Registration No. 33-11158
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 17
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
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(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
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Michael T. Westermeyer
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
Copies to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
Title and amount of Securities being Registered:
Individual Flexible Premium Variable Life Insurance Policies
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph(b) of Rule 485
_X_ on May 1, 2000 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
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION ON PROSPECTUS
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<S> <C>
1 The Company, The Separate Account
2 The Company
3 Not Applicable
4 Distributors
5 The Variable Account
6(a) Not Applicable
(b) Not Applicable
9 Not Applicable
10 Purchases
11 Investment Choices
12 Investment Choices
13 Expenses
14 Purchases
15 The Separate Account
16 Investment Choices
17 Policy Account, Transfers
18 Purchases
19 Not Applicable
20 Not Applicable
21 Not Applicable
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 The Company
26 The Company
27 The Company
28 The Company
29 The Company
30 The Company
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 The Company
37 Not Applicable
38 Distributors
39 Distributor
40 Not Applicable
41(a) Distributor
42 Not Applicable
43 Not Applicable
44 Purchases
45 Not Applicable
46 Policy Account, Transfers
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 The Company
52 Investment Choices
53 Taxes, Federal Tax Status
54 Financial Statements
55 Not Applicable
</TABLE>
<PAGE>
1 Flexible Premium Variable Life Prospectus
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY
ALLIANZ LIFE VARIABLE ACCOUNT A
AND
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
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This prospectus describes the Allianz ValueLife Flexible Premium Variable Life
Insurance Policy offered by Allianz Life Insurance Company of North America
(Allianz Life). All references to "we," "us" and "our" refer to Allianz Life.
The policy is a variable benefit policy. We have designed the policy for use in
estate and retirement planning and other insurance needs of individuals.
You, the policyowner, have a number of investment choices in the policy. These
investment choices include a fixed account (which is part of our general
account) as well as variable options. Each variable option invests in a
portfolio of the corresponding fund company listed below. When you buy a policy
and allocate funds to the variable options you are subject to investment risk.
This means that the value of your Policy Account may increase and decrease
depending upon the investment performance of the variable option(s) you select.
Under some circumstances, the death benefit and the duration of the policy will
also increase and decrease depending upon investment performance.
<TABLE>
<CAPTION>
The following portfolios are currently available with the policy:
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Growth Fund
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST+:
Franklin Aggressive Growth Securities Fund
Franklin Global Communications Securities Fund*
Franklin Global Health Care Securities Fund
Franklin Growth and Income Securities Fund*
Franklin High Income Fund
Franklin Income Securities Fund
Franklin Large Cap Growth Securities Fund*
Franklin Money Market Fund
Franklin Natural Resources Securities Fund
Franklin Real Estate Fund*
Franklin Rising Dividends Securities Fund*
Franklin S&P 500 Index Fund
Franklin Small Cap Fund
Franklin Technology Securities Fund
Franklin U.S. Government Fund*
Franklin Value Securities Fund
Franklin Zero Coupon Funds - 2005 and 2010
Mutual Discovery Securities Fund
Mutual Shares Securities Fund
Templeton Asset Strategy Fund*
Templeton Developing Markets Securities Fund*
Templeton Global Income Securities Fund
Templeton Growth Securities Fund*
Templeton International Securities Fund*
Templeton International Smaller Companies Fund
Templeton Pacific Growth Securities Fund*
+ Effective May 1, 2000, the funds of Templeton Variable Products Series Fund
were merged into similar funds of Franklin Templeton Variable Insurance
Products Trust.
USALLIANZ VARIABLE INSURANCE
PRODUCTS TRUST:
USAllianz VIP Diversified Assets Fund
USAllianz VIP Fixed Income Fund
USAllianz VIP Growth Fund
* The fund name changed since the last prospectus update as follows:
Current Name Previous Name
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<S> <C>
Franklin Global Communications Securities Fund Franklin Global Utilities Securities Fund
Franklin Growth and Income Securities Fund Franklin Growth and Income Fund
Franklin Large Cap Growth Securities Fund Franklin Capital Growth Fund
Franklin Real Estate Fund Franklin Real Estate Securities Fund
Franklin Rising Dividends Securities Fund Franklin Rising Dividends Fund
Franklin U.S. Government Fund Franklin U.S. Government Securities Fund
Templeton Asset Strategy Fund Templeton Global Asset Allocation Fund
Templeton Developing Markets Securities Fund Templeton Developing Markets Equity Fund
Templeton Growth Securities Fund Templeton Global Growth Fund
Templeton International Securities Fund Templeton International Equity Fund
Templeton Pacific Growth Securities Fund Templeton Pacific Growth Fund
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT AP PROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Flexible Premium Variable Life Prospectus 2
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Allianz ValueLife
Flexible Premium Variable Life Insurance Policy. The Securities and Exchange
Commission (SEC) maintains a Web site (http://www.sec.gov) that contains
information regarding companies that file electronically with the SEC.
THE POLICY:
O IS NOT A BANK DEPOSIT
O IS NOT FEDERALLY INSURED
O IS NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
THE POLICY IS SUBJECT TO INVESTMENT RISK. YOU MAY BE SUBJECT TO LOSS OF
PRINCIPAL.
This prospectus is not an offering of the securities in any state, country, or
jurisdiction in which we are not authorized to sell the policies. You should
rely only on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with information
that is different.
Date: May 1, 2000
<PAGE>
3 Flexible Premium Variable Life Prospectus
TABLE OF CONTENTS
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SPECIAL TERMS 4
SUMMARY 5
The Variable Life Insurance Policy 5
Purchases 5
Investment Choices 5
Expenses 5
Death Benefit 6
Taxes 6
Access to Your Money 7
Other Information 7
Inquiries 7
PART I
THE VARIABLE LIFE INSURANCE POLICY 8
PURCHASES 8
Premiums 8
Application For a Policy 8
Planned Periodic Premiums 8
Unscheduled Premiums 8
Grace Period 8
Reinstatement 9
Allocation of Premium 9
Policy Account 10
Method of Determining your Policy Account
Allocated to a Variable Option 10
Your Cash Value, Net Cash Value 10
Our Right to Reject or Return a Premium Payment 10
INVESTMENT CHOICES 10
Substitution and Limitations on Further Investments 12
Transfers 12
Dollar Cost Averaging 13
EXPENSES 13
Mortality and Expense Risk Charge 13
Administrative Charges 13
Insurance Risk Charges 14
Charges for Additional Benefit Riders 14
Surrender Charges 14
Partial Surrender Fee 15
Premium Fee 15
Transfer Fee 15
Income Tax Charge 15
Fund Annual Expenses 16
DEATH BENEFIT 17
Change in Death Benefit 17
Change in Face Amount of Insurance 17
Guaranteed Death Benefit Rider 18
Accelerated Death Benefit Rider 18
TAXES 18
Life Insurance in General 18
Taking Money Out of Your Policy 19
Diversification 19
ACCESS TO YOUR MONEY 19
Policy Loans 19
Loan Interest Charged 20
Loan Limit 20
Security 20
Restrictions on Making Loans 20
Repaying Policy Debt 20
Partial Surrenders 20
Full Surrenders 21
OTHER INFORMATION 21
The Company 21
The Separate Account 21
Distributor 22
Suspension of Payments or Transfers 22
Ownership 22
PART II
Executive Officers And Directors 24
Voting 25
Disregard of Voting Instructions 25
Legal Opinions 25
Our Right to Contest 25
Federal Tax Status 25
Reports to Owners 28
Legal Proceedings 28
Experts 28
Financial Statements 28
APPENDIX - Illustration of Policy Values A-1
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Flexible Premium Variable Life Prospectus 4
SPECIAL TERMS
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This prospectus is written in plain English to make it as understandable as
possible. However, by the very nature of the policy, certain technical words or
terms are unavoidable. We have identified some of these words or terms. For some
we have provided you with a definition. For the remainder, we believe that you
will find an adequate discussion in the text. The page indicated below is where
we believe you will find the best explanation for the word or term. These words
or terms are in italics on the indicated page.
ANNUAL GUARANTEED COVERAGE PREMIUM. Your Annual Guaranteed Coverage Premium is
equal to twelve times the Guaranteed Coverage Premium.
CASH VALUE. Your Policy Account minus the surrender charge.
FACE AMOUNT OF INSURANCE. The amount of coverage chosen by you. This amount is
used to determine the death benefit. The minimum Face Amount of Insurance is
$100,000.
GUARANTEED COVERAGE PREMIUM. Your Guaranteed Coverage Premium is a monthly
target premium amount which will vary by the issue age, sex and underwriting
classification of the insured as well as the amount and type of coverage. There
is a distinct Guaranteed Coverage Premium for the base policy and for each rider
attached to the base policy.
INSURANCE RISK AMOUNT. The excess of the death benefit over the value of your
Policy Account.
NET CASH VALUE. The Cash Value of your Policy minus any Policy Debt you may have
outstanding.
POLICY ACCOUNT. The sum of any amounts you may have in the fixed account and in
the variable options you have selected.
POLICY DEBT. The total of any outstanding loans you have made on your policy,
including interest paid in advance for the current policy year.
SURRENDER CHARGE PREMIUM. The Surrender Charge Premium is equal to the Annual
Guaranteed Coverage Premium for a base policy death benefit coverage on a person
insured as a standard risk. The Surrender Charge Premium will vary with the
issue age, sex and smoking clarification of the insured as well as the face
amount of the base policy.
TOTAL GUARANTEED COVERAGE PREMIUM. The Total Guaranteed Coverage Premium is the
sum of the Guaranteed Coverage Premium of the base policy and the Guaranteed
Coverage Premium of any riders attached to the base policy. During the first 10
years after the policy is issued the Total Guaranteed Coverage Premium is used
in the Calculation of the Minimum Required Premium to keep the policy in force
regardless of fund performance.
Page
----
beneficiary, contingent beneficiary 22
business day 10
insured 17
issue date 9
maturity benefit 23
maturity date 23
monthly anniversary 9
owner 22
policy month 9
policy year, policy anniversary 9
reallocation date 7
<PAGE>
5 Flexible Premium Variable Life Prospectus
The Prospectus is divided into three sections: the Summary, Part I and Part II.
The sections in the Summary correspond to sections in Part I of this Prospectus
which discuss the topics in more detail. Part II contains even more detailed
information.
SUMMARY
1. THE VARIABLE LIFE
INSURANCE POLICY
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The Allianz ValueLife variable life insurance policy is a contract between you,
the owner, and us, an insurance company. The policy provides for the payment of
a death benefit to your selected beneficiary upon the death of the insured. This
death benefit is distributed free from federal income taxes. The policy can be
used as part of your estate planning or used to save for retirement. The insured
is the person you chose to have his or her life insured under the policy. You,
the owner, can also be the insured, but you do not have to be.
The policy described in this prospectus is a flexible premium variable life
insurance policy. The policy is "flexible" because:
o the frequency and amount of premium payments can vary;
o you can choose between death benefit options; and
o you can increase or decrease the amount of insurance coverage, all within the
same policy of insurance.
The policy is "variable" because the Policy Account, when allocated to the
variable options, may increase or decrease depending upon the investment results
of the selected variable options. Under certain circumstances, the death benefit
and the duration of your policy may also vary.
During the life of the insured, you can surrender the policy for all or part of
its Net Cash Value. You may also obtain a policy loan, using the Policy Account
as security.
We make available a number of riders to meet a variety of your estate planning
needs. See the "Death Benefit" section for a description of the guaranteed death
benefit rider and the accelerated benefit rider.
2. PURCHASES
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You purchase the policy by completing the proper forms. Your registered
representative can help you complete the forms. In some circumstances, we may
contact you for additional information regarding the insured. We may require the
insured to provide us with medical records, physicians' statements or a complete
paramedical examination.
The minimum initial premium we accept is computed for you based on the face
amount you request. The policy is designed for the payment of subsequent
premiums. You can establish planned periodic premiums. The minimum subsequent
premium that we accept is $25 ($50 in Maryland).
3. INVESTMENT CHOICES
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You can put your money in the fixed account or in as many as 10 variable
options. The variable options invest in portfolios of AIM Variable Insurance
Funds, The Alger American Fund, Franklin Templeton Variable Insurance Products
Trust, and USAllianz Variable Insurance Products Trust. The portfolios available
under the policy are described fully in Part I and in the accompanying fund
prospectuses.
4. EXPENSES
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We make certain deductions from your premiums, your Policy Account and from the
variable options. These deductions are made for premium fees, mortality and
expense risks, administrative expenses, sales charges and for providing life
insurance protection. There are also operating expenses of the portfolios. These
deductions are summarized as follows:
CHARGE FOR PREMIUM FEES. This charge is for state and local premium taxes (in
states which charge a premium tax). It is also used to pay for other expenses
associated with premium collection. The charge is deducted from each premium
payment. The charge is equal to 2.5% of each premium payment and approximates
our average expenses associated with premium collection.
MORTALITY AND EXPENSE RISK CHARGE. This risk charge is guaranteed not to exceed,
on an annual basis, 0.90% of your average daily Policy Account value and is
deducted each business day. The current risk charge is 0.60%.
ADMINISTRATIVE CHARGES. These charges are equal to:
1) .15%, on an annual basis, of your average Policy Account value and is
deducted each business day; plus
2) $20 per policy month for the first policy year, and $9 per policy month
guaranteed thereafter. Currently, the charge is $5 per policy month after the
first policy year. These amounts are deducted from your Policy Account on the
monthly anniversary date. This part of the charge will be waived if the
Policy Account is equal to or greater than 15% of the initial Face Amount
plus the requested Face Amount increases.
<PAGE>
Flexible Premium Variable Life Prospectus 6
CHARGES FOR ADDITIONAL BENEFIT RIDERS. The amount of the charge, if any, each
policy month for additional benefit riders is determined in accordance with the
rider and is shown on the coverage page of your policy.
INSURANCE RISK CHARGE. On each monthly anniversary date, we deduct from your
Policy Account the cost of insurance for the next policy month. This charge
provides death benefit protection.
SURRENDER CHARGES. A surrender charge may be deducted in the event you make a
full or partial surrender of your Policy Account. The surrender charges contain:
a deferred administrative expense and a deferred sales load. The deferred
administrative expense is $5.00 per $1,000 of Face Amount of Insurance for the
first 3 policy years, then grades to zero over policy years 4 through 13. The
deferred sales load is the lesser of 30% of the Surrender Charge Premium, plus
5% of all premiums over the Surrender Charge Premium (SCP), or the following
percentage of SCP:
YEARS % OF SCP
------------------------
1-8 65%
9 60%
10 55%
11 44%
12 33%
13 22%
14 11%
15 0%
The SCP is equal to the Annual Guaranteed Coverage Premium for the base policy
death benefit for a life insured at standard risk. The SCP will vary with the
issue age, sex, and smoking classification of the insured, and the face amount
of the base policy.
PARTIAL SURRENDER FEE. If you surrender only a portion of the Net Cash Value at
any time during the insured's lifetime, there is an administrative fee assessed.
The fee is currently equal to the lesser of $25 or 2% of the partial surrender
amount you take out of the policy.
You may make a partial surrender once each policy year that does not exceed 10%
of the Net Cash Value without incurring a surrender charge or the partial
surrender fee.
TRANSFER FEE. You may transfer values from one variable option to another, or to
or from the fixed account. The first 12 transfers in a policy year are free. The
fee for each additional transfer is the lesser of $25 or 2% of the amount
transferred. Prescheduled automatic dollar cost averaging transfers are not
currently counted.
OTHER EXPENSES. There are deductions from and operating expenses paid out of the
assets of the portfolios of the funds.
5. DEATH BENEFIT
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The amount of the death benefit depends on:
o the Face Amount of Insurance of your policy;
o the death benefit option in effect at the time of death; and
o under some circumstances, the value of your Policy Account.
There are two death benefit options: Option A and Option B. If death benefit
Option A is in effect, the death benefit is the greater of your total Face
Amount in effect or your Policy Account multiplied by the applicable factor.
Under this option, the amount of the death benefit is fixed, except when we use
the factor to determine the benefit percentage.
If death benefit Option B is in effect, the death benefit is the greater of your
total Face Amount of Insurance in effect plus the Policy Account or the Policy
Account multiplied by the applicable factor. Under this option, the amount of
the death benefit is variable.
Under certain circumstances you can change death benefit options. You can also
change the Face Amount of Insurance under certain circumstances.
At the time of application for a policy, you designate a beneficiary. The
beneficiary is the person or persons who will receive the death proceeds. You
can change your beneficiary unless you have designated an irrevocable
beneficiary. The beneficiary does not have to be a natural person.
6. TAXES
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Your policy has been designed to comply with the definition of life insurance in
the Internal Revenue Code. As a result, the death proceeds paid under the policy
should be excludable from the gross income of your beneficiary. Any earnings in
your policy are not taxed until you take them out. The tax treatment of the loan
proceeds and surrender proceeds will depend on whether the policy is considered
a Modified Endowment Contract (MEC). Proceeds taken out of a MEC are considered
to come from earnings first and are includible in taxable income. If you are
younger than 591/2 when you take money out of a MEC, you may also be subject to
a 10% federal tax penalty on the earnings withdrawn.
<PAGE>
7 Flexible Premium Variable Life Prospectus
7. ACCESS TO YOUR MONEY
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You can terminate your policy at any time and we will pay you the Net Cash
Value. At any time during the insured's life and before your policy has
terminated, you may surrender a part of your Net Cash Value subject to the
requirements of the policy. When you terminate your policy or make a partial
surrender, a surrender charge may be assessed. Also, when you make a partial
surrender we assess a partial surrender fee of $25 or 2% of the partial
surrender amount, whichever is less. Once each policy year, on a non-cumulative
basis, you may make a free partial surrender up to 10% of your unloaned Policy
Value.
You can also borrow some of your Policy Value.
8. OTHER INFORMATION
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FREE LOOK. You can cancel the policy within 20 days after you receive it (or
whatever period is required in your state) or the 45th day after you sign your
application. We will refund all premiums paid less any Policy Debt. During the
underwriting process, we will allocate your initial net premium to the Franklin
Money Market Fund until the reallocation date, which occurs 30 days after the
policy is released to an active status in our processing system. After that, we
will invest your Policy Account value and any subsequent premiums as you
requested.
PURCHASING CONSIDERATIONS. The policy is designed for individuals and businesses
that have a need for death protection but who also desire to potentially
increase the values in their policies through investment in the variable
options.
The policy offers the following to individuals:
o create or conserve one's estate;
o supplement retirement income; and
o access to funds through loans and surrenders.
If you currently own a variable life insurance policy on the life of the
insured, you should consider whether the purchase of the policy described in
this prospectus is appropriate.
Also, you should carefully consider whether the policy should be used to replace
an existing policy on the life of the insured.
ADDITIONAL FEATURES. The following additional features are offered:
o You can arrange to have a regular amount of money automatically transferred
from the Franklin Money Market Fund or the Franklin U.S. Government Fund to
selected variable options each month, theoretically giving you a lower
average cost per unit over time than a single one time purchase. We call this
feature the dollar cost averaging option.
o If the insured becomes terminally ill, we will pay you a portion of the death
benefit. We call this feature the accelerated death benefit rider.
o If you pay a certain required premium, we guarantee that the policy will not
lapse even if your Policy Account value is not sufficient to cover the
monthly deductions. We call this feature the guaranteed minimum death benefit
rider.
o We also offer a number of additional riders that are common to life insurance
policies.
These features and riders may not be available in your state and may not be
suitable for your particular situation.
9. INQUIRIES
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If you need more information about buying a policy, please contact us at:
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, Minnesota 55403
1-800-542-5427
If you need policyowner service (such as changes in policy information, inquiry
into Policy Account values, or to make a loan), please contact us at our service
center:
Allianz Life ValueLife Service Center
300 Berwyn Park
P.O.Box 3031
Berwyn, Pennsylvania 19312-0031
1-800-336-0320
<PAGE>
Flexible Premium Variable Life Prospectus 8
PART I
1. THE VARIABLE LIFE
INSURANCE POLICY
- --------------------------------------------------------------------------------
The Allianz ValueLife variable life insurance policy is a contract between you,
the owner, and us, an insurance company. This kind of policy is most commonly
used for retirement planning and/or estate planning.
The policy provides for life insurance coverage on the insured. It has Policy
Account values, a death benefit, surrender rights, loan privileges and other
characteristics associated with traditional and universal life insurance.
However, since the policy is a variable life insurance policy, the value of your
policy will increase or decrease depending upon the investment experience of the
variable option(s) you choose. The duration or amount of the death benefit may
also vary based on the investment performance of the underlying portfolios. To
the extent you select any of the variable options, you bear the investment risk.
If your Net Cash Value is insufficient to pay the monthly deductions, the policy
may terminate. However, if you have paid the Guaranteed Coverage Premium and
have not taken out a loan, your policy will not lapse even if your Net Cash
Value is insufficient to pay the monthly deductions.
Because the policy is like traditional and universal life insurance, it provides
a death benefit which is paid to your named beneficiary. When the insured dies,
the death proceeds are paid to your beneficiary. These proceeds should be
excludable from the gross income of the beneficiary, however estate taxes may
apply. The tax-free death proceeds makes this an excellent way to accumulate
money you do not think you will use in your lifetime. It is also a tax-efficient
way to provide for those you leave behind. If you need access to your money, you
can borrow from the policy or make a total or partial surrender.
2. PURCHASES
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PREMIUMS
We will issue you your policy only after you pay the initial premium. Before we
send out the policy, the application must be in good order as determined by our
administrative rules and be approved for issue by underwriting. The policy is
not designed for professional market timing organizations, other entities, or
persons using programmed, large, or frequent transfers.
APPLICATION FOR A POLICY
In order to purchase a policy, you must submit an application to us that
requests information about the proposed insured. In some cases, we will ask for
additional information. We may request that the insured provide us with medical
records, a physician's statement or possibly require other medical tests.
PLANNED PERIODIC PREMIUMS
The policy is designed to allow you to make subsequent premium payments. You can
elect to make planned periodic premium payments. Planned periodic premiums may
be paid annually, semi-annually, quarterly or monthly. You select the planned
periodic premium and payment interval at the time of application. You may change
the amount and frequency of premiums. We have the right to limit the amount of
any increase. Each premium after the initial premium must be at least $25 ($50
in Maryland). Except in Maryland, we may increase this minimum amount 90 days
after we send you a written notice to that effect.
UNSCHEDULED PREMIUMS
You can make additional unscheduled premium payments at any time while the
policy is in force. However, in order to preserve the favorable tax status of
the policy, we may limit the amount of the premiums and may return any premiums
that exceed the limits stated under the U.S. tax laws.
GRACE PERIOD
When a policy is about to terminate, under some circumstances, the policy
provides a grace period in order for you to make a premium payment or a loan
repayment in order to keep your policy in force.
During the first 10 policy years (5 years in Massachusetts), a grace period will
begin on your monthly anniversary date when:
o your Net Cash Value is not large enough to cover the monthly deduction made
on that date; and
o your adjusted premium payments are less than your accumulated Guaranteed
Coverage Premiums.
Your adjusted premium payments as of the monthly anniversary date equal:
o the total of your premium payments received by us; minus
o any partial surrenders you have made to date; minus
o any Policy Debt.
<PAGE>
9 Flexible Premium Variable Life Prospectus
Your accumulated Guaranteed Coverage Premiums as of the monthly anniversary date
equal:
o the total Guaranteed Coverage Premium; multiplied by
o one plus the number of months the policy has been in force as of that monthly
anniversary date.
If you have not had the same total Guaranteed Coverage Premium in effect every
month, your accumulated Guaranteed Coverage Premiums will be based on the
different premiums that were in effect and the number of months for which each
applied.
During the first 10 policy years (5 years in Massachusetts), the premium payment
that you need to make to keep your policy from terminating at the end of the
grace period is the lesser of:
o three monthly deductions; or
o the accumulated Guaranteed Coverage Premiums for the monthly anniversary date
when the grace period began minus adjusted premium payments as of that date.
After the first 10 policy years (5 years in Massachusetts), a grace period will
begin on the monthly anniversary date when your Net Cash Value is not large
enough to cover the monthly deductions to be made on that date.
After the first 10 policy years (5 years in Massachusetts), the premium required
to keep the Policy from terminating at the end of a grace period equals three
monthly deductions.
When your policy is in a grace period, we will continue the policy for 61 days.
If your insured dies during a grace period, we will deduct the premium that
would have been required to keep your policy from terminating from the amount we
would otherwise pay out.
Your policy will terminate without value at the end of a grace period unless we
receive a premium payment during the grace period large enough to keep your
policy from terminating at the end of that grace period.
We will notify you in writing at least 31 days before a grace period ends. This
notice will show how much must be paid to keep the policy from terminating. We
send notices to the last address you have given us.
Your first policy year starts on the day the coverage is effective under your
policy. We call that date the issue date. Future policy years start on the same
day and month in each subsequent year. We call that date a policy anniversary.
Your first policy month starts on the issue date. Future policy months start on
the same day in each subsequent month. We call that date a monthly anniversary.
REINSTATEMENT
If your policy terminated at the end of a grace period, you can request that we
reinstate it (restore your insurance coverage) anytime within 5 years after its
termination. To reinstate your policy you must:
o submit an application for reinstatement;
o submit proof satisfactory to us that the insured is still insurable at the
risk classification that applies for the latest Face Amount of Insurance
portion then in effect;
o pay or agree to reinstatement of any Policy Debt; and
o pay the premium required to reinstate the policy.
The premium required to reinstate the policy equals the total of the following
amounts:
o the amounts that would have been required for the policy to continue in force
without entering into a grace period for each month during the grace period;
and
o the amount that will be required for the policy to continue in force without
entering a grace period for the next 3 months after the reinstatement date.
The reinstatement date is the monthly anniversary date on or following the day
we approve the application for reinstatement. The Policy Account on the
reinstatement date is equal to the Policy Account on the monthly anniversary
date when the grace period ended. The surrender charge on the reinstatement date
is equal to the surrender charge on the monthly anniversary date when the grace
period ended.
The policy may not be reinstated after:
o it has been surrendered for its Net Cash Value;
o the insured's death; or
o the maturity date.
ALLOCATION OF PREMIUM
Your premium is allocated to the fixed account or one or more of the variable
options, as selected by you. Prior to the reallocation date, the initial premium
is allocated to the Franklin Money Market Fund.
On the reallocation date, the Policy Account is allocated to the fixed account
and/or the variable options in accordance with your selections. This allocation
is not subject to the transfer fee provision (see "transfer fee"). However, we
reserve the right to limit the number of investment choices (the variable
options and the fixed account) that you may invest in at any one time.
Currently, you may invest in a maximum of 10 investment choices (which include
the
<PAGE>
Flexible Premium Variable Life Prospectus 10
fixed account and any variable option you select) at any one time throughout the
life of the policy.
POLICY ACCOUNT
On the issue date, the value of your Policy Account is:
o your initial premium less the charge for premium fees, less the initial
insurance risk charge and less the initial charge for any additional benefit
riders; minus
o the monthly deduction for the first policy month.
After the reallocation date the Policy Account equals the sum of the policy
amounts in the fixed account and in the variable options you have selected.
METHOD OF DETERMINING YOUR POLICY ACCOUNT ALLOCATED TO A VARIABLE OPTION
The value of your policy will go up or down depending upon the investment
performance of the variable option(s) you choose and the charges and deductions
made against your Policy Account. In order to keep track of the value of your
Policy Account, we use a unit of measure we call a valuation unit. (A valuation
unit works like a share of a mutual fund.)
Every business day we determine the value of the valuation unit for each
variable option by multiplying the Accumulation Unit Value for the previous
period by a factor for the current period. The factor is determined by:
o dividing the value of a portfolio at the end of the current period by the
value of a portfolio for the previous period; and
o multiplying it by one minus the daily amount of the insurance charges and any
charges for taxes.
The value of a valuation unit may go up or down from day to day.
When you make a premium payment, we credit your policy with valuation units. The
number of valuation units credited is determined by dividing the amount of
premiums allocated to the variable option by the value of the valuation unit for
that variable option.
When we assess any charges we do so by deducting valuation units from your
policy. When you take a loan we reduce the number of the valuation units in your
policy and transfer the amount to the fixed account.
Our business day is each day that the New York Stock Exchange is open for
business. Our business day closes when the New York Stock Exchange closes,
usually 4:00 p.m. Eastern Time.
Your Cash Value, Net Cash Value
YOUR CASH VALUE EQUALS:
o your Policy Account; minus
o the surrender charges.
Your Net Cash Value equals:
o the Cash Value; minus
o any Policy Debt you may have incurred.
During your insured's life, you may:
o take loans based on the Cash Value;
o make partial surrenders; or
o surrender the policy for its Net Cash Value.
OUR RIGHT TO REJECT OR RETURN A PREMIUM PAYMENT
In order to receive the tax treatment for life insurance under the Internal
Revenue Code (Code), a policy must initially qualify and continue to qualify as
life insurance under the Code. To maintain this qualification, we have reserved
the right under the policy to return any premiums paid which we have determined
will cause the policy to fail as life insurance. We also have the right to make
changes in the policy or to make a distribution to the extent we determine this
is necessary to continue to qualify the policy as life insurance. Such
distributions may have current income tax consequences to you.
If subsequent premiums will cause your policy to become a Modified Endowment
Contract (MEC), we will contact you prior to applying the premium to your
policy. If you elect to have the premium applied, we require that you
acknowledge in writing that you understand the tax consequences of a MEC before
we will apply the premiums.
3. INVESTMENT CHOICES
- --------------------------------------------------------------------------------
The policy offers variable options which invest in portfolios of AIM Variable
Insurance Funds, The Alger American Fund, Franklin Templeton Variable Insurance
Products Trust, and USAllianz Variable Insurance Products Trust. The policy also
offers a fixed account of Allianz Life. Additional portfolios may be available
in the future.
PURCHASERS SHOULD READ THIS PROSPECTUS AND THE ACCOMPANYING FUND PROSPECTUSES
CAREFULLY BEFORE INVESTING.
<PAGE>
11 Flexible Premium Variable Life Prospectus
AIM Variable Insurance Funds, The Alger American Fund, Franklin Templeton
Variable Insurance Products Trust, and USAllianz Variable Insurance Products
Trust are the mutual funds underlying the policy. Each portfolio has its own
investment objective.
Franklin Templeton Variable Insurance Products Trust (formerly, Franklin
Valuemark Funds) issues two classes of shares which are described in the
attached prospectus for Franklin Templeton Variable Insurance Products Trust.
Only Class 1 shares are available with your policy. Effective May 1, 2000, the
funds of Templeton Variable Products Series Fund were merged into similar funds
of Franklin Templeton Variable Insurance Products Trust.
Investment advisers for each portfolio are listed in the table below and are as
follows: A I M Advisors, Inc., Allianz of America, Inc., Fred Alger Management,
Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual
Advisers, LLC, Templeton Asset Management Ltd., Templeton Global Advisors
Limited, and Templeton Investment Counsel, Inc. Certain advisers have retained
one or more subadvisers to help them manage the portfolios.
The investment objectives and policies of certain portfolios are similar to the
investment objectives and policies of other mutual funds that certain of the
same investment advisers manage. Although the objectives and policies may be
similar, the investment results of the portfolios may be higher or lower than
the results of such other mutual funds. The investment advisers cannot
guarantee, and make no representation, that the investment results of similar
funds will be comparable even though the funds have the same investment
advisers.
A Portfolio's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a Portfolio with a small asset base.
A Portfolio may not experience similar performance as its assets grow.
<TABLE>
<CAPTION>
The following is a list of the portfolios available under the policy:
AVAILABLE PORTFOLIOS INVESTMENT ADVISERS
- ---------------------------------------------------------------------------------------------------
<S> <C>
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Growth Fund AIM Advisors, Inc.
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio Fred Alger Management, Inc.
Alger American Leveraged AllCap Portfolio (seeks long-term
capital appreciation) Fred Alger Management, Inc.
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST:
Franklin Aggressive Growth Securities Fund Franklin Advisers, Inc.
Franklin Global Communications Securities Fund* Franklin Advisers, Inc.
Franklin Global Health Care Securities Fund Franklin Advisers, Inc.
Franklin Growth and Income Securities Fund* Franklin Advisers, Inc.
Franklin High Income Fund Franklin Advisers, Inc.
Franklin Income Securities Fund Franklin Advisers, Inc.
Franklin Large Cap Growth Securities Fund* Franklin Advisers, Inc.
Franklin Money Market Fund Franklin Advisers, Inc.
Franklin Natural Resources Securities Fund Franklin Advisers, Inc.
Franklin Real Estate Fund* Franklin Advisers, Inc.
Franklin Rising Dividends Securities Fund* Franklin Advisory Services, Inc.
Franklin S&P 500 Index Fund Franklin Advisers, Inc.
Franklin Small Cap Fund Franklin Advisers, Inc.
Franklin Technology Securities Fund Franklin Advisers, Inc.
Franklin U.S. Government Fund* Franklin Advisers, Inc.
Franklin Value Securities Fund Franklin Advisory Services, Inc.
<PAGE>
Flexible Premium Variable Life Prospectus 12
AVAILABLE PORTFOLIOS INVESTMENT ADVISERS
- ---------------------------------------------------------------------------------------------------
Franklin Zero Coupon Funds - 2005 and 2010 Franklin Advisers, Inc.
Mutual Discovery Securities Fund (capital appreciation) Franklin Mutual Advisers, Inc.
Mutual Shares Securities Fund (capital appreciation with income
as a secondary goal) Franklin Mutual Advisers, Inc.
Templeton Asset Strategy Fund* Templeton Investment Counsel, Inc.
Templeton Developing Markets Securities Fund* Templeton Asset Management Ltd.
Templeton Global Income Securities Fund Franklin Advisers, Inc.
Templeton Growth Securities Fund* Templeton Global Advisors Limited
Templeton International Securities Fund* Templeton Investment Counsel, Inc.
Templeton International Smaller Companies Fund Templeton Investment Counsel, Inc.
Templeton Pacific Growth Securities Fund* Franklin Advisers, Inc.
USALLIANZ VARIABLE INSURANCE PRODUCTS TRUST:
USAllianz VIP Diversified Assets Fund Allianz of America, Inc.
USAllianz VIP Fixed Income Fund Allianz of America, Inc.
USAllianz VIP Growth Fund Allianz of America, Inc.
<FN>
* The fund name changed since the last prospectus update as of the effective date listed below:
CURRENT NAME PREVIOUS NAME EFFECTIVE DATE
- --------------------------------------------------------------------------------------------------------------
Franklin Global Communications Securities Fund Franklin Global Utilities Securities Fund 11-15-1999
Franklin Growth and Income Securities Fund Franklin Growth and Income Fund 05-01-2000
Franklin Large Cap Growth Securities Fund Franklin Capital Growth Fund 12-15-1999
Franklin Real Estate Fund Franklin Real Estate Securities Fund 11-15-1999
Franklin Rising Dividends Securities Fund Franklin Rising Dividends Fund 11-15-1999
Franklin U.S. Government Fund Franklin U.S. Government Securities Fund 11-15-1999
Templeton Asset Strategy Fund Templeton Global Asset Allocation Fund 05-01-2000
Templeton Developing Markets Securities Fund Templeton Developing Markets Equity Fund 05-01-2000
Templeton Growth Securities Fund Templeton Global Growth Fund 05-01-2000
Templeton International Securities Fund Templeton International Equity Fund 05-01-2000
Templeton Pacific Growth Securities Fund Templeton Pacific Growth Fund 05-01-2000
</FN>
</TABLE>
Shares of the funds may be offered in connection with certain variable annuity
contracts and variable life insurance policies of various insurance companies,
which may or may not be affiliated with Allianz Life. Certain funds may also be
sold directly to qualified plans. The funds believe that offering their shares
in this manner will not be disadvantageous to you.
Allianz Life may enter into certain arrangement under which it is reimbursed by
the funds' advisers, distributors and/or affiliates for the administrative
services, which it provides to the portfolios.
SUBSTITUTION AND LIMITATIONS ON FURTHER INVESTMENTS
We may substitute one of the variable options you have selected with another
variable option. We will not do this without the prior approval of the
Securities and Exchange Commission. We may also limit further investment in a
variable option. We will give you notice of our intention to do this.
TRANSFERS
At your request, we will transfer amounts from your Policy Account in any
variable option to another variable option, or to the fixed account. The minimum
amount that can be transferred is the lesser of the minimum transfer amount
(currently $500) or the total value in that variable option. You may transfer on
any policy anniversary an amount from the unloaned value in the fixed account to
one or more variable options.
However, transfers out of the fixed account can be made only if:
o we receive the request at least 30 days before that policy anniversary; and
o the amount requested is not more than the greater of 25% of the unloaned value
in the fixed account on that anniversary or the minimum transfer amount.
We will not transfer more than the unloaned value from the fixed account. The
minimum amount that we will transfer from the fixed account on any policy
anniversary
<PAGE>
13 Flexible Premium Variable Life Prospectus
is the lesser of the minimum transfer amount, currently $500, or the unloaned
value in the fixed account on that date.
You can make 12 transfers in a policy year without charge. We may charge a
transfer fee for additional transfers in a policy year. The current transfer fee
is the lesser of $25 or 2% of the amount transferred. You may tell us how much
of the transfer fee is to come from the unloaned value in the fixed account and
from the values in each of the variable options. If you do not tell us, we will
make a deduction proportionally based on the relation the unloaned values in the
fixed account and the value in the variable options have to the total unloaned
value in the Policy Account.
We have not designed this policy or the underlying portfolios for use by
professional market timing organizations, other entities, or persons using
programmed, large, or frequent transfers. Such activity may be disruptive to a
portfolio.
You may elect to make transfers by telephone. To elect this option, you must do
so in writing. If there are joint owners, the instructions will be accepted from
either one of the joint owners unless you inform us otherwise. We will use
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If we do not, we may be liable for any losses due to unauthorized or
fraudulent instructions. We tape record all telephone instructions.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which enables you to transfer specified
dollar amounts each month or quarter from the Franklin Money Market Fund or the
Franklin U.S. Government Fund to other portfolios (maximum of 8) at regular
intervals. By allocating on a regularly scheduled basis, you may be less
susceptible to the impact of market fluctuations.
Dollar Cost Averaging may be selected for a period of 12 to 36 months. The
minimum amount that can be transferred is $500 (monthly) or $1,500 (quarterly).
All dollar cost averaging transfers are made effective the 10th of the month (or
the next business day if the 10th of the month is not a business day). You can
elect to participate in this program at any time by:
o properly completing the Dollar Cost Averaging election form;
o returning it to us by the first of the month (to be effective that month);
and
o insuring that sufficient value is in either the Franklin Money Market Fund or
the Franklin U.S. Government Fund.
Dollar Cost Averaging will terminate when any of the following occurs:
1) the number of designated transfers has been completed;
2) you do not have enough money in the Franklin Money Market Fund or the
Franklin U.S. Government Fund to make the transfer (if less money is
available, that amount will be dollar cost averaged and the program will
end);
3) you request termination in writing and the writing is received by the first
of the month; or
4) your policy is terminated.
There is no current charge for Dollar Cost Averaging but we reserve the right to
charge for this program in the future.
4. EXPENSES
- --------------------------------------------------------------------------------
There are charges and other expenses associated with the policy that reduce the
return on your investment in the policy. The charges and expenses are:
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge from each variable option each
business day. This risk charge is guaranteed not to exceed, on an annual basis,
0.90% of your average daily Policy Account value. The current risk charge is
equal to 0.60%.
This risk charge compensates us for assuming the mortality and expense risks
under the policy. The mortality risk assumed by us is that the insureds, as a
group, may not live as long as expected. The expense risk assumed by us is that
actual expenses may be greater than those assumed. We are responsible for the
administration of the policy. We expect to profit from this charge.
ADMINISTRATIVE CHARGES
We deduct administrative charges from each variable option each business day and
from your Policy Account on each monthly anniversary date. The charge is equal,
on an annual basis, to 0.15% of your average daily Policy Account value. There
is also a policy charge which is equal to $20 per policy month for the first
policy year. Thereafter, it is guaranteed to not exceed $9 per policy month.
Currently, the charge is $5 per policy month after the first
<PAGE>
Flexible Premium Variable Life Prospectus 14
policy year. This part of the charge will be waived if the Policy Account is
equal to or greater than 15% of the initial face amount plus the requested face
amount increases.
The charges reimburse us for expenses incurred in the administration of the
policies. Such expenses include: confirmations, annual account statements,
maintenance of policy records, maintenance of variable account records,
administrative personnel costs, mailing costs, data processing costs, legal
fees, accounting fees, filing fees, the costs of other services necessary for
policy owner servicing and all accounting, valuation, regulatory and updating
requirements.
INSURANCE RISK CHARGES
This charge compensates us for the insurance coverage we provide in the month
following the charge. The insurance risk charge for each policy month equals the
total of the insurance risk charges for the policy month for each Face Amount of
Insurance portion then in effect. To determine the insurance risk charge for a
Face Amount of Insurance portion for a policy month, we multiply:
o the Insurance Risk Amount for the Face Amount of Insurance portion for that
month; by
o the cost of insurance rate that applies to the Face Amount of Insurance
portion for that month.
The Insurance Risk Amount for a Face Amount of Insurance portion for a policy
month equals the excess of:
o the death benefit associated with that Face Amount of Insurance portion; over
o the value of the Policy Account at the beginning of the policy month, before
the monthly deduction for the month is subtracted.
The cost of insurance rate for a Face Amount of Insurance portion for a policy
month equals the sum of:
o the standard cost of insurance rate for that month from the table of our
standard cost of insurance rates; and
o an additional rate for any extra mortality risk classification that applies
for the Face Amount of Insurance portion.
The additional rate for an extra mortality risk classification for any policy
month equals the amount of extra mortality that the risk classification
represents for that month.
The total cost of insurance rate for a policy month will be uniform for all Face
Amount of Insurance portions that:
o are in the same Face Amount band, sex, and risk classification;
o take effect when the insureds are the same age; and
o have been in force the same length of time.
We may change our standard cost of insurance rates from time to time based on
our expectations as to future cost elements such as: investment earnings,
mortality, persistency, expenses and taxes. Any change we make will apply to all
Face Amount portions in the same risk classification.
The declared standard cost of insurance rates for each policy month will not be
more than the amount shown in the table contained in your policy. The table is
based on the insured's age at his or her last birthday at the beginning of each
year (attained age), the insured's sex and whether or not the insured has
qualified for the non-smoker classification. For the initial Face Amount of
Insurance, the insured's attained age is determined at the beginning of each
policy year. For each Face Amount increase, attained age is determined at the
beginning of each policy year measured from the date the increase took effect.
Since the mortality tables used with the policy distinguish between males and
females, the cost of insurance and the benefits payable will differ between
males and females of the same age. Employers, employee plans and employee
organizations should seek legal advice to determine whether the Civil Rights Act
of 1964, Title VII, or other applicable law prohibits the use of sex distinct
mortality tables. We will offer the policy based upon unisex mortality tables
where required.
CHARGES FOR ADDITIONAL BENEFIT RIDERS
The amount of the charge, if any, each policy month for additional benefit
riders is determined in accordance with the rider and is shown on the coverage
page of your policy.
SURRENDER CHARGES
A surrender charge may be deducted if you make a full or partial surrender. The
surrender charge consists of 2 parts: a deferred administrative expense and a
deferred sales load. The maximum surrender charge varies by issue age, face
amount, sex, smoking status, and contract duration. This charge will never
exceed the sum of the deferred administrative expense and the deferred sales
load, assuming the Surrender Charge Premium (SCP) is paid yearly during the
first 15 years.
<PAGE>
15 Flexible Premium Variable Life Prospectus
The deferred administrative expense is $5.00 per $1,000 of Face Amount of
Insurance for the first 3 policy years. The charge then grades down to zero over
policy years 4 through 13.
The deferred sales load is the lesser of 30% of the Surrender Charge Premium
(SCP), plus 5% of all premiums over the SCP, or the following percentage of SCP.
YEARS % OF SCP
------------------------
1-8 65%
9 60%
10 55%
11 44%
12 33%
13 22%
14 11%
15 0%
The SCP is equal to the Annual Guaranteed Coverage Premium for the base policy
death benefit coverage of a standard mortality risk. The SCP varies with the
issue age, sex, and smoking classification of the insured as well as the Face
Amount of the base policy. The SCP will not exceed the amount shown in the
following table.
ISSUE AGE PER $1,000
--------------------------
0-29 $ 6
30-39 $ 11
40-49 $ 21
50-59 $ 40
60-69 $ 75
70-80 $150
For some higher issue ages, the Standard Non-Forfeiture Law of the state where
the policy is delivered may limit surrender charges to amounts less than those
defined above.
The surrender charge may also be deducted in the event of a decrease in Face
Amount.
The surrender charge at any time during the first policy year equals the
surrender charge at the end of the year. The surrender charge during any
subsequent policy year is calculated based on end of year surrender charges and
the portion of the year that has been completed.
When the policy terminates, your Policy Account may be less than the surrender
charge. If this happens, you will not have to pay the difference. If the policy
is reinstated, the surrender charge will also be reinstated.
PARTIAL SURRENDER FEE
If you surrender only a portion of your Net Cash Value at any time during the
insured's lifetime, there is an administrative fee assessed. This fee is
currently equal to the lesser of $25 or 2% of the partial surrender amount. You
can make a partial surrender once each policy year that does not exceed 10% of
the Net Cash Value without incurring a surrender charge or the partial surrender
fee.
PREMIUM FEE
This fee is used to pay for premium taxes charged by some states and other
governmental entities (e.g., municipalities). Allianz Life is responsible for
the payment of these taxes and will make a deduction from the value of the
policy for them. This fee is also used to pay for other expenses associated with
premium collection. The charge is equal to 2.5% of each premium payment.
TRANSFER FEE
You may transfer values from one variable option to another, or to or from the
fixed account. The first 12 transfers in a policy year are free. The fee for
each additional transfer is currently the lesser of $25 or 2% of the amount
transferred. Prescheduled automatic dollar cost averaging transfers are not
currently counted nor is the transfer of the initial premium at the end of the
free look period counted when we determine transfer fees.
INCOME TAX CHARGE
We do not currently assess any charge for income taxes. We reserve the right to
assess a charge for such taxes against the variable options or your Policy
Account if we determine that such taxes will be incurred.
<PAGE>
<TABLE>
<CAPTION>
Flexible Premium Variable Life Prospectus 16
FUND ANNUAL EXPENSES
(as a percentage of the Portfolios' average daily net assets for the most recent fiscal year). See the
accompanying fund prospectuses for more information.
MANAGEMENT
AND PORTFOLIO 12B-1 OTHER TOTAL ANNUAL
ADMINISTRATION FEES1 FEES EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund .63% -- .10% .73%
Alger American Growth Portfolio .75% -- .04% .79%
Alger American Leveraged AllCap Portfolio2 .85% -- .08% .93%
Franklin Aggressive Growth Securities Fund3 .50% -- 22% .72%
Franklin Global Communications Securities Fund .48% -- .03% .51%
Franklin Global Health Care Securities Fund .60% -- .22% .82%
Franklin Growth and Income Securities Fund .47% -- .02% .49%
Franklin High Income Fund .51% -- .03% .54%
Franklin Income Securities Fund .48% -- .02% .50%
Franklin Large Cap Growth Securities Fund4 .75% -- .02% .77%
Franklin Money Market Fund .52% -- .01% .53%
Franklin Natural Resources Securities Fund .62% -- .04% .66%
Franklin Real Estate Fund .56% -- .02% .58%
Franklin Rising Dividends Securities Fund .73% -- .02% .75%
Franklin S&P 500 Index Fund5 .15% -- .38% .53%
Franklin Small Cap Fund6 .55% -- .27% .82%
Franklin Technology Securities Fund3 .55% -- .38% .93%
Franklin U.S. Government Fund .49% -- .02% .51%
Franklin Value Securities Fund .60% -- .21% .81%
Franklin Zero Coupon Fund - 2005 .63% -- .02% .65%
Franklin Zero Coupon Fund - 2010 .63% -- .02% .65%
Mutual Discovery Securities Fund .80% -- .21% 1.01%
Mutual Shares Securities Fund4 .60% -- .19% .79%
Templeton Asset Strategy Fund6 .60% -- .18% .78%
Templeton Developing Markets Securities Fund6 1.25% -- .31% 1.56%
Templeton Global Income Securities Fund4 .60% -- .05% .65%
Templeton Growth Securities Fund4 .83% -- .05% .88%
Templeton International Securities Fund6 .69% -- .19% .88%
Templeton International Smaller Companies Fund .85% -- .26% .88%
Templeton Pacific Growth Securities Fund 1.00% -- .08% 1.08%
USAllianz VIP Diversified Assets Fund5/7 .55% .25% .20% 1.00%
USAllianz VIP Fixed Income Fund5/7 .50% .25% -- .75%
USAllianz VIP Growth Fund5/7 .65% .25% -- .90%
- ------
<FN>
1.The Portfolio Administration Fee is a direct expense for the Franklin Global Health Care Securities Fund,
the Franklin Small Cap Fund, the Franklin Value Securities Fund, the Mutual Discovery Securities Fund, the
Mutual Shares Securities Fund, the Templeton Asset Strategy Fund, the Templeton Developing Markets
Securities Fund, the Templeton International Securities Fund, and the Templeton International Smaller
Companies Fund. Other portfolios of Franklin Templeton Variable Insurance Products Trust pay for similar
services indirectly through the Management Fee. See "Management" in the accompanying fund prospectuses for
further information regarding these fees.
2. Other Expenses for the Alger American Leveraged AllCap Portfolio include 0.01% of interest expense.
3.The Franklin Aggressive Growth Securities Fund and the Franklin Technology Securities Fund commenced
operations as of the date of this prospectus. The expenses shown above for these portfolios are therefore
estimated for the current fiscal year.
4.On 2/8/00, a merger and reorganization was approved that combined the fund with a similar fund of Templeton
Variable Products Series Fund, effective 5/1/00. The table shows total expenses based on the fund's assets
as of 12/31/99, and not the assets of the combined fund. However, if the table reflected combined assets,
the fund's Management Fees, Other Expenses, and Total Fund Operating Expenses after 5/1/00 would be
estimated as: 0.75%, 0.02%, and 0.77% respectively for the Franklin Large Cap Growth Securities Fund;
0.60%, 0.19%, and 0.79% respectively for the Mutual Shares Securities Fund; 0.80%, 0.05%, and 0.85%
respectively for the Templeton Growth Securities Fund; and .0.60%, 0.04%, and 0.64% respectively for the
Templeton Global Income Securities Fund.
5.The Franklin S&P 500 Index Fund, the USAllianz VIP Diversified Assets Fund, the USAllianz VIP Fixed Income
Fund, and the USAllianz VIP Growth Fund commenced operations November 12, 1999. The expenses shown for
these Portfolios are therefore estimated for the funds' current fiscal year.
6. On 2/8/00, shareholders approved a merger and reorganization that combined the assets of the fund with a
similar fund of the Templeton Variable Products Series Fund, effective 5/1/00. The shareholders of the
fund had approved new management fees, which apply to the combined fund effective 5/1/00. The table shows
restated total expenses based on the new fees and assets of the fund as of 12/31/99, and not the assets of
the combined fund. However, if the table reflected both the new fees and the combined assets, the fund's
Management Fees, Other Expenses, and Total Fund Operating Expenses after 5/1/00 would be estimated as:
0.55%, 0.27%, and 0.82% respectively for the Franklin Small Cap Fund; 1.25%, 0.29%, and 1.54% respectively
for the Templeton Developing Markets Securities Fund; 0.60%, 0.14%, and 0.74% respectively for the
Templeton Asset Strategy Fund; and 0.65%, 0.20%, and 0.85% respectively for the Templeton International
Securities Fund.
7.Certain expenses of the USAllianz VIP Funds have been assumed by the Adviser. Had those expenses not been
assumed total return would have been lower and total fund expenses would have been 3.80% for the
Diversified Assets Fund, 3.77% for the Fixed Income Fund, and 3.90% for the Growth Fund.
</FN>
</TABLE>
<PAGE>
17 Flexible Premium Variable Life Prospectus
5. DEATH BENEFIT
- --------------------------------------------------------------------------------
The amount of the death benefit depends on the total Face Amount of Insurance,
your Policy Account on the date of the insured's death and the death benefit
option (Option A or Option B) in effect at that time. The insured is the person
whose life is covered by the policy. The insured is named on the coverage page
of the policy. The actual amount we pay the beneficiary will be reduced by any
outstanding Policy Debt.
The total Face Amount is the sum of all of the Face Amount portions. The initial
Face Amount and each Face Amount increase still in effect are Face Amount
portions. The initial Face Amount and the death benefit option in effect on the
issue date (the date when the insured's life is covered under the policy) are
shown on the coverage page of your policy.
OPTION A. The amount of the death benefit under Option A is the greater of:
o the total Face Amount at the beginning of the policy month when the death
occurs; or
o the Policy Account on the date of death multiplied by the applicable factor
from the Table of Death Benefit Factors contained in your policy.
OPTION B. The amount of the death benefit under Option B is the greater of:
o the total Face Amount at the beginning of the policy month when the death
occurs plus the Policy Account on the date of death; or
o the Policy Account on the date of death multiplied by the applicable factor
from the Table of Death Benefit Factors contained in your policy.
CHANGE IN DEATH BENEFIT
You may change the death benefit option after your policy has been in force for
at least one year, subject to the following requirements:
o you must request the change in writing;
o once you have changed the death benefit option, it cannot be changed again
for the next 3 years;
o if you want to change death benefit Option A to Option B, you must submit
proof satisfactory to us that the insured is still insurable at the risk
classification that applies for the initial Face Amount. The Face Amount will
not change; and
o if you want to change death benefit Option B to Option A, the Face Amount
will be increased by an amount equal to the Policy Account on the date of the
change. The risk classification for the last Face Amount portion to go into
effect which is still in force will apply to the Face Amount increase. This
increase will not result in any increase in premiums, expense charges or
surrender charges.
Any change in a death benefit option will take effect on the monthly anniversary
date on or following the date we approve the request for the change.
CHANGE IN FACE AMOUNT OF INSURANCE
You may change the Face Amount of Insurance of your policy on any monthly
anniversary date after your policy has been in force at least one year. Once the
Face Amount has been changed, it cannot be changed again for the next 12 months.
Face Amount Increases. To increase the Face Amount of Insurance you must:
o submit an application for the increase;
o submit proof satisfactory to us that the insured is an insurable risk; and
o pay any additional premium which is required.
The Face Amount of your policy can only be increased before your insured reaches
age 81. Each Face Amount increase must be at least as large as the minimum Face
Amount increase (currently $25,000). A Face Amount increase will take effect on
the monthly anniversary date on or following the day we approve the application
for the increase.
The risk classification that applies for any Face Amount increase may be
different from the risk classification that applies for the initial Face Amount.
The following changes will be made to reflect the increase:
o The Guaranteed Coverage Premium will be increased.
o The monthly administrative charge will increase to $20 per month for the 12
months following the increase.
o Additional surrender charges equal to the Face Amount increase (in $1,000's)
multiplied by the surrender charge factors will apply for 13 years following
the increase.
We will furnish a revised coverage page of your policy that shows:
o the risk classification and the amount of the increase; and
o the values for the changes described above.
<PAGE>
Flexible Premium Variable Life Prospectus 18
Face Amount Decreases. You must request in writing any decrease in Face Amount
of Insurance. The decrease will take effect on the
later of:
o the monthly anniversary date on or following the day we receive your request
for the decrease; or
o the monthly anniversary date one year after the last change you made in Face
Amount.
A Face Amount decrease will be used to reduce any previous Face Amount increases
which are then in effect starting with the latest increase and continuing in the
reverse order in which the increases were made. If any portion of the decrease
is left after all Face Amount increases have been reduced, it will be used to
reduce the initial Face Amount. We will not permit a Face Amount decrease that
would reduce the initial Face Amount below the minimum Face Amount, currently
$100,000.
The Guaranteed Coverage Premium will be reduced to reflect the Face Amount
decrease. The new Guaranteed Coverage Premium will be shown on a revised
coverage page of your policy.
We will deduct a charge from the Policy Account when the Face Amount is
decreased. The maximum charge we will deduct each time the Face Amount is
decreased is the lesser of:
o the total of the current surrender charge for the amount of each Face Amount
portion reduced; or
o the Policy Account when the decrease is made.
The charge will be deducted for each Face Amount portion reduced, starting with
the charge for the first Face Amount portion reduced, and continuing in the same
order in which the reductions are made until the charge is completely deducted.
Future surrender charges will be reduced proportionately for any charges
deducted. After the Face Amount is decreased, the surrender charges for each
Face Amount portion for which a charge is deducted will be equal to the
surrender charges shown for that Face Amount portion on the coverage page of
your policy, or in the revised coverage page, multiplied by the ratio of:
o the amount of the surrender charge in effect for the Face Amount portion at
the time the charge is deducted minus the amount of the charge deducted for
the Face Amount portion; divided by
o the amount of the surrender charge in effect for the Face Amount portion at
the time the charge is deducted.
GUARANTEED DEATH BENEFIT RIDER
You can elect a Guaranteed Death Benefit Rider. This rider provides that the
policy will remain in force to attained age 95 for death benefit Option A
policies and to attained age 80 for death benefit Option B policies, regardless
of the performance of the underlying portfolios, so long as you pay the minimum
required premium. The premium required is significantly higher than the minimum
premium required to issue the policy and to keep it in force. There is an
additional charge for this benefit, currently $0.01 per $1,000 of Face Amount
per policy month. A policy cannot have both the Guaranteed Death Benefit Rider
and any of the following riders:
o Insured Term Rider
o Spouse Term Rider
ACCELERATED DEATH BENEFIT RIDER
You can elect the Accelerated Benefit Rider. This rider provides that you may
elect to receive some of the death benefit proceeds of the policy if the insured
is suffering from a terminal illness, as defined in the rider. Receipt of an
accelerated death benefit amount may be taxable. You should contact your
personal tax or financial adviser for specific information.
Death benefits, Cash Values, if any, and loan values, if any, will be reduced if
a benefit is paid pursuant to this rider.
There is an administrative charge for this benefit which is guaranteed not to
exceed the lesser of $1,000 or 2% of the benefit. This limit may vary depending
on the state in which the policy was purchased. The current administrative
charge is $150.
The receipt of an accelerated death benefit amount may adversely affect the
recipient's eligibility for Medicaid or other government benefits or
entitlements.
6. TAXES
- --------------------------------------------------------------------------------
NOTE: We have prepared the following information on federal income taxes as a
general discussion of the subject. It is not intended as tax advise to anyone.
You should consult your tax adviser about your own circumstances. We have
included an additional discussion regarding taxes in Part II.
LIFE INSURANCE IN GENERAL
Life insurance, such as this policy, is a means of providing for death
protection and setting aside money for future
<PAGE>
19 Flexible Premium Variable Life Prospectus
needs. Congress recognized the importance of such planning and provided special
rules in the Internal Revenue Code (Code) for life insurance.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your life insurance policy until you take the money out.
Beneficiaries generally are not taxed when they receive the death proceeds upon
the death of the insured. However, estate taxes may apply.
TAKING MONEY OUT OF YOUR POLICY
You, as the owner, will not be taxed on increases in the value of your policy
until a distribution occurs either as a surrender or as a loan. If your policy
is a MEC, any loans or surrenders from the policy will be treated as first
coming from earnings and then from your investment in the policy. Consequently,
these distributed earnings are included in taxable income.
The Code also provides that any amount received from a MEC which is included in
income may be subject to a 10% penalty. The penalty will not apply if the income
received is:
1) paid on or after the taxpayer reaches age 591/2;
2) paid if the taxpayer becomes totally disabled (as that term is defined in the
Code); or
3) in a series of substantially equal payments made annually (or more
frequently) for the life or life expectancy of the taxpayer.
If your policy is not a MEC, any surrender proceeds will be treated as first a
recovery of the investment in the policy and to that extent will not be included
in taxable income. Furthermore any loan will be treated as indebtedness under
the policy and not as a taxable distribution. See "Federal Tax Status" in Part
II for more details including an explanation of whether your policy is a MEC.
DIVERSIFICATION
The Code provides that the underlying investments for a variable life policy
must satisfy certain diversification requirements in order to be treated as a
life insurance contract. We believe that the portfolios are being managed so as
to comply with such requirements.
Under current federal tax law, it is unclear as to the circumstances under which
you, because of the degree of control you exercise over the underlying
investments, and not us would be considered the owner of the shares of the
portfolios. If you are considered the owner of the investments, it will result
in the loss of the favorable tax treatment for the policy. It is unknown to what
extent owners are permitted to select portfolios, to make transfers among the
portfolios or the number and type of portfolios owners may select from without
being considered the owner of the shares. If guidance from the Internal Revenue
Service is provided which is considered a new position, the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean that you,
as the owner of the policy, could be treated as the owner of the portfolios. Due
to the uncertainty in this area, we reserve the right to modify the policy in an
attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
POLICY LOANS
We will loan money to you at the loan interest rate we establish for each policy
year during which the loan is outstanding. Your request for a loan must be in
writing.
The policy loan will be divided into two parts, the preferred loan and the
non-preferred loan. A preferred loan may be made not more than once per policy
year, beginning the later of:
o the tenth policy anniversary; or
o the anniversary following the insured's 60th birthday.
No more than 10% of the Cash Value of your policy at the time of the loan may be
made as a preferred loan. Any portion of a loan that is not a preferred loan is
a non-preferred loan.
The policy loan will be allocated to the fixed account. If the policy loan
requested exceeds the loan limit, you may also request a transfer of values from
the variable options to the fixed account. These values will be determined at
the time you request the transfer. If you do not indicate the proportions of the
variable options to be transferred, we will make the transfers based on the
proportions that your Policy Account in the variable options bear to the total
unloaned value in the Policy Account. Policy loans may have federal tax
consequences (see "Federal Tax Status").
<PAGE>
Flexible Premium Variable Life Prospectus 20
LOAN INTEREST CHARGED
There may be a lower declared loan interest rate each year for the preferred
loan than for the non-preferred loan. We will determine the loan interest rates
for a policy year at least 60 days before the policy year begins. The maximum
annual loan interest rates we will use for preferred and non-preferred loans for
a policy (the maximum allowable rate) are the greater of:
o the guaranteed interest rate for the fixed account shown on the coverage page
of your policy for a policy year (currently 3.5% for all policy years) plus
1%; or
o Moody's Corporate Bond Yield Average, Monthly Average Corporates as published
by Moody's Investors Service, Inc., for the calendar month ending two months
before the date on which the loan interest rate is determined.
If Moody's Corporate Bond Yield Average, Monthly Average Corporates is no longer
published on a timely basis, we will use a substantially similar average
approved by the insurance department in the state where your policy was
delivered to determine the maximum allowable rate.
If the maximum allowable rate for a policy is at least 1/2% lower than the loan
interest rate in effect for the previous policy year, we will decrease the loan
interest rate to not more than the maximum allowable rate. If the maximum
allowable rate for a policy year is at least 1/2% higher than either loan
interest rate in effect for the previous policy year, we may increase either
loan interest rate to not more than the maximum allowable rate. We will not use
a loan interest rate for any policy year that exceeds 15%.
We will notify you as to the preferred loan and non-preferred loan interest
rates that apply at the time a new loan is made or when any Policy Debt is
reinstated. If either loan interest rate that applies to an existing policy loan
is increased, we will notify you in writing at least 30 days before the new rate
takes effect.
When a loan is made, interest for the rest of the current policy year must be
paid in advance. If interest is not paid when due, it will be added to the
Policy Debt and allocated to the fixed account. The accumulation of preferred
loans, together with interest on such loans, is the preferred debt. The
accumulation of non-preferred loans, together with interest on such loans, is
the non-preferred debt.
Total Policy Debt is the sum of the preferred debt and the non-preferred debt,
and equals the total outstanding loan with interest. If the total Policy Debt
(including interest in advance) exceeds the fixed account, we will transfer
values from the variable options to the fixed account if such values are
available, based on the proportions that the values in the variable options bear
to the total value of the variable options. The unpaid interest will then be
treated as part of the Policy Debt and will bear interest at the loan rates.
LOAN LIMIT
A loan may be for any amount which does not exceed the loan limit.
The loan limit equals:
o the Cash Value on the date the loan is made; minus
o interest for the rest of the current policy year; minus
o any existing Policy Debt.
SECURITY
The policy will be the only security for the loan.
RESTRICTIONS ON MAKING LOANS
Loans will not be available during a grace period or after the insured dies.
REPAYING POLICY DEBT
The Policy Debt, or any part, may be repaid at any time as long as the policy is
in force. We have the right to not accept partial loan repayments for amounts
less than $50. Any Policy Debt outstanding will be deducted before any benefit
proceeds are paid or applied under a payment option.
Repayments will be applied first to the non-preferred debt, and then to the
preferred debt, unless you specify differently.
Repayments will be allocated to the fixed account and to the variable options
based on the premium allocation schedule then in effect, unless a different
allocation is requested.
When there is Policy Debt outstanding, any payments received will be applied
first as repayment of debt, rather than as premium, unless we are instructed
otherwise. If total Policy Debt equals or exceeds the Cash Value, we can
terminate the policy. A notice of termination will be mailed to the last address
we have on file 61 days prior to termination.
PARTIAL SURRENDERS
You may make a partial surrender from the Net Cash Value at any time during the
insured's life and before the
<PAGE>
21 Flexible Premium Variable Life Prospectus
policy has terminated. The minimum partial surrender amount is currently $500.
The partial surrender may not exceed the Net Cash Value, less $300.
We will assess a partial surrender fee when a partial surrender is made. The
maximum partial surrender fee we will charge is $50 and the current charge is
the lesser of 2% of the partial surrender amount or $25. In addition, a
surrender charge may be assessed on the amount surrendered. See "Surrender
Charges" above. You may make a partial surrender once each policy year that does
not exceed 10% of the Net Cash Value without incurring a surrender charge or the
partial surrender fee.
When a partial surrender is made, the amount of the partial surrender, the
partial surrender fee and the surrender charge, if any, will be deducted from
the Policy Account. You elect how much of each partial surrender, partial
surrender fee and surrender charge is to come from the unloaned value in the
fixed account and from values in each of the variable options. If you do not so
elect, or if we cannot make the surrender on the basis of the your direction or
those allocation percentages, we will make it based on the proportions that the
unloaned value in the fixed account and unloaned values in the variable options
bear to the total unloaned value in the Policy Account.
The Face Amount will be reduced if death benefit Option A is in effect when a
partial surrender is made. Such a reduction will be equal to the amount of the
partial surrender minus the excess, if any, of:
o the death benefit at the time the partial surrender is made; over
o the Face Amount at the time the partial surrender is made.
However, if the amount of the partial surrender is less than or equal to the
excess described above, the Face Amount will not be reduced.
Any Face Amount reduction will be used first to reduce any Face Amount increases
then in effect starting with the latest increase and continuing in the reverse
order in which the increases were made. If any of the reduction is left after
all Face Amount increases have been reduced, it will be used to reduce the
initial Face Amount.
We will not permit a partial surrender that would reduce the Face Amount below
the minimum Face Amount (currently $100,000). We may limit the number of partial
surrenders you can make in a policy year, but you will always be allowed to make
at least one partial surrender if the surrender meets these requirements.
FULL SURRENDERS
You may completely surrender your policy and receive the Net Cash Value anytime
during the insured's life and before the policy has terminated.
The full surrender will take effect on the later of:
o the date we receive your written request for the
surrender; or
o the date you request, in writing, for the surrender to take effect.
The policy and all coverage under it will terminate at 12:01 a.m. at our
ValueLife Service Center on the date the surrender takes effect.
Partial and full surrenders may have federal tax consequences (see "Federal Tax
Status").
8. OTHER INFORMATION
- --------------------------------------------------------------------------------
THE COMPANY
Allianz Life Insurance Company of North America is a life insurance company
organized under the laws of the state of Minnesota in 1896.
We are a wholly-owned subsidiary of Allianz Versicherungs-AG Holding
("Allianz"). Allianz is headquartered in Munich, Germany, and has subsidiaries
throughout the world. We offer fixed and variable life insurance and annuities,
and group life, accident and health insurance.
Administration for the policy is provided at our service center:
Allianz Life ValueLife Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, Pennsylvania 19312-0031
1-800-336-0320
THE SEPARATE ACCOUNT
We established a separate account, Allianz Life Separate Account A (Separate
Account), to hold the assets that underlie the policies.
The assets of the Separate Account are held in our name on behalf of the
Separate Account and legally belong to us. However, those assets that underlie
the policies, are not chargeable with liabilities arising out of any other
business we may conduct. All the income, gains and losses
<PAGE>
Flexible Premium Variable Life Prospectus 22
(realized or unrealized) resulting from those assets are credited to or against
the policies and not against any other policies we may issue. The Separate
Account is divided into variable options. (The variable options are referred to
as sub-accounts in the policy.)
DISTRIBUTOR
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, USAllianz Investor
Services, LLC (formerly NALAC Financial Plans, LLC), 1750 Hennepin Avenue,
Minneapolis, MN, 55403, a wholly-owned subsidiary of ours. USAllianz Investor
Services, LLC provides marketing services, and is reimbursed for expenses
incurred in the distribution of the policies.
Commissions will be paid to broker-dealers who sell the policies. Broker-dealers
will be paid commissions and expense reimbursements up to an amount equal to
100% of the first Guaranteed Coverage Premium; 4% of the next six Guaranteed
Coverage Premiums; and 2% of all premiums paid thereafter. Similar commissions
are paid on premiums received after any increase in Face Amount, or the addition
of a rider. In addition, broker-dealers may also receive additional
compensation, based on meeting certain production standards.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone any payments or transfers for any
period when:
1) the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2) trading on the New York Stock Exchange is restricted;
3) an emergency exists as a result of which disposal of shares of the portfolios
is not reasonably practicable or we cannot reasonably value the shares of the
portfolios;
4) during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
We may defer the portion of any transfer, amount payable or surrender, or Policy
Loan from the fixed account for not more than 6 months.
OWNERSHIP
OWNER. You, as the owner of the policy, have all of the rights under the policy
subject to:
o the rights of any assignee; and
o the rights of any irrevocable beneficiary.
The owner can also be the insured. If you die while the policy is still in force
and the insured is living, ownership passes to your successor owner or if you
have not designated a successor owner, then your estate becomes the owner.
JOINT OWNER. The policy can be owned by joint owners. Authorization of both
joint owners is required for all policy changes except for telephone transfers.
BENEFICIARY. The beneficiary is the person(s) or entity(ies) you name to receive
any death proceeds. The beneficiary is named at the time the policy is issued
unless changed at a later date. You can name a contingent beneficiary prior to
the death of the insured. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before the insured dies. If there is an
irrevocable beneficiary, all policy changes except premium allocations and
transfers require the consent of the beneficiary.
Primary and contingent beneficiaries are as named in the application, unless you
make a change. To change a beneficiary, you must send us a written request. We
may require the policy to record the change. The request will take effect when
signed, subject to any action we may take before receiving it.
One or more irrevocable beneficiaries may be named.
If a beneficiary is a minor, we will make payment to the guardian of his or her
estate. We may require proof of age of any beneficiary.
Proceeds payable to a beneficiary will be free from the claims of creditors, to
the extent allowed by law.
ASSIGNMENT. You can assign (transfer ownership) the policy. A copy of any
assignment must be filed with the ValueLife Service Center. We are not
responsible for the validity of any assignment. If you assign the policy, your
rights and those of any revocably-named person will be subject to the
assignment. An assignment will not affect any payments we may make or actions we
may take before such assignment has been recorded at our ValueLife Service
Center. This may be a taxable event. You should consult a tax adviser if you
wish to assign the policy.
<PAGE>
23 Flexible Premium Variable Life Prospectus
MATURITY BENEFIT. This is an amount equal to the Policy Account less any
outstanding Policy Debt on your policy. This amount is paid to you on the
maturity date.
MATURITY DATE. The policy provides that we will pay the Policy Account value,
less any Policy Debt, to you on the maturity date if the policy is still in
force. We will not accept any premiums after the maturity date.
<PAGE>
<TABLE>
<CAPTION>
Flexible Premium Variable Life Prospectus 24
PART II
EXECUTIVE OFFICERS AND DIRECTORS
- ----------------------------------------------------------------------------------------------------------------------
As of May 1, 2000, the directors and executive officers of Allianz Life Insurance Company of North America
(Allianz Life) and their principal occupations for the past 5 years are as follows:
NAME PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Robert W. MacDonald Chief Executive Officer and Director since October 1999.
Previously Chief Executive Officer of LifeUSA.
- ----------------------------------------------------------------------------------------------------------------------
Margery G. Hughes President and Chief Administrative Officer since October 1999.
Previously President and Chief Administrative Officer of LifeUSA.
- ----------------------------------------------------------------------------------------------------------------------
Mark A. Zesbaugh Senior Vice President and Chief Financial Officer since October
1999. Previously Chief Financial Officer of LifeUSA.
- ----------------------------------------------------------------------------------------------------------------------
Lowell C. Anderson Chairman of the Board.
Previously President and Chief Executive Officer of Allianz Life since
October 1988.
- ----------------------------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------------------------
Dr. Gerhard G. 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 Allianz Life
since April 1997. Formerly Second Vice President, Senior Counsel and
Assistant Secretary of Allianz Life.
- ----------------------------------------------------------------------------------------------------------------------
Paul M. Howman Vice President - Underwriting of Allianz Life since 1995.
- ----------------------------------------------------------------------------------------------------------------------
Robert S. James President - Individual Insurance Division of Allianz Life since
March 31, 1995. Previously President of Financial Markets Division.
- ----------------------------------------------------------------------------------------------------------------------
Edward J. Bonach President - Special Markets Division of Allianz Life since October 1999.
Previously Executive Vice President-Chief Financial Officer and
Treasurer of Allianz Life, since 1993.
- ----------------------------------------------------------------------------------------------------------------------
Rev. Dennis J. Dease President, University of St. Thomas, St. Paul since July 1991.
- ----------------------------------------------------------------------------------------------------------------------
James R. Campbell Chairman and Chief Executive Officer of Norwest Bank MN, N.A.
since 1998. Previously Executive Vice President since February 1988.
- ----------------------------------------------------------------------------------------------------------------------
Robert M. Kimmitt Partner in the law firm of Wilmer, Cutler & Pickering.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
25 Flexible Premium Variable Life Prospectus
VOTING
Pursuant to our view of present applicable law, we will vote the shares of the
portfolios at special meetings of shareholders in accordance with instructions
received from all owners having a voting interest. We will vote shares for which
we have not received instructions. We will vote all shares in the same
proportion as the shares for which we have received instructions. We will vote
our shares in the same manner.
If the Investment Company Act of 1940 or any regulation thereunder is amended or
if the present interpretation of the Act changes so as to permit us to vote the
shares in our own right, we may elect to do so.
Your voting interest in the portfolios is determined as follows:
o You may cast one vote for each $100 of Account Value which is allocated to a
variable option on the record date. Fractional votes are counted.
o The number of shares which you can vote will be determined as of the date
chosen by us.
o You will receive periodic reports relating to the portfolios in which you
have an interest, as well as any proxy material and a form with which to give
us such voting instructions.
DISREGARD OF VOTING INSTRUCTIONS
We may, when required to do so by state insurance authorities, vote shares of
the portfolios without regard to instructions from owners. We will do this if
such instructions would require the shares to be voted to cause a portfolio to
make, or refrain from making, investments which would result in changes in the
sub-classification or investment objectives of the portfolio. We may also
disapprove changes in the investment policy initiated by owners or
trustees/directors of the portfolios, if such disapproval:
o is reasonable and is based on a good faith determination by us that the
change would violate state or federal law;
o the change would not be consistent with the investment objectives of the
portfolios; or
o which varies from the general quality and nature of investments and
investment techniques used by other portfolios with similar investment
objectives underlying other variable contracts offered by us or of an
affiliated company.
In the event we do 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.
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.
OUR RIGHT TO CONTEST
We cannot contest the validity of the policy except in the case of fraud after
it has been in effect during the insured's lifetime for two years. If the policy
is reinstated, the two-year period is measured from the date of reinstatement.
In addition, if the insured commits suicide in the two-year period, or such
period as specified in state law, the benefit payable will be limited to
premiums paid less Policy Debt and less any surrenders. We also have the right
to adjust any benefits under the policy if the answers in the application
regarding the use of tobacco are not correct.
FEDERAL TAX STATUS
NOTE: The following description is based upon our understanding of current
federal income tax law applicable to life insurance in general. We 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. We believe
that the policies to be issued will qualify as "life insurance contracts" under
section 7702. We do 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 our 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.
<PAGE>
Flexible Premium Variable Life Prospectus 26
We are taxed as a life insurance company under the Code. For federal income tax
purposes, the Separate Account is not a separate entity from us and its
operations form a part of us.
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 these policies,
will 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. For purposes of these regulations, all securities of the same
issuer are treated as a single investment. 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."
We intend that each portfolio underlying the policies will be managed by the
investment advisers 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 separate account will cause the owner to be treated as the
owner of the assets of the separate 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 policyowner 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 the owner of the assets of the separate 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 you being retroactively
determined to be the owner of the assets of the separate account.
Due to the uncertainty in this area, we reserve 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 that the amount of mortality and other expense charges be reasonable.
In establishing these charges, we have 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 we have attempted to comply with Section 7702, the law in this area is
very complex and unclear. There is a
<PAGE>
27 Flexible Premium Variable Life Prospectus
risk, therefore, that the Internal Revenue Service will not concur with our
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. You should
consult your own tax advisers with respect to the tax consequences of purchasing
the policy.
POLICY PROCEEDS. The tax treatment accorded to loan proceeds and/or surrender
payments from the policies will depend on whether the policy is considered to be
a MEC. (See "Tax Treatment of Loans and Surrenders.") Otherwise, we believe that
the policy should receive the same federal income tax treatment as any other
type of life insurance. As such, the death benefit thereunder is excludable from
the gross income of the beneficiary under Section 101(a) of the Code. Also, you
are not deemed to be in constructive receipt of the Net Cash Value, including
increments thereon, under a policy until there is a distribution of such
amounts.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of policy proceeds, depend on the circumstances of each
owner or beneficiary.
TAX TREATMENT OF LOANS AND SURRENDERS. Section 7702A of the Code sets forth the
rules for determining when a life insurance policy will be deemed to be a MEC. A
MEC is a contract which is entered into or materially changed on or after June
21, 1988 and fails to meet the 7-pay test. A policy fails to meet the 7-pay test
when the cumulative amount paid under the policy at any time during the first 7
policy years exceeds the sum of the net level premiums which would have been
paid on or before such time if the policy provided for paid-up future benefits
after the payment of seven (7) level annual premiums. A material change would
include any increase in the future benefits or addition of qualified additional
benefits provided under a policy unless the increase is attributable to: (1) the
payment of premiums necessary to fund the lowest death benefit and qualified
additional benefits payable in the first seven policy years; or (2) the
crediting of interest or other earnings (including policyholder dividends) with
respect to such premiums.
Furthermore, any policy received in exchange for a policy classified as a MEC
will be treated as a MEC 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 MEC if no additional premiums are paid.
Due to the flexible premium nature of the policy, the determination of whether
it qualifies for treatment as a MEC depends on the individual circumstances of
each policy.
If the policy is classified as a MEC, then surrenders and/or loan proceeds are
taxable to the extent of income in the policy. Such distributions are deemed to
be on a last-in, first-out basis, which means the taxable income is distributed
first. Loan proceeds and/or surrender payments including those resulting from
the lapse of the policy, may also be subject to an additional 10% federal income
tax penalty applied to the income portion of such distribution. The penalty
shall not apply, however, to any distributions: (1) made on or after the date on
which the taxpayer reaches age 59 1/2; (2) which is attributable to the taxpayer
becoming disabled (within the meaning of Section 72(m)(7) of the Code); or (3)
which is part of a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer or
the joint lives (or joint life expectancies) of such taxpayer and his
beneficiary.
If a policy is not classified as a MEC, 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 MEC, will be treated as
indebtedness of the owner and not a distribution. Upon complete surrender or
lapse of the policy, if the amount received plus loan indebtedness exceeds the
total premiums paid that are not treated as previously surrendered by the policy
owner, the excess generally will be treated as ordinary income.
Personal interest payable on a loan under a policy owned by an individual is
generally not deductible. Furthermore, no deduction will be allowed for interest
on loans under policies covering the life of any employee or officer of the
taxpayer or any person financially interested in the business carried on by the
taxpayer to the extent the indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
<PAGE>
Flexible Premium Variable Life Prospectus 28
Policy owners should seek competent tax advice on the tax consequences of taking
loans, distributions, exchanging or surrendering any policy.
MULTIPLE POLICIES. The Code further provides that multiple MEC which are issued
within a calendar year period to the same owner by one company or its affiliates
are treated as one MEC 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. You should consult a tax adviser prior to purchasing
more than one MEC in any calendar year period.
TAX TREATMENT OF ASSIGNMENTS. An assignment of a policy or the change of
ownership of a policy may be a taxable event. You should therefore consult a
competent tax adviser should you wish to assign or change the owner of your
policy.
QUALIFIED PLANS. The policies may be used in conjunction with certain Qualified
Plans. Because the rules governing such use are complex, you should not do so
until you have consulted a competent Qualified Plans consultant.
INCOME TAX WITHHOLDING. All distributions or the portion thereof which is
includible in gross income of the policy owner are subject to federal income tax
withholding. However, in most cases you may elect not to have taxes withheld.
You may be required to pay penalties under the estimated tax rules, if
withholding and estimated tax payments are insufficient.
REPORTS TO OWNERS
We will, at a minimum, send you an annual and semi-annual report of the
portfolios. Within 30 days after each policy anniversary, we will send you an
annual statement. We may elect to send these more often. The statement will show
the current amount of death benefit payable under the policy, the current Policy
Account value, the current Net Cash Value, current Policy Debt and will show all
transactions previously confirmed. The statement will also show premiums paid
and all charges deducted during the policy year.
We will mail you confirmations within seven days of any transaction regarding:
(a) the receipt of premium; (b) any transfer between variable options; (c) any
loan, interest repayment, or loan repayment; (d) any surrender; (e) exercise of
the free look privilege; and (f) payment of the death benefit under the policy.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account or the Distributor
is a party or to which the assets of the Separate Account are subject. We are
not involved in any litigation that is of material importance in relation to our
total assets or that relates to the Separate Account.
EXPERTS
The financial statements of Allianz Life Variable Account A and our consolidated
financial statements as of and for the year ended December 31, 1999 included in
this prospectus have been audited by KPMG 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.
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the policies.
<PAGE>
ALLIANZ LIFE VARIABLE ACCOUNT A
OF
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Financial Statements
December 31, 1999
<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, 1999, 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
AIM Variable Insurance Funds, Inc., The Alger American Fund, Franklin Templeton
Variable Insurance Products Trust, and USAllianz Variable Insurance Products
Trust. 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, 1999, 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 LLP
Minneapolis, Minnesota
February 4, 2000
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Financial Statements
Statements of Assets and Liabilities
December 31, 1999
Franklin
Alger Alger American Global Franklin Franklin
AIM American Leveraged Communications Global Health Growth and Franklin
VI Growth Growth AllCap Securities Care Securities Income High Income
Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
AIM VI Growth Fund
3,244 shares, cost $102,904 $104,606 - - - - - -
Alger American Growth Fund
1,738 shares, cost $108,939 - 111,878 - - - - -
Alger American Leveraged AllCap Fund
120 shares, cost $6,610 - - 6,966 - - - -
Franklin Global Communications Securities Fund
95,296 shares, cost $1,735,057 - - - 2,369,062 - - -
Franklin Global Health Care Securities Fund
4,931 shares, cost $48,559 - - - - 48,427 - -
Franklin Growth and Income Fund
174,023 shares, cost $3,069,403 - - - - - 3,094,134 -
Franklin High Income Fund
141,855 shares, cost $1,726,809 - - - - - - 1,398,695
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 104,606 111,878 6,966 2,369,062 48,427 1,094,134 1,398,695
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 15 68 50 5,392 248 15,667 2,358
Accrued administrative charges 3 17 13 1,280 62 3,917 589
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 18 85 63 6,672 310 19,584 2,947
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $104,588 111,793 6,903 2,362,390 48,117 3,074,550 1,395,748
- ------------------------------------------------------------------------------------------------------------------------------------
Policy owners' equity (note 4) $104,588 111,793 6,903 2,362,390 48,117 3,074,550 1,395,748
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
3
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
Franklin Franklin Franklin Franklin Franklin Franklin
Income Large Cap Money Natural Resources Franklin Rising Dividends S&P 500
Securities Growth Sec Market Securities RealEstate Securities Index
Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Income Securities Fund
82,616 shares, cost $1,259,130 $1,213,628 - - - - - -
Franklin Large Cap Growth Securities Fund
43,610 shares, cost $699,773 - 919,304 - - - - -
Franklin Money Market Fund
1,283,666 shares, cost $1,283,666 - - 1,283,666 - - - -
Franklin Natural Resources Securities Fund
30,276 shares, cost $329,522 - - - 330,922 - - -
Franklin Real Estate Fund
41,159 shares, cost $614,176 - - - - 614,093 - -
Franklin Rising Dividends Securities Fund
77,852 shares, cost $1,136,415 - - - - - 1,059,568 -
Franklin S&P 500 Index Fund
12,767 shares, cost $133,279 - - - - - - 134,823
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,213,628 919,304 1,283,666 330,922 614,093 1,059,568 134,823
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 5,771 643 2,003 1,647 3,187 6,279 26
Accrued administrative charges 1,443 161 501 411 797 1,570 6
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 7,214 804 2,504 2,058 3,984 7,849 32
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $1,206,414 918,500 1,281,162 328,864 610,109 1,051,719 134,791
- ------------------------------------------------------------------------------------------------------------------------------------
Policy owners' equity (note 4) $1,206,414 918,500 1,281,162 328,864 610,109 1,051,719 134,791
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
4
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
Franklin Mutual
Franklin Franklin U.S. Value Franklin Franklin Franklin Discovery
Small Cap Government Securities Zero Coupon Zero Coupon Zero Coupon Securities
Fund Fund Fund Fund - 2000 Fund - 2005 Fund - 2010 Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Franklin Small Cap Fund
63,497 shares, cost $1,255,963 $1,706,161 - - - - - -
Franklin U.S. Government Fund
85,501 shares, cost $1,070,843 - 1,007,202 - - - - -
Franklin Value Securities Fund
741 shares, cost $6,343 - - 5,851 - - - -
Franklin Zero Coupon Fund - 2000
27,996 shares, cost $329,745 - - - 351,905 - - -
Franklin Zero Coupon Fund - 2005
24,919 shares, cost $308,806 - - - - 361,577 - -
Franklin Zero Coupon Fund - 2010
27,701 shares, cost $440,816 - - - - - 391,966 -
Mutual Discovery Securities Fund
40,352 shares, cost $482,859 - - - - - - 547,583
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,706,161 1,007,202 5,851 351,905 361,577 391,966 547,583
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 8,345 2,243 32 518 532 483 516
Accrued administrative charges 2,086 561 8 130 133 120 129
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 10,431 2,804 40 648 665 603 645
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $1,695,730 1,004,398 5,811 351,257 360,912 391,363 546,938
- ------------------------------------------------------------------------------------------------------------------------------------
Policy owners' equity (note 4) $1,695,730 1,004,398 5,811 351,257 360,912 391,363 546,938
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
5
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
Templeton
Mutual Templeton Templeton Templeton Templeton International
Shares Developing Global Asset Templeton Global Income International Smaller
Securities Markets Equity Allocation Global Growth Securities Equity Companies
Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments at net asset value:
Mutual Shares Securities Fund
82,769 shares, cost $1,018,876 $1,095,030 - - - - - -
Templeton Developing Markets Equity Fund
84,075 shares, cost $819,895 - 881,952 - - - - -
Templeton Global Asset Allocation Fund
21,344 shares, cost $247,176 - - 252,077 - - - -
Templeton Global Growth Fund
177,586 shares, cost $2,620,038 - - - 2,775,663 - - -
Templeton Global Income Securities Fund
16,528 shares, cost $191,447 - - - - 182,965 - -
Templeton International Equity Fund
124,044 shares, cost $2,077,368 - - - - - 2,226,583 -
Templeton International Smaller Companies Fund
3,532 shares, cost $40,082 - - - - - - 39,103
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,095,030 881,952 252,077 2,775,663 182,965 2,226,583 39,103
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 3,970 7,300 588 19,669 2,038 14,793 335
Accrued administrative charges 993 1,825 147 4,917 509 3,698 84
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,963 9,125 735 24,586 2,547 18,491 419
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $1,090,067 872,827 251,342 2,751,077 180,418 2,208,092 38,684
- ------------------------------------------------------------------------------------------------------------------------------------
Policy owners' equity (note 4) $1,090,067 872,827 251,342 2,751,077 180,418 2,208,092 38,684
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
6
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Financial Statements (continued)
Statements of Assets and Liabilities (cont.)
December 31, 1999
Templeton USAllianz USAllianz
Pacific VIP Diversified VIP Fixed USAllianz Total
Growth Assets Income VIP Growth All
Fund Fund Fund Fund Funds
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments at net asset value:
Templeton Pacific Growth Fund
43,781 shares, cost $448,304 $446,123 - - -
USAllianz VIP Diversified Assets Fund
0 shares, cost $0 - - - -
USAllianz VIP Fixed Income Fund
0 shares, cost $0 - - - -
USAllianz VIP Growth Fund
0 shares, cost $0 - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 446,123 - - - 24,961,513
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Accrued mortality and expense risk charges 3,685 - - - 108,401
Accrued administrative charges 921 - - - 27,031
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,606 - - - 135,432
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets $441,517 - - - 24,826,081
- ------------------------------------------------------------------------------------------------------------------------------------
Policy owners' equity (note 4) $441,517 - - - 24,826,081
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
7
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Alger American
AIM VI Growth Fund Alger American Growth Fund Leveraged AllCap Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ - - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 14 - - 68 - - 50 - -
Administrative charges 3 - - 17 - - 13 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 17 - - 85 - - 63 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net (17) - - (85) - - (63) - -
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions on mutual funds - - - - - - - - -
Realized gains (losses) on sales of investments, net 1 - - - - - 1 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on investments, net 1 - - - - - 1 - -
Net change in unrealized appreciation
(depreciation) on investments 1,702 - - 2,939 - - 356 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and unrealize
appreciation (depreciation) on investments, net 1,703 - - 2,939 - - 357 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
operations $ 1,686 - - 2,854 - - 294 - -
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
8
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Global Franklin Global
Communications Securities Fund Health Care Securities Fund Franklin Growth and Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 68,883 63,845 66,211 75 - - 122,075 86,614 61,679
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 13,853 10,459 9,862 242 54 - 21,089 16,628 14,386
Administrative charges 3,463 2,615 2,466 60 13 - 5,272 4,157 3,597
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 17,316 13,074 12,328 302 67 - 26,361 20,785 17,983
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 51,567 50,771 53,883 (227) (67) - 95,714 65,829 43,696
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 166,820 93,096 91,611 - - - 340,300 203,765 59,819
Realized gains (losses) on sales of
investments, net 268,795 56,812 59,135 (162) 2 - 23,652 27,735 75,044
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses)
on investments, net 435,615 149,908 150,746 (162) 2 - 363,952 231,500 134,863
Net change in unrealized appreciation
(depreciation) on investments 183,386 (40,828) 116,553 (1,826) 1,694 - (453,957)(118,668) 283,057
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses) and
unrealized appreciation (depreciation
on investments, net 619,001 109,080 267,299 (1,988) 1,696 - (90,005 112,832 417,920
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $670,568 159,851 321,182 (2,215) 1,629 - 5,709 178,661 461,616
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
9
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Franklin Large
Franklin High Income Fund Income Securities Fund Cap Growth Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $379,407 160,598 153,512 127,089 111,419 71,443 2,787 833 7
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 10,123 10,568 12,094 7,825 8,671 7,189 4,139 1,287 96
Administrative charges 2,531 2,642 3,023 1,956 2,168 1,797 1,035 322 24
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 12,654 13,210 15,117 9,781 10,839 8,986 5,174 1,609 120
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 366,753 147,388 138,395 117,308 100,580 62,457 (2,387) (776) (113)
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 55,544 9,531 5,036 45,538 26,313 15,347 - - -
Realized gains (losses) on sales
of investments, net (44,053) 29,193 43,795 (115,178) 3,544 7,042 2,133 989 (11)
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses)
on investments, net 11,491 38,724 48,831 (69,640) 29,857 22,389 2,133 989 (11)
Net change in unrealized appreciation
(depreciation) on investments (391,353)(177,480) 4,999 (78,033)(115,794) 68,874 185,307 34,912 (548)
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net (379,862)(138,756) 53,830 (147,673) (85,937) 91,263 187,440 35,901 (559)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $(13,109) 8,632 192,225 (30,365) 14,643 153,720 185,053 35,125 (672)
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
10
</FN>
</TABLE>
PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Natural
Franklin Money Market Fund Resources Securities Fund Franklin Real Estate Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $71,180 62,012 35,286 2,670 2,271 1,844 48,690 26,119 12,965
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 9,461 7,539 4,368 1,368 461 416 2,727 3,282 3,466
Administrative charges 2,365 1,885 1,092 342 115 104 682 821 867
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 11,826 9,424 5,460 1,710 576 520 3,409 4,103 4,333
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 59,354 52,588 29,826 960 1,695 1,324 45,281 22,016 8,632
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - - - - - 67,468 16,168 6,191
Realized gains (losses) on sales
of investments, net - - - (11,396) (8,058) (1,936) (179,615 15,172 17,125
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net - - - (11,396) (8,058) (1,936) (112,147) 31,340 23,316
Net change in unrealized appreciation
(depreciation) on investments - - - 57,915 (35,420) (25,118) 31,946 (179,557) 57,737
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net - - - 46,519 (43,478) (27,054) (80,201) (148,217) 81,053
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $59,354 52,588 29,826 47,479 (41,783) (25,730) (34,920) (126,201) 89,685
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
11
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Rising
Dividends Securities Fund Franklin S&P 500 Index Fund Franklin Small Cap Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 17,581 9,265 5,990 - - - 4,439 386 384
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 7,013 5,177 3,657 26 - - 11,584 3,458 1,277
Administrative charges 1,753 1,294 914 6 - - 2,896 865 319
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 8,766 6,471 4,571 32 - - 14,480 4,323 1,596
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 8,815 2,794 1,419 (32) - - (10,041) (3,937) (1,212)
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 176,138 113,543 10,229 - - - 620 49,628 4,546
Realized gains (losses) on sales
of investments, net (157,350) 6,199 18,073 - - - 346,621 (1,660) 2,723
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 18,788 119,742 28,302 - - - 347,241 47,968 7,269
Net change in unrealized appreciation
(depreciation) on investments (153,361) (77,635) 93,007 1,544 - - 472,910 (48,794) 22,458
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net (134,573) 42,107 121,309 1,544 - - 820,151 (826) 29,727
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $(125,758) 44,901 122,728 1,512 - - 810,110 (4,763) 28,515
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
12
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Franklin Franklin
U.S. Government Fund Value Securities Fund Zero Coupon Fund - 2000
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $152,061 64,457 52,576 15 - - 57,505 27,976 24,296
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 6,209 5,484 5,796 15 - - 2,164 2,236 2,223
Administrative charges 1,552 1,371 1,449 4 - - 541 559 556
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 7,761 6,855 7,245 19 - - 2,705 2,795 2,779
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 144,300 57,602 45,331 (4) - - 54,800 25,181 21,517
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - - - - - 7,930 4,476 550
Realized gains (losses) on sales
of investments, net 6,118 17,179 27,003 (5) (3) - 1,819 4,953 5,922
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 6,118 17,179 27,003 (5) (3) - 9,749 9,429 6,472
Net change in unrealized appreciation
(depreciation) on investments (167,882) (18,101) 136 (203) (289) - (56,550) (11,643) (6,554)
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net (161,764) (922) 27,139 (208) (292) - (46,801) (2,214) (82)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $(17,464) 56,680 72,470 (212) (292) - 7,999 22,967 21,435
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
13
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Franklin Mutual
Zero Coupon Fund-2005 Zero Coupon Fund-2010 Discovery Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 47,477 22,733 25,018 70,880 25,369 22,065 13,135 5,534 40
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 2,161 2,431 2,373 3,057 2,862 2,535 3,044 2,229 1,140
Administrative charges 540 608 593 764 716 634 761 557 285
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 2,701 3,039 2,966 3,821 3,578 3,169 3,805 2,786 1,425
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 44,776 19,694 22,052 67,059 21,791 18,896 9,330 2,748 (1,385)
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 2,291 5,259 87 20,609 3,510 176 - 5,149 -
Realized gains (losses) on sales
of investments, net 1,717 2,463 11,706 (15,611) 2,415 1,074 1,014 5,744 166
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 4,008 7,722 11,793 4,998 5,925 1,250 1,014 10,893 166
Net change in unrealized appreciation
(depreciation) on investments (74,447) 13,788 1,480 (146,933) 27,536 35,571 87,371 (49,861) 26,719
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net (70,439) 21,510 13,273 (141,935) 33,461 36,821 88,385 (38,968) 26,885
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $(25,663) 41,204 35,325 (74,876) 55,252 55,717 97,715 (36,220) 25,500
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
14
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Templeton Developing Templeton Global
Mutual Shares Securities Fund Markets Equity Fund Asset Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $31,535 11,623 72 12,690 19,038 10,159 17,439 10,932 7,863
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 8,110 6,003 2,067 7,442 2,862 3,802 1,526 1,629 2,512
Administrative charges 2,027 1,501 517 1,860 715 950 381 407 628
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 10,137 7,504 2,584 9,302 3,577 4,752 1,907 2,036 3,140
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 21,398 4,119 (2,512) 3,388 15,461 5,407 15,532 8,896 4,723
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - 10,153 - - 61,907 16,114 16,486 13,002 2,268
Realized gains (losses) on sales
of investments, net 57,630 10,137 2,034 (36,364) (23,346) 1,960 393 11,507 23,197
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 57,630 20,290 2,034 (36,364) 38,561 18,074 16,879 24,509 25,465
Net change in unrealized appreciation
(depreciation) on investments 58,050 (35,219) 51,689 329,456 (198,108) (127,265) (16,541) (31,637) 11,716
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 115,680 (14,929) 53,723 293,092 (159,547) (109,191) 338 (7,128) 37,181
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $137,078 (10,810) 51,211 296,480 (144,086) (103,784) 15,870 1,768 41,904
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
15
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Templeton Templeton Global Templeton
Global Growth Fund Income Securities Fund International Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 48,676 39,344 15,984 17,513 12,826 10,037 118,404 55,115 33,230
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges 22,604 9,684 7,051 1,140 1,127 903 16,444 10,176 8,366
Administrative charges 5,651 2,421 1,763 285 282 226 4,111 2,544 2,092
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 28,255 12,105 8,814 1,425 1,409 1,129 20,555 12,720 10,458
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 20,421 27,239 7,170 16,088 11,417 8,908 97,849 42,395 22,772
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds 235,493 143,312 5,328 - - - 57,531 110,714 50,952
Realized gains (losses) on sales
of investments, net 135,515 13,548 15,707 (19,414) (315) 668 210,059 9,119 13,328
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net 371,008 156,860 21,035 (19,414) (315) 668 267,590 119,833 64,280
Net change in unrealized appreciation
(depreciation) on investments 30,632 (70,051) 80,562 (9,989) (521) (6,915) 89,659 (97,026) 25,384
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 401,640 86,809 101,597 (29,403) (836) (6,247) 357,249 22,807 89,664
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $422,061 114,048 108,767 (13,315) 10,581 2,661 455,098 65,202 112,436
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
16
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Templeton International Templeton USAllianz
Smaller Companies Fund Pacific Growth Fund VIP Diversified Assets Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ 736 488 17 4,339 10,966 8,455 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Mortality and expense risk charges 204 99 29 3,239 1,388 214 - - -
Administrative charges 51 25 7 810 347 53 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 255 124 36 4,049 1,735 267 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net 481 364 (19) 290 9,231 8,188 - - -
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - 565 - - 3,337 - - - -
Realized gains (losses) on sales
of investments, net (73) (121) (2) (38,203) (38,525) 907 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net (73) 444 (2) (38,203) (35,188) 907 - - -
Net change in unrealized appreciation
(depreciation) on investments 4,391 (4,295) (1,075) 140,678 (7,500) (164,185) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net 4,318 (3,851) (1,077) 102,475 (42,688) (163,278) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $4,799 (3,487) (1,096) 102,765 (33,457) (155,090) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
17
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
USAllianz USAllianz
VIP Fixed Income Fund VIP Growth Fund Total All Funds
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends reinvested in fund shares $ - - - - - - 1,437,281 829,763 619,133
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk charges - - - - - - 166,941 115,794 95,822
Administrative charges - - - - - - 41,732 28,950 23,956
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses - - - - - - 208,673 144,744 119,778
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss), net - - - - - - 1,228,608 685,019 499,355
Realized gains (losses) and unrealized
appreciation (depreciation) on investments:
Realized capital gain distributions
on mutual funds - - - - - - 1,192,768 873,428 268,254
Realized gains (losses) on sales
of investments, net - - - - - - 438,044 144,683 324,660
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gains (losses) on
investments, net - - - - - - 1,630,812 1,018,111 592,914
Net change in unrealized appreciation
(depreciation) on investments - - - - - - 127,167 (1,240,497) 548,282
- ------------------------------------------------------------------------------------------------------------------------------------
Total realized gains (losses)
and unrealized appreciation
(depreciation) on investments, net - - - - - - 1,757,979 222,386) 1,141,196
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $ - - - - - - 2,986,587 462,633 1,640,551
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
18
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998
and 1997
AIM Alger Alger American
VI Growth Fund American Growth Fund Leveraged AllCap Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ (17) - - (85) - - (63) - -
Realized gains (losses) on investments, net 1 - - - - - 1 - -
Net change in unrealized appreciation
(depreciation) on investments 1,702 - - 2,939 - - 356 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 1,686 - - 2,854 - - 294 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 60 - - 290 - - 290 - -
Transfers between funds 102,862 - - 108,720 - - 6,349 - -
Surrenders and terminations - - - - - - - - -
Policy loan transactions 3 - - 3 - - - - -
Other transactions (note 2) (23) - - (74) - - (30) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions 102,902 - - 108,939 - - 6,609 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 104,588 - - 111,793 - - 6,903 - -
Net assets at beginning of year - - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $104,588 - - 111,793 - - 6,903 - -
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
19
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Global Franklin Global Franklin
Communications Securities Fund Health Care Securities Fund Growth and Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 51,567 50,771 53,883 (227) (67) - 95,714 65,829 43,696
Realized gains (losses) on investments
, net 435,615 149,908 150,746 (162) 2 - 363,952 231,500 134,863
Net change in unrealized appreciation
(depreciation) on investments 183,386 (40,828) 116,553 (1,826) 1,694 - (453,957)(118,668) 283,057
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 670,568 159,851 321,182 (2,215) 1,629 - 5,709 178,661 461,616
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 91,957 104,584 116,828 - - - 426,492 427,399 387,084
Transfers between funds 78,700 (38,007) (67,788) 3,673 6,656 - 160,733 282,965 194,269
Surrenders and terminations (92,132) (46,228) (8,311) - - - (172,737) (66,385) (271,440)
Policy loan transactions (58,830) 32,511 (60,609) - - - (33,949) (31,446) 3,110
Other transactions (note 2) (69,624) (65,057) (60,143) (1,606) (20) - (217,639) (202,446) (163,700)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions (49,929) (12,197) (80,023) 42,067 6,636 - 162,900 410,087 149,323
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 620,639 147,654 241,159 39,852 8,265 - 168,609 588,748 610,939
Net assets at beginning of year 1,741,751 1,594,097 1,352,938 8,265 - - 2,905,941 2,317,193 1,706,254
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $2,362,390 1,741,751 1,594,097 48,117 8,265 - 3,074,550 2,905,941 2,317,193
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
20
</FN>
</TABLE>
<TABLE>
<CAPTION>
<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, 1999, 1998 and 1997
Franklin Franklin Franklin Large
High Income Fund Income Securities FundCap Growth Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 366,753 147,388 138,395 117,308 100,580 62,457 (2,387) (776) (113)
Realized gains (losses) on
investments, net 11,491 38,724 48,831 (69,640) 29,857 22,389 2,133 989 (11)
Net change in unrealized appreciation
(depreciation) on investments (391,353) (177,480) 4,999 (78,033) (115,794) 68,874 185,307 34,912 (548)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (13,109) 8,632 192,225 (30,365) 14,643 153,720 185,053 35,125 (672)
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 41,715 55,984 50,642 184,826 219,675 255,347 2,228 - -
Transfers between funds (340,702) (12,125) (140,178) (229,489) 295,129 46,671 415,799 194,912 94,715
Surrenders and terminations (19,154) (21,000) (67,891) (146,257) (50,336) (11,918) - - -
Policy loan transactions 111,630 (168,452) (33,557) (33,988) (12,262) (25,240) - - -
Other transactions (note 2) (38,583) (43,702) (41,580) (95,328) (101,921) (96,044) (9,373) (3,276) (429)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions (245,094) (189,295) (232,564) (320,236) 350,285 168,816 408,654 191,636 94,286
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (258,203) (180,663) (40,339) 350,601) 364,928 322,536 593,707 226,761 93,614
Net assets at beginning of year 1,653,951 1,834,614 1,874,953 1,557,015 1,192,087 869,551 324,793 98,032 4,418
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $1,395,748 1,653,951 1,834,614 1,206,414 1,557,015 1,192,087 918,500 324,793 98,032
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
21
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Natural
Franklin Money Market Fund Resources Securities Fund Franklin Real Estate Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 59,354 52,588 29,826 960 1,695 1,324 45,281 22,016 8,632
Realized gains (losses) on
investments, net - - - (11,396) (8,058) (1,936) (112,147) 31,340 23,316
Net change in unrealized appreciation
(depreciation) on investments - - - 57,915 (35,420) (25,118) 31,946 (179,557) 57,737
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 59,354 52,588 29,826 47,479 (41,783) (25,730) (34,920) (126,201) 89,685
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 1,449,209 3,668,991 1,996,782 11,095 13,268 15,837 95,970 115,546 92,480
Transfers between funds (1,876,143)(2,423,871)(2,136,510) 158,751 59,479 (5,829) 29,166 37,909 176,166
Surrenders and terminations (5,222) (25,503) (52,158) (4,568) (5,593) (52) (27,988) (10,028) (2,795)
Rescissions - (29,369) - - - - - - -
Policy loan transactions (212,772) (9,864) (25,633) (1,372) 789 172 (4,008) (4,950) (15,416)
Other transactions (note 2) (37,400) (39,778) 168,886 (7,584) (6,590) (6,922) (50,794) (55,881) (43,348)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions (682,328) 1,140,606 (48,633) 156,322 61,353 3,206 42,346 82,596 207,087
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (622,974) 1,193,194 (18,807) 203,801 19,570 (22,524) 7,426 (43,605) 296,772
Net assets at beginning of year 1,904,136 710,942 729,749 125,063 105,493 128,017 602,683 646,288 349,516
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $1,281,162 1,904,136 710,942 328,864 125,063 105,493 610,109 602,683 646,288
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
22
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Rising Franklin
Dividends Securities Fund S&P 500 Index Fund Franklin Small Cap Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 8,815 2,794 1,419 (32) - - (10,041) 3,937) (1,212)
Realized gains (losses) on
investments, net 18,788 119,742 28,302 - - - 347,241 47,968 7,269
Net change in unrealized appreciation
(depreciation) on investments (153,361) (77,635) 93,007 1,544 - - 472,910 (48,794) 22,458
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (125,758) 44,901 122,728 1,512 - - 810,110 (4,763) 28,515
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 154,974 161,902 108,408 188 - - 110,923 113,167 44,998
Transfers between funds 163,115 244,722 193,808 133,170 - - 56,814 400,975 248,658
Surrenders and terminations (55,133) (14,872) (17,668) - - - (18,608) (9,697) (965)
Policy loan transactions (7,676) (4,345) (5,874) 4 - - (7,020) (575) -
Other transactions (note 2) (86,406) (78,620) (51,398) (83) - - (66,249) (47,188) (19,801)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions 168,874 308,787 227,276 133,279 - - 75,860 456,682 272,890
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 43,116 353,688 350,004 134,791 - - 885,970 451,919 301,405
Net assets at beginning of year 1,008,603 654,915 304,911 - - - 809,760 357,841 56,436
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $1,051,719 1,008,603 654,915 134,791 - - 1,695,730 809,760 357,841
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
23
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Franklin Franklin Franklin
U.S. Government Fund Value Securities Fund Zero Coupon Fund - 2000
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $144,300 57,602 45,331 (4) - - 54,800 25,181 21,517
Realized gains (losses) on
investments, net 6,118 17,179 27,003 (5) (3) - 9,749 9,429 6,472
Net change in unrealized appreciation
(depreciation) on investments (167,882) (18,101) 136 (203) (289) - (56,550) (11,643) (6,554)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (17,464) 56,680 72,470 (212) (292) - 7,999 22,967 21,435
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 35,686 36,225 40,913 - - - - - -
Transfers between funds 118,949 2,433 (108,226) 2,985 3,405 - - - (17,434)
Surrenders and terminations (4,133) (28,787) (20,318) - - - - (9,045) -
Policy loan transactions (5,749) (7,674) (7,823) - - - (5,480) (7,106) (73)
Other transactions (note 2) (31,127) (28,339) (27,460) (60) (15) - (3,818) (4,490) (4,421)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions 113,626 (26,142) (122,914) 2,925 3,390 - (9,298) (20,641) (21,928)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 96,162 30,538 (50,444) 2,713 3,098 - (1,299) 2,326 (493)
Net assets at beginning of year 908,236 877,698 928,142 3,098 - - 352,556 350,230 350,723
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $1,004,398 908,236 877,698 5,811 3,098 - 351,257 352,556 350,230
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Financial Statements (continued)
Statements of Changes in Net Assets (cont.)
For the years ended December 31, 1999, 1998 and 1997
Franklin Franklin Mutual
Zero Coupon Fund-2005 Zero Coupon Fund-2010 Discovery Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 44,776 19,694 22,052 67,059 21,791 18,896 9,330 2,748 (1,385)
Realized gains (losses) on
investments, net 4,008 7,722 11,793 4,998 5,925 1,250 1,014 10,893 166
Net change in unrealized appreciation
(depreciation) on investments (74,447) 13,788 1,480 (146,933) 27,536 35,571 87,371 (49,861) 26,719
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations (25,663) 41,204 35,325 (74,876) 55,252 55,717 97,715 (36,220) 25,500
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments - - - - - - - - -
Transfers between funds - - (61,213) 17,617 - 3,652 47,820 155,186 281,309
Surrenders and terminations - - - - - - - - -
Policy loan transactions - - - (211) (1,739) (183) (184) (56,263) -
Other transactions (note 2) (4,393) (4,873) (4,798) (7,354) (6,849) (5,717) (8,537) (7,963) (1,893)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions (4,393) (4,873) (66,011) 10,052 (8,588) (2,248) 39,099 90,960 279,416
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (30,056) 36,331 (30,686) (64,824) 46,664 53,469 136,814 54,740 304,916
Net assets at beginning of year 390,968 354,637 385,323 456,187 409,523 356,054 410,124 355,384 50,468
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $360,912 390,968 354,637 391,363 456,187 409,523 546,938 410,124 355,384
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
25
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Mutual Templeton Templeton
Shares Securities Fund Developing Markets Equity Fund Global Asset Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 21,398 4,119 (2,512) 3,388 15,461 5,407 15,532 8,896 4,723
Realized gains (losses) on
investments, net 57,630 20,290 2,034 (36,364) 38,561 18,074 16,879 24,509 25,465
Net change in unrealized appreciation
(depreciation) on investments 58,050 (35,219) 51,689 329,456 (198,108) (127,265) (16,541) (31,637) 11,716
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 137,078 (10,810) 51,211 296,480 (144,086) (103,784) 15,870 1,768 41,904
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 85,752 74,363 16,585 121,799 159,440 191,340 1,388 1,438 430
Transfers between funds (66,613) 214,033 776,453 12,846 5,954 2,200 - 5,929 (108,898)
Surrenders and terminations (53,521) (3,707) - (58,096) (19,910) (24,839) - - (108)
Policy loan transactions 639 (111,671) (1,956) (5,057) (16,461) (20,884) (249) (77,494) -
Other transactions (note 2) (51,904) (41,817) (9,654) (58,605) (56,866) (77,790) (4,265) (4,852) (5,240)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions (85,647) 131,201 781,428 12,887 72,157 70,027 (3,126) (74,979) (113,816)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 51,431 120,391 832,639 309,367 (71,929) (33,757) 12,744 (73,211) (71,912)
Net assets at beginning of year 1,038,636 918,245 85,606 563,460 635,389 669,146 238,598 311,809 383,721
Net assets at end of year $1,090,067 1,038,636 918,245 872,827 563,460 635,389 251,342 238,598 311,809
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
26
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Templeton Templeton Templeton
Global Growth Fund Global Income Securities Fund International Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 20,421 27,239 7,170 16,088 11,417 8,908 97,849 42,395 22,772
Realized gains (losses) on
investments, net 371,008 156,860 21,035 (19,414) (315) 668 267,590 119,833 64,280
Net change in unrealized appreciation
(depreciation) on investments 30,632 (70,051 80,562 (9,989) (521) (6,915) 89,659 (97,026) 25,384
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 422,061 114,048 108,767 (13,315) 10,581 2,661 455,098 65,202 112,436
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments 303,315 318,275 317,636 40,576 43,650 42,795 311,731 343,054 359,829
Transfers between funds 521,326 262,188 272,672 (6,299) 8,645 (1,929) (29,725) 214,070 170,913
Surrenders and terminations (97,718) (42,480) (35,910) (6,067) (2,203) (1,422) (170,512) (77,537) (30,410)
Policy loan transactions (20,511) (11,353) (19,640) (5,426) (4,262) (2,728) (30,248) (14,359) (37,789)
Other transactions (note 2) (160,767) (144,669) (131,055) (18,386) (18,506) (17,463) (155,117) (150,458 (138,095)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions 545,645 381,961 403,703 4,398 27,324 19,253 (73,871) 314,770 324,448
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 967,706 496,009 512,470 (8,917) 37,905 21,914 381,227 379,972 436,884
Net assets at beginning of year 1,783,371 1,287,362 774,892 189,335 151,430 129,516 1,826,865 1,446,893 1,010,009
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $2,751,077 1,783,371 1,287,362 180,418 189,335 151,430 2,208,092 1,826,865 1,446,893
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
27
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
Templeton International Templeton USAllianz
Smaller Companies Fund Pacific Growth Fund VIP Diversified Assets Fund
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ 481 364 (19) 290 9,231 8,188 - - -
Realized gains (losses) on
investments, net (73) 444 (2) (38,203) (35,188) 907 - - -
Net change in unrealized appreciation
(depreciation) on investments 4,391 (4,295) (1,075) 140,678 (7,500) (164,185) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations 4,799 (3,487) (1,096) 102,765 (33,457) (155,090) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments - - - 73,542 91,236 134,478 - - -
Transfers between funds 16,263 9,480 13,608 38,598 (25,732) (41,449) - - -
Surrenders and terminations - - - (7,288) (15,757) (10,217) - - -
Policy loan transactions - - - (1,853) (2,091) (13,651) - - -
Other transactions (note 2) (481) (360) (42) (38,569) (29,702) (52,839) - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions 15,782 9,120 13,566 64,430 17,954 16,322 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 20,581 5,633 12,470 167,195 (15,503) (138,768) - - -
Net assets at beginning of year 18,103 12,470 - 274,322 289,825 428,593 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 38,684 18,103 12,470 441,517 274,322 289,825 - - -
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
28
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1999, 1998 and 1997
USAllianz USAllianz
VIP Fixed Income Fund VIP Growth Fund Total All Funds
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Investment income (loss), net $ - - - - - - 1,228,608 685,019 499,355
Realized gains (losses) on investments, net - - - - - - 1,630,812 1,018,111 592,914
Net change in unrealized appreciation
(depreciation) on investments - - - - - - 127,167 (1,240,497) 548,282
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations - - - - - - 2,986,587 462,633 1,640,551
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions (note 4):
Purchase payments - - - - - - 3,544,006 5,948,197 4,172,412
Transfers between funds - - - - - - (314,715) (95,665) (214,360)
Surrenders and terminations - - - - - - (939,134) (449,068) (556,422)
Rescissions - - - - - - - (29,369) -
Policy loan transactions - - - - - - (322,304) (509,067) (267,774)
Other transactions (note 2) - - - - - - (1,224,179) (1,144,238) (790,946)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from policy transactions - - - - - - 743,674 3,720,790 2,342,910
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets - - - - - - 3,730,261 4,183,423 3,983,461
Net assets at beginning of year $ - - - - - - 21,095,820 16,912,397 12,928,936
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - - - - - - 24,826,081 21,095,820 16,912,397
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to financial
statements.
29
</FN>
</TABLE>
<PAGE>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements
December 31, 1999
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 select portfolios of AIM Variable Insurance Funds, Inc., The Alger
American Fund, Franklin Templeton Variable Insurance Products Trust (formerly,
Franklin Valuemark Funds), and USAllianz Variable Insurance Products Trust, in
accordance with the selection made by the policy owner. Not all portfolios are
available as investment options for the products which comprise the Variable
Account. The investment advisers for each portfolio are listed in the following
table.
<TABLE>
<CAPTION>
Portfolio Investment Adviser
<S> <C>
AIM VI Growth Fund AIM Advisors, Inc.
Alger American Growth Fund Fred Alger Management, Inc.
Alger American Leveraged AllCap Fund Fred Alger Management, Inc.
Franklin Global Communications Securities Fund Franklin Advisers, Inc.
Franklin Global Health Care Securities Fund Franklin Advisers, Inc.
Franklin Growth and Income Fund Franklin Advisers, Inc.
Franklin High Income Fund Franklin Advisers, Inc.
Franklin Income Securities Fund Franklin Advisers, Inc.
Franklin Large Cap Growth Securities Fund Franklin Advisers, Inc.
Franklin Money Market Fund Franklin Advisers, Inc.
Franklin Natural Resources Securities Fund Franklin Advisers, Inc.
Franklin Real Estate Fund Franklin Advisers, Inc.
Franklin Rising Dividends Securities Fund Franklin Advisory Services, LLCS&P 500 Index Fund Franklin Advisers,
Inc.
Franklin Small Cap Fund Franklin Advisers, Inc.
Franklin U.S. Government Fund Franklin Advisers, Inc.
Franklin Value Securities Fund Franklin Advisory Services, LLC
Franklin Zero Coupon - 2000 Fund Franklin Advisers, Inc.
Franklin Zero Coupon - 2005 Fund Franklin Advisers, Inc.
Franklin Zero Coupon - 2010 Fund Franklin Advisers, Inc.
Mutual Discovery Securities Fund Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund Franklin Mutual Advisers, LLC
Templeton Developing Markets Equity Fund Templeton Asset Management Ltd.
Templeton Global Asset Allocation Fund Templeton Global Advisors Limited
Templeton Global Growth Fund Templeton Global Advisors Limited
Templeton Global Income Securities Fund Franklin Advisers, Inc.
Templeton International Equity Fund Franklin Advisers, Inc.
Templeton International Smaller Companies Fund Templeton Investment Counsel, Inc.
Templeton Pacific Growth Fund Franklin Advisers, Inc.
USAllianz VIP Diversified Assets Fund Allianz of America, Inc.
USAllianz VIP Fixed Income Fund Allianz of America, Inc.
USAllianz VIP Growth Fund Allianz of America, Inc.
30
</TABLE>
<PAGE>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
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 AIM Variable Insurance Funds, Inc., The Alger American
Fund, Franklin Templeton Variable Insurance Products Trust, and the USAllianz
Variable Insurance Products Trust.
Realized investment gains include realized gain distributions received from the
respective portfolios and gains on the sale of portfolio shares as determined by
the average cost method. Realized gain distributions are reinvested in the
respective portfolios. Dividend distributions received from the portfolios are
reinvested in additional shares of the portfolios 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%.
The Franklin Global Health Care Securities Fund and Franklin Value Securities
Fund were added as available investment options on May 1, 1998. On November 12,
1999, the AIM VI Growth Fund, Alger American Growth Fund, Alger American
Leveraged AllCap Fund, Franklin S&P 500 Index Fund, USAllianz VIP Diversified
Assets Fund, USAllianz VIP Fixed Income Fund, and USAllianz VIP Growth Fund were
added as available investment options.
During the year ended December 31, 1999, several portfolios changed their names
as summarized, with the effective date of the change, in the following table.
<TABLE>
<CAPTION>
Current Portfolio Prior Portfolio Name Effective Date
<S> <C> <C>
Franklin Global Communications Securities Fund Franklin Global Utilities Securities Fund November 15, 1999
Franklin Real Estate Fund Franklin Real Estate Securities Fund November 15, 1999
Franklin Rising Dividends Securities Fund Franklin Rising Dividends Fund November 15, 1999
Franklin U.S. Government Fund Franklin U.S. Government Securities Fund November 15, 1999
Franklin Large Cap Growth Securities Fund Franklin Capital Growth Fund December 15, 1999
</TABLE>
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 0.60% 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 0.15% of the daily net assets of the Variable
Account.
31
<PAGE>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
2. Significant Accounting Policies (Continued)
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, 1999, 1998
and 1997 were $1,024,902, $939,693 and $832,417, 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 years ended December 31,
1999, 1998 and 1997 were $42,540, $40,600, and $37,629, 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, 1999, 1998 and 1997 were $167,757, $213,159, and $211,485,
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 years ended December 31, 1999, 1998 and 1997,
respectively. Net transfers to the Fixed Account during years ended December 31,
1999, 1998 and 1997 were $314,715, $95,665, and $214,360, respectively.
The cost of insurance, deferred issue, policy and transfer charges paid are
reflected in the Statements of Changes in Net Assets as Other transactions.
3. 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.
32
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
4. Policy Transactions - Unit Activity
Transactions in units for each fund for the years ended December 31, 1999, 1998
and 1997, were as follows:
Alger Franklin Franklin Franklin
Alger American Global Global Franklin Franklin Franklin Large Cap
AIM American Leveraged Communications Health Care Growth & High Income Growth
VI Growth Growth AllCap Securities Securities Income Income Securities Securities
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1996 - - - 54,519 - 54,351 84,503 39,98 391
Policy transactions:
Purchase payments - - - 4,451 - 10,974 2,141 11,090 -
Transfers between funds - - - (2,894) - 5,516 (5,679) 1,881 7,029
Surrenders and terminations - - - (304) - (7,932) (3,022) (513) -
Policy loan transactions - - - (2,428) - (68) (1,471) (1,113) -
Other transactions - - - (2,288) - (4,624) (1,789) (4,161) (34)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions - - - (3,463) - 3,866 (9,820) 7,184 6,995
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 - - - 51,056 - 58,217 74,683 47,169 7,386
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions:
Purchase payments - - - 3,254 - 10,356 2,263 8,710 -
Transfers between funds - - - (1,327) 778 6,612 (511) 11,713 13,340
Surrenders and terminations - - - (1,451) - (1,628) (852) (1,996) -
Policy loan transactions - - - 1,042 - (754) (6,603) (481) -
Other transactions - - - (2,025) (2) (4,902) (1,762) (4,044) (230)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions - - - (507) 776 9,684 (7,465) 13,902 13,110
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1998 - - - 50,549 776 67,901 67,218 61,071 20,496
====================================================================================================================================
Policy transactions:
Purchase payments 6 27 24 2,513 - 9,794 1,690 7,313 121
Transfers between funds 9,424 10,207 546 2,372 4,350 3,569 (13,852) (9,019) 24,283
Surrenders and terminations - - - (2,487) - (3,906) (778) (5,700) -
Policy loan transactions - - - (1,632) - (776) 4,472 (1,326) -
Other transactions (2) (7) (3) (1,783) (176) (4,992) (1,561) (3,782) (541)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions 9,428 10,227 567 (1,017) 4,174 3,689 (10,029) (12,514) 23,863
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at
December 31, 1999 9,428 10,227 567 49,532 4,950 71,590 57,189 48,557 44,359
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
33
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
4. Policy Transactions - Unit Activity (continued)
Franklin Franklin Franklin
Franklin Natural Rising Franklin Franklin Franklin Franklin Zero
Money Resources Franklin Dividends S&P 500 Small U.S. Value Coupon
Market Securities Real Estate Securities Index Cap Government Securities -2000
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1996 46,930 8,152 12,678 19,304 - 4,338 45,204 - 14,687
Policy transactions:
Purchase payments 125,344 1,090 3,106 5,847 - 3,088 1,925 - -
Transfers between funds (120,861) (400) 5,867 10,275 - 17,595 (5,101) - (707)
Surrenders and terminations (3,267) (6) (93) (909) - (74) (952) - -
Policy loan transactions (1,621) (7) (534) (334) - - (382) - (3)
Other transactions (2,758) (475) (1,455) (2,780) - (1,348) (1,294) - (181)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions (3,163) 202 6,891 12,099 - 19,261 (5,804) - (891)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 43,767 8,354 19,569 31,403 - 23,599 39,400 - 13,796
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions:
Purchase payments 216,819 1,227 3,889 7,667 - 7,774 1,572 - -
Transfers between funds (142,026) 4,888 1,042 11,079 - 26,906 45 401 -
Surrenders and terminations (1,535) (544) (354) (668) - (631) (1,237) - (346)
Rescissions (1,784) - - - - - - - -
Policy loan transactions (599) 57 (163) (199) - (47) (332) - (263)
Other transactions (2,394) (609) (1,880) (3,711) - (3,266) (1,215) (2) (171)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions 68,481 5,019 2,534 14,168 - 30,736 (1,167) 399 (780)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1998 112,248 13,373 22,103 45,571 - 54,335 38,233 399 13,016
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions:
Purchase payments 63,552 994 3,616 7,371 18 6,412 1,517 - -
Transfers between funds (88,436) 13,577 1,406 7,234 12,857 2,514 5,003 351 -
Surrenders and terminations (303) (385) (1,034) (2,659) - (1,091) (178) - -
Policy loan transactions (12,282) (121) (148) (360) - (330) (245) - (200)
Other transactions (2,142) (648) (1,924) (4,136) (8) (3,631) (1,327) (8) (140)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions (39,611) 13,417 1,916 7,450 12,867 3,874 4,770 343 (340)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1999 72,637 26,790 24,019 53,021 12,867 58,209 43,003 742 12,676
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
34
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
4. Policy Transactions - Unit Activity (continued)
Franklin Franklin Templeton Templeton Templeton
Zero Zero Mutual Mutual Developing Global Templeton Global Templeton
Coupon Coupon Discovery Shares Markets Asset Global Income International
-2005 -2010 Securities Securities Equity Allocation Growth Securities Equity
Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1996 14,331 11,896 4,953 8,280 59,260 30,332 58,157 7,756 60,849
Policy transactions:
Purchase payments - - - 1,460 15,655 31 21,703 2,567 19,816
Transfers between funds (2,226) 119 24,650 67,284 (2,887) (7,728) 18,498 (108) 9,327
Surrenders and terminations - - - - (1,900) (9) (2,308) (85) (1,686)
Policy loan transactions - (6) - (184) (1,728) - (1,348) (164) (2,099)
Other transactions (173) (183) (164) (841) (6,291) (396) (8,935) (1,050) (7,573)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions (2,399) (70) 24,486 67,719 2,849 (8,102) 27,610 1,160 17,785
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 11,932 11,826 29,439 75,999 62,109 22,230 85,767 8,916 78,634
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions:
Purchase payments - - - 6,140 18,632 102 20,228 2,504 17,692
Transfers between funds - - 11,424 16,707 714 445 16,458 502 10,775
Surrenders and terminations - - - (307) (2,188) - (2,700) (129) (3,966)
Policy loan transactions - (45) (4,187) (8,559) (1,902) (5,298) (677) (244) (733)
Other transactions (154) (184) (647) (3,446) (6,572) (335) (9,229) (1,062) (7,641)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions (154) (229) 6,590 10,535 8,684 (5,086) 24,080 1,571 16,127
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1998 11,778 11,597 36,029 86,534 70,793 17,144 109,847 10,487 94,761
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions:
Purchase payments - - - 6,655 12,797 97 17,440 2,351 15,075
Transfers between funds - 36 3,795 (4,569) (292) - 29,397 (416) (1,898)
Surrenders and terminations - - - (3,954) (5,532) - (5,394) (354) (8,060)
Policy loan transactions - (6) (15) 44 (539) (17) (1,166) (312) (1,465)
Other transactions (139) (205) (694) (4,023) (5,779) (302) (9,072) (1,070) (7,285)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions (139) (175) 3,086 (5,847) 655 (222) 31,205 199 (3,633)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1999 11,639 11,422 39,115 80,687 71,448 16,922 141,052 10,686 91,128
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
35
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
4. Policy Transactions - Unit Activity (continued)
Templeton USAllianz
International Templeton VIP USAllianz USAllianz
Smaller Pacific Diversified VIP Fixed VIP Total
Companies Growth Assets Income Growth All
Fund Fund Fund Fund Fund Funds
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1996 - 27,810 - - - 668,666
Policy transactions:
Purchase payments - 9,779 - - - 240,067
Transfers between funds 1,143 (2,629) - - - 17,964
Surrenders and terminations - (759) - - - (23,819)
Policy loan transactions - (884) - - - (14,374)
Other transactions (4) (3,737) - - - (52,534)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions 1,139 1,770 - - - 167,304
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 1,139 29,580 - - - 835,970
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions:
Purchase payments - 11,546 - - - 340,375
Transfers between funds 795 (2,703) - - - (11,943)
Surrenders and terminations - (2,018) - - - (22,550)
Rescissions - - - - - (1,784)
Policy loan transactions - (247) - - - (30,234)
Other transactions (35) (3,684) - - - (59,202)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions 760 2,894 - - - 214,662
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1998 1,899 32,474 - - - 1,050,632
- ------------------------------------------------------------------------------------------------------------------------------------
Policy transactions:
Purchase payments - 7,406 - - - 166,789
Transfers between funds 1,448 2,890 - - - 16,777
Surrenders and terminations - (672) - - - (42,487)
Policy loan transactions - (168) - - - (16,592)
Other transactions (46) (3,497) - - - (58,923)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
resulting from policy transactions 1,402 5,959 - - - 65,564
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1999 3,301 38,433 - - - 1,116,196
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
36
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
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 of the
five years in the period ended December 31, 1999 follows:
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM VI Growth Fund
December 31,
1999(1) 9,428 $11.094 $104,588 1.48+%
Alger American Growth Fund
December 31,
1999(1) 10,227 10.932 111,793 1.54+
Alger American Leveraged AllCap Fund
December 31,
1999(1) 567 12.171 6,903 1.68+
Franklin Global Communications Securities Fund
December 31,
1999 49,532 47.679 2,362,390 1.26
1998 50,549 34.456 1,741,751 1.25
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
Franklin Global Health Care Securities Fund
December 31,
1999 4,950 9.720 48,117 1.57
1998(2) 776 10.656 8,265 1.59+
Franklin Growth and Income Fund
December 31,
1999 71,590 42.947 3,074,550 1.24
1998 67,901 42.797 2,905,941 1.24
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
Franklin High Income Fund
December 31,
1999 57,189 24.406 1,395,748 1.29
1998 67,218 24.606 1,653,951 1.28
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
<FN>
37
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. Unit Values (continued)
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Franklin Income Securities Fund
December 31,
1999 48,557 $24.846 $1,206,414 1.25%
1998 61,071 25.496 1,557,015 1.24
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
Franklin Large Cap Growth Securities Fund
December 31,
1999 44,359 20.706 918,500 1.52
1998 20,496 15.847 324,793 1.52
1997 7,386 13.273 98,032 1.52
1996(3) 391 11.303 4,418 1.52+
Franklin Money Market Fund
December 31,
1999 72,637 17.638 1,281,162 1.28
1998 112,248 16.964 1,904,136 1.20
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
Franklin Natural Resources Securities Fund
December 31,
1999 26,790 12.277 328,864 1.41
1998 13,373 9.353 125,063 1.39
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
Franklin Real Estate Fund
December 31,
1999 24,019 25.401 610,109 1.33
1998 22,103 27.267 602,683 1.29
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
Franklin Rising Dividends Securities Fund
December 31,
1999 53,021 19.835 1,051,719 1.50
1998 45,571 22.132 1,008,603 1.47
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
<FN>
38
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. Unit Values (continued)
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Franklin S&P 500 Index Fund
December 31,
1999(1) 12,867 $10.476 $134,791 1.30+%
Franklin Small Cap Fund
December 31,
1999 58,209 29.131 1,695,730 1.52
1998 54,335 14.903 809,760 1.52
1997 23,599 15.164 357,841 1.52
1996 4,338 13.011 56,436 1.52
1995(5) - 10.157 - 1.65+
Franklin U.S. Government Fund
December 31,
1999 43,003 23.356 1,004,398 1.26
1998 38,233 23.755 908,236 1.25
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
Franklin Value Securities Fund
December 31,
1999 742 7.820 5,811 1.56
1998(2) 399 7.751 3,098 1.87+
Franklin Zero Coupon Fund - 2000
December 31,
1999 12,676 27.709 351,257 1.40
1998 13,016 27.086 352,556 1.15
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
Franklin Zero Coupon Fund - 2005
December 31,
1999 11,639 31.011 360,912 1.40
1998 11,778 33.196 390,968 1.15
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
<FN>
39
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. Unit Values (continued)
Ratio of
Expenses
Units to Average
Outstanding Unit Value Net Assets Net Assets*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Franklin Zero Coupon Fund - 2010
December 31,
1999 11,422 $34.265 $391,363 1.40%
1998 11,597 39.336 456,187 1.15
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
Mutual Discovery Securities Fund
December 31,
1999 39,115 13.983 546,938 1.76
1998 36,029 11.383 410,124 1.75
1997 29,439 12.072 355,384 1.81
1996(4) 4,953 10.190 50,468 2.12+
Mutual Shares Securities Fund
December 31,
1999 80,687 13.509 1,090,067 1.54
1998 86,534 12.002 1,038,636 1.52
1997 75,999 12.082 918,245 1.55
1996(4) 8,280 10.339 85,606 1.75+
Templeton Developing Markets Equity Fund
December 31,
1999 71,448 12.217 872,827 2.14
1998 70,793 7.959 563,460 2.16
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
Templeton Global Asset Allocation Fund
December 31,
1999 16,922 14.852 251,342 1.57
1998 17,144 13.917 238,598 1.59
1997 22,230 14.027 311,809 1.69
1996 30,332 12.651 383,721 1.61
1995(6) 21 10.637 220 1.65+
Templeton Global Growth Fund
December 31,
1999 141,052 19.504 2,751,077 1.63
1998 109,847 16.235 1,783,371 1.63
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
<FN>
40
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Variable Account A
of Allianz Life Insurance Company of North America
Notes to Financial Statements (continued)
December 31, 1999
5. Unit Values (continued)
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,
1999 10,686 $16.881 $180,418 1.40%
1998 10,487 18.052 189,335 1.38
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
Templeton International Equity Fund
December 31,
1999 91,128 24.230 2,208,092 1.65
1998 94,761 19.278 1,826,865 1.63
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
Templeton International Smaller Companies Fund
December 31,
1999 3,301 11.717 38,684 1.86
1998 1,899 9.528 18,103 1.85
1997 1,139 10.943 12,470 1.81
1996(3) - 11.194 - 1.53+
Templeton Pacific Growth Fund
December 31,
1999 38,433 11.488 441,517 1.83
1998 32,474 8.447 274,322 1.85
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
USAllianz VIP Diversified Assets Fund
December 31,
1999(1) - - - 1.75+
USAllianz VIP Fixed Income Fund
December 31,
1999(1) - - - 1.50+
USAllianz VIP Growth Fund
December 31,
1999(1) - - - 1.65+
* For the year ended December 31, including the effect of the expenses of the
underlying funds. + Annualized. 1 Period from November 12, 1999 (fund
commencement) to December 31, 1999. 2 Period from May 1, 1998 (fund
commencement) to December 31, 1998. 3 Period from May 1, 1996 (fund
commencement) to December 31, 1996. 4 Period from November 8, 1996 (fund
commencement) to December 31, 1996. 5 Period from November 1, 1995 (fund
commencement) to December 31, 1995. 6 Period from May 1, 1995 (fund
commencement) to December 31, 1995.
<FN>
41
</FN>
</TABLE>
ALLIANZ LIFE INSURANCE
COMPANY OF NORTH AMERICA
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1999 and 1998
Allianz Life Insurance Company of North America
And Subsidiaries
Independent Auditors' Report
The Board of Directors
Allianz Life Insurance Company of North America and subsidiaries:
We have audited the accompanying consolidated balance sheets of Allianz Life
Insurance Company of North America and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of operations, comprehensive
(loss) income, stockholder's equity and cash flows for each of the years in the
three-year period ended December 31, 1999. 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, 1999
and 1998, and the results of their operations and cash flows for each of the
years in the three-year period ended December 31, 1999, in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, the Company
changed its method of calculating deferred acquisition costs and future benefit
reserves for two-tiered annuities.
KPMG LLP
February 7, 2000
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Balance Sheets
December 31, 1999 and 1998 (in thousands)
Assets 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments:
Fixed maturities, at fair value $ 4,582,350 2,538,291
Equity securities, at fair value 675,541 512,404
Mortgage loans on real estate 528,933 457,128
Certificates of deposit and short-term securities 139,571 166,366
Policy loans 46,573 7,118
Real estate 154,063 80,637
Options 68,217 15,109
Investment in equity investments 3,045 80,928
- ------------------------------------------------------------------------------------------------------------------------------------
Total investments 6,198,293 3,857,981
Cash 58,110 67,195
Accrued investment income 73,774 36,649
Receivables (net of allowance for uncollectible accounts of
$3,395 in 1999 and $3,254 in 1998) 310,866 323,971
Reinsurance recoverable:
Funds held on deposit 1,151,941 1,170,170
Recoverable on future policy benefit reserves 3,330,612 1,191,098
Recoverable on unpaid claims 405,086 293,179
Receivable on paid claims 74,483 24,986
Goodwill (net of accumulated amortization of $3,847 in 1999) 304,561 0
Value of business acquired 210,363 0
Deferred acquisition costs 801,763 930,059
Other assets 55,811 35,755
Federal income tax recoverable 10,484 4,060
- ------------------------------------------------------------------------------------------------------------------------------------
Assets, exclusive of separate account assets 12,986,147 7,935,103
Separate account assets 8,488,404 9,915,150
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $21,474,551 17,850,253
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Balance Sheets (continued)
December 31, 1999 and 1998 (in thousands)
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities Future benefit reserves:
Life $ 1,874,904 1,445,844
Annuity 7,796,583 3,588,491
Policy and contract claims 927,915 770,846
Unearned premiums 49,013 53,778
Reinsurance payable 212,239 129,397
Deferred income on reinsurance 186,888 106,065
Deferred income taxes 51,356 257,903
Accrued expenses 108,232 91,631
Commissions due and accrued 55,904 41,000
Other policyholder funds 77,782 20,586
Other liabilities 98,251 89,038
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities, exclusive of separate account liabilities 11,439,067 6,594,579
Separate account liabilities 8,488,404 9,915,150
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 19,927,471 16,509,729
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholder's equity:
Common stock, $1 par value, 20 million shares authorized, issued and outstanding 20,000 20,000
Additional paid-in capital 830,274 407,088
Retained earnings 632,320 673,857
Accumulated other comprehensive income 64,486 239,579
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 1,547,080 1,340,524
Commitments and contingencies (notes 7 and 12)
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholder's equity $21,474,551 17,850,253
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Operations
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 447,026 416,199 339,841
Other life policy considerations 31,786 52,668 83,816
Annuity considerations 239,070 222,632 219,262
Accident and health premiums 843,906 773,570 747,718
- ------------------------------------------------------------------------------------------------------------------------------------
Total premiums and considerations 1,561,788 1,465,069 1,390,637
Premiums and annuity considerations ceded 478,239 411,316 438,018
- ------------------------------------------------------------------------------------------------------------------------------------
Net premiums and considerations 1,083,549 1,053,753 952,619
Investment income, net 274,860 217,066 162,350
Realized investment gains 112,253 89,226 61,488
Other 72,301 78,174 53,760
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenue 1,542,963 1,438,219 1,230,217
- ------------------------------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Life insurance benefits 382,464 461,891 336,090
Annuity benefits 243,398 251,463 206,189
Accident and health insurance benefits 765,257 623,640 566,746
- ------------------------------------------------------------------------------------------------------------------------------------
Total benefits 1,391,119 1,336,994 1,109,025
Benefit recoveries 443,441 501,719 426,607
- ------------------------------------------------------------------------------------------------------------------------------------
Net benefits 947,678 835,275 682,418
Commissions and other agent compensation 304,816 322,697 310,665
General and administrative expenses 162,798 116,007 106,744
Taxes, licenses and fees 26,292 15,848 20,605
Amortization of goodwill 3,847 0 0
Amortization of value of business acquired, net of interest credited 4,161 0 0
Change in deferred acquisition costs, net 129,142 (2,979) (63,742)
- ------------------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 1,578,734 1,286,848 1,056,690
- ------------------------------------------------------------------------------------------------------------------------------------
(Loss) income from operations before income taxes (35,771) 151,371 173,527
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense: Current 63,371 48,410 31,571
Deferred (73,727) 2,822 28,283
- ------------------------------------------------------------------------------------------------------------------------------------
Total income tax (benefit) expense (10,356) 51,232 59,854
- ------------------------------------------------------------------------------------------------------------------------------------
(Loss) income before cumulative effect of change in accounting (25,415) 100,139 113,673
Cumulative effect of change in accounting, net of tax benefit of $8,682 (16,122) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) income $ (41,537) 100,139 113,673
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Comprehensive (Loss) Income
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net (loss) income $ (41,537) 100,139 113,673
- ------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive (loss) gain:
Foreign currency translation adjustments, net of tax 1,461 (1,761) (975)
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized (losses) gains on fixed maturities and equity securities: Unrealized
holding (losses) gains arising during the period net of tax (benefit) expense of
$(55,781), $57,703 and $71,594 in 1999, 1998,
and 1997, respectively (103,590) 107,162 132,961
Reclassification adjustment for gains included in net income, net of tax
expense of $39,289, $30,627, and $21,588 in 1999, 1998, and 1997,
respectively 72,964 56,879 40,093
- ------------------------------------------------------------------------------------------------------------------------------------
Total unrealized holding (losses) gains (176,554) 50,283 92,868
- ------------------------------------------------------------------------------------------------------------------------------------
Total other comprehensive (loss) income (175,093) 48,522 91,893
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive (loss) income $ (216,630) 148,661 205,566
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Stockholder's Equity
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning and end of year $ 20,000 20,000 20,000
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred stock:
Balance at beginning of year 0 25,000 25,000
Redemption of stock during the year 0 (25,000) 0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 0 0 25,000
- ------------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital: Balance at beginning of year 407,088 407,088 407,088
Capital contribution 423,186 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 830,274 407,088 407,088
- ------------------------------------------------------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of year 673,857 574,447 462,925
Net income 41,537) 100,139 113,673
Cash dividend to stockholder 0 (729) (2,151)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 632,320 673,857 574,447
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income: Accumulated unrealized holding gain:
Balance at beginning of year 245,788 195,505 102,637
Net unrealized gain (loss) on investments
during the year, net of deferred federal income taxes (176,554) 50,283 92,868
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year 69,234 245,788 195,505
Accumulated unrealized foreign currency (loss):
Balance at beginning of year (6,209) (4,448) (3,473)
Net unrealized gain (loss) on foreign currency
translation during the year, net of deferred federal income taxes 1,461 (1,761) (975)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of year (4,748) (6,209) (4,448)
- ------------------------------------------------------------------------------------------------------------------------------------
Total accumulated other comprehensive income 64,486 239,579 191,057
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity $1,547,080 1,340,524 1,217,592
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Cash Flows
December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net (loss) income $ (41,537) 100,139 113,673
- ------------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
Realized investment gains (112,253) (89,226) (61,488)
Deferred federal income tax expense (82,409) 2,822 28,283
Charges to policy account balances (66,945) (104,681) (148,159)
Interest credited to policy account balances 251,303 262,956 251,182
Change in:
Accrued investment income (1,921) 1,696 (2,215)
Receivables 17,873 (61,295) (107,398)
Reinsurance recoverable (435,498) (162,959) (1,205,410)
Deferred acquisition costs 128,296 (2,979) (63,742)
Future benefit reserves (136,722) 25,183 138,370
Policy and contract claims and other policyholder funds 184,939 154,213 92,230
Unearned premiums (4,765) 3,610 17,992
Reinsurance payable 13,820 17,713 68,725
Current tax recoverable (6,424) 16,701 (8,306)
Accrued expenses and other liabilities (31,349) 14,797 12,113
Commissions due and accrued 5,627 1,483 2,414
Depreciation and amortization (5,917) (12,711) (13,312)
Equity in earnings of equity investments (690) (2,207) 0
Other, net (1,151) 94 18
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjustments (284,186) 65,210 (998,703)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (325,723) 165,349 (885,030)
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Cash Flows (continued)
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows (used in) provided by operating activities $ (325,723) 165,349 (885,030)
Cash flows (used in) provided by investing activities:
Purchase of fixed maturities (1,171,682) (1,256,653) (1,748,950)
Purchase of equity securities (404,985) (1,518,096) (1,699,847)
Purchase of real estate (66,502) (36,367) (8,398)
Purchase of options (32,617) (11,503) (3,482)
Funding of mortgage loans (114,840) (168,870) (103,626)
Sale of fixed maturities 1,123,115 1,460,969 1,921,534
Matured fixed maturities 21,280 28,152 1,150
Sale of equity securities 385,559 1,560,695 1,691,789
Sale of real estate 0 7,103 551
Repayment of mortgage loans 41,355 29,105 29,520
Net change in certificates of deposit and short-term securities 38,121 (49,242) 87,848
Purchase of Life USA, net of cash acquired (370,881) (79,091) 0
Other (5,438) (5,489) 94,126
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (557,515) (39,287) 262,215
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows provided by (used in) financing activities:
Policyholders' deposits to account balances 1,033,877 864,446 748,430
Policyholders' withdrawals from account balances (663,733) (562,667) (524,579)
Change in assets held under reinsurance agreements 80,823 7,876 150,526
Funds (repaid) borrowed on dollar reverse repurchase agreements, net 0 (369,664) 239,468
Capital contribution 423,186 0 0
Redemption of preferred stock 0 (25,000) 0
Cash dividends paid 0 (729) (2,151)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 874,153 (85,738) 611,694
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in cash (9,085) 40,324 (11,121)
Cash at beginning of year 67,195 26,871 37,992
- ------------------------------------------------------------------------------------------------------------------------------------
Cash at end of year $ 58,110 67,195 26,871
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Consolidated Statements of Cash Flows (continued)
Years ended December 31, 1999, 1998 and 1997 (in thousands)
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosures of noncash transactions:
Fair value of assets acquired in acquisition of LifeUSA:
Fixed maturities $ 2,283,214 0 0
Equity securities 21,358 0 0
Certificates of deposit and short-term securities 11,285 0 0
Policy loans 37,618 0 0
Options 20,491 0 0
Cash 62,767 0 0
Accrued investment income 35,204 0 0
Receivables (net of allowance for uncollectible accounts of $145) 4,768 0 0
Recoverable on future policy benefit reserves - annuity 3,023,377 0 0
Deferred tax asset 29,825 0 0
Other assets 21,291 0 0
Liabilities assumed in acquisition of LifeUSA:
Future policy benefit reserves - annuity 5,395,155 0 0
Reinsurance payable 69,022 0 0
Accrued expenses 14,611 0 0
Commissions due and accrued 9,277 0 0
Other policyholder funds 29,729 0 0
Other liabilities 42,552 0 0
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997 (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 wholly owned subsidiary of
Allianz Aktiengesellschaft Holding (Allianz AG), a Federal Republic of Germany
company.
The Company is a life insurance company that is licensed to sell group and
individual life, annuity and accident and health policies in the United States,
Canada and several U.S. territories. Based on 1999 net revenues and
considerations, 36%, 18% and 46% 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, third party
marketing organizations and with independent agents. The Company has a
significant relationship with The Franklin Templeton Group and its broker/dealer
network related to sales of its variable life and variable annuity products.
Following is a summary of the significant accounting policies reflected in the
accompanying consolidated financial statements.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) which vary in certain respects
from accounting rules prescribed or permitted by state insurance regulatory
authorities. The accounts of the Company's major subsidiaries, Life USA Holding,
Inc. (Life USA) and Preferred Life Insurance Company of New York, and other less
significant subsidiaries have been consolidated. The consolidated financial
statements only include the results of Life USA's operations subsequent to
October 1, 1999, the date of its acquisition by the Company (see note 2). 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.
Traditional Life, Group Life and Group Accident and Health Insurance
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.
Nontraditional and Variable Life and Annuity Business
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.
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (Continued)
Value of Business Acquired and Goodwill
The value of insurance in force purchased is recorded as the value of business
acquired (VOBA). The initial value was determined by an actuarial study using
the present value of future profits in calculating the value of the insurance
purchased. An accrual of interest is added to the unamortized balance using the
rates credited to the policyholder accounts. The balance is amortized in
relation to the present value of expected future gross profits in the same
manner as deferred acquisition costs. The amortization period is expected to be
approximately 20 years from the date the business was acquired. The activity in
the VOBA balance for 1999 is summarized below.
Balance, beginning of year$ 0
Additions 214,524
Interest 1,975
Amortization (6,136)
------
Balance, end of year 210,363
------
The amortization of the VOBA in each of the next five years is expected to be:
2000 - $21,491; 2001 - $20,123; 2002 - $18,329; 2003 - $18,105; and 2004 -
$16,958.
Goodwill is the excess of the amount paid to acquire a company over the fair
value of its net assets and VOBA, reduced by amortization and valuation
adjustments, if any. Goodwill is amortized on a straight-line basis over 20
years. The value of VOBA and goodwill will be monitored at least annually based
on estimates of future earnings. For VOBA, those earnings relate to the
insurance in force purchased. For goodwill, estimates will be based on
production subsequent to the purchase. If estimated future earnings are less
than the carrying amount of the related asset, the carrying value of the asset
may not be recoverable. If impairment is indicated, the carrying value will be
reduced to its fair value with a corresponding charge to earnings.
Deferred Acquisition Costs
Acquisition costs, consisting of commissions and other costs that vary with and
are primarily related to production of new business, are deferred. For
traditional life and group life products, such costs are amortized over the
revenue-producing period of the related policies using the same actuarial
assumptions used in computing future policy benefit reserves. Acquisition costs
for accident and health insurance policies are deferred and amortized over the
lives of the policies in the same manner as premiums are earned. For interest
sensitive products, acquisition costs are amortized in relation to the present
value of expected future gross profits from investment margins and mortality,
morbidity and expense charges. Deferred acquisition costs amortized during 1999,
1998 and 1997 were $312,036, $202,644, and $219,266, 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 range from 6% to 3.5%.
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.
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (Continued)
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 fixed maturity and equity portfolio as
"available-for-sale" and, accordingly, the securities are carried at fair value.
Short-term investments are carried at amortized cost, which approximates market
value. 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, 1999 and 1998, investments with a carrying value of $164,045
and $116,197, 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.
Accounting for Option Contracts
Certain annuity products provide additional benefits to the policy annuitization
value based on the growth in the Standard & Poor's (S&P) 500 Index. The Company
has analyzed the characteristics of these benefits and has purchased option
contracts tied to the S&P 500 Index with similar characteristics to hedge these
risks. Management monitors correlation of in force amounts and option contract
values to ensure proper matching. If persistency assumptions were to deviate
significantly from anticipated rates, management would purchase or sell option
contracts as deemed appropriate. As of December 31, 1999, management believes a
proper hedge exists.
The option contracts are reported at fair value on the consolidated balance
sheet. The fair value of the options is deemed by management to approximate the
estimated market values. Unrealized gains and losses on the option contracts are
recorded in annuity benefits on the consolidated statement of operations to
offset increases in the future policy benefits liability recorded for the index
benefit.
The Company purchases "over-the-counter" European-Asian call option contracts
based upon the S&P 500 Index. Two types of options are purchased: five- and
seven-year options with daily averaging of the index during the last year of the
contract and five-year cliquet options which use monthly averaging of the index
during each year and resets at each anniversary date of the contract. The strike
price depends on the product, index period, cap and credited rate. The Company
only purchases option contracts from counterparties rated AA- or better and the
option contracts are not used for trading purposes.
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.
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(1) Summary of Significant Accounting Policies (Continued)
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 fair
value. The assets of each account are legally segregated and are not subject to
claims that 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
Effective January 1, 1999, the Company changed its methodology for calculating
deferred acquisition costs and future benefit reserves for two tiered deferred
annuities. The revised calculation better reflects the income streams from this
product. Under the previous method of accounting, a disproportionate amount of
gains were recognized when contract annuitization or surrenders occurred. The
new methodology provides for profit emergence over the life of the block of
annuities. The cumulative effect of the change in accounting principle for the
years prior to 1999 in the amount of $16,122, net of taxes, is recorded in the
accompanying consolidated statement of operations. The effect of the change in
methodology does not have a significant impact on the financial statements for
prior years, therefore no proforma retroactive information is included.
In 1999, the Company adopted Statement of Position (SOP) 97-3, Accounting for
Insurance and Other Enterprises for Insurance-Related Assessment, and SOP 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. No material adjustments were made to the consolidated financial statements
upon adoption of these statements.
In 1998, the Company adopted Statement of Financial Accounting Standard
(SFAS) No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and SFAS No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits. No adjustments were made to the
consolidated financial statements upon adoption of these pronouncements.
Accounting Pronouncements to be Adopted
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The statement
establishes accounting and reporting standards for derivative financial
instruments and other similar financial instruments and for hedging activities.
In June 1999, SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of Effective Date of FASB Statement No. 133 was issued.
This statement defers the effective date to fiscal years beginning after June
15, 2000. The Company will adopt these statements on January 1, 2001. The impact
of adoption of SFAS No. 133 on the financial position of the Company has not
been determined.
Reclassifications
Certain prior year balances have been reclassified to conform to the current
year presentation.
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(2) Business Combination
On October 1, 1999, the Company acquired all of the outstanding capital stock
(including all outstanding options) of Life USA that it did not already own for
approximately $423 million in cash. The acquisition was financed by a capital
contribution from AZOA.
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the consolidated financial statements include only the results of
Life USA's operations from the date of acquisition. The value of business
acquired was approximately $215 million and is being amortized in relation to
the present value of future gross profits, which will be approximately 20 years.
The remaining excess of the purchase price over the fair value of assets
acquired in the amount of $308 million has been recorded as goodwill and is
being amortized on a straight-line basis over 20 years.
During 1999, expenses of approximately $7 million were recorded related to the
acquisition of Life USA and its integration with the Company. These expenses
resulted primarily from the costs of the integration of the Company's and Life
USA's strategies, policies and practices. These charges include filing fees,
legal fees and other consulting fees related to the acquisition.
Following are the Company's unaudited pro forma results for the years ended
December 31, 1999 and 1998 assuming the acquisition occurred on January 1, 1998.
Unaudited
1999 1998
- ------------------------------------------------------------------------------
Total revenue $ 1,766,792 1,654,531
Net (loss) income (44,624) 103,236
- ------------------------------------------------------------------------------
These unaudited pro forma results have been prepared for comparative purposes
only and include additional amortization expenses as a result of goodwill and
certain other adjustments. They do not purport to be indicative of the results
of operations that actually would have resulted had the combination occurred on
January 1, 1998 or that may result in the future.
In 1998, the Company accounted for its investment in Life USA under the equity
method of accounting and carried its investment at cost, adjusted for its share
of Life USA's earnings, amortization of goodwill and dividends received. The
difference between the cost of the investment and underlying equity was to be
amortized on a straight-line basis over ten years. As of December 31, 1998, the
company held 21.41% of the outstanding common stock of Life USA with an
approximate market value of $68,290. The carrying value of the Life USA
investment at year-end 1998 was $80,928, which was $20,983 higher than the
equity in net assets of $59,945.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(3) Investments
Investments at December 31, 1999 consist of:
Amount
shown on
Amortized Estimated consolidated
cost fair balance
or cost value sheet
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
U.S. government $ 294,587 291,996 291,996
States and political subdivisions 57,378 52,452 52,452
Foreign government 172,877 169,686 169,686
Public utilities 227,934 220,602 220,602
Corporate securities 2,981,913 2,873,327 2,873,327
Mortgage backed securities 345,794 347,235 347,235
Collateralized mortgage obligations 634,680 627,052 627,052
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturities $4,715,163 4,582,350 4,582,350
- ------------------------------------------------------------------------------------------------------------------------------------
Equity securities:
Common stocks:
Banks, trusts and insurance companies 22,935 23,831 23,831
Industrial and miscellaneous 413,279 651,710 651,710
- ------------------------------------------------------------------------------------------------------------------------------------
Total equity securities $ 436,214 675,541 675,541
- ------------------------------------------------------------------------------------------------------------------------------------
Other investments:
Mortgage loans on real estate 528,933 XXXXXX 528,933
Certificates of deposit and short-term securities 139,571 XXXXXX 139,571
Policy loans 46,573 XXXXXX 46,573
Real estate 154,063 XXXXXX 154,063
Options 51,131 XXXXXX 68,217
Investment in equity investments 3,045 XXXXXX 3,045
- ------------------------------------------------------------------------------------------------------------------------------------
Total other investments $ 923,316 XXXXXX 940,402
- ------------------------------------------------------------------------------------------------------------------------------------
Total investments $6,074,693 XXXXXX 6,198,293
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(3) Investments (CONTINUED)
At December 31, 1999 and 1998, the amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values
of securities are as follows:
Amortized Gross Gross Estimated
cost unrealized unrealized fair
or cost gains losses value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999:
U.S. Government $ 294,587 3,340 5,931 291,996
States and political subdivisions 57,378 0 4,926 52,452
Foreign government 172,877 334 3,525 169,686
Public utilities 227,934 20 7,352 220,602
Corporate securities 2,981,913 3,902 112,488 2,873,327
Mortgage backed securities 345,794 5,026 3,585 347,235
Collateralized mortgage obligations 634,680 2,126 9,754 627,052
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturities 4,715,163 14,748 147,561 4,582,350
Equity securities 436,214 289,441 50,114 675,541
- ------------------------------------------------------------------------------------------------------------------------------------
Total $5,151,377 304,189 197,675 5,257,891
- ------------------------------------------------------------------------------------------------------------------------------------
1998:
U.S. Government $ 274,813 36,717 234 311,296
States and political subdivisions 94,640 6,481 0 101,121
Foreign government 34,652 2,079 0 36,731
Public utilities 66,236 5,948 202 71,982
Corporate securities 1,441,359 67,234 9,891 1,498,702
Mortgage backed securities 401,505 26,799 0 428,304
Collateralized mortgage obligations 80,599 10,141 585 90,155
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturities 2,393,804 155,399 10,912 2,538,291
Equity securities 278,753 245,913 12,262 512,404
- ------------------------------------------------------------------------------------------------------------------------------------
Total $2,672,557 401,312 23,174 3,050,695
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The changes in unrealized (losses) gains on fixed maturity securities were $(277,300), $22,170, and $58,422 in each of the years
ended December 31, 1999, 1998 and 1997, respectively.
The changes in unrealized gains in equity investments, which include common stocks and nonredeemable preferred stocks were $5,676,
$55,188, and $84,718 for the years ended December 31, 1999, 1998 and 1997, respectively.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(3) Investments (CONTINUED)
The amortized cost and estimated fair value of fixed maturities at December 31, 1999, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Amortized Estimated
cost fair value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Due in one year or less $ 102,823 102,554
Due after one year through five years 1,055,901 1,037,031
Due after five years through ten years 1,279,988 1,243,845
Due after ten years 1,295,977 1,224,633
Mortgage backed securities and collateralized mortgage obligations 980,474 974,287
- ------------------------------------------------------------------------------------------------------------------------------------
Totals $4,715,163 4,582,350
- ------------------------------------------------------------------------------------------------------------------------------------
Gross gains of $151,920, $105,723, and $70,335 and gross losses of $39,717, $18,217, and $8,654 were realized on sales of
securities in 1999, 1998 and 1997, respectively.
Net realized investment gains (losses) for the respective years ended December 31 are summarized as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed maturities, at market $ (4,474) 30,299 40,268
Equity securities 116,677 57,207 21,413
Mortgage loans (1,680) ,320) (982)
Real estate 331 3,133 635
Other (601) 93) 154
- ------------------------------------------------------------------------------------------------------------------------------------
Net gains before taxes 112,253 89,226 61,488
Tax expense on net realized gains 39,257 31,229 21,521
- ------------------------------------------------------------------------------------------------------------------------------------
Net gains after taxes $ 72,996 7,997 39,967
- ------------------------------------------------------------------------------------------------------------------------------------
The valuation allowances on mortgage loans at December 31, 1999, 1998 and 1997 and the changes in the allowance for the years
then ended are summarized as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of Year $ 9,599 8,279 7,279
Charged to operations 1,680 1,320 1,000
Recoveries 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
End of Year $ 11,279 9,599 8,279
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(3) Investments (CONTINUED)
Major categories of net investment income for the respective years ended December 31 are:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest:
Fixed maturities $ 212,992 155,397 211,335
Mortgage loans 40,011 34,449 25,232
Policy loans 737 497 6,526
Short-term investments 1,823 15,022 12,804
Dividends:
Preferred stock 212 668 748
Common stock 5,259 5,190 4,603
Interest on assets held by reinsurers 8,097 8,272 8,858
Rental income on real estate 13,356 7,505 5,657
Other invested assets 6,405 1,132 3,781
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment income 288,892 228,132 279,544
Investment expenses related to coinsurance agreements (note 8) 2,660 2,689 98,417
Investment expenses 11,372 8,377 18,777
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 274,860 217,066 162,350
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
During the first two months of 1998, the Company entered into mortgage backed security reverse repurchase transactions
("dollar rolls") with certain securities dealers. Under this program, the Company sold certain securities for delivery in the
current month and simultaneously contracted with the same dealer to repurchase similar, but not identical, securities on a
specified future date. The Company gave up the right to receive principal and interest on the securities sold. As of December 31,
1999 and 1998 there were no outstanding amounts under the Company's dollar roll program. Average balances outstanding for the
first two months of 1998 were $120,525 and weighted average interest rates were 6.5%. The maximum balance outstanding during 1998
was $120,525. No dollar rolls were transacted in 1999.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(4) Summary Table of Fair Value Disclosures
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------- ----- ------- -----
Financial assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fixed maturities, at market:
U.S. Government $ 291,996 291,996 311,296 311,296
States and political subdivisions 52,452 52,452 101,121 101,121
Foreign governments 169,686 169,686 36,731 36,731
Public utilities 220,602 220,602 71,982 71,982
Corporate securities 2,873,327 2,873,327 1,546,342 1,546,342
Mortgage backed securities 347,235 347,235 380,664 380,664
Collateralized mortgage obligations 627,052 627,052 90,155 90,155
Equity securities 675,541 675,541 512,404 512,404
Mortgage loans 528,933 530,033 457,128 495,202
Short term investments 139,571 139,571 166,366 166,366
Policy loans 46,573 46,573 7,118 7,118
Options 68,217 68,217 15,109 15,109
Investment in equity investments 3,045 4,286 80,928 68,290
Receivables 310,866 310,866 323,971 323,971
Separate accounts assets 8,488,404 8,488,404 9,915,150 9,915,150
Financial liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Investment contracts 7,609,726 7,208,876 3,645,657 3,035,787
Separate account liabilities 8,488,404 8,361,112 9,915,150 9,765,791
- ------------------------------------------------------------------------------------------------------------------------------------
See Note 1 "Summary of Significant Accounting Policies" for description of the methods and significant assumptions used to
estimate fair values.
(5) Receivables
Receivables at December 31 consist of the following:
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums due $ 264,685 270,657
Agents balances 4,809 10,088
Related party receivables 2,230 3,852
Reinsurance commission receivable 9,304 8,022
Scholarship enrollment fees 14,125 12,010
Due from administrators 4,550 13,271
Other 11,163 6,071
- ------------------------------------------------------------------------------------------------------------------------------------
Total receivables $ 310,866 323,971
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(6) Accident and Health Claims Reserves
Accident and health claims reserves are based on estimates that are 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, 1999 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
$19,542, $9,918, and $12,479 in 1999, 1998 and 1997, respectively, is summarized as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, net of reinsurance
recoverables of $128,764, $141,033, and $124,320 $ 366,425 312,886 273,813
Adjustment primarily related to commutation of block of business (53,585) 0 0
Incurred related to:
Current year 431,279 417,042 346,901
Prior years 3,264 (12,217) (12,087)
- ------------------------------------------------------------------------------------------------------------------------------------
Total incurred 434,543 404,825 334,814
- ------------------------------------------------------------------------------------------------------------------------------------
Paid related to:
Current year 193,341 204,100 150,942
Prior years 185,696 147,186 144,798
- ------------------------------------------------------------------------------------------------------------------------------------
Total paid 379,037 351,286 295,740
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, net of reinsurance
recoverables of $175,142, $128,764, and $141,033 $ 368,346 366,425 312,887
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The Company incurred additional losses in 1999 on prior year incurred claims primarily on its reinsurance assumed (non-HMO)
business. Due to lower than anticipated losses related to prior years, the provision for claims and claim adjustment expenses
decreased in 1998 and 1997.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(7) Reinsurance
In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a
portion of benefits paid by ceding risks under excess coverage and coinsurance contracts. The Company retains a maximum of $1
million coverage per individual life. Reinsurance contracts do not relieve the Company from its obligations to policyholders.
Failure of reinsurers to honor their obligations could result in losses to the Company. 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.
Life insurance, annuities and accident and health business assumed from and ceded to other companies is as follows:
Percentage
Assumed Ceded of amount
Direct from other to other Net assumed
Year ended amount companies companies amount to net
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999:
<S> <C> <C> <C> <C> <C>
Life insurance in force $36,994,161 129,809,733 24,174,006 142,629,888 91.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums:
Life 205,208 273,604 67,069 411,743 66.5%
Annuities 199,341 39,729 95,232 143,838 27.6%
Accident and health 541,847 302,059 315,938 527,968 57.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Total premiums $ 946,396 615,392 478,239 1,083,549 56.8%
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998:
Life insurance in force $34,118,554 98,832,792 19,483,581 113,467,765 87.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums:
Life 244,416 224,451 93,812 375,055 59.8%
Annuities 220,812 1,820 50,385 172,247 1.1%
Accident and health 479,237 294,333 267,119 506,451 58.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Total premiums $ 944,465 520,604 411,316 1,053,753 49.4%
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1997:
Life insurance in force $32,234,241 72,682,842 19,873,094 85,043,989 85.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Premiums:
Life 252,859 170,798 110,579 313,078 54.6%
Annuities 217,353 1,910 30,789 188,474 1.0%
Accident and health 436,105 311,612 296,650 451,067 69.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Total premiums $ 906,317 484,320 438,018 952,619 50.8%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
Included in reinsurance receivables at December 31, 1999 are $2,095,817 and $849,279 recoverable from two insurers who, as of
December 31, 1999, were both rated A+ by A.M. 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.
Of the amounts ceded to others, the Company ceded life insurance inforce of $3,387,592, $2,067,664, and $1,163,533 in 1999,
1998 and 1997, respectively, and life insurance premiums earned of $6,008, $4,165, and $2,538 in 1999, 1998 and 1997,
respectively, to its ultimate parent Allianz AG. The Company also ceded accident and health premiums earned to Allianz AG of
$3,131, $2,817, and $2,467 in 1999, 1998 and 1997.
</FN>
</TABLE>
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(7) Reinsurance (Continued)
Effective January 1, 1999, the Company entered into a 100% coinsurance agreement
with an unrelated insurance company to coinsure a block of preneed life and
annuity business with 1999 premium of $10,300. In connection with this
agreement, the Company recognized a recoverable on future benefit reserves of
$95,000, received a ceding commission of $2,600 and transferred cash of $91,700.
The unearned ceding commission represents deferred revenue that will be
amortized over the revenue-producing period of the related reinsured policies.
During 1999, $1,200 was amortized and included in other revenue in the
consolidated statements of operations. The servicing of the coinsured business
was also transferred to a third party administrator.
Effective December 31, 1999, the Company entered into a 100% coinsurance
agreement with an unrelated insurance company to coinsure the remaining block of
preneed life and annuity business with 1999 premium of $97,100. In connection
with this agreement, the Company recognized a recoverable on future benefit
reserves of $245,000, received a ceding commission of $73,900 and transferred
cash of $154,000. The unearned ceding commission represents deferred revenue
that 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 administrator. Because the agreement was effective December 31,
1999, no revenue was recognized on this transaction in 1999.
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 that will
be amortized over the revenue-producing period of the related reinsured
policies. During 1999, 1998 and 1997 $14,996, $15,965 and $22,647, respectively,
was amortized and included in other revenue in the consolidated statements of
operations. The servicing of the coinsured business was also transferred to a
third party insurer who is also the retrocessionaire of the block. Effective
January 1, 1998, the coinsurance agreement was amended to include another block
of business with future benefit reserves of $66,000, capitalized deferred
acquisition costs of $1,935 and deferred income of $750.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(8) Income Taxes
Income Tax (Benefit) Expense
Total income tax expense (benefit) for the years ended December 31 are as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax expense attributable to operations:
<S> <C> <C> <C>
Current tax expense $ 63,371 48,410 31,571
Deferred tax (benefit) expense (73,727) 2,822 28,283
- ------------------------------------------------------------------------------------------------------------------------------------
Total income tax (benefit) expense attributable to operations (10,356) 51,232 59,854
Tax benefit due to cumulative effect of change in accounting (8,682) 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total income tax (benefit) expense attributable to net income (19,038) 51,232 59,854
Income tax effect on equity:
Income tax allocated to stockholder's equity:
Attributable to unrealized gains and losses for the year (94,283) 26,127 49,748
- ------------------------------------------------------------------------------------------------------------------------------------
Total income tax effect on equity $ (113,321) 77,359 109,602
- ------------------------------------------------------------------------------------------------------------------------------------
Components of Income Tax (Benefit) Expense
Income tax expense computed at the statutory rate of 35% varies from tax expense reported in the consolidated statements of
operations for the respective years ended December 31 as follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense computed at the statutory rate $ (12,520) 52,980 60,735
Dividends received deductions and tax-exempt interest (2,605) (3,294) (2,792)
Foreign tax (1,014) (133) 916
Interest on tax deficiency 800 900 1,100
Goodwill amortization 1,365 0 0
Other 3,618 779 (105)
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) expense as reported $ (10,356) 51,232 59,854
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(8) Income Taxes (Continued)
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:
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
<S> <C> <C>
Provision for post retirement benefits $ 2,286 2,223
Allowance for uncollectible accounts 929 929
Policy reserves 282,573 173,414
- ------------------------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 285,788 176,566
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Deferred acquisition costs 219,869 272,815
Net unrealized gain 25,701 128,883
Value of business acquired 73,627 0
Other 17,947 32,771
- ------------------------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 337,144 434,469
- ------------------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 51,356 257,903
- ------------------------------------------------------------------------------------------------------------------------------------
<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 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.
The Company and its subsidiaries, with the exception of Life USA Insurance 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 $57,121, $30,808, and $39,914 in 1999, 1998 and 1997, respectively. At December 31, 1999 and 1998
the Company had a tax recoverable from AZOA of $3,251 and $3,030, respectively.
At December 31, 1999 and 1998, the Company had a tax recoverable separate from the agreement with AZOA in the amount of
$7,233 and $1,030, respectively. These amounts are for foreign taxes and Life USA taxes recoverable prior to the purchase by the
Company.
</FN>
</TABLE>
<PAGE>
24
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(9) Related Party Transactions
In conjunction with the purchase of LifeUSA on October 1, 1999, the Company
received a capital contribution from AZOA in the amount of $423,186.
The Company reimbursed AZOA $3,582, $2,495, and $2,519 in 1999, 1998 and 1997,
respectively, for certain administrative and investment management services
performed. The Company's liability to AZOA for such services was $581 and $490
at December 31, 1999 and 1998, respectively.
The Company shares a data center with and receives other system support from
affiliated insurance companies. Usage and other system support charges paid by
the Company were $902, $1,291 and $2,826 in 1999, 1998 and 1997, respectively.
The Company's liability for data center and other system support charges was
$157 and $345 at December 31, 1999 and 1998, 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.
The Company had 25 million shares of Series A preferred stock outstanding until
March 1998, which was held by AZOA with a dividend rate of 6.4% and a book value
of $25,000. In March 1998, the Company redeemed and canceled the 25 million
shares of Series A preferred stock.
(10) Employee Benefit Plans
The Company participates in the Allianz Primary Retirement Plan (Primary
Retirement Plan), a defined contribution plan. The Company makes contributions
to a money purchase pension plan on behalf of eligible participants. All
employees, excluding agents, are eligible to participate in the Primary
Retirement Plan after two years of service. The contributions are based on a
percentage of the participant's salary with the participants being 100% vested
upon eligibility. It is the Company's policy to fund the plan costs as accrued.
Total pension contributions were $2,025, $756, and $810 in 1999, 1998 and 1997,
respectively.
The Company participates in the Allianz Asset Accumulation Plan (Allianz Plan),
a defined contribution plan sponsored by AZOA. Under the Allianz Plan
provisions, the Company will match 75% of eligible employees' contributions up
to a maximum of 6% of a participant's compensation. The plan can also declare a
profit sharing allocation of up to 5.0% of base pay at year-end based upon the
profitability of AZOA. All employees 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 $980, $868, and $1,057 in 1999, 1998 and 1997, respectively, toward
planned contributions.
Employees of Life USA also participated in a defined contribution plan, which
will be merged with the Allianz Plan effective January 1, 2000. Total Company
contributions made subsequent to October 1, 1999 were $329.
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, 1999 and 1998 was $6,532 and $6,352, respectively.
This liability is included in "Other liabilities" in the accompanying balance
sheet.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(11) Statutory Financial Data and Dividend Restrictions
Statutory accounting is directed toward insurer solvency and protection of policyholders. Accordingly, certain items recorded
in financial statements prepared under GAAP are excluded 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 NAIC
has completed a project to codify statutory accounting practices, the result of which will constitute the primary source of
"prescribed" statutory accounting practices. Accordingly, that project, which is currently in the process of state adoption and
expected to be effective January 1, 2001, will 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 has not quantified the effects of adopting the NAIC codification on their statutory
financial statements.
The differences between stockholder's equity and net income reported in accordance with statutory accounting practices and
the accompanying consolidated financial statements as of and for the year ended December 31 are as follows:
Stockholder's equity Net income
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Statutory basis $ 873,617 654,371 97,768 35,188 72,343
Adjustments:
Change in reserve basis (289,261) (226,145) (80,952) 2,036 (99,981)
Deferred acquisition costs 801,763 930,059 (128,296) 2,979 63,742
Difference in accounting for
purchase of Life USA 340,675 0 (6,373) 0 0
Net deferred taxes (51,356) (257,903) 82,409 (2,822) (28,283)
Statutory asset valuation reserve 236,210 178,011 0 0 0
Statutory interest maintenance reserve 43,786 48,697 (4,912) 14,361 7,994
Modified coinsurance reinsurance 0 (2,358) 0 29,595 81,790
Unrealized (losses) gains
on investments (136,719) 158,391 0 0 0
Nonadmitted assets 7,411 14,946 0 0 0
Deferred income on reinsurance (186,888) (106,065) 0 0 0
Other liabilities related
to reinsurance (32,998) (52,337) 0 0 0
Valuation allowance on mortgage loans (11,279) (9,599) (1,680) (1,320) (1,000)
Loss from non-insurance subsidiaries 0 0 (11,714) (618) (1,260)
Other (47,881) 10,456 11,613 20,740 18,327
- ------------------------------------------------------------------------------------------------------------------------------------
As reported in the accompanying
consolidated financial statements $1,547,080 1,340,524 (42,137) 100,139 113,672
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The Company is required to meet minimum statutory capital and surplus requirements. The Company's statutory capital and
surplus as of December 31, 1999 and 1998 were in compliance with these requirements. The maximum amount of dividends that 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 1998, the Company paid AZOA dividends on preferred stock in the amount $729. A common stock dividend of $551 was paid in
1997. Dividends of $49,391 could be paid in 2000 without prior approval of the Commissioner of Commerce.
</FN>
</TABLE>
<PAGE>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(11) Statutory Financial Data and Dividend Restrictions (Continued)
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's adjusted capital is in excess of the Company action level as of
December 31, 1999 and 1998.
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 Company does not currently use permitted
statutory accounting practices that have a significant impact on its statutory
financial statements.
(12) Commitments and Contingencies
The Company and its subsidiaries are involved in various pending or threatened
legal proceedings arising from the conduct of their business. In the opinion of
management, the ultimate resolution of such litigation will not have a material
effect on the consolidated financial position of the Company.
The Company is contingently liable for possible future assessments under
regulatory requirements pertaining to insolvencies and impairments of
unaffiliated insurance companies. Provision has been made for assessments
currently received and assessments anticipated for known insolvencies.
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(13) 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 comprehensive income. An analysis of this account for
the respective years ended December 31 follows:
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning amount of cumulative translation adjustments $ (6,209) (4,448) (3,473)
- ------------------------------------------------------------------------------------------------------------------------------------
Aggregate adjustment for the period resulting from
translation adjustments 2,248 (2,710) (1,500)
Amount of income tax (expense) benefit for period
related to aggregate adjustment (787) 949 525
- ------------------------------------------------------------------------------------------------------------------------------------
Net aggregate translation included in equity 1,461 (1,761) (975)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending amount of cumulative translation adjustments $ (4,748) (6,209) (4,448)
- ------------------------------------------------------------------------------------------------------------------------------------
Canadian foreign exchange rate at end of year 0.6924 0.6535 0.6992
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(14) Supplementary Insurance Information
The following table summarizes certain financial information by line of business for 1999, 1998 and 1997:
As of December 31
- ------------------------------------------------------------------------------------------------------------------------------------
Future policy Other
Deferred benefits, policy
policy losses, claims and
acquisition claims and Unearned benefits
costs loss expense premiums payable
- ------------------------------------------------------------------------------------------------------------------------------------
1999:
<S> <C> <C> <C> <C>
Life $ 231,927 1,874,904 3,049 116,569
Annuities 561,966 7,728,072 0 1,771
Accident and health 7,870 0 45,964 809,575
- ------------------------------------------------------------------------------------------------------------------------------------
$ 801,763 9,602,976 49,013 927,915
- ------------------------------------------------------------------------------------------------------------------------------------
1998:
Life $ 217,262 1,445,844 3,859 97,647
Annuities 694,388 3,588,491 0 1,727
Accident and health 18,409 0 49,919 671,472
- ------------------------------------------------------------------------------------------------------------------------------------
$ 930,059 5,034,335 53,778 770,846
- ------------------------------------------------------------------------------------------------------------------------------------
1997:
Life $ 189,971 1,297,269 5,215 63,572
Annuities 717,721 3,251,829 0 1,881
Accident and health 19,388 0 44,953 487,660
- ------------------------------------------------------------------------------------------------------------------------------------
$ 927,080 4,549,098 50,168 553,113
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allianz Life Insurance Company of North America
And Subsidiaries
Notes to Consolidated Financial Statements (continued)
December 31, 1999, 1998 and 1997 (in thousands, except share data)
(14) Supplementary Insurance Information (Continued)
For the year ended December 31
- ------------------------------------------------------------------------------------------------------------------------------------
Premium Benefits, Net change
revenue claims in
and other Net losses, and policy Other
contract investment settlement acquisition operating
considerations income expenses costs (a) expenses
- ------------------------------------------------------------------------------------------------------------------------------------
1999:
<S> <C> <C> <C> <C> <C>
Life $ 411,743 36,171 319,210 (14,665) 153,281
Annuities 143,838 211,432 163,329 133,268 166,715
Accident and health 527,968 27,257 465,139 10,539 173,910
- ------------------------------------------------------------------------------------------------------------------------------------
$1,083,549 274,860 947,678 129,142 493,906
- ------------------------------------------------------------------------------------------------------------------------------------
1998:
Life $ 375,055 34,731 306,318 (27,291) 141,705
Annuities 172,247 158,458 135,356 23,333 151,719
Accident and health 506,451 23,877 393,601 979 161,128
- ------------------------------------------------------------------------------------------------------------------------------------
$1,053,753 217,066 835,275 (2,979) 454,552
- ------------------------------------------------------------------------------------------------------------------------------------
1997:
Life $ 313,078 24,352 230,357 (14,363) 99,913
Annuities 188,474 118,028 124,535 (44,924) 186,789
Accident and health 451,067 19,970 327,526 (4,455) 151,312
- ------------------------------------------------------------------------------------------------------------------------------------
$ 952,619 162,350 682,418 (63,742) 438,014
- ------------------------------------------------------------------------------------------------------------------------------------
(a) See note 1 for total gross amortization.
</TABLE>
<PAGE>
Flexible Premium Variable Life Prospectus A-1
APPENDIX
- --------------------------------------------------------------------------------
ILLUSTRATION OF POLICY VALUES
The following tables illustrate how Policy Account values, Net Cash Values and
death benefits of a policy change based on the investment experience of the
variable options. The illustrations are hypothetical and may not be used to
project or predict investment results. The Policy Account values, Net Cash
Values and death benefits in the tables take into account all charges and
deductions against the policy. These tables assume that the cost of insurance
rates for the policy are based on the current and guaranteed rates appropriate
to the class shown. These tables also assume that a level annual premium of
$1,200 was paid. These tables assume that the insured is in the most favorable
male risk status, i.e., non-smoker. For insureds who are classified as smoker or
less favorable risk status, the cost of insurance will be greater and the policy
values will be less given the same assumed hypothetical gross annual investment
rates of return. The cost of insurance will be less and the policy values will
be greater for female insureds of comparable risk status. Some states require
that the policies contain tables based upon unisex rates.
Gross investment returns of 0%, 6% and 12% are assumed to be level for all years
shown. The values would be different if the rates of return averaged 0%, 6% and
12% over the period of years but fluctuated above and below those averages
during individual years.
The values shown reflect the fact that the net investment return of the variable
options is lower than the gross investment return on the assets held in the
portfolios because of the charges assessed on amounts in the variable options.
The daily investment advisory fee for the portfolios are assumed to be equal to
an annual rate of 0.665% of the net assets of the portfolios (which is the
average of the investment advisory fees assessed in 1999). The values also
assume that each portfolio will incur operating expenses annually which are
assumed to be 0.117% of the average net assets of the portfolio. This is the
average in 1999. The variable options will be assessed for mortality and expense
risks at a guaranteed annual rate not to exceed 0.90% (the current annual rate
is 0.60%) of the average daily net assets of the variable option and for
administrative expenses at an annual rate of 0.15% of the average daily net
assets of the variable option. 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 -1.52%, 4.39% and 10.30%.
We deduct an insurance risk premium for a policy month from the Policy Account
values. The insurance risk premium rate is based on the sex (where permitted by
state law), attained age and rate class of the insured.
Upon request, we 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>
A-2 Flexible Premium Variable Life Prospectus
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
VARIABLE UNIVERSAL LIFE
PREPARED FOR: CLIENT INITIAL DEATH BENEFIT: $100,000
ISSUE AGE: 35, NON-SMOKER ANNUAL PREMIUM: $1,200.00
SEX: MALE INITIAL DEATH BENEFIT OPTION: A
CURRENT VALUES
----------------------------------------------------------------------------------
VALUES PROJECTED AT VALUES PROJECTED AT VALUES PROJECTED AT
0.00% 6.00% 12.00%
----------------------------------------------------------------------------------
END ACCUM NET NET NET NET NET NET
OF ANNUAL @ 5.00% POLICY CASH DEATH POLICY CASH DEATH POLICY CASH DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 756 35 100,000 813 91 100,000 869 148 100,000
2 36 1,200 2,583 1,673 891 100,000 1,838 1,057 100,000 2,011 1,229 100,000
3 37 1,200 3,972 2,570 1,728 100,000 2,904 2,062 100,000 3,265 2,424 100,000
4 38 1,200 5,431 3,448 2,596 100,000 4,011 3,159 100,000 4,644 3,792 100,000
5 39 1,200 6,962 4,307 3,487 100,000 5,162 4,341 100,000 6,160 5,340 100,000
6 40 1,200 8,570 5,144 4,374 100,000 6,354 5,583 100,000 7,824 7,053 100,000
7 41 1,200 10,259 5,969 5,248 100,000 7,599 6,879 100,000 9,662 8,941 100,000
8 42 1,200 12,032 6,773 6,102 100,000 8,892 8,222 100,000 11,682 11,012 100,000
9 43 1,200 13,893 7,559 6,971 100,000 10,238 9,650 100,000 13,910 13,322 100,000
10 44 1,200 15,848 8,330 7,825 100,000 11,641 11,135 100,000 16,430 15,924 100,000
15 49 1,200 27,189 11,849 11,849 100,000 19,690 19,690 100,000 33,437 33,437 100,000
20 54 1,200 41,633 14,565 14,565 100,000 29,339 29,339 100,000 61,086 61,086 100,000
25 59 1,200 60,136 16,346 16,346 100,000 40,619 40,619 100,000 106,168 106,168 141,141
30 64 1,200 83,713 16,275 16,275 100,000 53,802 53,802 100,000 178,713 178,713 216,311
35 69 1,200 113,804 12,991 12,991 100,000 69,461 69,461 100,000 294,783 294,783 339,268
CURRENT VALUES ARE BASED ON PROJECTED INTEREST RATES AND CURRENT EXPENSES AND COST OF INSURANCE CHARGES NOW IN
EFFECT, WHICH ARE SUBJECT TO CHANGE. THE CURRENT MONTHLY EXPENSE CHARGES ARE $20.00 PER MONTH IN YEAR 1 AND $5.00
PER MONTH THEREAFTER.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN IN THIS ILLUSTRATION ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY THE OWNER, PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND NET CASH
VALUE FOR A POLICY WOULD BE DIFFERENT THAN THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Flexible Premium Variable Life Prospectus A-3
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
VARIABLE UNIVERSAL LIFE
PREPARED FOR: CLIENT INITIAL DEATH BENEFIT: $100,000
ISSUE AGE: 35, NON-SMOKER ANNUAL PREMIUM: $1,200.00
SEX: MALE INITIAL DEATH BENEFIT OPTION: A
GUARANTEED VALUES
----------------------------------------------------------------------------------
VALUES PROJECTED AT VALUES PROJECTED AT VALUES PROJECTED AT
0.00% 6.00% 12.00%
----------------------------------------------------------------------------------
END ACCUM NET NET NET NET NET NET
OF ANNUAL @ 5.00% POLICY CASH DEATH POLICY CASH DEATH POLICY CASH DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 746 25 100,000 802 81 100,000 859 137 100,000
2 36 1,200 2,583 1,600 818 100,000 1,762 980 100,000 1,931 1,150 100,000
3 37 1,200 3,972 2,427 1,585 100,000 2,750 1,909 100,000 3,101 2,259 100,000
4 38 1,200 5,431 3,230 2,378 100,000 3,769 2,918 100,000 4,377 3,525 100,000
5 39 1,200 6,962 4,008 3,188 100,000 4,820 4,000 100,000 5,772 4,951 100,000
6 40 1,200 8,570 4,752 3,981 100,000 5,893 5,123 100,000 7,285 6,514 100,000
7 41 1,200 10,259 5,472 4,751 100,000 7,002 6,281 100,000 8,941 8,221 100,000
8 42 1,200 12,032 6,159 5,488 100,000 8,135 7,465 100,000 10,745 10,074 100,000
9 43 1,200 13,893 6,813 6,225 100,000 9,296 8,708 100,000 12,711 12,123 100,000
10 44 1,200 15,848 7,435 6,929 100,000 10,486 9,980 100,000 14,859 14,353 100,000
15 49 1,200 27,189 10,051 10,051 100,000 16,895 16,895 100,000 29,040 29,040 100,000
20 54 1,200 41,633 11,552 11,552 100,000 23,928 23,928 100,000 51,483 51,483 100,000
25 59 1,200 60,136 11,315 11,315 100,000 31,239 31,239 100,000 87,732 87,732 116,673
30 64 1,200 83,713 8,220 8,220 100,000 38,260 38,260 100,000 145,167 145,167 175,772
35 69 1,200 113,804 0 0 100,000 43,851 43,851 100,000 234,776 234,776 270,313
GUARANTEED VALUES ARE BASED ON PROJECTED INTEREST RATES AND GUARANTEED EXPENSES AND COST OF INSURANCE CHARGES.
THE GUARANTEED MONTHLY EXPENSE CHARGES ARE $20.00 PER MONTH IN YEAR 1 AND $9.00 PER MONTH THEREAFTER.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN IN THIS ILLUSTRATION ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY THE OWNER, PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND NET CASH
VALUE FOR A POLICY WOULD BE DIFFERENT THAN THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
A-4 Flexible Premium Variable Life Prospectus
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
VARIABLE UNIVERSAL LIFE
PREPARED FOR: CLIENT INITIAL DEATH BENEFIT: $100,000
ISSUE AGE: 35, NON-SMOKER ANNUAL PREMIUM: $1,200.00
SEX: MALE INITIAL DEATH BENEFIT OPTION: B
CURRENT VALUES
----------------------------------------------------------------------------------
VALUES PROJECTED AT VALUES PROJECTED AT VALUES PROJECTED AT
0.00% 6.00% 12.00%
----------------------------------------------------------------------------------
END ACCUM NET NET NET NET NET NET
OF ANNUAL @ 5.00% POLICY CASH DEATH POLICY CASH DEATH POLICY CASH DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 755 33 100,755 811 89 100,811 868 146 100,868
2 36 1,200 2,583 1,668 886 101,668 1,833 1,052 101,833 2,006 1,224 102,006
3 37 1,200 3,972 2,561 1,719 102,561 2,893 2,052 102,893 3,253 2,412 103,253
4 38 1,200 5,431 3,432 2,581 103,432 3,992 3,140 103,992 4,622 3,770 104,622
5 39 1,200 6,962 4,284 3,463 104,284 5,132 4,312 105,132 6,124 5,303 106,124
6 40 1,200 8,570 5,110 4,340 105,110 6,310 5,539 106,310 7,768 6,997 107,768
7 41 1,200 10,259 5,923 5,202 105,923 7,538 6,817 107,538 9,580 8,859 109,580
8 42 1,200 12,032 6,712 6,042 106,712 8,809 8,138 108,809 11,567 10,896 111,567
9 43 1,200 13,893 7,483 6,895 107,483 10,128 9,540 110,128 13,751 13,163 113,751
10 44 1,200 15,848 8,236 7,730 108,236 11,499 10,993 111,499 16,211 15,705 116,211
15 49 1,200 27,189 11,619 11,619 111,619 19,270 19,270 119,270 32,654 32,654 132,654
20 54 1,200 41,633 14,045 14,045 114,045 28,235 28,235 128,235 58,572 58,572 158,572
25 59 1,200 60,136 15,282 15,282 115,282 37,916 37,916 137,916 99,237 99,237 199,237
30 64 1,200 83,713 14,343 14,343 114,343 47,497 47,497 147,497 162,851 162,851 262,851
35 69 1,200 113,804 9,619 9,619 109,619 55,226 55,226 155,226 261,937 261,937 361,937
CURRENT VALUES ARE BASED ON PROJECTED INTEREST RATES AND CURRENT EXPENSES AND COST OF INSURANCE CHARGES NOW IN
EFFECT, WHICH ARE SUBJECT TO CHANGE. THE CURRENT MONTHLY EXPENSE CHARGES ARE $20.00 PER MONTH IN YEAR 1 AND $5.00
PER MONTH THEREAFTER.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN IN THIS ILLUSTRATION ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY THE OWNER, PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND NET CASH
VALUE FOR A POLICY WOULD BE DIFFERENT THAN THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Flexible Premium Variable Life Prospectus A-5
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
VARIABLE UNIVERSAL LIFE
PREPARED FOR: CLIENT INITIAL DEATH BENEFIT: $100,000
ISSUE AGE: 35, NON-SMOKER ANNUAL PREMIUM: $1,200.00
SEX: MALE INITIAL DEATH BENEFIT OPTION: B
GUARANTEED VALUES
----------------------------------------------------------------------------------
VALUES PROJECTED AT VALUES PROJECTED AT VALUES PROJECTED AT
0.00% 6.00% 12.00%
----------------------------------------------------------------------------------
END ACCUM NET NET NET NET NET NET
OF ANNUAL @ 5.00% POLICY CASH DEATH POLICY CASH DEATH POLICY CASH DEATH
YR. AGE PREMIUM PREMIUM ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT ACCOUNT VALUE BENEFIT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35 1,200 1,260 745 23 100,745 801 79 100,801 857 135 100,857
2 36 1,200 2,583 1,595 813 101,595 1,757 975 101,757 1,926 1,144 101,926
3 37 1,200 3,972 2,418 1,576 102,418 2,739 1,898 102,739 3,088 2,246 103,088
4 38 1,200 5,431 3,214 2,362 103,214 3,750 2,898 103,750 4,354 3,502 104,354
5 39 1,200 6,962 3,983 3,163 103,983 4,789 3,969 104,789 5,733 4,913 105,733
6 40 1,200 8,570 4,715 3,945 104,715 5,847 5,076 105,847 7,225 6,454 107,225
7 41 1,200 10,259 5,422 4,701 105,422 6,935 6,214 106,935 8,852 8,132 108,852
8 42 1,200 12,032 6,092 5,421 106,092 8,043 7,372 108,043 10,617 9,946 110,617
9 43 1,200 13,893 6,726 6,138 106,726 9,171 8,583 109,171 12,532 11,944 112,532
10 44 1,200 15,848 7,325 6,819 107,325 10,321 9,815 110,321 14,613 14,107 114,613
15 49 1,200 27,189 9,766 9,766 109,766 16,375 16,375 116,375 28,085 28,085 128,085
20 54 1,200 41,633 10,945 10,945 110,945 22,568 22,568 122,568 48,379 48,379 148,379
25 59 1,200 60,136 10,170 10,170 110,170 28,006 28,006 128,006 78,577 78,577 178,577
30 64 1,200 83,713 6,333 6,333 106,333 31,061 31,061 131,061 123,036 123,036 223,036
35 69 1,200 113,804 0 0 0 28,650 28,650 128,650 187,484 187,484 287,484
GUARANTEED VALUES ARE BASED ON PROJECTED INTEREST RATES AND GUARANTEED EXPENSES AND COST OF INSURANCE CHARGES.
THE GUARANTEED MONTHLY EXPENSE CHARGES ARE $20.00 PER MONTH IN YEAR 1 AND $9.00 PER MONTH THEREAFTER.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN IN THIS ILLUSTRATION ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT
ALLOCATIONS MADE BY THE OWNER, PREVAILING INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND NET CASH
VALUE FOR A POLICY WOULD BE DIFFERENT THAN THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
</TABLE>
<PAGE>
PART II
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission theretofore or hereafter duly adopted pursuant to authority conferred
in that section.
REPRESENTATION
Allianz Life Insurance Company of North America ("Company") hereby represents
that the fees and charges deducted under the Policy described in the Prospectus,
in the aggregate, are reasonable in relation to the services rendered, the
expenses to be incurred and the risks assumed by the Company.
INDEMNIFICATION
The Bylaws of the Company provide that:
Each person (and the heirs, executors, and administrators of such person) made
or threatened to be made a party to any action, civil or criminal, by reason of
being or having been a director, officer, or employee of the corporation (or by
reason of serving any other organization at the request of the corporation)
shall be indemnified to the extent permitted by the laws of the State of
Minnesota, and in the manner prescribed therin.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted for directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the Policies issued by the Variable
Account, the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Prospectus consisting of __ pages
Undertakings to File Reports
The signatures
Written consents of the following persons: Counsel, Actuary, Independent
Auditors
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 (4)
2. Not Applicable
3. a. Principal Underwriter Agreement (5)
3. b. Selling Agreement
4. Not Applicable
5. Individual Variable Life Insurance Policy (3)
i. Individual Variable Life Insurance Policy Endorsements (4)
6. a. Copy of Articles of Incorporation of the Company (4)
6. b. Copy of the Bylaws of the Company (4)
7. Not Applicable
8. Not Applicable
9. a. Administrative Agreement (filed confidentially) (2)
9. b. (i) Form of Fund Participation Agreement between AIM Variable
Insurance Funds, Inc.,Allianz Life Insurance Company of North
America and NALAC Financial Plans LLC(6)
(ii) Form of Fund Participation Agreement between Alger American
Fund, Allianz Life Insurance Company of North America and
Fred Alger and Company(6)
(iii) Form of Fund Participation Agreement between USAllianz
Variable Insurance Products Trust, Allianz Life Insurance
Company of North America and BISYS Fund Services Limited
Partnership(6)
10. Application for Individual Variable Life Insurance Policy (3)
12. Memorandum of Exchange Rights (1)
13. Powers of Attorney(6)
27. Not Applicable
B. Opinion and Consent of Counsel
C. Consent of Actuary
D. Independent Auditors' Consent
(1) Incorporated by reference to Registrant's Form N-8 B-2.
(2) Incorporated by reference to Registrant's Pre-Effective Amendment No. 1
(3) Incorporated by reference to Registrant's Post-Effective Amendment No. 9 to
Form S-6, File Nos. 33-11158 and 811-4965 as electronically filed on
April 24, 1996.
(4) Incorporated by reference to Registrant's Post-Effective Amendment No. 11 to
Form S-6, File Nos. 33-11158 and 811-4965 as electronically filed on
April 30, 1997.
(5) Incorporated by reference to Registrant's Post-Effective Amendment No. 12 to
Form S-6, File Nos. 33-11158 and 811-4965 as electronically filed on
April 29, 1998.
(6) Incorporated by reference to Registrant's Post-Effective Amendment No. 16 to
Form S-6, File Nos. 33-11158 and 811-4965 as electronically filed on
November 12, 1999.
REPRESENTATIONS
1. Registrant represents that Section (b)(13)(iii)(F) of Rule 6e-3(T) is
being relied on.
2. Registrant represents that the level of the risk charge is within the
range of industry practice for comparable flexible contracts.
3. Registrant represents that it has analyzed the risk charge taking into
consideration such facts as current charge levels, potential adverse
mortality, the manner in which charges are imposed, the markets in
which the Policy will be offered and anticipated sales and lapse rates.
Registrant also represents that a memorandum has been prepared in
connection with the analysis of the risk charge as set forth above.
Registrant undertakes to keep and make available to the Commission on
request a copy of the memorandum.
4. Registrant represents that the Company has concluded that there is a
reasonable likelihood that the distribution financing arrangements of
the Variable Account will benefit the Variable Account and
policyholders and will keep and make available to the Commission on
request a memorandum setting forth the basis for this representation.
5. Registrant represents that the Variable Account will invest only in
management investment companies which have undertaken to have a Board
of Directors, a majority of whom are not interested persons of the
Company, formulate and approve any plan under Rule 12b_1 to finance
distribution expenses.
<PAGE>
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 17th day of April, 2000.
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/ STEVEN A. FRIEDMAN
------------------------
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature and Title
<S> <C> <C>
Lowell C. Anderson* Chairman of the Board 04/17/2000
Lowell C. Anderson Date
Robert W. MacDonald* Director and 04/17/2000
Robert W. MacDonald Chief Executive Officer Date
Margery G. Hughes* President and 04/17/2000
Margery G. Hughes Chief Administrative Officer Date
Mark A. Zesbaugh* Senior Vice President and 04/17/2000
Mark A. Zesbaugh Chief Financial Officer Date
Herbert F. Hansmeyer* Director 04/17/2000
Herbert F. Hansmeyer Date
Michael P. Sullivan* Director 04/17/2000
Michael P. Sullivan Date
Dr. Gerhard G. Rupprecht* Director 04/17/2000
Dr. Gerhard G. Rupprecht Date
Rev. Dennis J. Dease* Director 04/17/2000
Rev. Dennis J. Dease Date
James R. Campbell* Director 04/17/2000
James R. Campbell Date
Robert M. Kimmitt* Director 04/17/2000
Robert M. Kimmitt Date
</TABLE>
*By Power of Attorney
By:/S/ MICHAEL T. WESTERMEYER
--------------------------------
Michael T. Westermeyer
Attorney-in-Fact
<PAGE>
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 17
TO
FORM S-6
ALLIANZ LIFE VARIABLE ACCOUNT A
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit Page
- ------- ----
EX-99.A3.b. Selling Agreement
EX-99.B Opinion and Consent of Counsel
EX-99.C Consent of Actuary
EX-99.D Independent Auditors' Consent
GENERAL AGENCY AGREEMENT
AGREEMENT between ____________________________________________________
(Broker/Dealer) and ________________________________________________ (Life Agent
or Agency) hereinafter taken together and referred to as "General Agent" and
USAllianz Investor Services, LLC ("USAZ").
WITNESSETH:
WHEREAS, General Agent is itself, or is affiliated with an entity which is
registered as a broker-dealer with the Securities and Exchange Commission (the
"SEC") and which is a member of the National Association of Securities Dealers,
Inc. (the "NASD") and is also duly licensed as a life insurance a gency under
the insurance laws of the various states in which it operates; and
WHEREAS, USAZ has been authorized by Allianz Life Insurance Company Of North
America and Preferred Life Insurance Company Of New York (hereinafter
collectively referred to as "Life Company" to obtain and appoint general agents
of Life Company to solicit for and sell those certain variable insurance
policies (the "Policies") which are described on the Commission Schedule which
is attached hereto and incorporated herein; and
WHEREAS, the parties desire General Agent to solicit for and sell the Policies;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
undertakings herein set forth, the parties hereby agree as follows:
1.APPOINTMENT
General Agent is hereby appointed as a general agent of Life Company for the
sale of the Policies in those states where General Agent is duly licensed to do
so and in those states where Life Company is authorized to sell such Products.
General Agent shall have no exclusive territory for the sale of the Policies.
USAZ shall inform General Agent of those jurisdictions in which the Policies may
be lawfully sold.
2.AUTHORITY TO SOLICIT AND SELL
General Agent shall have the authority, pursuant to the rules and regulations of
Life Company and USAZ to solicit sales of the Policies, obtain completed
applications therefor and accept premiums paid thereon. All applications for the
Policies shall be on forms duly authorized by Life Company in acc ordance with
the insurance laws and regulations of the various states in which such Policies
are sold. All such applications and premiums shall be promptly remitted to USAZ
or to Life Company in accordance with the rules and regulations of USAZ and Life
Company applicable to such transactions. Premiu ms are received in fiduciary
capacity by General Agent for USAZ or Life Company and remittance shall not
exceed 30 days.
No solicitation for a Policy shall be made by any person associated with General
Agent unless and until such person has been duly appointed as an agent of Life
Company in accordance with applicable insurance laws and regulations. General
Agent is not authorized to solicit for the sale of the Polici es in any
jurisdiction where such product is not duly authorized to be sold.
3.AUTHORITY TO RECOMMEND APPOINTMENT OF AGENTS
General Agent is authorized to recommend to USAZ those persons associated with
General Agent who are to be appointed as agents of Life Company and who are to
be authorized to solicit for the sale of the Policies in accordance herewith.
USAZ shall have absolute discretion to accept or reject such reco mmendation for
the appointment of any such person as an agent for the sale of the Policies.USAZ
shall also have the absolute right to terminate any such person as an agent of
Life Company.
4.TRAINING, COMPLIANCE AND LICENSING
General Agent shall have the sole responsibility for the training and
supervision of all persons appointed as agents hereunder. General Agent and all
persons associated with General Agent shall, in the solicitation and sale of the
Policies, comply with all written procedures, rules and regulations of USAZ or
Life Company applicable thereto. General Agent and all persons associated with
General Agent shall use only those sales, advertising and promotional materials
which have been approved in writing by USAZ.
General Agent shall have the responsibility for compliance with all laws, rules
and regulations applicable to the solicitation and sale of the Policies by
General Agent and by all persons associated with General Agent. General Agent
shall indemnify and hold USAZ and Life Company harmless from any li ability
(including but not limited to costs of defense and attorney's fees) arising from
any act or omission of General Agent or of any affiliate of General Agent, or of
any officer, director, employee of General Agent or of sales persons associated
with General Agent.
General Agent, its affiliates, its officers, directors, employees, and sales
personnel, shall obtain and maintain all licenses, registrations, and
appointments required by any law, regulation, or other requirement of the SEC,
the NASD, or of any jurisdiction where the Policies are to be sold.
5.COMPENSATION
General Agent shall receive commissions on premiums on all Policies issued as a
result of applications obtained by it and accepted by Life Company. Commissions
payable hereunder are specified in the Commission Schedule which is attached
hereto and incorporated herein. Such Commission Schedule may b e amended or
modified at any time by USAZ without notice. Any such amendment or modification
shall apply only to applications for Policies which are obtained by General
Agent after the date of such modification or amendment.
In the event an application or premium payment is rejected by USAZ or Life
Company or if a premium is refunded to a purchaser and General Agent has
received compensation on the amount so rejected or refunded, General Agent shall
promptly repay such compensation to USAZ.Also, repayment of commission may apply
to surrenders within twelve months of premium payment. Such commission
repayments are specified in the Commission Schedule. If such repayment is not
promptly made, USAZ may, at its option, deduct such amount from any future
payments due General Agent or may otherwise institute proceedings against
General Agent to recover such amounts.
6.AFFILIATED ENTITY
In the event General Agent utilizes an affiliated entity to satisfy
broker-dealer requirements pursuant to permission granted by a no-action letter
issued by the SEC, such affiliated broker-dealer shall countersign this
Agreement and shall be duly bound hereby.
7.ENTIRE AGREEMENT
This Agreement is the complete and exclusive statement of the agreement between
the parties as to the subject matter hereof which supersedes all proposals or
agreements, oral or written, and all other communications or letters of intent
between the parties related to the subject matter of this Agre ement.
8.MODIFICATION OF AGREEMENT
This Agreement can only be modified by a written agreement duly signed by the
persons authorized to sign agreements on behalf of the parties. Variance from
the terms or conditions of this Agreement or any order or other written
notifications will be of no effect.
9.SEPARABILITY OF PROVISIONS
If any provision or provisions of this Agreement shall be held to be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or be impaired thereby.
10.ASSIGNMENT
This Agreement and the rights, duties, and obligations of the parties hereto
shall not be assignable by either party hereto without the prior written consent
of the other, and any purported assignment shall be void.
11.WAIVER
No waiver by either party of any default by the other in the performance of any
promise, term, or condition of this Agreement shall be construed to be a waiver
by such party of any other or subsequent default in performance of the same or
any other covenant, promise, term, or condition hereof. No p rior transactions
or dealings between the parties shall be deemed to establish any custom or usage
waiving or modifying any provision hereof.
12.NOTIFICATION OF CLAIMS, DEMANDS, OR ACTIONS
Each party hereto shall promptly notify the other in writing of any claims,
demands, or actions having any bearing on this Agreement.
13.PERFORMANCE IN ACCORDANCE WITH LAW
Each party agrees to perform its obligation hereunder in accordance with all
applicable laws, rules, and regulations now or hereafter in effect.
14.BINDING AGREEMENT
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, their successors, and permitted assigns.
15.ACTS BEYOND THE CONTROL OF THE PARTIES
No liability shall result to either party, nor shall either party be deemed to
be in default hereunder, as a result of delay in its performance or from its
non-performance hereunder caused by circumstances beyond its control, including
but not limited to: act of God, act of war, riot, epidemic, fir e, flood, or
other disaster, or act of government. Nevertheless, the party shall be required
to be diligent in attempting to remove such cause or causes.
16.RELATIONSHIP OF THE PARTIES
Each of the parties will act as an independent contractor under the terms of
this Agreement and neither is now, or in the future, an agent, or a legal
representative of the other for any purposes. Neither party has any right or
authority to supervise or control the activities of the other party's e mployees
in connection with the performance of this Agreement or to assign or create any
application of any kind, express, or implied, on behalf of the other party or to
bind it in any way, to accept any services of process upon it or to receive any
notice of any nature whatsoever on its behalf.
17.ARBITRATION
Any controversy relating to this Agreement shall be determined by arbitration in
the City of Minneapolis, Minnesota, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. All parties agree to
be bound by the results of this arbitration; judgment upon the aware so rendered
may be entered and enforced in any court of competent jurisdiction.
18.TERMINATION This agreement shall automatically terminate upon breach by
either party or any of the terms and conditions hereof, or upon the dissolution,
bankruptcy, or insolvency of either party. This Agreement may be terminated by
either party at any time upon written notice. Termination shall not affect Ge
neral Agent's right to any compensation earned on premiums received and accepted
by Life Company prior to the effective date of such termination.
19.GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Minnesota.
20.CAPTIONS
Captions contained in this Agreement are for reference purposes only and do not
constitute part of this Agreement.
21.NOTICE
All notices which are required to be given or submitted pursuant to this
Agreement shall be in writing and shall be deemed given when deposited with the
United States Postal Service, postage prepaid, registered or certified mail,
return receipt requested, to the last address of record of the party being
notified which is maintained by the other party in the ordinary course of
business.
IN WITNESS WHEREOF, the parties have executed this Agreement in Minneapolis,
Minnesota on _______________________, _____.
GENERAL AGENT:
-------------------------------------------
Name of Broker Dealer
By ________________________________________
-------------------------------------------
Print Name and Title
-------------------------------------------
Name of Life Agent of Agency
By ________________________________________
-------------------------------------------
Name and Title
USAllianz Investor Services, LLC
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
By _____________________________
- --------------------------------
Name and Title
Blazzard, Grodd & Hasenauer, P.C.
943 Post Road East
Westport, CT 06880
(203) 226-7866
April 6, 2000
Board of Directors
Allianz Life Insurance Company of North America
1750 Hennepin Avenue
Minneapolis, MN 55403
RE: Opinion and Consent of Counsel
Allianz Life Variable Account A
Dear Sir or Madam:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of a Post-Effective Amendment to a Registration Statement on Form S-6
for the Individual Flexible Premium Variable Life Insurance Policies to be
issued by Allianz Life Insurance Company of North America and its separate
account, Allianz Life Variable Account A.
We are of the following opinions:
1. Allianz Life Variable Account A is a unit investment trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"),
and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of premium payments made by a Policy Owner pursuant to a
Policy issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such a
Policy Owner will have a legally-issued, fully-paid, non-assessable
contractual interest under such Policy.
You may use this opinion letter, or copy hereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Prospectus which forms a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By:/S/LYNN KORMAN STONE
-----------------------------
Lynn Korman Stone
Allianz Life Insurance Company of North America [Allianz Logo]
Jack L. Baumer, FSA, MAAA
Assistant Vice President and Actuary
Product Development-Variable
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
Telephone: 612/337 6180
Telefax: 612/337 6252
www.allianzlife.com
April 4, 2000
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 the Appendix in a Registration Statement Form S-6 registering
Flexible Premium Variable Life Insurance Policies. The illustrations have been
prepared in accordance with standard actuarial principles and reflect the
operation of the Policy by taking into account all charges under the Policy and
in the underlying fund, and are shown for the male, non-smoker risk
classification.
Sincerely,
/s/JACK L. BAUMER
- ------------------
Jack L. Baumer
JLB:rar
KPMG 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 the Contract Owners of Allianz Life Variable Account A:
We consent to the use of our report, dated February 4, 2000 on the financial
statements of Allianz Life Variable Account A and our report dated February 7,
2000, 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".
Our report dated February 7, 2000 on the consolidated financial statements of
Allianz Life Insurance Company of North America and subsidiaries refers to a
change in the method of calculating deferred acquisition costs and future
benefit reserves for two-tiered annuities.
KPMG LLP
Minneapolis, Minnesota
April 21, 2000
