ANNUITY INVESTORS VARIABLE ACCOUNT B 497
ANNUITY INVESTORS LIFE INSURANCE COMPANY®
ANNUITY INVESTORS® VARIABLE ACCOUNT B
THE COMMODORE INDEPENDENCE®
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES
SUPPLEMENT DATED JULY 16, 2007 TO
PROSPECTUS DATED MAY 1, 2007
The Contract Owner Transaction Expenses table is replaced in its entirety by the following
table.
Contract Owner Transaction Expenses
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Current |
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Maximum |
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Sales load imposed on Purchase Payments |
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None |
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None |
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Sales load imposed on withdrawals or on surrenders |
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None |
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None |
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Transfer Fee |
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* This fee currently applies to transfers in
excess of 12 in any Contract Year. |
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$ |
25 |
* |
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$ |
30 |
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Annual Automatic Transfer Program Fee |
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None |
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$ |
30 |
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Annual Systematic Withdrawal Fee |
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None |
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$ |
30 |
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Current Loan Interest Spread** .......... 3.00% |
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** |
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The Loan Interest Spread is the difference between the amount of interest we charge you for a loan and the amount of interest we credit to that portion of the Contract used to
secure the loan. |
The Total Annual Portfolio Operating Expenses table and related text is replaced in its
entirety by the following table and text.
Total Annual Portfolio Operating Expenses
(expenses that are deducted from Portfolio assets, including management fees, distribution and service (12b-1) fees, acquired fund fees and expenses, and other expenses)
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Minimum |
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Maximum |
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Before any fee reduction or expense reimbursement |
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0.27 |
% |
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10.73 |
% |
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After contractual fee reductions and/or expense reimbursements* |
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0.27 |
% |
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1.67 |
% |
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* |
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Contractual fee reductions and/or expense reimbursements related to a Portfolio will continue for a period that ends on a specific date. The shortest period will end on September
30, 2007 and the longest period will end on April 30, 2009. |
The information about Portfolio expenses that we used to prepare this table was provided to us
by the Portfolios. We have not independently verified the Portfolio expense information. The
minimum and maximum expenses shown in the table are for the year ended December 31, 2006, except as
noted below. Actual expenses of a Portfolio in future years may be higher or lower.
The Portfolios in the Financial Investors Variable Insurance Trust and the Wilshire Variable
Insurance Trust are structured as fund of funds and invest in other investment companies
(Acquired Funds). As a result, each Ibbotson portfolio and each Wilshire portfolio will likely
incur higher expenses than fund that invest directly in securities.
The maximum expenses shown in the table are the expenses of the Wilshire 2045 Moderate Fund (the
Wilshire 2045 Fund). The expenses shown in the table for the 2045 Wilshire Fund include fees and
expenses of its Acquired Funds. The 2045 Wilshire Funds expenses before any reduction or
reimbursement reflect the small asset base of the 2045 Wilshire Fund, which commenced operations on
May 1, 2006. The Wilshire 2045 Funds expenses after reductions and/or reimbursements reflect that
(1) its adviser has contractually agreed to waive management fees and/or reimburse expenses through
April 30, 2008, so that the Wilshire 2045 Funds expenses, excluding the fees and expenses of its
Acquired Funds will not exceed 0.50% and (2) two components (other expenses and expense
reimbursements) of the 2045 Wilshire Funds total expenses were calculated as of April 10, 2007 to
reflect asset growth in the Wilshire 2045 Fund since December 31, 2006.
Page 1 of 4
The following text is added to the Overview section.
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What Benefits Are Available under the Contract? |
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Annuity Benefit
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When the Contract is annuitized, we promise to pay a stream of Annuity Benefit payments for the duration
of the settlement option selected. |
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Death Benefit
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A Death Benefit will be paid under the Contract if you or a joint owner dies before the Annuity
Commencement Date and before the Contract is surrendered. |
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What Are the Risks Related to the Contract?
The variable investment options to which you allocate Purchase Payments may lose value, which
would cause your Account Value to decrease. We may not be able to pay claims related to the
annuity or death benefits. A penalty tax may be imposed at the time of a withdrawal or a surrender
depending on your age and other circumstances. |
The Transfer Fee table is replaced in its entirety by the following table.
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Transfer Fee |
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Purpose of Fee
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To offset costs incurred in administering the Contracts. |
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Amount of Fee
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$25 for each transfer in excess of 12 in any Contract
Year. We reserve the right to change the amount of this
fee at any time or the number of transfers that can be
made without incurring the transfer fee. The maximum
amount of the fee that we would impose on a transfer is
$30. |
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When Assessed
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Before the Commencement Date. |
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Assessed Against What
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Deducted from amount transferred. |
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Waivers
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Currently, the transfer fee does not apply to transfers
associated with the dollar cost averaging, interest
sweep and portfolio rebalancing programs. Transfers
associated with these programs do not count toward the
12 free transfers permitted in a Contract Year. We
reserve the right to eliminate this waiver at any time.
We also reserve the right to charge fees for the
automatic transfer programs described in the Transfers
section of this prospectus, and/or for the systematic
withdrawal program described in the Withdrawals and
Surrenders section of this prospectus, if we determine,
in our discretion, that such charges are necessary to
offset the costs of administering the programs. |
The second paragraph in the Contract Loans section is replaced in its entirety by the
following paragraph.
We will charge interest on these loans. The maximum rate of interest that we will charge will
be 8% or such other higher rate than may be required by the plan administrator or an employer
retirement plan that controls the Contract. These loans will be secured with an interest in the
Contract. The collateral for the loan will be moved from the designated Subaccounts to the Fixed
Accumulation Account option and will earn a fixed rate of interest applicable to loan collateral.
The minimum rate of interest that we will credit to loan collateral is 1% or any higher Fixed
Account guaranteed interest rate stated in your Contract. The difference between the amount of
interest we charge on a loan and the amount of interest we credit to loan collateral is called the
loan interest spread. The current loan interest spread is 3%.
The following sentence is added to the Voting of Portfolio Shares section.
Because we will use this proportional method of voting, a small number of Owners may determine
the manner in which we will vote Portfolio shares for which we solicit voting instructions but
receive no timely instructions.
Page 2 of 4
The following text is added to the Settlement Options section.
The Annuity 2000 Mortality Table for blended lives (60% female/40% male) with interest at 1%
per year, compounded annually, is used to compute all guaranteed settlement option factors, values,
and benefits under the Contract.
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1998 Version
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The 1983 Individual Annuity Mortality Table with interest at 3% per year, compounded annually, is used to compute all
guaranteed settlement option factors, values, and benefits under the Contract. |
Considerations in Selecting a Settlement Option and Payment Forms
Periodic payments under a settlement option are affected by various factors, including the length
of the payment period, the life expectancy of the person on whose life benefit payments are based,
the frequency of the payment interval (monthly, quarterly, semi-annual or annual), and the payment
form selected (fixed dollar or variable dollar).
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Generally, the longer the period over which payments are made or the more frequently the payments are made, the lower
the amount of each payment because more payments will be made. |
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For life contingent settlement options (Option B and Option C), the longer the life expectancy of the Annuitant or
Beneficiary, the lower the amount of each payment because more payments are expected to be paid. |
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Fixed dollar payments will remain level for the duration of the payment period. |
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The actual amount of each variable dollar payment may vary from payment to payment regardless of the duration of the
payment period. The actual amount of each variable dollar payment will reflect the investment performance of the
Subaccount(s) selected. The assumed daily investment factor, which is based on a net investment rate of 1% per year,
compounded annually, (3% per year, compounded annually, for the 1998 version of the Contract) also affects the amount
by which variable dollar payments increase or decrease. |
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Additional information about fixed dollar payments, variable dollar payments, and the assumed daily investment factor
is included in the Calculation of Benefit Payments and Glossary of Financial Terms sections of this prospectus. |
The following text is added to the Distribution of Variable Annuity Contracts section.
GAA may enter into revenue sharing, shelf space, and other arrangements with broker-dealers
under which GAA pays them additional compensation for services that they provide in connection with
the distribution of the Contracts (such as providing access to their distribution networks,
sponsoring conferences, seminars, sales programs or training programs for registered
representatives or other employees, paying travel expenses incurred in connection with these
events, and sponsoring sales and advertising campaigns related to the Contracts) or additional
compensation for administrative or operational expenses. These arrangements may not be applicable
to all firms in the selling network, the terms of these arrangements may differ between firms, and
the compensation payable under these arrangements may include cash compensation, non-cash
compensation, or other benefits. Compensation paid under these arrangements will not result in any
additional direct charge to you. Compensation under these arrangements may provide an incentive for
a selling firm or its registered representatives to favor the sale of the Contracts over other
financial products available in the marketplace.
The following text is added to the Federal Tax Matters section.
Required Minimum Distributions
The Contracts are subject to the required minimum distribution (RMD) rules of federal tax
law. These rules vary based on the tax qualification of the Contract or the plan under which it is
issued.
If the Contract is nonqualified or is a Roth IRA, then there are no required minimum distributions
during life. For all tax-qualified Contracts other than Roth IRAs, required minimum distributions
must generally begin by April 1 following attainment of age 70 1/2. However, a participant who is
not a 5% owner of the employer may delay required minimum distributions from the employers
Tax-Sheltered Annuity Plan, Pension, Profit-Sharing, or 401(k) Plan, or Governmental Deferred
Compensation Plan until April 1 following the year in which the participant retires from the
employer. The required minimum distributions during life are calculated based on standard life
expectancy tables adopted under federal tax law.
Page 3 of 4
Both nonqualified and tax-qualified Contracts are subject to required minimum distributions after
death. Generally, if payments have begun under a settlement option during life, then after death
any remaining payments must be made at least as rapidly as those before death. If payments have not
begun under a settlement option during life, then the death benefit must be paid out in full within
five years after death, or must be paid out in substantially equal payments beginning within one
year of death over a period not exceeding the beneficiarys life expectancy. If the Contract is
nonqualified or is a traditional IRA or Roth IRA, a spouse beneficiary may elect out of these
requirements, and apply the required minimum distribution rules as if the contract were his or her
own.
The following text is added to the Benefit Unit Value section.
This factor shall be no greater than 0.99997236, which is the factor based on a net investment
rate of 1% per year, compounded annually, as reflected in the guaranteed Settlement Option Tables.
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1998 Version
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The product is then multiplied by the assumed daily
investment factor (0.99991781), for the number of days in the
Valuation Period. The assumed daily investment factor is
based on the assumed net investment rate of 3% per year,
compounded annually, that is reflected in the Settlement
Option Tables. |
The following text replaces the first paragraph in The Registration Statement section.
We filed a Registration Statement with the SEC under the Securities Act of 1933 relating to
the Contracts offered by this prospectus. This prospectus was filed as a part of the Registration
Statement, but it does not constitute the complete Registration Statement. The Registration
Statement contains further information relating to the Company and the Contracts. The Registration
Statement and the exhibits thereto may be inspected and copied at the office of the SEC, located at
100 F Street, N.E., Washington, D.C., and may also be accessed at the SECs web site www.sec.gov.
The registration number for the Contracts is 333-51955.
Page 4 of 4