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Allianz Life Insurance Company of North America has introduced a variable annuity contract that may appeal to consumers who want exposure to the stocks of a wide range of European companies and smaller U.S. companies, as well to the stocks of the biggest publicly traded U.S. companies.

The Golden Valley, Minnesota-based unit of Allianz SE offers access to extra diversification through the new Allianz Index Advantage Income Variable Annuity contract.

The new contract gives purchasers a choice of four contract value investment allocations, or “strategies,” that put some of the contract value in fixed-income securities, and some in instruments tied to the performance of the S&P 500 Index, the Russell 2000 Index, the Nasdaq-100 Index, and the Euro Stoxx 50.

(Related: Something Unusual Happened to Q4 Annuity Sales: IRI)

Annuity holders who are willing to accept market-drop risk can get higher maximum returns than holders who want Allianz Life to protect all of their contract value.

Allianz Life is offering several payout options: life, life with period certain, joint and last survivor, joint and last survivor with period certain, and refund life.

Allianz Life has designed the contract to reward purchasers who put off collecting retirement income. Starting at age 45, the company guarantees the contract lifetime income percentage to increase each year the holder defers collecting income payments.

Holders who have waited a year, are at least age 50 and want to retire can choose either level payment options or income payment options set to increase, Allianz Life says.

Eligibility

Allianz Life is offering the contract to purchasers ages 0 to 80, according to a summary description on the company’s website.

The minimum initial purchase payment is $10,000.

The maximum purchase payment is $1 million.

Investments

Because the new contract is a variable annuity, and is registered as a security, agents and purchasers can see a contract prospectus.

Allianz Life is using derivatives in its own general account to back the most conservative investment strategy, the Index Protection Strategy, according to the prospectus.

The company is using derivatives in a separate account along with derivatives in its general account to back the other strategies.

“We currently limit our purchase of derivative securities to liquid securities,” Allianz Life says in the prospectus. “However, like many types of derivative securities, these securities may be volatile, and their price may vary substantially. In addition, because we pay credits regardless of the performance of derivative securities we purchase, we may incur losses on hedging mismatches or errors in hedging.”"

Hedging experience could affect rates for new contracts, and it could also affect the renewal rates for some product features, the company says.

Compensation

Allianz Life says in the prospectus that it’s possible that sales commissions for the contracts could be as high as 7%, and that, in some cases, the value of sale commissions and trail commissions combined could exceed 7% of the purchase payments.

Allianz Life says the financial professionals who sell the contracts might be eligible for benefits such as producer incentive bonuses, and non-cash compensation, including conferences, seminars, entertainment and awards.

Cost

The contract has a 1.25% annual product fee.

Allianz Life also charges a 0.7% annualized rider fee for the income benefit.

Contracts with a maximum anniversary value death benefit have another annualized rider fee of 0.2%.

For contracts with a value under $100,000, the company charges a $50 annual contract maintenance fee.

— Read Using Variable Annuities as a Tax-Friendly Rebalancing Toolon ThinkAdvisor.

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