
Net change in unrealized appreciation
(depreciation) on investments 22,458 3,624 - (127,265) 56,503 4,422 11,716 41,378 (15)
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net 29,727 4,096 - (109,191) 64,497 3,969 37,181 54,028 2
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $28,515 3,965 - (103,784) 64,222 (342) 41,904 51,675 (25)
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Templeton Global Templeton Global Templeton International
Growth Fund Income Securities Fund Equity Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $15,984 8,202 1,137 10,037 7,568 2,871 33,230 19,177 6,289
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 7,051 3,948 1,255 903 745 470 8,366 6,014 2,178
Administrative charges 1,763 987 314 226 186 118 2,092 1,504 545
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 8,814 4,935 1,569 1,129 931 588 10,458 7,518 2,723
Investment income (loss), net 7,170 3,267 (432) 8,908 6,637 2,283 22,772 11,659 3,566
Realized gains (losses) and unrealized
appreciation (depreciation)
on investments:
Realized capital gain distributions
on mutual funds 5,328 8,202 - - - - 50,952 23,468 7,792
Realized gains (losses) on sales of
investments, net 15,707 2,914 587 668 432 392 13,328 4,043 606
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 21,035 11,116 587 668 432 392 64,280 27,511 8,398
Net change in unrealized appreciation
(depreciation) on investments 80,562 91,158 23,468 (6,915) 2,837 6,634 25,384 114,314 19,054
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net 101,597 102,274 24,055 (6,247) 3,269 7,026 89,664 141,825 27,452
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $108,767 105,541 23,623 2,661 9,906 9,309 112,436 153,484 31,018
============================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Templeton International Templeton U.S Government
Smaller Companies Fund Pacific Growth Fund Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $17 - - 8,455 10,710 4,502 52,576 45,170 41,763
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 29 3 - 214 2,726 1,485 5,796 4,926 3,974
Administrative charges 7 1 - 53 682 371 1,449 1,231 994
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 36 4 - 267 3,408 1,856 7,245 6,157 4,968
Investment income (loss), net (19) (4) - 8,188 7,302 2,646 45,331 39,013 36,795
Realized gains (losses) and unrealized
appreciation (depreciation)
on investments:
Realized capital gain distributions
on mutual funds - - - - 6,208 1,872 - - -
Realized gains (losses) on sales of
investments, net (2) 119 - 907 6,092 1,245 27,003 18,468 7,473
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses)
on investments, net (2) 119 - 907 12,300 3,117 27,003 18,468 7,473
Net change in unrealized appreciation
(depreciation) on investments (1,075) - - (164,185) 12,362 13,125 136 (37,068) 56,173
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealized
appreciation (depreciation) on
investments, net (1,077) 119 - (163,278) 24,662 16,242 27,139 (18,600) 63,646
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations ($1,096) 115 - (155,090) 31,964 18,888 72,470 20,413 100,441
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $66,211 75,714 70,912 - - 17,379 24,296 19,213 13,993
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 9,862 11,220 8,983 - - (594) 2,223 2,212 2,179
Administrative charges 2,466 2,805 2,246 - - (149) 556 553 545
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 12,328 14,025 11,229 - - (743) 2,779 2,765 2,724
Investment income (loss), net 53,883 61,689 59,683 - - 18,122 21,517 16,448 11,269
Realized gains (losses) and unrealized
appreciation (depreciation)
on investments:
Realized capital gain distributions
on mutual funds 91,611 - - - - 86 550 190 -
Realized gains (losses) on sales of
investments, net 59,135 118,555 23,410 - - 37,619 5,922 2,734 1,164
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 150,746 118,555 23,410 - - 37,705 6,472 2,924 1,164
Net change in unrealized appreciation
(depreciation) on investments 116,553 (93,370) 259,686 - -(37,457) (6,554) (13,736) 44,013
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation (depreciation)
on investments, net 267,299 25,185 283,096 - - 248 (82) (10,812) 45,177
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $321,182 86,874 342,779 - - 18,370 21,435 5,636 56,446
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Operations (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Total All Funds
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in
fund shares $25,018 19,668 12,928 22,065 8,167 3,109 619,133 514,679 331,100
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense
risk charges 2,373 2,270 2,227 2,535 1,411 916 95,822 77,110 52,287
Administrative charges 593 568 557 634 353 229 23,956 19,277 13,073
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 2,966 2,838 2,784 3,169 1,764 1,145 119,778 96,387 65,360
- ---------------------------------------------------------------------------------------------------------------------------
Investment income
(loss), net 22,052 16,830 10,144 18,896 6,403 1,964 499,355 418,292 265,740
Realized gains (losses) and
unrealized appreciation
(depreciation) on investments:
Realized capital gain distributions
on mutual funds 87 - - 176 2,213 - 268,254 164,334 36,296
Realized gains (losses) on
sales of investments, net 11,706 4,146 1,495 1,074 6,865 258 324,660 252,789 122,564
- ---------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 11,793 4,146 1,495 1,250 9,078 258 592,914 417,123 158,860
Net change in unrealized
appreciation (depreciation)
on investments 1,480 (21,955) 68,320 35,571 4,806 32,162 548,282 354,212 871,051
- ---------------------------------------------------------------------------------------------------------------------------
Total realized gains
(losses) and unrealized
appreciation (depreciation)
on investments, net 13,273 (17,809) 69,815 36,821 13,884 32,420 1,141,196 771,335 1,029,911
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations $35,325 (979) 79,959 55,717 20,287 34,384 1,640,551 1,189,627 1,295,651
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Adjustable
U.S. Government Fund Capital Growth Fund Growth and Income Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $- 17,105 1,199 (113) (2) - 43,696 16,297 2,877
Realized gains (losses) on
investments, net - (10,027) 35 (11) - - 134,863 127,607 42,515
Net change in unrealized appreciation
(depreciation) on investments - (200) 240 (548) (140) - 283,057 37,916 184,273
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations - 6,878 1,474 (672) (142) - 461,616 181,820 229,665
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments - 6,969 12,633 - - - 387,084 347,781 233,408
Transfers between funds - (34,766) 11,222 94,715 4,560 - 194,269 289,040 111,030
Surrenders and terminations - (1,178) - - - - (271,440) (28,415) (54,886)
Policy loan transactions - 74 (1,764) - - - 3,110 8,174 842
Other transactions (note 2) - (2,842) (6,127) (429) - - (163,700) (145,312) (92,875)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
policy transactions - (31,743) 15,964 94,286 4,560 - 149,323 471,268 197,519
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets - (24,865) 17,438 93,614 4,418 - 610,939 653,088 427,184
Net assets at beginning of year - 24,865 7,427 4,418 - - 1,706,254 1,053,166 625,982
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $- - 24,865 98,032 4,418 - 2,317,193 1,706,254 1,053,166
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Investment Grade
High Income Fund Income Securities Fund Intermediate Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income
(loss), net $138,395 151,749 68,408 62,457 27,550 16,941 - 3,249 3,288
Realized gains (losses)
on investments, net 48,831 42,764 7,610 22,389 7,923 2,313 - 1,981 1,106
Net change in unrealized
appreciation (depreciation)
on investments 4,999 26,432 122,964 68,874 37,183 47,314 - (3,575) 2,630
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
from operations 192,225 220,945 198,982 153,720 72,656 66,568 - 1,655 7,024
---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 50,642 57,851 44,935 255,347 275,281 223,737 - 11,940 14,163
Transfers between funds (140,178) 344,787 37,055 46,671 120,002 186,849 - (72,421) 8,123
Surrenders and
terminations (67,891) (3,551) (14,331) (11,918) (20,210) (14,487) - (751)(40,771)
Policy loan transactions (33,557) 8,073 1,359 (25,240) (4,239) (19,420) - - -
Other transactions
(note 2) (41,580) (35,494) (32,177) (96,044) (98,005) (89,585) - (5,413) (7,440)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from policy transactions (232,564) 371,666 36,841 168,816 272,829 287,094 - (66,645)(25,925)
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (40,339) 592,611 235,823 322,536 345,485 353,662 - (64,990)(18,901)
Net assets at beginning of year 1,874,953 1,282,342 1,046,519 869,551 524,066 170,404 - 64,990 83,891
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $1,834,614 1,874,953 1,282,342 1,192,087 869,551 524,066 - - 64,990
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Mutual Discovery Mutual Shares
Money Market Fund Securities Fund Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $29,826 27,558 27,041 (1,385) (27) - (2,512) (39) -
Realized gains (losses) on
investments, net - - - 166 - - 2,034 2 -
Net change in unrealized
appreciation (depreciation)
on investments - - - 26,719 495 - 51,689 1,634 -
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations 29,826 27,558 27,041 25,500 468 - 51,211 1,597 -
Policy transactions (note 4):
Purchase payments 1,996,782 2,288,562 1,140,571 - - - 16,585 - -
Transfers between funds (2,136,510) (2,221,762) (843,539) 281,309 50,000 - 776,453 84,053 -
Surrenders and terminations (52,158) (27,431) (48,126) - - - - - -
Policy loan transactions (25,633) (5,692) (251) - - - (1,956) - -
Other transactions (note 2) 168,886 (13,338) (124,409) (1,893) - - (9,654) (44) -
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
policy transactions (48,633) 20,339 124,246 279,416 50,000 - 781,428 84,009 -
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (18,807) 47,897 151,287 304,916 50,468 - 832,639 85,606 -
Net assets at beginning of year 729,749 681,852 530,565 50,468 - - 85,606 - -
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $710,942 729,749 681,852 355,384 50,468 - 918,245 85,606 -
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Natural Resources Real Estate Rising
Securities Fund Securities Fund Dividends Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income
(loss), net $1,324 837 489 8,632 5,589 2,834 1,419 1,941 961
Realized gains (losses) on
investments, net (1,936) 16,425 17,696 23,316 1,980 3,559 28,302 2,703 463
Net change in unrealized
appreciation (depreciation)
on investments (25,118) (8,994) (10,144) 57,737 58,343 14,488 93,007 44,265 19,701
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations (25,730) 8,268 8,041 89,685 65,912 20,881 122,728 48,909 21,125
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 15,837 18,730 24,963 92,480 67,454 53,203 108,408 74,745 52,764
Transfers between funds (5,829) (46,431) 23,956 176,166 86,682 38,779 193,808 86,767 38,476
Surrenders and
terminations (52) (7,791) (81,139) (2,795) (1,098) (8,139) (17,668) (7,693) (264)
Policy loan transactions 172 (524) 282 (15,416) (1,340) (145) (5,874) (1,876) -
Other transactions (note 2) (6,922) (9,019) (12,614) (43,348) (27,619) (23,363) (51,398) (33,070) (19,499)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from policy transactions 3,206 (45,035) (44,552) 207,087 124,079 60,335 227,276 118,873 71,477
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (22,524) (36,767) (36,511) 296,772 189,991 81,216 350,004 167,782 92,602
Net assets at beginning of year 128,017 164,784 201,295 349,516 159,525 78,309 304,911 137,129 44,527
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $105,493 128,017 164,784 646,288 349,516 159,525 654,915 304,911 137,129
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Templeton Developing Markets Templeton Global
Small Cap Fund Equity Fund Asset Allocation Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($1,212) (131) - 5,407 (275) (4,311) 4,723 (2,353) (27)
Realized gains (losses) on
investments, net 7,269 472 - 18,074 7,994 (453) 25,465 12,650 17
Net change in unrealized appreciation
(depreciation) on investments 22,458 3,624 - (127,265) 56,503 4,422 11,716 41,378 (15)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations 28,515 3,965 - (103,784) 64,222 (342) 41,904 51,675 (25)
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 44,998 683 - 191,340 215,896 169,165 430 439 -
Transfers between funds 248,658 51,952 - 2,200 267,310 63,297 (108,898) 333,332 311
Surrenders and terminations (965) 75 - (24,839) (10,080) (18,763) (108) - -
Policy loan transactions - - - (20,884) (2,638) - - - -
Other transactions (note 2) (19,801) (239) - (77,790) (73,383) (61,489) (5,240) (1,945) (66)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
policy transactions 272,890 52,471 - 70,027 397,105 152,210 (113,816) 331,826 245
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 301,405 56,436 - (33,757) 461,327 151,868 (71,912) 383,501 220
Net assets at beginning of year 56,436 - - 669,146 207,819 55,951 383,721 220 -
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $357,841 56,436 - 635,389 669,146 207,819 311,809 383,721 220
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Templeton Global Templeton Global Templeton International
Growth Fund Income Securities Fund Equity Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income
(loss), net $7,170 3,267 (432) 8,908 6,637 2,283 22,772 11,659 3,566
Realized gains (losses)
on investments, net 21,035 11,116 587 668 432 392 64,280 27,511 8,398
Net change in unrealized
appreciation (depreciation)
on investments 80,562 91,158 23,468 (6,915) 2,837 6,634 25,384 114,314 19,054
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations 108,767 105,541 23,623 2,661 9,906 9,309 112,436 153,484 31,018
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 317,636 335,873 237,156 42,795 39,862 42,908 359,829 371,300 297,409
Transfers between
funds 272,672 119,840 114,188 (1,929) 9,506 18,457 170,913 100,214 206,753
Surrenders and
terminations (35,910) (12,771) (6,710) (1,422) (2,101) (6,040) (30,410) (30,572) (9,230)
Policy loan transactions (19,640) (8,767) (3,177) (2,728) (425) (638) (37,789) (10,040) (1,799)
Other transactions (note 2) (131,055) (113,183) (83,481) (17,463) (16,260) (17,786) (138,095) (129,653)(110,168)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from policy transactions 403,703 320,992 257,976 19,253 30,582 36,901 324,448 301,249 382,965
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets 512,470 426,533 281,599 21,914 40,488 46,210 436,884 454,733 413,983
Net assets at beginning
of year 774,892 348,359 66,760 129,516 89,028 42,818 1,010,009 555,276 141,293
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end
of year $1,287,362 774,892 348,359 151,430 129,516 89,028 1,446,893 1,010,009 555,276
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Templeton International Templeton U.S Government
Smaller Companies Fund Pacific Growth Fund Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net ($19) (4) - 8,188 7,302 2,646 45,331 39,013 36,795
Realized gains (losses) on
investments, net (2) 119 - 907 12,300 3,117 27,003 18,468 7,473
Net change in unrealized appreciation
(depreciation) on investments (1,075) - - (164,185) 12,362 13,125 136 (37,068) 56,173
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations (1,096) 115 - (155,090) 31,964 18,888 72,470 20,413 100,441
- ---------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments - - - 134,478 181,194 141,914 40,913 26,467 25,128
Transfers between funds 13,608 (115) - (41,449) 14,234 74,887 (108,226) 261,674 24,109
Surrenders and terminations - - - (10,217) (20,255) (10,270) (20,318) (7,837) (18,462)
Policy loan transactions - - - (13,651) (2,894) (27,456) (7,823) (424) (2,060)
Other transactions (note 2) (42) - - (52,839) (73,664) (64,733) (27,460) (19,100) (16,258)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
policy transactions 13,566 (115) - 16,322 98,615 114,342 (122,914) 260,780 12,457
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 12,470 - - (138,768) 130,579 133,230 (50,444) 281,193 112,898
Net assets at beginning of year - - - 428,593 298,014 164,784 928,142 646,949 534,051
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $12,470 - - 289,825 428,593 298,014 877,698 928,142 646,949
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Utility Equity Fund Zero Coupon Fund - 1995 Zero Coupon Fund - 2000
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $53,883 61,689 59,683 - - 18,122 21,517 16,448 11,269
Realized gains (losses) on
investments, net 150,746 118,555 23,410 - - 37,705 6,472 2,924 1,164
Net change in unrealized
appreciation (depreciation)
on investments 116,553 (93,370) 259,686 - - (37,457) (6,554) (13,736) 44,013
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
operations 321,182 86,874 342,779 - - 18,370 21,435 5,636 56,446
Policy transactions (note 4):
Purchase payments 116,828 127,511 116,016 - - - - - -
Transfers between funds (67,788) (163,650) 124,589 - - (270,886) (17,434) - 10,631
Surrenders and terminations (8,311) (80,389) (35,449) - - - - - -
Policy loan transactions (60,609) (97,734) (13,309) - - - (73) (64) (64)
Other transactions (note 2) (60,143) (65,596) (62,877) - - (2,815) (4,421) (4,271) (3,831)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from policy transactions (80,023) (279,858) 128,970 - - (273,701) (21,928) (4,335) 6,736
Increase (decrease) in net assets 241,159 (192,984) 471,749 - - (255,331) (493) 1,301 63,182
Net assets at beginning of year 1,352,938 1,545,922 1,074,173 - - 255,331 350,723 349,422 286,240
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $1,594,097 1,352,938 1,545,922 - - - 350,230 350,723 349,422
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Zero Coupon Fund - 2005 Zero Coupon Fund - 2010 Total All Funds
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $22,052 16,830 10,144 18,896 6,403 1,964 499,355 418,292 265,740
Realized gains (losses) on
investments, net 11,793 4,146 1,495 1,250 9,078 258 592,914 417,123 158,860
Net change in unrealized
appreciation (depreciation)
on investments 1,480 (21,955) 68,320 35,571 4,806 32,162 548,282 354,212 871,051
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
from operations 35,325 (979) 79,959 55,717 20,287 34,384 1,640,551 1,189,627 1,295,651
Policy transactions (note 4):
Purchase payments - - - - - - 4,172,412 4,448,538 2,830,073
Transfers between funds (61,213) 57,145 - 3,652 223,644 - (214,360) (34,403) (21,713)
Surrenders and
terminations - (3,894) - - - - (556,422) (265,942) (367,067)
Policy loan transactions - - (687) (183) (176) (169) (267,774) (120,512) (68,456)
Other transactions
(note 2) (4,798) (4,109) (3,625) (5,717) (3,437) (1,657) (790,946) (874,996) (836,875)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from policy
transactions (66,011) 49,142 (4,312) (2,248) 220,031 (1,826) 2,342,910 3,152,685 1,535,962
Increase (decrease) in net assets (30,686) 48,163 75,647 53,469 240,318 32,558 3,983,461 4,342,312 2,831,613
Net assets at beginning
of year 385,323 337,160 261,513 356,054 115,736 83,178 12,928,936 8,586,624 5,755,011
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end
of year $354,637 385,323 337,160 409,523 356,054 115,736 16,912,397 12,928,936 8,586,624
===========================================================================================================================
<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, 1997
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. and its Templeton and Franklin affiliates, 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. Gains on the sale of fund shares are 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 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.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Investments (cont.)
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. The Precious Metals Fund name was changed to
Natural Resources Securities Fund on May 1, 1997.
Expenses
Asset Based Expenses
A mortality and expense risk charge is deducted from the Variable Account on a
daily basis equal, on an annual basis, to .60% of the daily net assets of the
Variable Account.
An administrative charge is deducted from the Variable Account on a daily basis
equal, on an annual basis, to .15% of the daily net assets of the Variable
Account.
Contract Based Expenses
A cost of insurance charge is deducted against each policy by liquidating units.
The amount of the charge is based upon age, sex, rate class and net amount at
risk (death benefit less total cash surrender value). Total cost of insurance
charges paid by the policy owners for the years ended December 31, 1997, 1996
and 1995 were $832,417, $715,700, and $581,193, respectively.
A deferred issue charge is deducted annually, at the end of the policy year,
from each single premium variable life policy for the first ten policy years by
liquidating units. The amount of the charge is 7% of the single premium
consisting of 2.5% for premium taxes, 4% for sales charge and .5% for policy
issue charge (in the State of California, 2.35%, 4.15% and .5%, respectively).
If the policy is surrendered before the full amount is collected, the
uncollected portion of this charge is deducted from the account value. Total
deferred issue charges paid by the policy owners for the years ended December
31, 1997, 1996 and 1995 were $37,629, $28,152, and $28,613, 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, 1997, 1996 and 1995 were $211,485, $204,321, and $292,695,
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, 1997, 1996 and 1995,
respectively. Net transfers to the Fixed Account during the years ended December
31, 1997, 1996 and 1995 were $214,360, $34,403, and $21,713, 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.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
3. 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.
4. POLICY TRANSACTIONS - UNIT ACTIVITY
Transactions in units for each fund for the years ended December 31, 1997, 1996
and 1995, were as follows:
<TABLE>
<CAPTION>
Adjustable Growth Investment Mutual Mutual
U.S Capital and High Income Grade Money Discovery Shares
Government Growth Income Income Securities Intermediate Market Securities Securities
Fund Fund Fund Fund Fund Bond Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1994 654 - 29,795 63,380 10,514 6,002 37,381 - -
Policy transactions:
Purchase payments 1,060 - 9,561 2,463 12,397 963 77,441 - -
Transfers between funds 966 - 4,664 1,925 10,593 562 (57,166) - -
Surrenders and terminations - - (2,237) (772) (783) (2,761) (3,275) - -
Policy loan transactions (151) - 38 75 (1,137) - (17) - -
Other transactions (516) - (3,800) (1,738) (4,970) (507) (8,596) - -
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy
transactions 1,359 - 8,226 1,953 16,100 (1,743) 8,387 - -
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 2,013 - 38,021 65,333 26,614 4,259 45,768 - -
===========================================================================================================================
Policy transactions:
Purchase payments 553 - 12,119 2,801 13,495 778 147,764 - -
Transfers between funds (2,257) 391 9,962 17,863 5,904 (4,635) (143,612) 4,953 8,284
Surrenders and terminations (94) - (1,005) (177) (1,004) (49) (1,836) - -
Policy loan transactions 6 - 311 405 (212) - (376) - -
Other transactions (221) - (5,057) (1,722) (4,812) (353) (778) - (4)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy
transactions (2,013) 391 16,330 19,170 13,371 (4,259) 1,162 4,953 8,280
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - 391 54,351 84,503 39,985 - 46,930 4,953 8,280
===========================================================================================================================
Policy transactions:
Purchase payments - - 10,974 2,141 11,090 - 125,344 - 1,460
Transfers between funds - 7,029 5,516 (5,679) 1,881 - (120,861) 24,650 67,284
Surrenders and terminations - - (7,932) (3,022) (513) - (3,267) - -
Policy loan transactions - - (68) (1,471) (1,113) - (1,621) - (184)
Other transactions - (34) (4,624) (1,789) (4,161) - (2,758) (164) (841)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions - 6,995 3,866 (9,820) 7,184 - (3,163 24,486 67,719
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 - 7,386 58,217 74,683 47,169 - 43,767 29,439 75,999
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
4. POLICY TRANSACTIONS - UNIT ACTIVITY (cont.)
<TABLE>
<CAPTION>
Natural Templeton Templeton Templeton Templeton Templeton
Resources Real Estate Rising Small Developing Global Asset Global Global Income International
Securities Securities Dividends Cap Markets Allocation Growth Securities Equity
Fund Fund Fund Fund Equity Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1994 13,441 4,368 4,474 - 6,099 - 6,748 3,175 11,403
Policy transactions:
Purchase payments 1,662 2,884 4,625 - 18,183 - 22,517 2,992 22,647
Transfers between funds 1,698 2,056 3,323 - 6,624 27 11,063 1,333 15,984
Surrenders and terminations (5,150) (427) (23) - (2,067) - (627) (416) (691)
Policy loan transactions 20 (7) - - (211) - (307) (44) (130)
Other transactions (840) (1,246) (1,699) - (6,418) (6) (7,923) (1,239) (8,383)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in units resulting from
policy transactions (2,610) 3,260 6,226 - 16,111 21 24,723 2,626 29,427
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at
December 31, 1995 10,831 7,628 10,700 - 22,210 21 31,471 5,801 40,830
===========================================================================================================================
Policy transactions:
Purchase payments 1,115 2,975 5,400 54 20,769 39 28,048 2,551 24,859
Transfers between funds (2,791) 3,397 6,298 4,297 24,526 30,441 9,880 609 6,586
Surrenders and terminations (438) (51) (581) 6 (952) - (1,089) (138) (2,070)
Policy loan transactions (29) (62) (134) - (251) - (718) (26) (665)
Other transactions (536) (1,209) (2,379) (19) (7,042) (169) (9,435) (1,041) (8,691)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in units resulting from
policy transactions (2,679) 5,050 8,604 4,338 37,050 30,311 26,686 1,955 20,019
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at
December 31, 1996 8,152 12,678 19,304 4,338 59,260 30,332 58,157 7,756 60,849
===========================================================================================================================
Policy transactions:
Purchase payments 1,090 3,106 5,847 3,088 15,655 31 21,703 2,567 19,816
Transfers between funds (400) 5,867 10,275 17,595 (2,887) (7,728) 18,498 (108) 9,327
Surrenders and terminations (6) (93) (909) (74) (1,900) (9) (2,308) (85) (1,686)
Policy loan transactions (7) (534) (334) - (1,728) - (1,348) (164) (2,099)
Other transactions (475) (1,455) (2,780) (1,348) (6,291) (396) (8,935) (1,050) (7,573)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in units resulting from
policy transactions 202 6,891 12,099 19,261 2,849 (8,102) 27,610 1,160 17,785
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at
December 31, 1997 8,354 19,569 31,403 23,599 62,109 22,230 85,767 8,916 78,634
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
4. POLICY TRANSACTIONS - UNIT ACTIVITY (cont.)
<TABLE>
<CAPTION>
Templeton
International Templeton U.S. Zero Zero Zero Zero
Smaller Pacific Government Utility Coupon Coupon Coupon Coupon Total
Companies Growth Securities Equity Fund - Fund - Fund - Fund - All
Fund Fund Fund Fund 1995 2000 2005 2010 Funds
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1994 - 12,635 31,714 59,969 14,325 14,594 12,559 3,804 347,034
Policy transactions:
Purchase payments - 10,718 1,355 5,744 - - - - 197,212
Transfers between funds - 5,757 1,281 6,185 (14,174) 458 - - 3,159
Surrenders and terminations - (779) (965) (1,893) - - - - (22,866)
Policy loan transactions - (2,141) (111) (695) - (3) (30) (6) (4,857)
Other transactions - (4,868) (872) (3,112) (151) (175) (147) (63) (57,269)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions - 8,687 688 6,229 (14,325) 280 (177) (69) 115,379
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - 21,322 32,402 66,198 - 14,874 12,382 3,735 462,413
===========================================================================================================================
Policy transactions:
Purchase payments - 12,100 1,329 5,397 - - - - 282,146
Transfers between funds - 802 12,856 (6,933) - 1 2,260 8,290 (2,628)
Surrenders and terminations - (1,318) (400) (3,354) - - (149) - (14,699)
Policy loan transactions - (189) (22) (4,007) - (3) - (7) (5,979)
Other transactions - (4,907) (961) (2,782) - (185) (162) (122) (52,587)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions - 6,488 12,802 (11,679) - (187) 1,949 8,161 206,253
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - 27,810 45,204 54,519 - 14,687 14,331 11,896 668,666
===========================================================================================================================
Policy transactions:
Purchase payments - 9,779 1,925 4,451 - - - - 240,067
Transfers between funds 1,143 (2,629) (5,101) (2,894) - (707) (2,226) 119 17,964
Surrenders and terminations - (759) (952) (304) - - - - (23,819)
Policy loan transactions - (884) (382) (2,428) - (3) - (6) (14,374)
Other transactions (4) (3,737) (1,294) (2,288) - (181) (173) (183) (52,534)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions 1,139 1,770 (5,804) (3,463) - (891) (2,399) (70) 167,304
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 1,139 29,580 39,400 51,056 - 13,796 11,932 11,826 835,970
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
5. 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 year of
the five-year period ended December 31, 1997 as follows.
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable U.S. Government Fund
December 31,
19961 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
Capital Growth Fund
December 31,
1997 7,386 13.273 98,032 1.52
19962 391 11.303 4,418 1.52+
Growth and Income Fund
December 31,
1997 58,217 39.803 2,317,193 1.24
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
High Income Fund
December 31,
1997 74,683 24.565 1,834,614 1.28
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
Income Securities Fund
December 31,
1997 47,169 25.273 1,192,087 1.25
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
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
5. UNIT VALUES (cont.)
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Grade Intermediate Bond Fund
December 31,
19961 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
Money Market Fund
December 31,
1997 43,767 16.244 710,942 1.20
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
Mutual Discovery Securities Fund
December 31,
1997 29,439 12.072 355,384 1.81
19963 4,953 10.190 50,468 2.12+
Mutual Shares Securities Fund
December 31,
1997 75,999 12.082 918,245 1.55
19963 8,280 10.339 85,606 1.75+
Natural Resources Securities Fund
December 31,
1997 8,354 12.629 105,493 1.44
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
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
5. UNIT VALUES (cont.)
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real Estate Securities Fund
December 31,
1997 19,569 $ 33.025 $ 646,288 1.29%
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
Rising Dividends Fund
December 31,
1997 31,403 20.855 654,915 1.49
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
Small Cap Fund
December 31,
1997 23,599 15.164 357,841 1.52
1996 4,338 13.011 56,436 1.52
19954 - 10.157 - 1.65+
Templeton Developing Markets Equity Fund
December 31,
1997 62,109 10.230 635,389 2.17
1996 59,260 11.292 669,146 2.24
1995 22,210 9.357 207,819 2.16
19945 6,099 9.173 55,951 2.28+
Templeton Global Asset Allocation Fund
December 31,
1997 22,230 14.027 311,809 1.69
1996 30,332 12.651 383,721 1.61
19956 21 10.637 220 1.65+
Templeton Global Growth Fund
December 31,
1997 85,767 15.010 1,287,362 1.63
1996 58,157 13.324 774,892 1.68
1995 31,471 11.069 348,359 1.72
19945 6,748 9.894 66,760 1.89+
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
5. UNIT VALUES (cont.)
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Templeton Global Income Securities Fund
December 31,
1997 8,916 $ 16.985 $ 151,430 1.37%
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
Templeton International Equity Fund
December 31,
1997 78,634 18.400 1,446,893 1.64
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
Templeton International Smaller Companies Fund
December 31,
1997 1,139 10.943 12,470 1.81
19962 - 11.194 - 1.53+
Templeton Pacific Growth Fund
December 31,
1997 29,580 9.798 289,825 1.78
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
U.S. Government Securities Fund
December 31,
1997 39,400 22.276 877,698 1.25
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
Utility Equity Fund
December 31,
1997 51,056 31.223 1,594,097 1.25
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
</TABLE>
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Notes to Financial Statements (continued)
December 31, 1997
5. UNIT VALUES (cont.)
<TABLE>
<CAPTION>
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Zero Coupon Fund - 1995
December 31,
19957 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
Zero Coupon Fund - 2000
December 31,
1997 13,796 25.386 350,230 1.15
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
Zero Coupon Fund - 2005
December 31,
1997 11,932 29.722 354,637 1.15
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
Zero Coupon Fund - 2010
December 31,
1997 11,826 34.629 409,523 1.15
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
<FN>
*For the year ended December 31, including the effect of the expenses of the underlying funds.
+Annualized.
1 Period from January 1, 1996 to October 25, 1996 (fund closure).
2 Period from May 1, 1996 (fund commencement) to December 31, 1996.
3 Period from November 8, 1996 (fund commencement) to December 31, 1996.
4 Period from November 1, 1995 (fund commencement) to December 31, 1995.
5 Period from July 1, 1994 (fund commencement) to December 31, 1994.
6 Period from May 1, 1995 (fund commencement) to December 31, 1995.
7 Period from January 1, 1995 to December 15, 1995 (fund closure).
</FN>
</TABLE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1997 and 1996
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA AND SUBSIDIARIES
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 and subsidiaries as of December 31, 1997 and
1996, 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,
1997. 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, 1997
and 1996, 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,
1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 4, 1998
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Financial Statements
Consolidated Balance Sheets
December 31, 1997 and 1996
(in thousands)
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments:
Fixed maturities, at market $ 2,705,210 2,768,306
Equity securities, at market 442,607 327,834
Mortgage loans on real estate 318,683 245,559
Certificates of deposit and short-term securities 117,124 204,972
Policy loans 5,695 103,708
Other invested assets 51,863 44,948
- ---------------------------------------------------------------------------------------------------------------------------
Total investments 3,641,182 3,695,327
Cash 26,871 37,992
Accrued investment income 38,345 36,130
Receivables (net of allowance for uncollectible accounts of $3,122 in 1997 and $4,630 in 1996) 262,676 155,278
Reinsurance receivable:
Funds held on deposit 1,145,210 1,101,716
Recoverable on future policy benefit reserves 1,120,663 48,909
Recoverable on unpaid claims 219,443 142,199
Receivable on paid claims 31,158 18,240
Deferred acquisition costs 927,080 863,338
Other assets 34,475 26,052
Federal income tax recoverable 20,761 12,455
- ---------------------------------------------------------------------------------------------------------------------------
Assets, exclusive of separate account assets 7,467,864 6,137,636
Separate account assets 10,756,929 9,520,561
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $18,224,793 15,658,197
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Financial Statements (Continued)
Consolidated Balance Sheets (cont.)
December 31, 1997 and 1996
(in thousands)
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities:
Future benefit reserves:
Life $ 1,297,269 1,204,633
Annuity 3,251,829 2,879,221
Policy and contract claims 553,113 438,824
Unearned premiums 50,168 32,176
Reinsurance payable 165,582 96,857
Deferred income on reinsurance 150,526 0
Deferred income taxes 228,861 150,760
Accrued expenses 93,341 84,254
Commissions due and accrued 39,517 37,103
Other policyholder funds 30,208 52,267
Other liabilities 389,858 147,364
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities, exclusive of separate account liabilities 6,250,272 5,123,459
Separate account liabilities 10,756,929 9,520,561
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 17,007,201 14,644,020
- ---------------------------------------------------------------------------------------------------------------------------
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 195,505 102,637
Net unrealized Canadian currency loss (4,448) (3,473)
Retained earnings 574,447 462,925
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 1,217,592 1,014,177
Commitments and contingencies (notes 6 and 11)
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $18,224,793 15,658,197
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Financial Statements (Continued)
Consolidated Statements of Income
Years ended December 31, 1997, 1996 and 1995
(in thousands)
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 339,841 284,084 257,647
Other life policy considerations 83,816 85,747 93,158
Annuity considerations 219,262 170,656 147,112
Accident and health premiums 747,718 603,230 527,059
- ---------------------------------------------------------------------------------------------------------------------------
Total premiums and considerations 1,390,637 1,143,717 1,024,976
Premiums ceded 438,018 277,163 223,226
- ---------------------------------------------------------------------------------------------------------------------------
Net premiums and considerations 952,619 866,554 801,750
Investment income, net 162,350 222,622 201,158
Realized investment gains, net 61,488 28,561 29,202
Other 53,760 6,193 10,170
- ---------------------------------------------------------------------------------------------------------------------------
Total revenue 1,230,217 1,123,930 1,042,280
- ---------------------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Life insurance benefits 336,090 281,441 268,163
Annuity benefits 206,189 153,238 145,636
Accident and health insurance benefits 566,746 434,793 374,743
- ---------------------------------------------------------------------------------------------------------------------------
Total benefits 1,109,025 869,472 788,542
Benefit recoveries 426,607 249,552 210,702
- ---------------------------------------------------------------------------------------------------------------------------
Net benefits 682,418 619,920 577,840
Commissions and other agent compensation 310,665 267,714 233,939
General and administrative expenses 106,744 99,018 115,419
Taxes, licenses and fees 20,605 19,959 17,672
Increase in deferred acquisition costs, net (63,742) (36,344) (28,552)
- ---------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 1,056,690 970,267 916,318
- ---------------------------------------------------------------------------------------------------------------------------
Income from operations before income taxes 173,527 153,663 125,962
- ---------------------------------------------------------------------------------------------------------------------------
Income tax expense:
Current 31,571 21,936 12,993
Deferred 28,283 30,559 25,772
- ---------------------------------------------------------------------------------------------------------------------------
Total income tax expense 59,854 52,495 38,765
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 113,673 101,168 87,197
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Financial Statements (Continued)
Consolidated Statements of Stockholder's Equity
Years ended December 31, 1997, 1996 and 1995
(in thousands)
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<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 25,000 40,000
Redemption of stock during the year 0 0 (15,000)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of year 25,000 25,000 25,000
- ---------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital:
Balance at beginning of year 407,088 407,088 406,494
Additional contribution from parent 0 0 594
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of year 407,088 407,088 407,088
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments:
Balance at beginning of year 102,637 139,204 (62,073)
Net unrealized gain on securities transferred from held-to-maturity
to available-for-sale classification, net of deferred federal income 0 0 1,789
Net unrealized gain (loss) during the year, net of deferred federal income taxes 92,868 (36,567) 199,488
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of year 195,505 102,637 139,204
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized Canadian currency loss:
Balance at beginning of year (3,473) (3,455) (3,787)
Net unrealized gain (loss) during the year, net of deferred federal income taxes (975) (18) 332
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of year (4,448) (3,473) (3,455)
- ---------------------------------------------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of year 462,925 363,357 278,811
Net income 113,673 101,168 87,197
Cash dividend to stockholder (2,151) (1,600) (2,651)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of year 574,447 462,925 363,357
- ---------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity $1,217,592 1,014,177 951,194
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Financial Statements (continued)
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(in thousands)
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 113,673 101,168 87,197
- ---------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Realized investment gains, net (61,488) (28,561) (29,202)
Deferred federal income tax expense 28,283 30,559 25,772
Charges to policy account balances (859,852) (675,737) (632,962)
Interest credited to policy account balances 211,590 166,766 169,151
Change in:
Accrued investment income (2,215) 728 (2,072)
Receivables (107,398) (30,578) (13,300)
Reinsurance receivables (1,644,423) (119,384) (190,953)
Deferred acquisition costs (63,742) (36,344) (28,552)
Future benefit reserves 1,194,990 76,478 66,932
Policy and contract claims and other policyholder funds 92,230 37,055 25,116
Unearned premiums 17,992 (2,005) (6,195)
Reinsurance payable 68,725 24,019 (8,669)
Current tax recoverable (8,306) (8,508) (153)
Accrued expenses and other liabilities 12,113 15,506 17,365
Commissions due and accrued 2,414 14,124 (1,211)
Depreciation and amortization (13,312) (25,874) (23,391)
Other, net 18 (1,568) 916
- ---------------------------------------------------------------------------------------------------------------------------
Total adjustments (1,132,381) (563,324) (631,408)
Net cash provided by (used in) operating activities (1,018,708) (462,156) (544,211)
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Financial Statements (continued)
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(in thousands)
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities (1,018,708) (462,156) (544,211)
Cash flows provided by (used in) investing activities:
Purchase of fixed maturities, at market $(1,748,950) (1,324,676)(1,533,290)
Purchase of equity securities (1,699,847) (137,304) (166,701)
Funding of mortgage loans (103,626) (70,265) (66,301)
Sale of fixed maturities, at market 1,921,534 1,043,748 1,242,988
Matured or redeemed fixed maturities, at amortized cost 0 0 7,022
Matured fixed maturities, at market 1,150 2,711 38,991
Sale of equity securities 1,691,789 122,788 97,619
Repayment of mortgage loans 29,520 23,317 25,563
Net change in certificates of deposit and short-term securities 87,848 (173,471) 123,806
Other 82,797 (20,566) (10,754)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 262,215 (533,718) (241,057)
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows provided by (used in) financing activities:
Policyholders' deposits to account balances $1,497,321 1,184,338 1,066,407
Policyholders' withdrawals from account balances (448,998) (368,490) (291,102)
Change in assets held under reinsurance agreements (540,268) 52,973 36,354
Funds borrowed on dollar reverse repurchase agreements, net 239,468 130,196 (58,150)
Net change in mortgage notes payable 0 0 (1,049)
Additional paid-in capital from parent 0 0 594
Preferred stock transactions 0 0 (15,000)
Cash dividends paid (2,151) (1,600) (2,651)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 745,372 997,417 735,403
- ---------------------------------------------------------------------------------------------------------------------------
Net change in cash (11,121) 1,543 (49,865)
Cash at beginning of year 37,992 36,449 86,314
- ---------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 26,871 37,992 36,449
===========================================================================================================================
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(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 1997 premiums and considerations,
33%, 20% and 47% 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 in which it holds
an ownership interest effective in 1998.
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.
Recognition of Nontraditional and Variable Life and Annuity Revenue
Nontraditional and variable life insurance and interest sensitive contracts that
have significant mortality or morbidity risk are accounted for in accordance
with the retrospective deposit method. Interest sensitive contracts that do not
have significant mortality or morbidity risk are accounted for in a manner
consistent with interest bearing financial instruments. For both types of
contracts, premium receipts are reported as deposits to the contractholder's
account while revenues consist of amounts assessed against contractholders
including surrender charges and earned administrative service fees. Mortality or
morbidity charges are also accounted for as revenue on those contracts
containing mortality or morbidity risk. Benefits consist of interest credited to
contractholder's accounts and claims or benefits incurred in excess of the
contractholder's balance.
Deferred Acquisition Costs
Acquisition costs, consisting of commissions and other costs which vary with and
are primarily related to production of new business, are deferred. For
traditional life and group life products, such costs are amortized over the
revenue-producing period of the related policies using the same actuarial
assumptions used in computing future policy benefit reserves. Acquisition costs
for accident and health insurance policies
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (cont.)
Deferred Acquisition Costs (cont.)
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 1997, 1996 and 1995 were $219,266, $137,618,
and $117,782, 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.
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.
Investments
The Company has classified all of its investment portfolio as
"available-for-sale". 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.
The Company analyzes loan impairment at least once a year when assessing the
adequacy of the allowance for possible credit losses. The Company does not
accrue interest on impaired loans and accounts for interest income on such loans
on a cash basis.
Realized gains and losses are computed based on the specific identification
method.
As of December 31, 1997 and 1996, investments with a carrying value of $103,590
and $102,361, 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
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (cont.)
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 underlying 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 Statement of Financial Accounting Standard (SFAS)
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. No adjustments were made to the consolidated financial
statements upon adoption of this pronouncement.
In 1997 the Company adopted SFAS No. 129, Disclosure of Information about
Capital Structure, which establishes standards for disclosing information about
an entity's capital structure. No additional disclosures were required.
Accounting Pronouncements to be Adopted
The Financial Accounting Standards Board (FASB) has 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 applicable to the Company. The Statements are
to be applied prospectively. As a result of SFAS No. 127, the Company will adopt
SFAS No. 125 January 1, 1998. Adoption of these pronouncements is not expected
to have a significant impact on the consolidated financial statements.
In June, 1997, the FASB issued SFAS No. 130 Reporting Comprehensive Income,
which establishes standards for reporting and displaying comprehensive income
and its components in general purpose financial statements, and SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, which
requires certain business enterprises to report specified information about
their operating segments in a complete set of financial statements to
shareholders. SFAS No. 130 and SFAS No. 131 are effective for the Company, and
will be adopted in 1998.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (cont.)
Reclassifications
Certain prior year balances have been reclassified to conform to the current
year presentation.
(2) Investments
Investments at December 31, 1997 consist of:
<TABLE>
<CAPTION>
Amount
shown on
Amortized Estimated consolidated
cost fair balance
or cost value sheet
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
U.S. Government $ 499,652 528,657 528,657
States and political subdivisions 82,287 85,829 85,829
Foreign government 35,858 37,734 37,734
Public utilities 44,151 48,237 48,237
Corporate securities 1,206,392 1,250,532 1,250,532
Mortgage backed securities 628,307 663,891 663,891
Collateralized mortgage obligations 86,246 90,330 90,330
- ---------------------------------------------------------------------------------------------------------------------------
Total fixed maturities $2,582,893 2,705,210 2,705,210
- ---------------------------------------------------------------------------------------------------------------------------
Equity securities:
Common stocks:
Banks, trusts and insurance companies 7,670 11,220 11,220
Industrial and miscellaneous 246,395 418,871 418,871
Nonredeemable preferred stocks 10,079 12,516 12,516
- ---------------------------------------------------------------------------------------------------------------------------
Total equity securities $ 264,144 442,607 442,607
- ---------------------------------------------------------------------------------------------------------------------------
Other investments:
Mortgage loans on real estate 318,683 XXXXXXXXX 318,683
Certificates of deposit and short-term securities 117,124 XXXXXXXXX 117,124
Policy loans 5,695 XXXXXXXXX 5,695
Other invested assets 51,863 XXXXXXXXX 51,863
- ---------------------------------------------------------------------------------------------------------------------------
Total other investments $ 493,365 XXXXXXXXX 493,365
- ---------------------------------------------------------------------------------------------------------------------------
Total investments $3,340,402 XXXXXXXXX 3,641,182
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(2) Investments (cont.)
At December 31, 1997 and 1996, the amortized cost, gross unrealized gains, gross
unrealized losses and estimated fair values of securities are as follows:
<TABLE>
<CAPTION>
Amortized Gross Gross Estimated
cost unrealized unrealized fair
or cost gains losses value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997:
U.S. Government $ 499,652 29,191 186 528,657
States and political subdivisions 82,287 3,561 19 85,829
Foreign government 35,858 1,876 0 37,734
Public utilities 44,151 4,086 0 48,237
Corporate securities 1,206,392 60,016 15,876 1,250,532
Mortgage backed securities 628,307 35,584 0 663,891
Collateralized mortgage obligations 86,246 4,086 2 90,330
- ---------------------------------------------------------------------------------------------------------------------------
Total fixed maturities 2,582,893 138,400 16,083 2,705,210
Equity securities 264,144 205,632 27,169 442,607
- ---------------------------------------------------------------------------------------------------------------------------
Total $2,847,037 344,032 43,252 3,147,817
===========================================================================================================================
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
===========================================================================================================================
<FN>
The changes in unrealized gains (losses) on fixed maturity securities were
$58,422, $(97,973) and $261,471 in each of the years ended December 31, 1997,
1996 and 1995, respectively.
The changes in unrealized gains (losses) in equity investments, which include
common stocks and nonredeemable preferred stocks were $84,718, $40,895 and
$48,186 for the years ended December 31, 1997, 1996 and 1995, respectively.
The amortized cost and estimated fair value of fixed maturities at December 31,
1997, 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.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 27,247 27,392
Due after one year through five years 439,279 446,935
Due after five years through ten years 913,045 941,311
Due after ten years 575,015 625,68
Mortgage backed securities 628,307 663,891
- ---------------------------------------------------------------------------------------------------------------------------
Totals $2,582,893 2,705,210
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(2) Investments (cont.)
Gross gains of $70,335, $43,696 and $41,962 and gross losses of $8,654, $16,834
and $14,607 were realized on sales of securities in 1997, 1996 and 1995,
respectively; related taxes were $21,588, $9,402, and $9,574 in 1997, 1996 and
1995, respectively. Proceeds from redemptions of held-to-maturity securities
during 1995 were $7,022 with no gain or loss realized on such transactions.
Net realized investment gains (losses) for the respective years ended December
31 are summarized as follows:
<TABLE>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities, at market $40,268 8,897 21,877
Equity securities 21,413 17,964 5,478
Mortgage loans (982) (1,129) (687)
Real estate 635 3,104 2,530
Other 154 (275) 4
- ---------------------------------------------------------------------------------------------------------------------------
Net gains before taxes 61,488 28,561 29,202
Tax expense on net realized gains 21,521 9,996 10,218
- ---------------------------------------------------------------------------------------------------------------------------
Net gains after taxes $39,967 18,565 18,984
===========================================================================================================================
</TABLE>
The Company has 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,
1997 and 1996, mortgage backed securities underlying such agreements were
carried at a market value of $350,985 and $124,281 respectively, and other
liabilities included $369,664 and $130,196 respectively for funds received under
these agreements. Average balances outstanding were $183,530 and $83,602 and
weighted average interest rates were 7.2% and 7.5% during 1997 and 1996
respectively. The maximum balance outstanding during 1997 and 1996 was $369,664
and $130,196 respectively.
The Company participates 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 loans 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, 1997 and 1996.
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 at December 31,
1997 and 1996.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(2) Investments (cont.)
The valuation allowances at December 31, 1997, 1996 and 1995 and the changes in
the allowance for the years then ended are summarized as follows:
<TABLE>
<CAPTION>
Writedowns
Beginning Charged to Charged to End
of year Operations Allowance Recoveries of year
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1997:
Mortgage loans $ 7,279 1,000 0 0 8,279
- ---------------------------------------------------------------------------------------------------------------------------
Total valuation allowance $ 7,279 1,000 0 0 8,279
===========================================================================================================================
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
===========================================================================================================================
</TABLE>
Major categories of net investment income for the respective years ended
December 31 are:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest:
Fixed maturities, at amortized cost $ 0 0 6,284
Fixed maturities, at market 211,335 178,664 158,421
Mortgage loans 25,232 19,267 16,125
Policy loans 6,526 7,013 6,688
Short-term investments 12,804 10,688 7,182
Dividends:
Preferred stock 748 818 581
Common stock 4,603 4,527 3,204
Interest on assets held by reinsurers 8,858 9,709 10,445
Other invested assets 9,438 5,344 3,614
- ---------------------------------------------------------------------------------------------------------------------------
Total investment income 279,544 236,030 212,544
Investment expenses related to coinsurance agreement (note 6) 98,417 0 0
Investment expenses 18,777 13,408 11,386
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income $162,350 222,622 201,158
============================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(3) Summary Table of Fair Value Disclosures
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets Fixed maturities, at market:
U.S. Government $ 528,657 528,657 645,264 645,264
States and political subdivisions 85,829 85,829 424 424
Foreign governments 37,734 37,734 309,394 309,394
Public utilities 48,237 48,237 7,041 7,041
Corporate securities 1,250,532 1,250,532 1,040,322 1,040,322
Mortgage backed securities 663,891 663,891 687,054 687,054
Collateralized mortgage obligations 90,330 90,330 78,807 78,807
Equity securities 442,607 442,607 327,834 327,834
Mortgage loans 318,683 333,540 245,559 252,825
Short term investments 117,124 117,124 204,972 204,972
Policy loans 5,695 5,695 103,708 103,708
Other long term investments 51,863 51,863 124 124
Receivables 262,676 262,676 155,278 155,278
Separate accounts assets 10,756,929 10,756,929 9,520,561 9,520,561
Financial liabilities:
Investment contracts 3,536,690 2,945,366 3,297,973 2,747,914
Separate account liabilities 10,756,929 10,565,205 9,520,561 9,324,358
Dollar reverse repurchase agreements 369,664 369,664 130,196 130,196
<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
Receivables at December 31 consist of the following:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Premiums due $207,293 125,216
Agents balances 3,186 5,523
Related party receivables 1,445 2,099
Reinsurance commission receivable 23,921 7,515
Scholarship enrollment fees 8,401 8,025
Due from administrators 13,630 3,244
Other 4,800 3,656
- ---------------------------------------------------------------------------------------------------------------------------
Total receivables $262,676 155,278
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(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, 1997 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.
Activity in the accident and health claims reserves, exclusive of long term
care, hospital indemnity and AIDS reserves of $12,479, $14,348 and $18,858 in
1997, 1996 and 1995, respectively, is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance recoverables of $114,230,
$99,292 and $96,090 $216,596 191,804 185,028
Incurred related to:
Current year 341,908 271,308 242,024
Prior years (12,087) (11,642) (9,163)
- ---------------------------------------------------------------------------------------------------------------------------
Total incurred 329,821 259,666 232,861
- ---------------------------------------------------------------------------------------------------------------------------
Paid related to:
Current year 150,942 107,842 100,165
Prior years 144,798 127,032 125,920
- ---------------------------------------------------------------------------------------------------------------------------
Total paid 295,740 234,874 226,085
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, net of reinsurance recoverables of $125,543,
$114,230 and $99,292 $250,677 216,596 191,804
===========================================================================================================================
<FN>
Due to lower than anticipated losses related to prior years, the provision for
claims and claim adjustment expenses decreased.
</FN>
</TABLE>
(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, 1997 are $902,500, $851,849,
$254,448, and $36,520 recoverable from four insurers who, as of December 31,
1997, were rated A+, A+, B++, and A+, 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, 1997, 1996 and 1995 (in thousands, except share data)
(6) Reinsurance (cont.)
Life insurance, annuities and accident and health business assumed from and
ceded to other companies is as follows:
<TABLE>
<CAPTION>
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, 1997:
Life insurance in force $32,234,241 72,682,842 19,873,094 85,043,989 85.5%
- ---------------------------------------------------------------------------------------------------------------------------
Premiums:
Life insurance 252,859 170,798 110,579 313,078 54.6%
Annuities 217,353 1,910 30,789 188,474 1.0%
Accident and health insurance 436,105 311,612 296,650 451,067 69.1%
- ---------------------------------------------------------------------------------------------------------------------------
Total premiums 906,317 484,320 438,018 952,619 50.8%
===========================================================================================================================
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%
===========================================================================================================================
</TABLE>
Effective January 1, 1997, the Company entered into a 100% coinsurance agreement
with an unrelated insurance company to coinsure a block of business with life
insurance inforce of $13,200,000 and 1997 premium of $90,000. The coinsured
block included certain universal life and traditional life insurance policies
and annuity contracts. In connection with this agreement, the Company recognized
a recoverable on future benefit reserves of $1,102,000, received a ceding
commission of $138,500 and transferred assets of $881,000 which support the
business. The unearned ceding commission represents deferred revenue which will
be amortized over the revenue-producing period of the related reinsured
policies. The servicing of the coinsured business was also transferred to a
third party insurer who is also the retrocessionaire of the block.
Of the amounts ceded to others, the Company ceded life insurance inforce of
$1,163,533, $381,381 and $182,638 in 1997, 1996 and 1995, respectively, and life
insurance premiums earned of $2,538, $1,293 and $641 in 1997, 1996 and 1995,
respectively, to its ultimate parent Allianz Aktiengesellshaft. The Company also
ceded accident and health premiums earned to Allianz Aktiengesellshaft of
$2,467, $1,922 and $(7,520) in 1997, 1996 and 1995.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(7) Income Taxes
Income Tax Expense
Total income tax expense (benefit) for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense attributable to operations:
Current tax expenses $ 31,571 21,936 12,993
Deferred tax expense 28,283 30,559 25,772
- ---------------------------------------------------------------------------------------------------------------------------
Total income tax expense attributable to operations $ 59,854 52,495 38,765
Income tax effect on equity:
Income tax allocated to stockholder's equity:
Attributable to unrealized gains and losses for the year 49,748 (19,967) 108,559
- ---------------------------------------------------------------------------------------------------------------------------
Total income tax effect on equity $109,602 32,528 147,324
===========================================================================================================================
</TABLE>
Components of Income Tax Expense
Income tax expense computed at the statutory rate of 35% varies from tax expense
reported in the Consolidated Statements of Income for the respective years ended
December 31 as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense computed at the statutory rate $60,735 53,782 44,087
Dividends received deductions and tax-exempt interest (2,792) (650) (5,430)
Foreign tax 916 (2,723) (464)
Interest on tax deficiency 1,100 261 408
Other (105) 1,824 164
- ---------------------------------------------------------------------------------------------------------------------------
Income tax expense as reported $59,854 52,494 38,765
===========================================================================================================================
</TABLE>
Components of Deferred Tax Assets and Liabilities on the Balance Sheet
Tax effects of temporary differences giving rise to the significant components
of the net deferred tax liability at December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Provision for post retirement benefits $ 2,100 2,024
Allowance for uncollectible accounts 929 1,256
Policy reserves 177,442 158,131
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 180,471 161,411
Deferred tax liabilities:
Deferred acquisition costs 277,627 240,906
Net unrealized gain 102,756 53,008
Other 28,949 18,257
- ---------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 409,332 312,171
Net deferred tax liability $228,861 150,760
===========================================================================================================================
<FN>
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
</FN>
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(7) Income Taxes (cont.)
Components of Deferred Tax Assets and Liabilities on the Balance Sheet (cont.)
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, 1997 and 1996, 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 $39,914, $30,946 and
$14,865 in 1997, 1996 and 1995, respectively. At December 31, 1997 and 1996 the
Company had a tax recoverable from AZOA of $20,689 and $11,599, respectively and
a recoverable from Revenue Canada Taxation of $72 and $856, respectively.
(8) Related Party Transactions
The Company reimbursed AZOA $562, $86 and $738 in 1997, 1996 and 1995,
respectively, for certain administrative services performed. The Company had no
liability to AZOA for such amounts at December 31, 1997 and 1996, respectively.
AZOA's investment division manages the Company's investment portfolio. The
Company paid AZOA $1,957, $1,657 and $1,024 in 1997, 1996 and 1995,
respectively, for investment advisory fees. The Company's liability to AZOA for
such amounts was $437 and $543 at December 31, 1997 and 1996, respectively.
The Company shares a data center with affiliated insurance companies. Usage
charges paid to the data center by the Company were $2,826, $3,275 and $3,752 in
1997, 1996 and 1995, respectively. The Company's liability for data center
charges was $292 and $58 at December 31, 1997 and 1996, 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 million 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. These receivables,
valued at $5,827, were repurchased by the Company in 1997.
(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 $729, $808 and $860 in 1997, 1996 and 1995,
respectively.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(9) Employee Benefit Plans (cont.)
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 Plan participants was 90% in 1997 and 100% in 1996 and 1995,
respectively. 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 $907, $1,105 and $1,188 in 1997, 1996 and 1995, 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. 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. The Company made no contributions to the
Plan in either 1997 or 1996, and $118 in 1995.
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, 1997 and 1996 was $6,001 and $5,783, respectively.
This liability is included in "Other liabilities" in the accompanying balance
sheet.
(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. Currently, 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 and annuity
benefit reserves calculated for statutory accounting do not include provisions
for withdrawals.
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:
<TABLE>
<CAPTION>
Stockholder's equity Net income
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statutory basis $ 635,711 384,989 72,343 67,995 11,565
Adjustments:
Change in reserve basis (255,816) (199,566) (85,110) 13,324 (43,642)
Deferred acquisition costs 927,080 863,338 63,742 36,344 28,552
Net deferred taxes (228,861) (150,760) (28,283) (30,559) (25,772)
Statutory asset valuation reserve 151,675 133,564 0 0 0
Statutory interest maintenance reserve 34,336 26,342 7,994 1,183 8,756
Modified coinsurance reinsurance (31,953) (113,743) 81,790 5,435 104,222
Unrealized gains on investments 124,754 64,928 0 0 0
Nonadmitted assets 14,824 7,121 0 0 0
Deferred income on reinsurance (150,526) 0 0 0 0
Other (3,632) (2,036) 1,197 7,446 3,516
- ---------------------------------------------------------------------------------------------------------------------------
As reported in the accompanying
consolidated financial statements $1,217,592 1,014,177 113,673 101,168 87,197
===========================================================================================================================
</TABLE>
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(10) Statutory Financial Data and Dividend Restrictions (cont.)
The Company is required to meet minimum statutory capital and surplus
requirements. The Company's statutory capital and surplus as of December 31,
1997 and 1996 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 1997 and 1996, the Company paid AZOA
dividends on preferred stock in the amount of $1,600. A common stock dividend of
$551 was paid in 1997. Dividends of $59,071 could be paid in 1998 without prior
approval of the Commissioner of Commerce.
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,
1997 and 1996.
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.
(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.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(11) Commitments and Contingencies (cont.)
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.
The Company is expending significant resources to assure that its computer
systems are reprogrammed in time to effectively deal with transactions in the
year 2000 and beyond. Costs associated with this effort are not expected to be
material and are expensed as incurred. This "Year 2000 Computer Problem" creates
risk for the Company from unforeseen problems in its own computer systems and
from third parties with whom the Company deals on financial transactions
worldwide. Such failures of the Company and/or third parties' computer systems
could have a material impact on the Company's ability to conduct its business,
and especially to process and account for the transfer of funds electronically.
(12) Foreign Currency Translation
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:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $(3,473) (3,455) (3,787)
- ---------------------------------------------------------------------------------------------------------------------------
Aggregate adjustment for the period resulting from translation adjustments (1,500) (28) 511
Amount of income tax benefit (expense) for period related to aggregate adjustment 525 10 (179)
- ---------------------------------------------------------------------------------------------------------------------------
Net aggregate translation included in equity (975) (18) 332
- ---------------------------------------------------------------------------------------------------------------------------
Ending amount of cumulative translation adjustments $(4,448) (3,473) (3,455)
===========================================================================================================================
Canadian foreign exchange rate at end of year 0.6992 0.7297 0.7329
</TABLE>
(13) Subsequent Event - Life USA Holding, Inc.
In 1995, in conjunction with an expanded marketing agreement, the Company
provided Life USA Holding, Inc. (Life USA), 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 based
on LIBOR plus 1%. In connection with a definitive agreement signed in January
1998, the Company will convert its debenture to equity in 1998.
As noted above, the Company entered into a definitive agreement with Life USA in
January 1998 to acquire up to a 35% equity ownership in Life USA and extend the
existing marketing agreement between the two companies to December 31, 2000.
Acquisition of the Company's equity ownership will be accomplished through the
following:
- Conversion of the $30,000 debenture for 2.43 million shares of common stock
(conversion price of $12.34 per share);
- Exercise of the Company's preemptive right to purchase 241,846 shares of
common stock at $12.36 per share;
- Purchase of 925,000 shares of common stock from certain members of Life USA
management at $16.44 per share; and
- Commitment of $100 million to purchase newly issued common stock in
increments of $20 million over a five year period beginning in 1998.
Additionally, the Company may acquire an additional 1,604,104 shares of Life USA
common stock in open market purchases over the next year.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
December 31, 1997, 1996 and 1995 (in thousands, except share data)
(13) Subsequent Event - Life USA Holding, Inc. (cont.)
As part of this agreement, the Company has the right to nominate two people to
Life USA's board of directors, with additional rights of nomination in the
future based on the Company's proportional ownership. Two members of the
Company's management were named to Life USA's board of directors in January
1998.
(14) Supplementary Insurance Information
The following table summarizes certain financial information by line of business
for 1997, 1996 and 1995:
<TABLE>
<CAPTION>
As of December 31 For the year ended December 31
- ---------------------------------------------------------------------------------------------------------------------------
Future policy Other Premium Benefits, Net change
Deferred benefits, policy revenue claims in
policy losses, claims and and other Net losses, and policy Other
acquisitionclaims andUnearned benefits contract investment settlement acquisition operating Premiums
costs loss expensepremiums payable considerations income expenses costs (a) expenses written (b)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997:
Life $189,971 1,297,269 5,215 63,572 313,078 24,352 230,357 (14,363) 99,913
Annuities 717,721 3,251,829 0 1,881 188,474 118,028 124,535 (44,924) 186,789
Accident and health 19,388 0 44,953 487,660 451,067 19,970 327,526 (4,455) 151,312
- ---------------------------------------------------------------------------------------------------------------------------
$927,080 4,549,098 50,168 553,113 952,619 162,350 682,418 (63,742) 438,014
===========================================================================================================================
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
===========================================================================================================================
<FN>
(a) See note 1 for total gross amortization.
(b) Premiums written are not applicable for life insurance companies.
</FN>
</TABLE>
APPENDIX A
ILLUSTRATION OF POLICY VALUES
The following tables illustrate how Policy Values, Cash Surrender Values and
death benefits of a Policy change with the investment experience of the Policy
Sub-Accounts. The Policy Values, Cash Surrender 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 $100,000 single premium is paid. For premiums of other than
$100,000, the tables shown can be adjusted (i.e. for a $20,000 premium, multiply
the attached tables by $20,000 divided by 100,000 or for a $200,000 premium,
multiply the attached tables by $200,000 divided by 100,000). These tables all
assume that the Insured, both male and female, is in the most favorable 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.
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 Policy
Sub-Accounts is lower than the gross investment return on the assets held in the
Portfolios because of the charges levied against the Policy Sub-Accounts. The
daily investment advisory fee is assumed to be equivalent to an annual rate of
0.54% of the net assets of the Portfolio of the Trust (which is the average of
the investment advisory fees assessed the Trust in 1997 weighted by Policy
Sub-Account value as of 12/31/97). The values also assume that each Portfolio of
the Trust will incur expenses annually which are assumed to be 0.064% of the
average net assets of the Portfolio. This is the average in 1997, weighted by
Policy Sub-Account value as of 12/31/97. The Policy Sub-Accounts will be
assessed for mortality and expense risks at an annual rate of 0.60% of the
average daily net assets of the Policy Sub-Account and for administrative
expenses at an annual rate of 0.15% of the average daily net assets of the
Policy 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 -1.34%, 4.57% and 10.49%.
The Company deducts the cost of insurance for a Policy Processing Period from
the Policy Values. The cost of insurance 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 Designed For: Jane Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount:..................... $448,956 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- -----------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 0.00% gross rate of return.
This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $97,553 $91,253 $448,956
2 0 110,250 0 95,110 89,510 448,956
3 0 115,762 0 92,666 87,766 448,956
4 0 121,550 0 90,217 86,017 448,956
5 0 127,628 0 87,760 84,260 448,956
10 0 162,889 0 75,206 75,206 448,956
15 0 207,892 0 65,395 65,395 448,956
20 0 265,329 0 53,905 53,905 448,956
25 0 338,635 0 39,724 39,724 448,956
30 0 432,194 0 20,848 20,848 448,956
Summary of end of year values assuming 0.00% gross rate of return.
This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $97,419 $91,119 $448,956
2 0 110,250 0 94,834 89,234 448,956
3 0 115,762 0 92,237 87,337 448,956
4 0 121,550 0 89,626 85,426 448,956
5 0 127,628 0 86,995 83,495 448,956
10 0 162,889 0 73,341 73,341 448,956
15 0 207,892 0 61,977 61,977 448,956
20 0 265,329 0 48,197 48,197 448,956
25 0 338,635 0 30,581 30,581 448,956
30 0 432,194 0 6,273 6,273 448,956
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE 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 ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: Jane Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount:..................... $448,956 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 6.00% gross rate of return.
This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $103,453 $ 97,153 $469,004
2 0 110,250 0 107,035 101,435 473,452
3 0 115,762 0 110,748 105,848 477,734
4 0 121,550 0 114,597 110,397 480,786
5 0 127,628 0 118,582 115,082 485,912
10 0 162,889 0 140,665 140,665 504,528
15 0 207,892 0 170,734 170,734 522,380
20 0 265,329 0 206,404 206,404 541,174
25 0 338,635 0 248,516 248,516 561,398
30 0 432,194 0 297,868 297,868 582,270
Summary of end of year values assuming 6.00% gross rate of return.
This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $103,313 $ 97,013 $468,326
2 0 110,250 0 106,740 101,140 472,073
3 0 115,762 0 110,281 105,381 475,623
4 0 121,550 0 113,939 109,739 477,918
5 0 127,628 0 117,712 114,212 482,241
10 0 162,889 0 138,369 138,369 496,293
15 0 207,892 0 166,278 166,278 508,749
20 0 265,329 0 198,755 198,755 521,119
25 0 338,635 0 236,292 236,292 533,784
30 0 432,194 0 279,226 279,226 545,828
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE 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 ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: Jane Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount:..................... $448,956 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- -----------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 12.00% gross rate of return.
This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $ 109,347 $ 103,047 $ 497,460
2 0 110,250 0 119,617 114,017 532,178
3 0 115,762 0 130,895 125,995 568,664
4 0 121,550 0 143,280 139,080 605,700
5 0 127,628 0 156,873 153,373 647,589
10 0 162,889 0 247,371 247,371 887,256
15 0 207,892 0 395,411 395,411 1,209,807
20 0 265,329 0 629,525 629,525 1,650,559
25 0 338,635 0 998,192 998,192 2,254,916
30 0 432,194 0 1,575,611 1,575,611 3,079,988
Summary of end of year values assuming 12.00% gross rate of return.
This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $ 109,199 $ 102,899 $ 496,742
2 0 110,250 0 119,286 113,686 530,632
3 0 115,762 0 130,340 125,440 566,159
4 0 121,550 0 142,453 138,253 602,101
5 0 127,628 0 155,719 152,219 642,716
10 0 162,889 0 243,346 243,346 872,819
15 0 207,892 0 385,112 385,112 1,178,297
20 0 265,329 0 606,228 606,228 1,589,475
25 0 338,635 0 949,141 949,141 2,144,111
30 0 432,194 0 1,477,077 1,477,077 2,887,375
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE 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 ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: John Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount:..................... $400,205 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 0.00% gross rate of return.
This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $97,557 $91,257 $400,205
2 0 110,250 0 95,124 89,524 400,205
3 0 115,762 0 92,694 87,794 400,205
4 0 121,550 0 90,263 86,063 400,205
5 0 127,628 0 87,829 84,329 400,205
10 0 162,889 0 75,443 75,443 400,205
15 0 207,892 0 65,632 65,632 400,205
20 0 265,329 0 53,623 53,623 400,205
25 0 338,635 0 37,136 37,136 400,205
30 0 432,194 0 12,201 12,201 400,205
Summary of end of year values assuming 0.00% gross rate of return.
This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $97,425 $91,125 $400,205
2 0 110,250 0 94,853 89,253 400,205
3 0 115,762 0 92,275 87,375 400,205
4 0 121,550 0 89,687 85,487 400,205
5 0 127,628 0 87,087 83,587 400,205
10 0 162,889 0 73,656 73,656 400,205
15 0 207,892 0 62,288 62,288 400,205
20 0 265,329 0 47,791 47,791 400,205
25 0 338,635 0 26,978 26,978 400,205
30 0 432,194 0 0 0 400,205
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE 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 ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: John Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount:..................... $400,205 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 6.00% gross rate of return.
This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $103,458 $ 97,158 $418,095
2 0 110,250 0 107,052 101,452 422,079
3 0 115,762 0 110,783 105,883 425,900
4 0 121,550 0 114,654 110,454 429,594
5 0 127,628 0 118,671 115,171 433,173
10 0 162,889 0 141,036 141,036 449,573
15 0 207,892 0 171,411 171,411 465,178
20 0 265,329 0 207,197 207,197 481,614
25 0 338,635 0 248,426 248,426 499,338
30 0 432,194 0 294,887 294,887 518,535
Summary of end of year values assuming 6.00% gross rate of return.
This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $103,319 $ 97,019 $417,499
2 0 110,250 0 106,762 101,162 420,872
3 0 115,762 0 110,326 105,426 424,063
4 0 121,550 0 114,014 109,814 427,105
5 0 127,628 0 117,830 114,330 430,011
10 0 162,889 0 138,856 138,856 442,624
15 0 207,892 0 167,159 167,159 453,638
20 0 265,329 0 199,774 199,774 464,360
25 0 338,635 0 236,177 236,177 474,718
30 0 432,194 0 275,503 275,503 484,449
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE 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 ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America Designed For: John Doe
Minneapolis, Minnesota Prepared By: Any Representative
FRANKLIN VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount:..................... $400,205 Single Premium:......................... $100,000
Issue Age:............................... 35 State:.................................. MN
- ------------------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 12.00% gross rate of return.
This illustration is based on CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 $ 109,352 $ 103,052 $ 443,463
2 0 110,250 0 119,636 114,036 474,433
3 0 115,762 0 130,936 126,036 506,963
4 0 121,550 0 143,351 139,151 541,207
5 0 127,628 0 156,991 153,491 577,300
10 0 162,889 0 248,023 248,023 790,609
15 0 207,892 0 396,978 396,978 1,077,324
20 0 265,329 0 631,939 631,939 1,468,898
25 0 338,635 0 997,824 997,824 2,005,636
30 0 432,194 0 1,559,834 1,559,834 2,742,843
Summary of end of year values assuming 12.00% gross rate of return.
This illustration is based on GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 $ 109,206 $ 102,906 $ 442,830
2 0 110,250 0 119,311 113,711 473,080
3 0 115,762 0 130,394 125,494 504,784
4 0 121,550 0 142,549 138,349 538,085
5 0 127,628 0 155,875 152,375 573,104
10 0 162,889 0 244,201 244,201 778,428
15 0 207,892 0 387,150 387,150 1,050,651
20 0 265,329 0 609,330 609,330 1,416,344
25 0 338,635 0 948,673 948,673 1,906,842
30 0 432,194 0 1,457,371 1,457,371 2,562,671
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE 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 ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE PORTFOLIOS.
THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE
SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR
THE TRUST THAT THIS ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX B
Table of Net Single Premium Factors
Attained FACTORS Attained FACTORS Attained FACTORS
--------------- ------------- -------------
Age Male* Female* Age Male* Female* Age Male* Female*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 12.62467 14.69383 35 4.30327 4.82748 70 1.52757 1.66607
1 12.50646 14.48692 36 4.16038 4.66752 71 1.49533 1.62425
2 12.16372 14.08281 37 4.02237 4.51338 72 1.46481 1.58427
3 11.82118 13.67851 38 3.88934 4.36506 73 1.43608 1.54629
4 11.48209 13.27838 39 3.76113 4.22232 74 1.40915 1.51041
5 11.14463 12.88451 40 3.63755 4.08498 75 1.38398 1.47664
6 10.80849 12.49577 41 3.51861 3.95303 76 1.36040 1.44488
7 10.47450 12.11263 42 3.40410 3.82624 77 1.33828 1.41498
8 10.14347 11.73553 43 3.29382 3.70425 78 1.31741 1.38673
9 9.81784 11.36605 44 3.18765 3.58674 79 1.29764 1.35999
10 9.49960 11.00434 45 3.08543 3.47344 80 1.27888 1.33468
11 9.19034 10.65053 46 2.98710 3.36425 81 1.26112 1.31079
12 8.89337 10.30762 47 2.89249 3.25897 82 1.24440 1.28836
13 8.61119 9.97611 48 2.80143 3.15749 83 1.22879 1.26746
14 8.34507 9.65635 49 2.71381 3.05962 84 1.21434 1.24807
15 8.09470 9.34852 50 2.62950 2.96530 85 1.20100 1.22998
16 7.85593 9.04683 51 2.54845 2.87445 86 1.18868 1.21335
17 7.62788 8.75962 52 2.47062 2.78696 87 1.17723 1.19789
18 7.40829 8.48131 53 2.39595 2.70281 88 1.16647 1.18342
19 7.19529 8.21157 54 2.32443 2.62191 89 1.15617 1.16975
20 6.98773 7.95007 55 2.25594 2.54404 90 1.14612 1.15668
21 6.78427 7.69599 56 2.19040 2.46904 91 1.13609 1.14399
22 6.58380 7.44915 57 2.12767 2.39670 92 1.12581 1.13142
23 6.38615 7.20889 58 2.06757 2.32674 93 1.11497 1.11871
24 6.19122 6.97553 59 2.01001 2.25900 94 1.10328 1.10559
25 5.99922 6.74889 60 1.95494 2.19345 95 1.09064 1.09192
26 5.81010 6.52878 61 1.90230 2.13013 96 1.07717 1.07777
27 5.62462 6.31538 62 1.85199 2.06916 97 1.06337 1.06359
28 5.44313 6.10815 63 1.80404 2.01067 98 1.05029 1.05034
29 5.26593 5.90723 64 1.75842 1.95479 99 1.04000 1.04000
30 5.09324 5.71269 65 1.71504 1.90144
31 4.92522 5.52403 66 1.67380 1.85048
32 4.76215 5.34132 67 1.63456 1.80168
33 4.60408 5.16433 68 1.59713 1.75478
34 4.45114 4.99306 69 1.56150 1.70960
<FN>
*In states requiring unisex rates, male rates should apply.
</FN>
</TABLE>
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 Compnay 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
Under its Bylaws, Article XI, the Company indemnifies, to the extent permitted
by the laws of the State of Minnesota, 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 Company (or by reason of serving any other organization at
the request of the Company).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to such provisions of the bylaws or statutes 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 said
Act and is, 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 such 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 said 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 80 pages
Representations
The signatures
Part II
Other Information
Page 2
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's Agreement###
3.b. General Agency Agreement###
4. Not Applicable
5. Individual Single Premium Variable Life Insurance Policy##
6.a. Articles of Incorporation of the Company#
6.b. Bylaws of the Company#
7. Not Applicable
8. Not Applicable
9.a. Administrative Agreement*
9.b. Fund Participation Agreement##
10. Application Form##
12. Illustrative Calculations for the Exchange of the Single Premium
Variable Life Insurance Policy for a Whole Life Policy
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 Pre-Effective Amendment No. 1 to Form
S-6, File No. 33-11158 filed on October 19, 1987
# incorporated by reference to Post-Effective Amendment No. 14 to
Registrants Form S-6 electronically filed on November 1, 1995.
## incorporated by reference to Post-Effective Amendment No. 15 to
Registrants Form S-6 electronically filed on April 23, 1996.
### incorporated by reference to Post-Effective Amendment No. 17 to
Registrants Form S-6 electronically filed on April 29, 1997.
SIGNATURES
As required by the Securities Act of 1933, the Registrant certifies that it
meets all of 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, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
ALLIANZ LIFE
VARIABLE ACCOUNT A
(Registrant)
By: ALLIANZ LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Depositor)
By: /S/ Michael T. Westermeyer
------------------
Michael T. Westermeyer
Attest: /S/ Thomas B. Clifford
---------------------------
</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.
Signature and Title
<TABLE>
<CAPTION>
<S> <C> <C>
Chairman of the Board,
Lowell C. Anderson* President 4-24-98
Lowell C. Anderson and Chief Executive Officer
Herbert F. Hansmeyer* Director 4-24-98
Herbert F. Hansmeyer
Michael P. Sullivan* Director 4-24-98
Michael P. Sullivan
Dr.Jerry E. Robertson* Director 4-24-98
Dr.Jerry E. Robertson
Dr. Gerhard Rupprecht* Director 4-24-98
Dr. Gerhard Rupprecht
Edward J. Bonach* Chief Financial Officer 4-24-98
Edward J. Bonach
Rev. Dennis J. Dease* Director 4-24-98
Rev. Dennis J. Dease
James R. Campbell* Director 4-24-98
James R. Campbell
Robert M. Kimmitt* Director 4-24-98
Robert M. Kimmitt
</TABLE>
*By Power of Attorney
By: /S/ Michael T. Westermeyer
---------------------------------
Michael T. Westermeyer
Attorney-in-Fact
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 19
TO
FORM S-6
ALLIANZ LIFE VARIABLE ACCOUNT A
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
EX99.A12 Illustrative Calculations for the Exchange of the Single Premium
Variable Life Insurance Policy for a Whole Life Policy
EX99.A13 Powers of Attorney
EX99.B Opinion and Consent of Counsel
EX99.C Consent of Actuary
EX99.D Independent Auditors' Consent
North American Life and Casualty Company
Illustrative Calculations for the Exchange of
the Single Premium Variable Life Insurance
Policy to a Whole Life Policy
General Assumptions:
1. Male, nonsmoker, fully underwritten standard, issue age 35
2. Policy date of single premium variable life insurance policy is 1/1/87.
3. Initial Face amount of insurance of $100,000.
Example 1:
1. Exchange made 12 months after the policy date to NALAC's Preferred Whole Life
(PWL) policy which is being issued as of 1/1/87.
2. Cash surrender value of the single premium variable life insurance policy as
of the date of exchange is equal to $22,000.
3. PWL cash value is $0.
4. Payment to owner from NALAC on exchange is $22,000.
5. Premiums of $1,147 required as of 1/1/87 and annually thereafter to continue
the new $100,000 PWL policy in force.
Example 2:
1. Exchange made 12 months after the policy date to NALAC's Single Premium Whole
Life (SPWL) policy which is being issued as of 1/1/87.
2. Cash surrender value of the single premium variable life insurance policy as
of the date of exchange is equal to $12,000.
3. SPWL cash value is $14,800.
4. Payment to NALAC from owner on exchange is $2,800.
5. No further premiums are required under the $100,000 SPWL policy to keep it in
force.
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Herbert F. Hansmeyer, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 29th day of September 1997.
WITNESS
/s/ Kathleen Doolwith /s/ Herbert Hansmeyer
___________________________ _____________________________
Herbert Hansmeyer
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Michael P Sullivan, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 5th day of September 1997.
WITNESS
/s/ Karen M Amundson /s/ Michael P. Sullivan
___________________________ _____________________________
Michael P. Sullivan
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Jerry E. Robertson, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 4th day of September 1997.
WITNESS
/s/ Jerry E. Robertson
___________________________ _____________________________
Jerry E. Robertson
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Gerhard G. Rupprecht, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a securi.y under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this ____ day of ___________ 1997.
WITNESS
/s/ Gerhard G. Rupprecht
___________________________ _____________________________
Gerhard G Rupprecht
I hereby certify that the above is the true signature, acknowledged in my
presence of
Dr. Gerhard Rupprecht
Chairman of the Board of Management
Reinsburgstrabe 19, 70178 Stuttgart, Germany
personally known to me.
Stuttgart, den 17.09.1997
/s/ Dr. Kubler
Dr. Kubler
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Dennis J. Dease, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 5th day of September 1997.
WITNESS
/s/ Sandra J. Schwartz /s/ Dennis J. Dease
___________________________ _____________________________
Dennis J. Dease
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, James R. Campbell, a Director
of Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 8th day of September 1997.
WITNESS
/s/ Carrie Knowles /s/ James R. Campbell
___________________________ _____________________________
James R. Campbell
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Edward J Bonach, Senior Vice
President and Chief Financial Officer of Allianz Life Insurance Company of North
America (Allianz Life), a corporation duly organized under the laws of
Minnesota, do hereby appoint Lowell C. Anderson and Michael T. Westermeyer, each
individually as my attorney and agent, for me, and in my name as Senior Vice
President and Chief Financial Officer on behalf of Allianz Life, with full power
to execute, deliver and file with the Securities and Exchange Commission all
documents required for registration of a security under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, and to do
and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 7th day of April 1998.
WITNESS
/s/ Mary Ann Lemke /s/ Edward J. Bonach
___________________________ _____________________________
Edward J. Bonach
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Lowell C. Anderson, Chairman of
the Board, President & Chief Executive Officer of Allianz Life Insurance Company
of North America (Allianz Life), a corporation duly organized under the laws of
Minnesota, do hereby appoint Michael T. Westermeyer, as my attorney and agent,
for me, and in my name as Chairman of the Board, President & Chief Executive
Officer on behalf of Allianz Life, with full power to execute, deliver and file
with the Securities and Exchange Commission all documents required for
registration of a security under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and to do and perform each and every
act that said attorney may deem necessary or advisable to comply with the intent
of aforesaid Acts.
WITNESS my hand and seal this 3rd day of April 1998.
WITNESS
/s/ Mary Ann Lemke /s/ Lowell C. Anderson
___________________________ _____________________________
Lowell C. Anderson
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that I, Robert M. Kimmitt, a Director of
Allianz Life Insurance Company of North America (Allianz Life), a corporation
duly organized under the laws of Minnesota, do hereby appoint Lowell C. Anderson
and Michael T. Westermeyer, each individually, as my attorney and agent, for me,
and in my name as Director of Allianz Life on behalf of Allianz Life, with full
power to execute, deliver and file with the Securities and Exchange Commission
all documents required for registration of a security under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of aforesaid Acts.
WITNESS my hand and seal this 6th day of April 1998.
WITNESS
/s/ Mary Ann Lemke /s/ Robert M. Kimmitt
___________________________ _____________________________
Robert M. Kimmitt
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 24, 1998
Board of Directors
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
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 Single
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
March 16, 1998
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 and the Table of Net Single Premium Factors contained
in Appendix B in a Registration Statement Form S-6 registering Single 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 males and females at a variety of
underwriting classifications.
Sincerely,
/s/Jack L. Baumer
Jack L. Baumer, FSA, MAAA
JLB/saf
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 30, 1998, on the financial
statements of Allianz Life Variable Account A and our report dated February 4,
1998, 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, 1998
