hero-azl-Understanding-your-fixed-index-annuity-allocation-options

Understanding your fixed index annuity allocation options

Please note: The following educational information may help you understand more about your allocation options and provide additional details if you choose to make any allocation changes, now or in the future. It is not meant to be a substitute for working with a financial professional.
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Benefits of a fixed index annuity (FIA)

Fixed index annuities – or FIAs – offer the potential to earn tax-deferred interest, guarantees against loss of principal and credited interest from market downturns, and a guaranteed income stream for life.

Another benefit of an FIA is the potential to earn interest based on one or more external market indexes, or “allocation options.”

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What is an allocation option?

Your fixed index annuity (FIA) contract can earn interest based on positive changes in an external index. After you choose one or more indexes, we then use a crediting method (which we explain below) to track the performance of your index(es) over a specified period of time. We call this combination of factors an “allocation option.”

At the end of this specified time – the “crediting period” – we calculate the indexed interest. If the result is positive, your annuity will automatically receive indexed interest, subject to a participation rate, cap, or spread (which we will also define below). That interest is locked in and cannot be lost due to index declines at some point in the future.

If the result is negative, nothing happens – and that can be good news! Although you won’t receive any indexed interest for that crediting period, your annuity’s value doesn’t decline due to market downturns.1 That’s because your annuity does not directly participate in any stock or equity or bond investments. You are not buying shares of any stock or index fund.

A fixed interest allocation is also available. With the fixed interest allocation, interest is credited daily at the rate we establish at the beginning of each crediting period.

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Which allocation options do I have?

You can view how your contract is currently allocated as well as all of the allocation options available to you on each annual statement, or you can log in to view your contract details. (If this is your first visit to the website, you will need to click on "Register" and follow the instructions to create an account.)

Once logged in, you can also find rates for all of your current allocation options on your annual statement, as well as the rates that will apply to the new allocation(s) available to you. Please note that depending on your anniversary date, your next statement may not be available yet.

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Index options

Your annuity may offer one or more of the following index options. Please see your contract for specific availability.

Allianz exclusive benchmark ER index offerings

Allianz Exclusive Benchmark Excess Return indexes are designed to manage market volatility, either dynamically, with protection against rising rates, or with a forward-looking annual adjustment. Volatility-controlled indexes are designed to help stabilize index returns during volatile markets. In addition, these indexes track the price of futures to create the opportunity for a level of stability in renewal rates by addressing the effects of changing short-term interest rates.

Allianz exclusive benchmark index offerings

Allianz Exclusive Benchmark indexes are designed to manage market volatility, either dynamically, with protection against rising rates, or with a forward-looking annual adjustment. Volatility-controlled indexes are designed to help stabilize index returns during volatile markets.

Benchmark index offerings

Your annuity may also have one or more of these common benchmark equity indexes.

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Crediting methods

In addition to index options listed above, another factor that impacts how much indexed interest you receive is the crediting method you choose for your FIA.

A crediting method is simply a mathematical calculation we use to determine how much indexed interest your FIA will receive. Remember that no single crediting method is best in all situations. In some market conditions, one crediting method may result in more interest than others – or zero interest in a given crediting period.

The crediting method defines how changes in the index are measured over a specific period of time (we call this the “crediting period”). The crediting period can vary for different allocations (e.g., one year for annual point-to-point, two years for two-year point-to-point, two or five years for MY (multi-year) point-to-point).

The crediting method also has components such as caps, spreads, and participation rates that may limit the amount of indexed interest you receive, as described below.

Crediting method components

Crediting methods have certain components – such as caps, spreads, and participation rates – that can affect how much indexed interest you receive.

Review your statement for minimum rates. Note that some allocation options may have an allocation charge applied.

Crediting method options

Your annuity may give you several crediting method options (please see your contract for availability). Here’s an overview of four of these options and how they work.
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Which allocation option should I choose?

You can use the Allocation Insights tool to see how allocation options could perform differently from each other in a variety of market conditions.

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Not registered yet?

There are many benefits to online access. Here are just a few:

  • Current contract values available at any time
  • Secure access to seven years of your statement history
  • Ability to change your allocations online

Access your contract information now.

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Questions?

Feel free to contact us.

Or call us at 800.950.5872 Monday – Friday from 8:00 a.m. to 5:00 p.m. Central time.

1 With the purchase of additional-cost riders, the contract’s value will be reduced by the cost of the rider each contract year. This may result in a loss of principal in any contract year in which the contract does not earn interest or earns interest in an amount less than the rider charge.

The indexes available within the contract are constructed to keep track of diverse segments of the U.S. or international markets, or specific market sectors. These indexes are benchmarks only. Indexes can have different constituents and weighting methodologies. Some indexes have multiple versions that can weight components or may track the impact of dividends differently. Although an index may affect your interest credited, you cannot buy, directly participate in, or receive dividend payments from any of them through the contract.

No single index allocation option will be most effective in all market environments.

The S&P 500® Index is comprised of 500 stocks representing major U.S. industrial sectors. The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.

S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for use by S&P Dow Jones Indices LLC and its affiliates. S&P® and S&P 500® are trademarks of S&P and Dow Jones®, Dow Jones Industrial Average, DJIA and The Dow are trademarks of Dow Jones. These trademarks have been sublicensed for certain purposes by Allianz Life Insurance Company of North America (“Allianz”). The S&P 500 and Dow Jones Industrial Average (DJIA) are products of S&P Dow Jones Indices LLC and/or its affiliates and have been licensed for use by Allianz. Allianz products are not sponsored, endorsed, sold, or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates make any representation regarding the advisability of investing in such product.

The Nasdaq-100 Index® includes 100 of the largest domestic and international non-financial securities listed on the NASDAQ Stock Market® based on market capitalization.

NASDAQ®, and Nasdaq-100 Index®, are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by Allianz Life Insurance Company of North America. The Product(s) have not been passed on by the Corporations as to their legality or suitability. The Product(s) are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S).

The Russell 2000® Index is an equity index that measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000® Index is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not affect the performance and characteristics of the true small-cap index.

The Russell 2000® Index (the “Index”) is a trademark of Frank Russell Company (“Russell”) and has been licensed for use by Allianz Life Insurance Company of North America (“Allianz”). Allianz products are not in any way sponsored, endorsed, sold, or promoted by Russell or the London Stock Exchange Group companies (“LSEG”) (together the “Licensor Parties”) and none of the Licensor Parties make any claim, prediction, warranty, or representation whatsoever, expressly or impliedly, either as to (i) the results to be obtained from the use of the Index (upon which the Allianz product is based), (ii) the figure at which the Index is said to stand at any particular time on any particular day or otherwise, or (iii) the suitability of the Index for the purpose to which it is being put in connection with the Allianz product. None of the Licensor Parties have provided or will provide any financial or investment advice or recommendation in relation to the Index to Allianz or to its clients. The Index is calculated by Russell or its agent. None of the Licensor Parties shall be (a) liable (whether in negligence or otherwise) to any person for any error in the Index or (b) under any obligation to advise any person of any error therein.

The PIMCO Tactical Balanced Index is comprised of the S&P 500® Index, a bond component comprised of the PIMCO Synthetic Bond Index and a duration overlay, and cash, and shifts weighting between them daily based on historical realized volatility of the components. The PIMCO Synthetic Bond Index is comprised of a small number of derivative instruments designed to provide exposure to U.S. Investment-grade and Treasury bond markets.

The “PIMCO Tactical Balanced Index” is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and Pacific Investment Management Company LLC (“PIMCO”), and has been licensed for use by Allianz Life Insurance Company of North America (“Allianz”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Allianz. PIMCO’s Trademark(s) are trademarks of PIMCO and have been licensed for use by SPDJI and Allianz. Allianz products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, or PIMCO and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the PIMCO Tactical Balanced Index.

The PIMCO Tactical Balanced ER Index is comprised of the U.S. Equity Futures Custom Index, a bond component comprised of the PIMCO Synthetic Bond ER Index and a duration overlay, and shifts weighting between them daily based on historical realized volatility of the components. The U.S. Equity Futures Custom Index provides exposure to large cap U.S. stocks in excess of a short-term interest rate. The PIMCO Synthetic Bond ER Index is comprised of a small number of derivative instruments designed to provide exposure to U.S. Investment-grade and Treasury bond markets in excess of a short-term interest rate. The Index is an excess return index, which means that it captures the returns of the underlying constituents which are in excess of a short-term interest rate. All else equal, higher short-term interest rates would result in an excess return index to underperform a non-excess return version of the same index.

The “PIMCO Tactical Balanced ER Index” (the “Index”) is a rules-based index that tactically allocates across U.S. equity and fixed income markets using quantitative signals. The Index is a trademark of Pacific Investment Management Company LLC (“PIMCO”) and has been licensed for use for certain purposes by Allianz Life Insurance Company of North America (the “Company” or “Allianz”) with respect to this Allianz product (the “Product”). The Index is the exclusive property of PIMCO and is made and compiled without regard to the needs, including, but not limited to, the suitability or appropriateness needs, as applicable, of the Company, the Product, or any Product owners. The Product is not sold, sponsored, endorsed or promoted by PIMCO or any other party involved in, or related to, making or compiling the Index. PIMCO Tactical Balanced Excess Return Index performance contains backtested performance beginning 22 April 2004, which is prior to the actual launch of the index: The PIMCO Tactical Balanced Excess Return Index launched on 2 August 2018.

Neither PIMCO nor any other party involved in, or related to, making or compiling the Index has any obligation to continue to provide the Index to the Company with respect to the Product. In the event that the Index is no longer available to the Product or Product owners, the Company may seek to replace the Index with another suitable index, although there can be no assurance that one will be available.

The EURO STOXX 50®, Europe's leading blue-chip index for the Eurozone, provides a blue-chip representation of supersector leaders in the Eurozone. The index covers 50 stocks from 11 Eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.

The EURO STOXX 50® is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland (“STOXX”), Deutsche Börse Group, or their licensors, which is used under license. Allianz products are neither sponsored nor promoted, distributed or in any other manner supported by STOXX, Deutsche Börse Group or their licensors, research partners, or data providers and STOXX, Deutsche Börse Group and their licensors, research partners, or data providers do not give any warranty, and exclude any liability (whether in negligence or otherwise) with respect thereto generally or specifically in relation to any errors, omissions, or interruptions in the EURO STOXX 50 or its data.

The BlackRock iBLD Claria® Index is comprised of an equity component, a bond component, and a cash component. It shifts weighting between them daily based on historical realized volatility of the components. Annually, BlackRock will set allocations to the ETFs within each of the equity component and the bond component. The equity component will be comprised of the following ETFs: iShares Russell 2000 ETF, iShares Core S&P 500 ETF, iShares MSCI EAFE ETF, iShares MSCI Emerging Markets ETF. The bond component will be comprised of the following ETFs: iShares 1-3 year Treasury Bond ETF, iShares 3-7 year Treasury Bond ETF, iShares 7-10 year Treasury Bond ETF. The cash component is represented by the 3 month LIBOR rate. The BlackRock iBLD Claria® ER Index is comprised of an equity component, a bond component, and a cash component. It shifts weighting between the components daily based on historical realized volatility of the components. The index tracks the return in excess of a benchmark rate. Annually, BlackRock will set allocations to the ETFs within each of the equity component and the bond component. The equity component will be comprised of the following ETFs: iShares Russell 2000 ETF, iShares Core S&P 500 ETF, iShares MSCI EAFE ETF, iShares MSCI Emerging Markets ETF. The bond component will be comprised of the following ETFs: iShares 1-3 year Treasury Bond ETF, iShares 3-7 year Treasury Bond ETF, iShares 7-10 year Treasury Bond ETF. The cash component is represented by the 3 month LIBOR rate.

The BlackRock iBLD Claria® Index and the BlackRock iBLD Claria® ER Index (the “Indices”) are products of BlackRock Index Services, LLC and have been licensed for use by Allianz Life Insurance Company of North America (“Allianz”). BlackRock®, BlackRock iBLD Claria® Index, BlackRock iBLD Claria® ER Index, and the corresponding logos are registered and unregistered trademarks of BlackRock. The Allianz product is not sponsored, endorsed, sold or promoted by BlackRock Index Services, LLC, BlackRock, Inc., or any of its affiliates, or any of their respective third party licensors (including the Indices calculation agent, as applicable) (collectively, “BlackRock”). BlackRock has no obligation or liability in connection with the administration or marketing of the Allianz product. BlackRock makes no representation or warranty, express or implied, to the owners of the Allianz product or any member of the public regarding the advisability of investing in the Allianz product or the ability of the Index to track general market performance. BlackRock does not guarantee the adequacy, accuracy, timeliness, and/or completeness of the Indices or any data or communication related thereto nor does it have any liability for any errors, omissions or interruptions of the Indices.

Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.

• Not FDIC insured • May lose value • No bank or credit union guarantee • Not a deposit • Not insured by any federal government agency or NCUA/NCUSIF

Products are issued by Allianz Life Insurance Company of North America, PO Box 59060, Minneapolis, MN 55459-0060.

Product and feature availability may vary by state and broker/dealer.