Registration No. 33-15464
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 24
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
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
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.
Title and amount of securities being registered:
Individual Single Premium Variable Life Insurance Policies.
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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N-8B-2 Item Caption in Prospectus
1 Allianz Life, The Separate Account
2 Allianz Life
3 Not Applicable
4 Distributor
5 The Separate Account
6(a) Not Applicable
(b) Not Applicable
9 Not Applicable
10 Purchases
11 Investment Options
12 Investment Options
13 Expenses
14 Purchases
15 The Separate Account
16 Investment Options
17 Policy Values, Access to your Money
and Transfers
18 Purchases
19 Not Applicable
20 Not Applicable
21 Not Applicable
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 Allianz Life
26 Allianz Life
27 Allianz Life
28 Allianz Life
29 Allianz Life
30 Allianz Life
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Allianz Life
37 Not Applicable
38 Distributor
39 Distributor
40 Not Applicable
41(a) Distributor
42 Not Applicable
43 Not Applicable
44 Purchases
45 Not Applicable
46 Policy Values, Access to your Money
and Transfers
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 Allianz Life
52 Investment Options
53 Taxes
54 Financial Statements
55 Not Applicable
</TABLE>
THE SINGLE 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 Single Premium Variable Life Insurance Policy
(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 planning and other insurance needs of individuals.
The Policy offers you Variable Options, each of which invest in a Portfolio
listed below. When you buy a Policy, you are subject to investment risk. This
means that the death benefit and your Policy Value may increase and decrease
depending upon the performance of the Variable Option(s) you select. Some of the
Variable Options may not be available in your state. There is a Guaranteed Death
Benefit payable. However, any loans against the Policy will impact this
guarantee. You can surrender your Policy for its Cash Surrender Value. No
partial surrenders are allowed.
VARIABLE OPTIONS:
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 Fun
Franklin Zero Coupon Funds-- 2000, 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 SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATIOIN TO THE CONTRARY IS A CRIMINAL OFFENSE.
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*The Fund name changed:
CURRENT NAME PREVIOUS NAME
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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 Fun
Franklin Real Estate Fund Franklin Real Estate Securities Fun
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>
2
The Portfolios are described in the attached fund prospectuses. You can make or
lose money based on the Portfolio's performance. The Policy is subject to
investment risk.
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Allianz Life Single
Premium Variable Life Insurance Policy. The Securities and Exchange Commission
(SEC) maintains a Web site (http://www.sec.gov) that contains material
incorporated by reference and other 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
o is not guaranteed and 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 Policy. 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.
Dated May 1, 2000
<PAGE>
Prospectus 3
TABLE OF CONTENTS
Special Terms 4
Summary 4
Part I 6
1. The Variable Life
Insurance Policy 6
2. Purchases 6
Single Premium 6
Application for a Policy 7
Allocation of Single Premium 7
Free Look 7
Grace Period 7
Reinstatement 7
Policy Values 7
Exchange Provision 8
3. Investment Options 8
Transfers 10
Substitution 10
4. Expenses 10
Insurance Charges 10
Cost of Insurance Charge 10
Deferred Issue Charge 11
Transfer Fee 11
Taxes 11
Portfolio Expenses 11
5. Death Benefit 11
6. Taxes 13
Life Insurance in General 13
Taking Money Out of Your Policy 13
Diversification 13
7. Access to Your Money 13
Loans 13
Total Surrender and Termination of the Policy 14
8. Other Information 14
Allianz Life 14
The Separate Account 14
Distributor 14
Suspension of Payments or Transfers 15
Ownership 15
Part II 15
Management of Allianz Life 15
Administration of the Policies 16
Voting 16
The Separate Account 16
Legal Opinions 16
Misstatement of Age or Sex 17
Right to Contest 17
Settlement Options 17
Tax Status 17
Reports to Owners 20
Legal Proceedings 20
Experts 20
Financial Statements 20
Appendix A - Illustration of
Policy Values
Appendix B - Table of Net
Single Premium Factors
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4
SPECIAL TERMS
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We have tried to make this prospectus as readable and understandable for you as
possible. However, by the very nature of the Policy certain technical words or
terms are unavoidable. We have identified some of those words or terms. For
several of these terms we have provided a definition. For the remainder, we
believe that you will find an adequate discussion in the text. The page
indicated here is where we believe you will find the best explanation for the
word or term. These words or terms are in italics or bold on the indicated page.
Cash Surrender Value - Your Policy Value less the sum of the uncollected
Deductions and any Indebtedness.
Deductions - The charges we levy against your Policy.
Face Amount - The amount of coverage that you choose. This amount is used to
determine the death benefit.
Guaranteed Death Benefit - We guarantee that the Policy will remain in force
regardless of investment experience, unless the Indebtedness under your Policy
exceeds the Policy Value less uncollected Deductions. If there is no
Indebtedness, the Policy cannot lapse even if the Policy Value is $0.
Indebtedness - The amount of any existing Policy loans plus the pro-rata portion
of any accrued interest.
Policy Date, Policy Anniversary, Policy Year - The Policy Date is when the
insured's life is covered under your Policy. It is the date from which your
Policy Anniversaries and Policy Years are determined.
Policy Value - The total value of your Policy. It is equal to the sum of the
values allocated to the variable options and the values allocated to the loan
account. (Policy Value is referred to as Account Value in the Policy.)
Processing Date - The Policy Date and the same day of the month as the Policy
Date at the end of each successive 3-month period. The Processing Date is when
we deduct charges and recalculate the death benefit.
Valuation Unit - An accounting unit used to calculate Policy Values when they
are allocated to the Variable Options.
Page
Beneficiary. 15
Business Day. 7
Insured. 4
Issue Date. 7
Joint Owner. 15
Loan Account. 14
Owner. 15
Portfolio. 8
Premium 6
Variable Option. 8
The prospectus is divided into three sections: Summary, Part I and Part II. The
sections in the Summary correspond to sections in Part I of this prospectus
where the topics are discussed in more detail. Additional important information
is contained in Part II of this prospectus.
SUMMARY
1. THE VARIABLE LIFE INSURANCE POLICY
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The variable life insurance policy that we are offering is a contract between
you, the owner, and Allianz Life, 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. Estate taxes may apply.
The insured is the person whose life is insured under the Policy. You, the owner
can also be the insured but you do not have to be.
You can choose among the Variable Options. Each variable option invests in one
portfolio of a fund. The portfolios are listed in Item 3. You can allocate your
unloaned Policy Value to any or all of the variable options. You can transfer
between Variable Options up to 12 times a year without charge and without being
taxed. If you make more than 12 transfers in a year, we will charge $25 or 2% of
the amount transferred, whichever is less. Market timing transfers may not be
permitted.
While the Policy is in force, the Policy Value and, under certain circumstances,
the death benefit, will vary with the investment performance of the portfolios
you choose. You are not taxed on the earnings from the variable options until
you surrender or borrow from your Policy.
Prospectus 5
2. PURCHASES
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You buy the Policy with a single premium payment. The minimum single premium we
will accept is $20,000. In some circumstances, the insured may be required to
provide us with medical records or a complete paramedical examination. Your
registered representative can help you complete the proper forms.
3. INVESTMENT OPTIONS
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The Variable Options each invest in a portfolio of a fund. You can put your
money in the Portfolios which are described in the accompanying fund
prospectuses. Depending upon market conditions and the performance of the
portfolio(s) you select, you can make or lose money in any of these portfolios.
4. EXPENSES
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The Policy has both insurance features and investment features, and there are
costs related to each that reduce the return on your investment.
Each business day we deduct a total insurance charge which is equal, on an
annual basis, to 0.75% of your average Policy Value.
Each Processing Date we deduct from your Policy Value the cost of insurance
charge. This charge pays us for providing you with death benefit protection for
the period since the last Processing Date. This charge varies and depends upon
the sex, age and rating classification of the insured.
When the single premium is received by us, we accrue against your Policy a
deferred issue charge. This charge includes a premium tax charge which is 2.5%
of the premium; a sales charge which is 4% of the premium; and a policy issue
charge which is 0.5% of the premium. A portion of the deferred issue charge is
deducted annually for the first 10 years of the Policy. If you surrender your
Policy before the full amount of the deferred issue charge is deducted, we will
collect the remaining portion of the charge from your Policy Value at the time
of surrender.
Under certain circumstances, we may assess a transfer fee when you transfer your
Policy Value from one Variable Option to another.
There are also annual Portfolio operating expenses, which vary depending upon
the Portfolio(s) you select. These expenses range from 0.49% to 1.56% of the
average daily value of the Portfolios.
5. DEATH BENEFIT
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The Policy provides for a Face Amount of insurance. On the day we issue you a
Policy the death benefit is the Face Amount. Thereafter the death benefit may
vary. The actual amount payable to your beneficiary is the death benefit less
any Indebtedness.
The death benefit will be the greater of 1) your Face Amount or 2) your Policy
Value multiplied by a specified percentage. These percentages vary by the age of
the insured and are shown in your Policy. Therefore, increases in your Policy
Value under certain circumstances will increase the death benefit. A decrease in
Policy Value may decrease the death benefit, but the death benefit will never be
less than the Face Amount so long as the Policy remains in force.
When you apply for a Policy, you designate a beneficiary who will receive the
death benefit. 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 earnings are not taxed until you take them out. In most cases, your Policy
will be a modified endowment contract unless it was exchanged for a contract
issued before June 21, 1988. Money taken out of a modified endowment contract is
considered to come from earnings first and is taxed as income. Also, if you are
younger than 591/2 when you take money out, you may be charged a 10% federal tax
penalty on the earnings withdrawn. The death benefit is paid to your beneficiary
income tax free. However, estate taxes may apply.
7. ACCESS TO YOUR MONEY
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Under the Policy you may surrender the Policy at anytime for its Cash Surrender
Value. You can also borrow some of your Policy Value. The minimum loan amount is
$1,000. Loans will affect the death benefit, Policy Value and investment
performance. You cannot make partial surrenders.
8. OTHER INFORMATION
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Right to Examine
If you cancel your Policy within ten days after you receive it (or whatever
period is required in your state),
6
we will return to you the greater of 1) the premium(s) you paid or 2) your
Policy Value on the day we, or the agent through whom it was purchased, received
the returned Policy. Until the end of the time you are allowed to examine your
Policy (15 days or the required period in your state), your premium will remain
in the Franklin Money Market Fund. After that, we will invest your Policy Value
as you requested.
Who Should Purchase the Policy?
The Policy is designed for an individual who wants to:
o create or conserve his/her estate;
o retain access to cash through loans and surrenders;
and
o use the income tax advantages of life insurance.
If you currently own a variable life insurance policy on the life of the
insured, you should consider whether the purchase of the Policy is appropriate.
Also, you should carefully consider whether the Policy should be used to replace
an existing policy on the life of an insured. Replacement of an existing policy
with this Policy may not be advantageous to your situation.
Allianz Life will not issue a Policy on an insured older than 80. However, we
may waive this requirement under special circumstances.
9. INQUIRIES
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If you need more information, please contact us at:
Allianz Life Insurance Company of North America
1750 Hennepin Ave.
Minneapolis, MN 55403
1-800-542-5427
If you need Policy owner service (such as changes in Policy information,
questions regarding Policy Values, or to make a loan), please contact us at:
USAllianz Service Center
300 Berwyn Park
P.O Box 3031
Berwyn, PA 19312-0031
1-800-624-0197
<PAGE>
PART I
1. THE VARIABLE LIFE INSURANCE POLICY
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This variable life insurance policy is a contract between you, the owner, and
Allianz Life, an insurance company. This kind of policy is most commonly used
for estate planning.
While the insured is still alive, you can select among the Variable Options
offered in the Policy. (The Variable Options are listed in Item 3.) Currently
you can transfer between the Variable Options up to 12 times a year without
charge. The Policy Value and, under some circumstances, the death benefit will
go up or down depending upon the investment experience of the Portfolio(s) you
select. This gives you the opportunity to capture the upside potential of the
market. It also means you could lose money.
While your money remains in the Policy, you pay no current income taxes on
earnings or gains. This is called tax-deferred accumulation. It helps your money
grow faster. Subject to some limitations, you may take money out at any time
through loans or a surrender. There are no partial surrenders allowed, only full
surrenders. However, any money you take out, even as a loan, is taxed as
earnings until all earnings have been removed from the Policy. If you are
younger than age 591/2 when you take money out, you may also incur an additional
10% federal tax penalty. If you purchased a Policy in exchange for a policy
issued prior to June 21, 1988, different tax rules may apply. (See Section 6.
Taxes. Part II also contains more detailed information regarding taxes.)
Because this is a life insurance policy, it provides a death benefit, which is
an amount greater than your Policy Value. When the insured dies, the death
benefit (minus any loans and any accrued loan interest) is paid to your
beneficiary free from federal income tax. Estate taxes may apply.
2. PURCHASES
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SINGLE PREMIUM
The single premium is the money you give us to buy the Policy. The minimum
single premium we will accept is $20,000. When you apply for the Policy, you
request a specific amount of insurance which will vary depending, in part, on
the amount of the premium you pay. We call this amount the Face Amount of the
Policy. The Internal
Prospectus 7
Revenue Code (Code) has established certain criteria which must be met in order
for a life insurance policy to qualify as life insurance under the Code. The
Code re- quires that there be a minimum Face Amount for a specified premium
depending upon the age of the insured.
APPLICATION FOR A POLICY
In order to purchase a Policy, you must submit to us an application which
provides us with information on the proposed insured. In some cases, we will ask
for additional information. We may request that the insured provide us with
medical records or possibly require other medical tests.
We will not issue a Policy if the insured is over age 80, except under special
circumstances.
We will review all the information we have about the insured and determine
whether or not the insured meets our standards for issuing the Policy. This
process is called underwriting. If the insured meets all of our underwriting
requirements, we will issue a Policy. There are several underwriting classes
under which the Policy may be issued. We will not issue the Policy unless the
premium and the application are in good order as determined by our underwriting
rules.
ALLOCATION OF SINGLE PREMIUM
When you purchase a Policy, we will initially invest your money in the Franklin
Money Market Fund. After 15 days from the issue date (or the period required in
your state), we will allocate your Policy Value to the Portfolios as you
requested in the application. The issue date is the date that underwriting is
completed and we issue the policy. We reserve the right to limit the number of
Variable Options which you can invest in. Currently, you can invest in up to 10
Variable Options.
If as a result of underwriting review, we do not issue you a Policy, we will
return your premium, plus interest required by your state.
FREE LOOK
If you change your mind about owning a Policy, you can cancel it within 10 days
after receiving it (or the period required in your state). We will give you back
the greater of your premium payment or your Policy Value. Any amounts we refund
will include all Policy fees and charges.
GRACE PERIOD
Your policy will lapse if your total Indebtedness under the Policy is greater
than your Policy Value less any uncollected Deductions. If you have no loan
outstanding, the Policy cannot lapse even if your Policy Value goes to zero.
If your Policy does lapse, you have a 31-day grace period to repay your loan by
making a payment of at least an amount which is sufficient to keep your Policy
in force through 3 Processing Dates. If you do not make the required loan
repayment by the end of the grace period, your Policy will lapse and all
coverage under your Policy will terminate without value.
Your Policy continues in force during the grace period. If the insured dies
during the grace period, the death benefit is calculated as the death benefit in
effect immediately prior to the start of the grace period less any accrued
Deductions and less any Indebtedness.
REINSTATEMENT
If your Policy terminates while the insured is still alive you can have it
reinstated if the Policy did not terminate because you made a total surrender.
You can only reinstate your Policy during the lifetime of the insured.
The requirements for a reinstatement are:
o We must receive a properly executed application for reinstatement. It must be
sent to our Service Office.
o You must provide us with satisfactory evidence of insurability of the insured.
o You must pay a premium sufficient to keep the Pol icy in force through 3
Processing Dates.
o You must repay any Indebtedness.
We will reinstate your Policy on the next Processing Date after we approve the
reinstatement application.
The effective date of the reinstated Policy is the next Processing Date
following our approval of your application for reinstatement.
POLICY VALUES
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 the Policy Value. In order to keep track of your Policy Value, 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 Allianz Life determines the value of a Valuation Unit for
each of the Variable Options. The value of a Valuation Unit for any given
business day is determined by multiplying a factor we call the net
8
investment factor times the value of Valuation Unit for the previous business
day. We do this for each Variable Option. The net investment factor is a number
that reflects the change (up or down) in an underlying investment Portfolio
share. Our business days are 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.
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 a Variable Option by the value of the Valuation Unit for
that Variable Option.
When we assess the Deductions we do so by deducting Valuation Units from your
Policy. If you select more than one Variable Option, we make the deductions pro
rata from all of the Variable Options. When you make a loan we also deduct
Valuation Units and place the amount in the Loan Account.
EXCHANGE PROVISION
You can exchange a Policy for a policy with benefits that do not vary with the
investment results of the Portfolios. You must elect such an exchange within 24
months after we issue you the Policy. You do not need to submit any evidence of
insurability so long as the benefits under the new policy are equal to or less
than the benefits under the Policy at the time of exchange.
3. INVESTMENT OPTIONS
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The Contract offers Variable Options, which invest in Portfolios of AIM Variable
Insurance Funds, Inc., The Alger American Fund, Franklin Templeton Variable
Insurance Products Trust, and the USAllianz Variable Insurance Products Trust.
Additional Portfolios may be available in the future.
You should read the fund prospectuses (which are attached to this prospectus)
carefully before investing.
AIM Variable Insurance Funds, The Alger American Fund, Franklin Templeton
Variable Insurance Products Trust and USAllianz Variable Insurance Products
Trust are the funds underlying your 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 in connection 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
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.
THE FRANKLIN ZERO COUPON FUND-2000 WILL MATURE DECEMBER 15, 2000. If you have
not made a section prior to the maturity date of a Zero Coupon Fund, the Policy
Value held in the Franklin Zero Coupon Fund-2000 underlying your Policy will be
automatically transferred to the Franklin Money Market Fund. We will notify you
of a maturing Zero Coupon Fund in writing at least 30 days prior to the
maturity. Included with the notification will be investment options available at
that time as well as the automatic Money Market option.
Shares of the Portfolios may be offered in connection with certain variable
annuity contracts and variable life insurance policies of various insurance
companies which
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Prospectus 9
The following is a list of the Portfolios available under the Policy and the investment adviser for each Portfolio:
Investment
Variable Options Advisers
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AIM Variable Insurance Funds:
AIM V.I. Growth Fund A I M Advisors, Inc.
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio Fred Alger Management, Inc.
Alger American Leveraged AllCap Portfolio Fred Alger Management, Inc.
(seeks long term capital appreciation)
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, LLC
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, LLC
Franklin Zero Coupon Funds - 2000, 2005 and 2010 Franklin Advisers, Inc.
Mutual Discovery Securities Fund (capital appreciation) Franklin Mutual Advisers, LLC
Mutual Shares Securities Fund Franklin Mutual Advisers, LLC
(capital appreciation with income as a secondary goal)
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.
Templeton International Smaller Companies Fund Templeton Global Advisors Limited
Templeton Pacific Growth 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.
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10
<TABLE>
<CAPTION>
*The Portfolio name changed as of the effective date listed below:
CURRENT NAME PREVIOUS NAME EFFECTIVE DATE
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<S> <C> <C>
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
</TABLE>
may or may not be affiliated with Allianz Life. Certain Portfolios may also be
sold directly to qualified plans. The investment advisers believe that offering
their shares in this manner will not be disadvantageous to you.
Allianz Life may enter into certain arrangements under which it is reimbursed by
the Portfolios' advisers, distributors and/or affiliates for the administrative
services which it provides to the Portfolios.
TRANSFERS
You can transfer money among the Variable Options. Currently you can make 12
transfers every Policy Year without charge while the insured is alive. If you
make more than 12 transfers in a year, there is a transfer fee deducted. (We
measure years from your Policy Date.) The fee is $25 per transfer or, if less,
2% of the amount transferred. The minimum amount which you can transfer is $500,
or your entire value in the Variable Option.
You can make transfers by telephone only if you previously elected to do so in
writing. Unless we are instructed otherwise, if you own the Policy with a joint
owner we will accept instructions from either you or the other owner. We will
use reasonable procedures to confirm that instructions given to us by telephone
are genuine. If we fail to use such procedures, we may be liable for any losses
due to unauthorized or fraudulent instructions. We record all telephone
instructions.
We have not designed the Policy for use by professional market timing
organizations or other persons using programmed, large, or frequent transfers.
Such activity may be disruptive to a Portfolio. We reserve the right to reject
any transfer request from any person, if in the Portfolio managers' judgment, a
Portfolio would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected.
SUBSTITUTION
We may elect to substitute one of the Variable Options you have selected with
another Variable Option. We would not do this without the prior approval of the
Securities and Exchange Commission. We will give you notice of our intent to do
this. We may also limit further investment in a Variable Option if we deem the
investment inappropriate.
4. EXPENSES
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There are charges and other expenses associated with the Policy that reduce the
return on your investment in the Policy. These charges and expenses are:
INSURANCE CHARGES
Each business day we will make a deduction for the mortality and expense risk
charge and the administrative charge.
MORTALITY AND EXPENSE RISK CHARGE. This charge is equal, on an annual basis, to
0.60% of the Policy Value of the Policy. This charge cannot be increased. This
charge compensates us for assuming the mortality and expense risks under the
Policy.
ADMINISTRATIVE CHARGE. This charge is equal, on an annual basis, to 0.15% of the
Policy Value of the Policy. This charge cannot be increased. This charge
compensates us for expenses we incur in the administration of the Policies.
COST OF INSURANCE CHARGE
This charge compensates us for insurance coverage provided since the last
Processing Date.
The guaranteed cost of insurance charge is determined by multiplying the net
amount at risk by the cost of insurance rate. The net amount at risk is the
difference
Prospectus 11
between the death benefit and the sum of your Cash Surrender Value and your loan
account value. The cost of insurance rate is based upon the sex (in states where
permitted), age and rate classification of the insured. The rate classification
of the insured is determined through our underwriting process.
The Policy provides that for standard risks, the guaranteed cost of insurance
rate is based on the Commissioners Standard 1980 Ordinary Male and Female,
Smoker and Non-Smoker Mortality Tables last birthday (1980 CSO Tables). For
substandard risks, the guaranteed cost of insurance rate is higher and will be
based upon a multiple of the 1980 CSO Tables. The multiple is based on the
insured's substandard rating. Tables setting forth the guaranteed cost of
insurance rates are included in each Policy.
We can use rates that are less than the guaranteed cost of insurance rates shown
in the Policy. We refer to these rates as the current cost of insurance rates.
The current rates we currently use are approximately 75% of the 1980 CSO Tables.
The current rates will never be more than the guaranteed maximum cost of
insurance rates.
DEFERRED ISSUE CHARGE
When we receive your single premium payment, a Deferred Issue Charge of 7% of
the premium is accrued. We deduct this charge in 10 equal annual deductions of
0.7% of the premium on Policy Anniversaries for the first 10 Policy Years. If
you surrender the Policy before the full amount is deducted, the uncollected
portion of this charge is deducted from the Policy Value. The total Deferred
Issue Charge is 7.0% of the premium. The Deferred Issue Charge is for premium
taxes (2.5% of the single-premium); sales charge (4.0% of the single-premium);
and Policy issue charge (0.5% of the single-premium). For policies issued in the
state of California only, the Deferred Issue Charge is for premium taxes (2.35%
of the single-premium); sales charge (4.15% of the single-premium); and Policy
issue charge (0.5% of the single-premium).
PREMIUM TAXES - Most states and certain jurisdictions, such as cities and
counties, tax premium payments. Premium taxes vary from state to state and
generally range from 2% to 3%. This charge does not apply in states that have no
premium tax.
SALES CHARGE - This sales charge reimburses us for expenses incurred in
connection with the promotion, sale and distribution of the Policy. This charge
is not expected to cover all of our distribution costs. If this charge is in-
sufficient to cover the distribution costs, we may make up the difference from
our general assets and from the profit we expect from the Mortality and Expense
Risk Charge.
POLICY ISSUE CHARGE - This charge is designed to cover the administrative
expenses we incur in connection with issuing a Policy. Such expenses include
initial underwriting review, medical examinations, inspection reports, attending
physicians' statements, insurance underwriting costs, Policy issuance costs,
establishing permanent Policy records, preparation of illustrations, preparation
of riders and the initial confirmation of the transaction.
TRANSFER FEE
Currently you can make 12 free transfers every year. We measure a year from the
Policy Date. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25, or 2% of the amount that is transferred, whichever is less.
If we do assess a transfer fee, it will be deducted from the amount transferred.
Your initial allocation will not count in determining the transfer fee.
TAXES
We may assess a charge against a Policy for any taxes attributable to the
Policy. We do not expect to incur such taxes.
PORTFOLIO EXPENSES
There are deductions from the assets of the various Portfolios for operating
expenses (including management fees), which are summarized on the next page. See
the accompanying fund prospectuses for a complete description.
5. DEATH BENEFIT
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The primary purpose of the Policy is to provide death benefit protection on the
life of your insured. Even if your Policy Value is $0, the Policy will not lapse
if there is no Indebtedness under the Policy.
The death benefit is paid upon receipt of due proof of the insured's death. The
death benefit is the greater of: 1) the Face Amount; or 2) the variable
insurance amount as of the date we receive proof of death of the insured. After
the issue date, the variable insurance amount will be your Policy Value, less
the uncollected Deductions, multiplied by the net single premium factor for the
insured's attained age as of such date. The table of net single premium factors
is contained in Appendix B to this prospectus and is
(cont. on p. 13)
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12
<TABLE>
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FUND ANNUAL EXPENSES:
(as a percentage of a Portfolio's average net assets for the most recent fiscal
year). See the accompanying Portfolio prospectuses for more information.
MANAGEMENT
AND PORTFOLIO 12B-1 TOTAL ANNUAL
ADMINISTRATION FEES1 FEES OTHER EXPENSES EXPENSES
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<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 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 - 2000 .63% -- .02% .65%
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% 1.11%
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% .00% .75%
USAllianz VIP Growth Fund5/7 .65% .25% .00% .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 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 the Franklin Templeton Variable Insur- ance Products Trust prospectus
for further information regarding these fees.
2. Other expenses for the Alger American Leveraged AllCap Fund 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 US Allianz VIP Diversified Assets Fund, the US Allianz VIP Fixed Income Fund, and the US
Allianz VIP Growth Fund commenced operations on November 12, 1999. The expenses shown above for these portfolios are therefore
estimated for the fund's 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 Prod ucts 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 l lower and total fund expenses would have been 3.80% for the USAllianz VIP Diversified Assets Fund, 3.77% for the
USAllianz VIP Fixed Income Fund, and 3.90% for the Growth Fund.
</FN>
</TABLE>
<PAGE>
Prospectus 13
(cont. from p. 11)
shown in your Policy. The Face Amount is determined on the date we issue your
Policy. The variable insurance amount is the same as the Face Amount on that
date. Thereafter the variable insurance amount will vary.
The amount payable for the death benefit is reduced by any Indebtedness and any
accrued Deductions, and is increased by any amount due from riders. Payment of
the death benefit may be delayed pending receipt of any applicable tax consents
and/or forms from a state. Your Policy will terminate without value, as
described in the grace period provision, if your Indebtedness is greater than
the Policy Value less the uncollected Deductions.
6. TAXES
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NOTE: We have prepared the following information on taxes as a general
discussion of the subject. It is not in tended as tax advice to any person. You
should consult your own tax adviser about your own circumstances. We have
included an additional discussion regarding taxes in Part II of this prospectus.
LIFE INSURANCE IN GENERAL
Life insurance, such as the Policy, is a means of providing for certain
financial protections upon your death and setting aside money for future 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. The
beneficiaries are not taxed when they receive the death proceeds upon the death
of the insured. However, estate taxes may apply.
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. When you
receive a distribution, you are taxed on the amount of the surrender that is
earnings.
TAKING MONEY OUT OF YOUR POLICY
For tax purposes, your Policy will be treated as a modified endowment contract,
unless under certain circumstances it was exchanged for a policy issued before
June 21, 1988. Consequently, if you make a withdrawal or take a loan from your
Policy, the Code treats it as first coming from earnings and then from your
premiums. These earnings are included in taxable income.
The Code also provides that any amount received from an insurance policy 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 1/42; 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 you purchased a Policy in exchange for a policy issued prior to June 21,
1988, different tax rules may apply. See "Tax Status" in Part II for more
details.
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 the 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
investment 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,
then the guidance would generally be applied prospectively. However, if such
guidance is considered not to be a new position, it may be applied retro
actively. 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
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The Cash Surrender Value in your Policy is available: 1) by making a complete
surrender, or 2) by taking a loan from your Policy.
LOANS
You may borrow money from us while the Policy is still in force. The Policy is
the only security we require for a Policy loan. You cannot borrow against your
Policy until the end of the right to examine period and you cannot borrow if the
Policy is in a grace period. Loans are con-
14
sidered distributions from the Policy for tax purposes and the portion of the
loan that has come from earnings will be taxable to you and may be subject to a
10% penalty tax. Loan amounts are treated as coming first from earnings and then
from premiums. See "Tax Status" in Part II for more details.
LOAN AMOUNT. The maximum loan amount is equal to 90% of the Policy Value less
any uncollected Deductions.
The minimum loan amount is $1,000. If total loans equal or exceed the Policy
Value, the Policy will terminate at the end of the grace period if an
appropriate loan repayment is not made.
LOAN ACCOUNT. When you make a loan, a portion of your Policy Value equal to the
loan will be transferred on a prorata basis from the portfolios to the loan
account. The loan account is a portion of our general account that contains
Policy Values attributable to Policy loans.
LOAN INTEREST. Loan interest due on the Policy loan accrues daily at a current
rate of 4.75% per annum. The loan interest is due each Policy Anniversary and if
not paid will become part of the loan. When that happens, a portion of the
Policy Value equal to the loan interest due is transferred, on a prorata basis,
from the portfolios to the loan account.
INTEREST CREDITED. Amounts held in the loan account are credited daily with
interest, at a current rate of 4.0% per annum.
EFFECT OF LOAN. When you make a loan against your Policy, we will redeem
Valuation Units from the portfolios equal to the loan request and transfer that
amount to the loan account.
A Policy loan, whether or not repaid, will have a permanent effect on the
Policy. This is because the loan account does not share in the investment
results of the port fo lio(s). If it is not repaid, the Policy loan and accrued
loan interest will reduce the amount of Policy Value. It will also reduce the
amount payable at death because Indebtedness is deducted from the death benefit.
LOAN REPAYMENTS. You can repay all or part of a loan at any time while your
Policy is in force and the insured is alive. The minimum loan repayment amount
is $1,000. If you want to repay a loan in full, the loan repayment must equal
the loan plus all the accrued loan interest. When you repay a loan, we will
transfer the amount held in the loan account to the portfolios according to your
most recent instructions.
Unless you tell us otherwise, any payment we receive from you will go first to
pay any interest due and then to repay any loan.
TOTAL SURRENDER AND TERMINATION OF THE POLICY
You can terminate your Policy by notifying us in writing. We will pay you the
Cash Surrender Value. When that happens, the Policy will be terminated and there
will be no other benefits. When you make a total surrender we deduct any
uncollected Deductions. Partial surrenders are not allowed.
Your Policy will also terminate if the grace period has ended or the insured has
died.
8. OTHER INFORMATION
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ALLIANZ LIFE
Allianz Life Insurance Company of North America (Allianz Life), 1750 Hennepin
Avenue, Minneapolis, Minnesota 55403, was organized under the laws of the state
of Minnesota in 1896. Allianz Life offers fixed and variable life insurance and
annuities and group life, accident and health insurance. Allianz Life is
licensed to do direct business in 49 states and the District of Columbia.
Allianz Life is a wholly-owned subsidiary of Allianz Versicherugs-AG Holding.
USAllianz Investor Services, LLC (formerly NALAC Financial Plans, LLC) is a
wholly-owned subsidiary of Allianz Life. It provides marketing services and is
the principal underwriter of the Policy. USAllianz Investor Services, LLC is
reimbursed for expenses incurred in the distribution of the Policies.
Administration for the Policy is provided at our Service Office:
USAllianz Service Center
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
1-800-624-0197
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
Prospectus 15
losses (realized or unrealized) resulting from those assets are credited to or
against the Policies and not against any other policies we may issue.
DISTRIBUTOR
USAllianz Investor Services, LLC, 1750 Hennepin Ave., Minneapolis, MN 55403,
acts as the distributor of the Policies. USAllianz Investor Services, LLC is an
affiliate of Allianz Life.
Commissions will be paid to broker-dealers who sell the Policies. Broker-dealers
will be paid commissions up to 6% of premiums and a trail commission up to 0.25%
per year of the Policy Value after the first Policy Year. In addition, under
certain circumstances, Allianz Life may pay certain sellers production bonuses
which will take into account, among other things, the total premiums which have
been paid under Policies associated with the broker-dealer. In addition, Allianz
Life may pay certain sellers for other services not directly related to the sale
of the Policies (such as special marketing support allowances).
Sometimes, we enter into an agreement with the broker-dealer to pay the
broker-dealer persistency bonuses, in addition to the standard commission. A
persistency bonus is paid as an additional commission to certain broker-dealers
based on the value and length of time in force for the block of policies
associated with the broker-dealer.
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 Allianz Life 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.
OWNERSHIP
OWNER. You, as the owner of the Policy, have all of the rights under the Policy.
If you die while the Policy is still in force and the insured is living,
ownership passes to a successor owner or if none, 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 you name to receive any
death benefit. The beneficiary is named at the time the Policy is issued unless
changed at a later date. 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.
ASSIGNMENT. You can transfer ownership of (assign) the Policy.
PART II - MORE INFORMATION
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MANAGEMENT OF ALLIANZ LIFE
As of May 1, 2000 the directors and executive officers of the Company and their
principal occupations for the past 5 years are as follows:
Name Principal Occupations During the Past Five Years
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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 Chariman of the Board. Previously Chairman, Pres-
ident and Chief Executive Officer of the Company
since October, 1988.
Herbert F. Hansmeyer Chairman of the Board of Allianz Life of America
Corp. Member of the Board of Management of
Allianz Life-AG, Munich, Germany, since 1986.
Dr. Gerhard Rupprecht Chairman of the Board of Management - Allianz Life
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 Secr-
tary of the Company since April 1997. Formerly
Second Vice President, Senior Counsel and Assistant
Secretary of the Company.
Paul Howman Vice President - Underwriting of the Company since 1995.
Robert S. James President - Individual Marketing Division of the Com-
pany since March 31, 1995. Previously President of
16
Financial Markets Division.
Edward J. Bonach President, Special Markets Division. Previoulsy Exec-
utive Vice President - Chief Financial Officer and
Treasurer of the Company 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 Norwes
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.
ADMINISTRATION OF THE POLICIES
While we have primary responsibility for all administration of the Policies and
the Separate Account, we have retained the services of Delaware Valley Financial
Services, Inc. ("DVFS" or "USAllianz Service Center") pursuant to an
Administrative Agreement. Such administrative services include issuance of the
Policies and maintenance of Policy owners' records. We pay all charges and fees
assessed by DVFS. DVFS serves as the administrator to various insurance
companies offering variable and fixed annuity and variable life insurance
contracts. Our ability to administer the Policies could be adversely affected
should DVFS elect to terminate the Agreement.
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 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. The funds do not hold regular meetings of shareholders.
If the Investment Company Act of 1940 or any regulation thereunder is amended or
if the present interpretation thereof changes so as to permit us to vote the
shares in our own right, we may elect to do so.
The voting interests of an owner is determined as follows:
o Owners may cast one vote for each $100 of Policy Value which is allocated to a
portfolio on the record date. Fractional votes are counted.
o The number of shares which a person has a right to vote will be determined as
of the date chosen by us.
o Each owner having a voting interest will receive periodic reports relating to
the portfolios in which he or she has an interest, proxy material and a form
with which to give such voting instructions.
DISREGARD OF VOTING INSTRUCTIONS. We may, when required to do so by state
insurance authorities, vote shares of the funds 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 funds, 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 funds 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.
THE SEPARATE ACCOUNT
We have established the separate account, Allianz Life Separate Account A
(Separate Account), to hold the assets that underlie the Policies. Our Board of
Directors adopted a resolution to establish the Separate Account under Minnesota
insurance law on May 31, 1985. We have registered the Separate Account with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. The Separate Account is divided into Variable
Options (also known as sub-accounts). Each Variable Option invests in one
Portfolio.
The investment program of the Separate Account will not be changed without the
approval by the Insurance Commissioner of the state of Minnesota. If required,
the approval process is on file with the Commissioner of the state in which this
Policy is issued.
If the New York Stock Exchange is closed (except for holidays and weekends) or
trading is restricted due to an emergency as defined by the Securities and
Exchange Commission so that we cannot value Valuation Units, we
Prospectus 17
may postpone all procedures which require valuation of the Valuation Units until
valuation is possible.
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.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the insured(s) is incorrectly stated, the death benefit
will be adjusted. This adjustment will reflect the death benefit that would have
been provided by the last cost of insurance at the correct age and/or sex of the
insured.
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 2 years from the Policy
Date. If the Policy is reinstated, the 2-year period is measured from the date
of reinstatement. In addition, if the insured commits suicide in the 2-year
period, or such period as specified in state law, the benefit payable is limited
to premiums paid, less debt and less any surrenders.
SETTLEMENT OPTIONS
The Cash Surrender Value or the death proceeds may be paid in a lump sum or may
be applied to one of the Settlement Options. The Settlement Options are:
Option 1: Proceeds at Interest
Option 2: Payments for a Definite Period
Option 3: Life Annuity with Minimum Guarantee for Minimum Period
Option 4: Payments for a Designated Amount
Option 5: Life Annuity with Cash Refund
You or the beneficiary can select to have the Settlement Options payable on
either a fixed or variable basis.
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 Allianz Life's understanding of
current federal income tax laws as they are currently interpreted. No
representation is made regarding the likelihood of continuation of those current
federal income tax laws or of the current interpretations by the Internal
Revenue Service.
We are taxed as a life insurance company under the Code. For federal income tax
purposes, the Separate Account is not a separate entity and its operations form
a part of our operation.
DIVERSIFICATION. Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable life insurance policies. The Code
provides that a variable life insurance policy will not be treated as life
insurance for any period (and any subsequent period) for which the investments
are not, in accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification of
the Policy as a life insurance contract would result in imposition of federal
income tax to the owner with respect to earnings allocable to the Policy prior
to the receipt of payments under the Policy. The Code contains a safe harbor
provision which provides that life insurance policies such as the Policies meet
the diversification requirements if, as of the close of each quarter, the
underlying assets meet the diversification standards for a regulated investment
company and no more than fifty-five (55%) percent of the total assets consist of
cash, cash items, U.S. Government securities and securities of other regulated
investment companies. There is an exception for securities issued by the U.S.
Treasury in connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
Section 1.817-5), which established diversification requirements for the
investment portfolios underlying variable contracts such as the Policies. The
Regulations amplify the diversification requirements for
18
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 are 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 where owner control of the
investments of the Separate Account causes 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 policy owner was not
the owner of the assets of the separate account. It is unknown whether these
differences, such as the owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the owner to be
considered as the owner of the assets of the Separate Account.
In the event any future guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the owner being
retroactively determined to be the owner of the assets of the 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 regu- lations 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 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
comply, it would not qualify for the favorable tax treatment usually accorded
life insurance policies. Owners should consult their tax advisers with respect
to the tax consequences of purchasing the Policy.
POLICY PROCEEDS. Loan proceeds and/or surrender payments from the Policies,
including those resulting from the lapse of the Policy, are fully taxable to the
extent of income in the Policy and may further be subject to an additional 10%
federal income tax penalty. (See "Tax Treatment of Loans and Surrenders.")
Otherwise, the Policy should receive the same federal income tax treatment as
any other type of life insurance. As such, the death benefit thereunder is
excludable from the gross income of the beneficiary under Section 101(a) of the
Code. Furthermore, the owner is not deemed to be in constructive receipt of the
Policy Value or Cash Surrender Value, in- cluding increments thereon, under a
Policy until surrender thereof. If the death proceeds are to be paid under one
of the Settlement Options, the payments will be pro rated between the amount
attributable to the death benefit which will be excludable from the
beneficiary's income and the amount attributable to interest which will be
includable in the beneficiary's income.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of Policy proceeds, depend on the circumstances of each
Policy
Prospectus 19
owner or beneficiary. Owners and beneficiaries should consult their tax
advisers.
TAX TREATMENT OF LOANS AND SURRENDERS. The Code alters the tax treatment
accorded to loans and certain distributions from life insurance policies which
are deemed to be "modified endowment contracts". The Policy's premium
requirements are such that Policies issued on or after June 21, 1988 will be
treated as modified endowment contracts. A Policy received in exchange for a
modified endowment contract is also a modified endowment contract regardless of
whether it meets the 7-pay test.
However, an exchange under Section 1035 of the Code of a life insurance policy
entered into before June 21, 1988 for the Policy will not cause the Policy to be
treated as a modified endowment contract if no additional premiums are paid.
A Policy, that was entered into prior to June 21, 1988, may be deemed to be a
modified endowment contract if it is materially changed and fails to meet the
7-pay test. A Policy fails to meet the 7-pay test when the cumulative amount
paid under the Policy at any time during the first 7 Policy Years exceeds the
sum of the net level premiums which would have been paid on or before such time
if the Policy provided for paid-up future benefits after the payment of 7 level
annual premiums. A material change would include any increase in the future
benefits provided under a Policy unless the increase is attributable to: (1) the
payment of premiums necessary to fund the lowest death benefit and qualified
additional benefits payable in the first seven Policy Years; or (2) the
crediting of interest or other earnings (including policyholder dividends) with
respect to such premiums.
Assuming that the Policy is treated as a modified endowment contract, surrenders
and/or loan proceeds are taxable to the extent of income in the Policy. Such
distributions are deemed to be on a last-in, first-out basis, which means the
taxable income is distributed first. Loan proceeds and/or surrender payments may
also be subject to an additional 10% federal income tax penalty applied to the
income portion of such distribution. The penalty shall not apply, however, to
any distribution: (1) made on or after the date on which the taxpayer reaches
age 591/2; (2) which is attributable to the taxpayer becoming disabled (within
the meaning of Section 72(m)(7) of the Code); or (3) which is part of a series
of substantially equal periodic payments made not less frequently than annually
for the life (or life expectancy) of the taxpayer or the joint lives (or joint
life expectancies) of such taxpayer and his or her beneficiary. Furthermore,
only under limited circumstances will interest paid on Policy loans be tax
deductible.
If a Policy is not classified as a modified endowment contract, then any
surrenders shall be treated first as a recovery of the investment in the Policy
which would not be received as taxable income. However, if a distribution is the
result of a reduction in benefits under the Policy within the first fifteen
years after the Policy is issued in order to comply with Section 7702, such
distribution will, under rules set forth in Section 7702, be taxed as ordinary
income to the extent of income in the Policy.
Any loans from a Policy which is not classified as a modified endowment
contract, will be treated as indebtedness of the Owner and not a distribution.
Upon complete surrender or lapse of the Policy or when maturity benefits are
paid, if the amount received plus the policy debt exceeds the total premiums
paid that are not treated as previously surrendered by the Policy owner, the
excess generally will be treated as ordinary income.
Policy owners should seek competent tax advice on the tax consequences of taking
loans, making a total surrender or making any material modifications to their
Policies.
TAX TREATMENT OF SETTLEMENT OPTIONS. Under the Code, a portion of the Settlement
Option payments which are in excess of the death benefit proceeds are included
in the Beneficiary's taxable income. Under a Settlement Option payable for the
lifetime of the Beneficiary, the death benefit proceeds are divided by the
Beneficiary's life expectancy (or joint life expectancy in the case of a joint
and survivor option) and proceeds received in excess of these prorated amounts
are included in taxable income. The value of the death benefit proceeds is
reduced by the value of any period certain or refund guarantee. Under a fixed
payment or fixed period option, the death benefit proceeds are prorated by
dividing the proceeds over the payment period under the option. Any payments in
excess of the prorated amount will be included in taxable income.
MULTIPLE POLICIES. The Code further provides that multiple modified endowment
contracts that are issued within a calendar year period to the same owner by one
company or its affiliates are treated as one modified endowment contract for
purposes of determining the taxable portion of any loans or distributions. Such
treatment may result in adverse tax consequences including more rapid taxation
of the loans or distributed amounts from such combination of contracts. Policy
owners
20
should consult a tax adviser prior to purchasing more than one modified
endowment contract in any calendar year period.
TAX TREATMENT OF ASSIGNMENTS. An assignment of a Policy or the change of
ownership of a Policy may be a taxable event. Policy owners should therefore
consult competent tax advisers should they wish to assign or change the owner of
their Policies.
QUALIFIED PLANS. The Policies may be used in conjunction with certain qualified
plans. Because the rules governing such use are complex, a purchaser should not
do so until he has consulted a competent qualified plans consultant.
INCOME TAX WITHHOLDING. All distributions or the portion thereof which is
includable in gross income of the Policy owner are subject to federal income tax
withholding. However, the Policy owner in most cases may elect not to have taxes
withheld. The Policy owner may be required to pay penalties under the estimated
tax rules, if the Policy owner's withholding and estimated tax payments are
insufficient.
REPORTS TO OWNERS
We will send to each owner semi-annual and annual reports of the Portfolios.
Within 30 days after each Policy Anniversary, an annual statement will be sent
to each owner. The statement will show the current amount of death benefit
payable under the Policy, the current Policy Value, the current Cash Surrender
Value, current debt and will show all transactions previously confirmed. The
statement will also show premiums paid and all charges deducted during the
Policy Year.
Confirmations will be mailed to Policy owners within seven days of the
transaction of: (a) the receipt of premium; (b) any transfer between Portfolios;
(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. Upon request a Policy owner shall be entitled to a receipt of
premium payment.
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. Allianz
Life is not involved in any litigation that is of material importance in
relation to its total assets or that relates to the Separate Account.
EXPERTS
The financial statements of Allianz Life Variable Account A and the consolidated
financial statements of Allianz Life, 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 Allianz Life that are included in this
prospectus should be considered only as bearing upon our ability to meet our
obligations under the Policy.
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>
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATION OF POLICY VALUES
The following tables show you how Policy Values, Cash Surrender Values and death
benefits of your Policy will change with the investment experience of the
portfolios. The Policy Values, Cash Surrender Values and death benefits in the
tables take into account all charges and deductions against the Policy. These
tables assume that the cost of insurance rates for the Policy are based on the
current and guaranteed rates appropriate to the class shown. These tables also
assume that you paid a $100,000 single premium. For premiums of other than
$100,000, the tables shown can be adjusted (i.e. for a $20,000 premium, multiply
the tables by $20,000 divided by 100,000 or for a $200,000 premium, multiply the
attached tables by $200,000 divided by 100,000). These tables all assume that
the insured, both male and female, is in the most favorable risk status, i.e.,
non-smoker. For insureds who are classified as smoker or less favorable risk
status, the cost of insurance will be greater and therefore Policy Values will
be less given the same assumed hypothetical gross annual investment rates of
return.
The tables assume gross investment returns of 0%, 6% and 12% 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 daily management and portfolio administration fees are assumed to be .66% on
an annual basis, of the net assets of the Class 1 portfolios of Valuemark Funds
(Trust) (which is the arithmetic average of the management and portfolio
administration fees assessed in 1999). The values also assume that each Class 1
portfolio of the Trust will incur expenses annually which are assumed to be .11%
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 an annual
rate of 0.60% of the average daily net assets of the variable options and for
administrative expenses at an annual rate of 0.15% of the average daily net
assets of the variable options. 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 -1.51%, 4.40% and 10.31%.
Allianz Life deducts the cost of insurance for a Policy Processing Period from
the Policy Values. The cost of insurance rate is based on the sex (where
permitted by state law), attained age and rate class of the insured.
Upon request, 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>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA DESIGNED FOR: JANE DOE
MINNEAPOLIS, MINNESOTA PREPARED BY: ANY REPRESENTATIVE
VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount: $448,956 Single Premium: . $100,000
Issue Age: 35 State: MN
- ---------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 0.00% gross
rate of return. This illustration is based on
CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 97,389 91,089 448,956
2 0 110,250 0 94,789 89,189 448,956
3 0 115,763 0 92,194 87,294 448,956
4 0 121,551 0 89,600 85,400 448,956
5 0 127,628 0 87,004 83,504 448,956
10 0 162,889 0 73,841 73,841 448,956
15 0 207,893 0 63,545 63,545 448,956
20 0 265,330 0 51,763 51,763 448,956
25 0 338,635 0 37,216 37,216 448,956
30 0 432,194 0 18,172 18,172 448,956
Summary of end of year values assuming 0.00% gross
rate of return. This illustration is based on
GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 97,255 90,955 448,956
2 0 110,250 0 94,513 88,913 448,956
3 0 115,763 0 91,766 86,866 448,956
4 0 121,551 0 89,010 84,810 448,956
5 0 127,628 0 86,241 82,741 448,956
10 0 162,889 0 71,984 71,984 448,956
15 0 207,893 0 60,150 60,150 448,956
20 0 265,330 0 46,009 46,009 448,956
25 0 338,635 0 28,152 28,152 448,956
30 0 432,194 0 3,735 3,735 448,956
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY. THEY SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY ALLIANZ LIFE OR THE FUND THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA DESIGNED FOR: JANE DOE
MINNEAPOLIS, MINNESOTA PREPARED BY: ANY REPRESENTATIVE
VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount: $448,956 Single Premium: $100,000
Issue Age: 35 State: MN
- ---------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 6.00% gross
rate of return. This illustration is based on
CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 103,286 96,986 452,685
2 0 110,250 0 106,690 101,090 456,258
3 0 115,763 0 110,212 105,312 459,692
4 0 121,551 0 113,854 109,654 462,994
5 0 127,628 0 117,620 114,120 466,178
10 0 162,889 0 138,377 138,377 480,645
15 0 207,893 0 166,646 166,646 494,156
20 0 265,330 0 199,912 199,912 508,583
25 0 338,635 0 238,876 238,876 523,964
30 0 432,194 0 284,200 284,200 540,388
Summary of end of year values assuming 6.00% gross
rate of return. This illustration is based on
GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 103,148 96,848 452,041
2 0 110,250 0 106,400 100,800 454,948
3 0 115,763 0 109,753 104,853 457,689
4 0 121,551 0 113,209 109,009 460,270
5 0 127,628 0 116,770 113,270 462,704
10 0 162,889 0 136,151 136,151 472,911
15 0 207,893 0 162,361 162,361 481,449
20 0 265,330 0 192,615 192,615 490,020
25 0 338,635 0 227,311 227,311 498,596
30 0 432,194 0 266,709 266,709 507,131
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY. THEY SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY ALLIANZ LIFE OR THE FUNDS THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA DESIGNED FOR: JANE DOE
MINNEAPOLIS, MINNESOTA PREPARED BY: ANY REPRESENTATIVE
VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
FEMALE NON-SMOKER
Initial Face Amount: $448,956 Single Premium: $100,000
Issue Age: 35 State: MN
- ---------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 12.00% gross
rate of return. This illustration is based on
CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 109,108 102,880 480,193
2 0 110,250 0 119,250 113,650 512,945
3 0 115,763 0 130,292 125,392 547,344
4 0 121,551 0 142,398 138,198 583,516
5 0 127,628 0 155,668 152,168 621,602
10 0 162,889 0 243,607 243,607 846,153
15 0 207,893 0 386,581 386,581 1,146,329
20 0 265,330 0 611,167 611,167 1,554,834
25 0 338,635 0 962,598 962,598 2,111,411
30 0 432,194 0 1,509,895 1,509,895 2,870,974
Summary of end of year values assuming 12.00% gross
rate of return. This illustration is based on
GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 109,036 102,736 479,523
2 0 110,250 0 118,930 113,330 511,503
3 0 115,763 0 129,758 124,858 545,011
4 0 121,551 0 141,603 137,403 580,159
5 0 127,628 0 154,559 151,059 617,074
10 0 162,889 0 239,771 239,771 832,832
15 0 207,893 0 376,846 376,846 1,117,462
20 0 265,330 0 589,324 589,324 1,499,263
25 0 338,635 0 916,987 916,987 2,011,365
30 0 432,194 0 1,419,034 1,419,034 2,698,208
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY. THEY SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY ALLIANZ LIFE OR THE FUND THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA DESIGNED FOR: JOHN DOE
MINNEAPOLIS, MINNESOTA PREPARED BY: ANY REPRESENTATIVE
VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount: $400,205 Single Premium: $100,000
Issue Age: 35 State: MN
- ---------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 0.00% gross
rate of return. This illustration is based on
CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 97,394 91,094 400,205
2 0 110,250 0 94,803 89,203 400,205
3 0 115,763 0 92,222 87,322 400,205
4 0 121,551 0 89,646 85,446 400,205
5 0 127,628 0 87,073 83,573 400,205
10 0 162,889 0 74,075 74,075 400,205
15 0 207,893 0 63,775 63,775 400,205
20 0 265,330 0 51,376 51,376 400,205
25 0 338,635 0 34,597 34,597 400,205
30 0 432,194 0 9,481 9,481 400,205
Summary of end of year values assuming 0.00% gross
rate of return. This illustration is based on
GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 97,261 90,961 400,205
2 0 110,250 0 94,532 88,932 400,205
3 0 115,763 0 91,803 86,903 400,205
4 0 121,551 0 89,071 84,871 400,205
5 0 127,628 0 86,332 82,832 400,205
10 0 162,889 0 72,296 72,296 400,205
15 0 207,893 0 60,450 60,450 400,205
20 0 265,330 0 45,582 45,582 400,205
25 0 338,635 0 24,508 24,508 400,205
30 0 432,194 0 0 0 400,205
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY. THEY SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY ALLIANZ LIFE OR THE FUND THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA DESIGNED FOR: JOHN DOE
MINNEAPOLIS, MINNESOTA PREPARED BY: ANY REPRESENTATIVE
VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount: $400,205 Single Premium: $100,000
Issue Age: 35 State: MN
- ---------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 6.00% gross
rate of return. This illustration is based on
CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 103,291 96,991 403,520
2 0 110,250 0 106,707 101,107 406,689
3 0 115,763 0 110,246 105,346 409,727
4 0 121,551 0 113,913 109,713 412,643
5 0 127,628 0 117,710 114,210 415,445
10 0 162,889 0 138,743 138,743 428,081
15 0 207,893 0 167,301 167,301 439,917
20 0 265,330 0 200,680 200,680 452,722
25 0 338,635 0 238,828 238,828 466,895
30 0 432,194 0 281,496 281,496 482,776
Summary of end of year values assuming 6.00% gross
rate of return. This illustration is based on
GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 103,155 96,855 402,952
2 0 110,250 0 106,422 100,822 405,544
3 0 115,763 0 109,798 104,898 407,986
4 0 121,551 0 113,286 109,086 410,288
5 0 127,628 0 116,889 113,389 412,457
10 0 162,889 0 136,631 136,631 421,564
15 0 207,893 0 163,212 163,212 429,166
20 0 265,330 0 193,603 193,603 436,757
25 0 338,635 0 227,250 227,250 444,259
30 0 432,194 0 263,328 263,328 451,617
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY. THEY SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY ALLIANZ LIFE OR THE FUND THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA DESIGNED FOR: JOHN DOE
MINNEAPOLIS, MINNESOTA PREPARED BY: ANY REPRESENTATIVE
VALUEMARK
SINGLE PREMIUM VARIABLE LIFE INSURANCE
MALE NON-SMOKER
Initial Face Amount: $400,205 Single Premium: $100,000
Issue Age: 35 State: MN
- ---------------------------------------------------------------------------------------------------------------------------
Summary of end of year values assuming 12.00% gross
rate of return. This illustration is based on
CURRENT mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 $100,000 $105,000 0 109,185 102,885 428,040
2 0 110,250 0 119,269 113,669 457,218
3 0 115,763 0 130,333 125,433 487,852
4 0 121,551 0 142,472 138,272 520,057
5 0 127,628 0 155,787 152,287 553,953
10 0 162,889 0 244,246 244,246 753,603
15 0 207,893 0 388,095 388,095 1,020,497
20 0 265,330 0 613,547 613,547 1,384,125
25 0 338,635 0 962,641 962,641 1,881,906
30 0 432,194 0 1,496,536 1,496,536 2,566,618
Summary of end of year values assuming 12.00% gross
rate of return. This illustration is based on
GUARANTEED mortality costs.
PREMIUM CASH
POLICY ACCUM POLICY POLICY SURRENDER DEATH
YEAR PAYMENT @ 5.00% LOAN VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------
1 $100,000 $105,000 0 109,043 102,743 427,451
2 0 110,250 0 118,956 113,356 455,959
3 0 115,763 0 129,812 124,912 485,826
4 0 121,551 0 141,701 137,501 517,158
5 0 127,628 0 154,718 151,218 550,062
10 0 162,889 0 240,611 240,611 742,388
15 0 207,893 0 378,817 378,817 996,099
20 0 265,330 0 592,386 592,386 1,336,388
25 0 338,635 0 917,041 917,041 1,792,760
30 0 432,194 0 1,402,305 1,402,305 2,405,009
<FN>
IT IS EMPHASIZED THAT THE ASSUMED INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE ARE ILLUSTRATIVE ONLY. THEY SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN
AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER AND RATES OF RETURN FOR THE
PORTFOLIOS. THE DEATH BENEFIT, POLICY VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL GROSS RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS CAN BE MADE BY ALLIANZ LIFE OR THE FUND THAT THIS ASSUMED INVESTMENT RATE OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPENDIX B
- ---------------------------------------------------------------------------------------------------------------------------
TABLE OF NET SINGLE PREMIUM FACTORS
ATTAINED FACTORS ATTAINED FACTORS ATTAINED FACTORS
------- ------- -------
AGE MALE* FEMALE* AGE MALE* FEMALE* AGE MALE* FEMALE*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 12.62467 14.69383 35 4.30327 4.82748 70 1.52757 1.66607
1 12.50646 14.48692 36 4.16038 4.66752 71 1.49533 1.62425
2 12.16372 14.08281 37 4.02237 4.51338 72 1.46481 1.58427
3 11.82118 13.67851 38 3.88934 4.36506 73 1.43608 1.54629
4 11.48209 13.27838 39 3.76113 4.22232 74 1.40915 1.51041
5 11.14463 12.88451 40 3.63755 4.08498 75 1.38398 1.47664
6 10.80849 12.49577 41 3.51861 3.95303 76 1.36040 1.44488
7 10.47450 12.11263 42 3.40410 3.82624 77 1.33828 1.41498
8 10.14347 11.73553 43 3.29382 3.70425 78 1.31741 1.38673
9 9.81784 11.36605 44 3.18765 3.58674 79 1.29764 1.35999
10 9.49960 11.00434 45 3.08543 3.47344 80 1.27888 1.33468
11 9.19034 10.65053 46 2.98710 3.36425 81 1.26112 1.31079
12 8.89337 10.30762 47 2.89249 3.25897 82 1.24440 1.28836
13 8.61119 9.97611 48 2.80143 3.15749 83 1.22879 1.26746
14 8.34507 9.65635 49 2.71381 3.05962 84 1.21434 1.24807
15 8.09470 9.34852 50 2.62950 2.96530 85 1.20100 1.22998
16 7.85593 9.04683 51 2.54845 2.87445 86 1.18868 1.21335
17 7.62788 8.75962 52 2.47062 2.78696 87 1.17723 1.19789
18 7.40829 8.48131 53 2.39595 2.70281 88 1.16647 1.18342
19 7.19529 8.21157 54 2.32443 2.62191 89 1.15617 1.16975
20 6.98773 7.95007 55 2.25594 2.54404 90 1.14612 1.15668
21 6.78427 7.69599 56 2.19040 2.46904 91 1.13609 1.14399
22 6.58380 7.44915 57 2.12767 2.39670 92 1.12581 1.13142
23 6.38615 7.20889 58 2.06757 2.32674 93 1.11497 1.11871
24 6.19122 6.97553 59 2.01001 2.25900 94 1.10328 1.10559
25 5.99922 6.74889 60 1.95494 2.19345 95 1.09064 1.09192
26 5.81010 6.52878 61 1.90230 2.13013 96 1.07717 1.07777
27 5.62462 6.31538 62 1.85199 2.06916 97 1.06337 1.06359
28 5.44313 6.10815 63 1.80404 2.01067 98 1.05029 1.05034
29 5.26593 5.90723 64 1.75842 1.95479 99 1.04000 1.04000
30 5.09324 5.71269 65 1.71504 1.90144
31 4.92522 5.52403 66 1.67380 1.85048
32 4.76215 5.34132 67 1.63456 1.80168
33 4.60408 5.16433 68 1.59713 1.75478
34 4.45114 4.99306 69 1.56150 1.70960
<FN>
*In states requiring unisex rates, male rates should apply.
</FN>
</TABLE>
PART II
UNDERTAKINGS TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission theretofore or hereafter duly adopted pursuant to authority conferred
in that section.
REPRESENTATION
Allianz Life Insurance 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
Under its Bylaws, Article XI, the Company indemnifies, to the extent permitted
by the laws of the State of Minnesota, each person (and the heirs, executors,
and administrators of such person) made or threatened to be made a party to any
action, civil or criminal, by reason of being or having been a director, officer
or employee of the Company (or by reason of serving any other organization at
the request of the Company).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to such provisions of the bylaws or statutes or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in said
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any such action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
Policies issued by the Variable Account, the Company will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in said Act and will be governed by the
final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Prospectus consisting of 122 pages
The undertaking to file reports
The signatures
Written consents of the following persons:
Counsel
Actuary
Independent Auditor
Part II
Other Information
Page 2
The following exhibits:
A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2.
1. Resolution of the Board of Directors of the Company (2)
2. Not Applicable
3.a. Principal Underwriter's Agreement (4)
3.b. General Agency Agreement
4. Not Applicable
5. Individual Single Premium Variable Life Insurance Policy (3)
6.a. Articles of Incorporation of the Company (2)
6.b. Bylaws of the Company (2)
7. Not Applicable
8. Not Applicable
9.a. Administrative Agreement (1)
9.b.(1) Form of Fund Participation Agreement between North American
Life and Casualty Company and Franklin Valuemark Funds(3)
9.b.(2) Form of Fund Participation Agreement between AIM Variable
Insurance Funds, Inc., Allianz Life Insurance Company of North
America and NALAC Financial Plans LLC(6)
9.b.(3) Form of Fund Participation Agreement between Alger American
Fund, Allianz Life Insurance Company of North America and Fred
Alger and Company(6)
9.b.(4) 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 Form (3)
12. Illustrative Calculations for the Exchange of the Single Premium
Variable Life Insurance Policy for a Whole Life Policy (5)
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 Pre-Effective Amendment No. 1 to Form S-6, File
No. 33-11158 filed on October 19, 1987
(2) incorporated by reference to Post-Effective Amendment No. 14 to Registrants
Form S-6 electronically filed on November 1, 1995.
(3) incorporated by reference to Post-Effective Amendment No. 15 to Registrants
Form S-6 electronically filed on April 23, 1996.
(4) incorporated by reference to Post-Effective Amendment No. 17 to Registrants
Form S-6 electronically filed on April 29, 1997.
(5) incorporated by reference to Post-Effective Amendment No. 19 to Registrants
Form S-6 electronically filed on April 29, 1998.
(6) incorporated by reference to Post-Effective Amendment No. 23 to Registrants
Form S-6 electronically filed on November 12, 1999.
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.
Signature and Title
<TABLE>
<CAPTION>
<S> <C> <C>
Lowell C. Anderson* Chairman of the Board 04-17-00
Lowell C. Anderson
Robert W. MacDonald* Director and 04-17-00
Robert W. MacDonald Chief Executive Officer
Margery G. Hughes President and 04-17-00
Margery G. Hughes Chief Administrative Officer
Mark A. Zesbaugh Chief Financial Officer 04-17-00
Mark A. Zesbaugh Senior Vice President
Herbert F. Hansmeyer* Director 04-17-00
Herbert F. Hansmeyer
Michael P. Sullivan* Director 04-17-00
Michael P. Sullivan
Dr. Gerhard Rupprecht* Director 04-17-00
Dr. Gerhard Rupprecht
Rev. Dennis Dease* Director 04-17-00
Rev. Dennis Dease
James R. Campbell* Director 04-17-00
James R. Campbell
Robert M. Kimmitt* Director 04-17-00
Robert M. Kimmitt
</TABLE>
*By Power of Attorney
By: /S/ Michael T. Westermeyer
---------------------------------
Michael T. Westermeyer
Attorney-in-Fact
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 24
TO
FORM S-6
ALLIANZ LIFE VARIABLE ACCOUNT A
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
INDEX TO EXHIBITS
Exhibit
EX99.A.3.b General Agency Agreement
EX99.B Opinion and Consent of Counsel
EX99.C Consent of Actuary
EX99.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 55403-2195
Re: Opinion and Consent of Counsel
Allianz Life Variable Account A
Dear Sir or Madam:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, of a Post Effective Amendment to a Registration Statement on Form S-6
for the Individual Single Premium Variable Life Insurance Policies to be issued
by Allianz Life Insurance Company of North America and its separate account,
Allianz Life Variable Account A.
We are of the following opinions:
1. Allianz Life Variable Account A is a unit investment trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"),
and is currently registered with the Securities and Exchange Commission,
pursuant to Section 8(a) of the Act.
2. Upon the acceptance of premium payments made by a Policy Owner pursuant to a
Policy issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such a
Policy Owner will have a legally-issued, fully-paid, non-assessable
contractual interest under such Policy.
You may use this opinion letter, or copy hereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Prospectus which forms a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD, & HASENAUER, P.C.
By: /s/ LYNN KORMAN STONE
- ----------------------------------
Lynn Korman Stone
Allianz Life Insurance Company of North America [Allianz Logo]
Jack L. Baumer, FSA, MAAA
Manager
Variable Products Actuarial
1750 Hennepin Avenue
Minneapolis, MN 55403-2195
Telephone: (612) 337-6180
Telefax: (612) 337-6136
March 24, 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 Appendix A and the Table of Net Single Premium Factors contained
in Appendix B in a Registration Statement Form S-6 registering Single Premium
Variable Life Insurance Policies. The illustrations have been prepared in
accordance with standard actuarial principles and reflect the operation of
the Policy by taking into account all charges under the Policy and in the
underlying fund, and are shown for males and females at a variety of
underwriting classifications.
Sincerely,
/s/Jack L. Baumer
Jack L. Baumer, FSA, MAAA
JLB/saf
KPMG LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors of Allianz Life Insurance Company of North America and
Policy Owners of Allianz Life Variable Account A:
We consent to the use of our report, dated 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.
/s/ KPMG LLP
KPMG LLP
Minneapolis, Minnesota
April 21, 2000
