ANNUITY INVESTORS LIFE INSURANCE COMPANY®
ANNUITY INVESTORS® VARIABLE ACCOUNT B
THE COMMODORE SPIRIT®
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES
SUPPLEMENT DATED AUGUST 19, 2013 TO PROSPECTUS DATED MAY 1, 2013
The information below replaces in its entirety the DEATH BENEFIT AMOUNT section in The Commodore Spirit prospectus dated May 1, 2013. In the May 1, 2013 prospectus, certain paragraphs in this section were mislabeled and misplaced. These paragraphs have been relabeled and moved to the correct location in this sticker.
Death Benefit Amount
The calculation of the Death Benefit Amount depends on the form of individual Contract that you received, or the form of the master group Contract that was issued. The different forms contain provisions that affect the way the Death Benefit Amount is calculated.
The charts in the sections below are intended to help you identify the version of the Death Benefit that applies to your Contract. If you have questions about which version of the Death Benefit applies, contact us at P.O. Box 5423, Cincinnati, Ohio 45201-5423, or call us at 1-800-789-6771.
Individual Contracts. If you own an individual Spirit Contract, you can determine whether Version 1, Version 2 or Version 3 applies to your Contract by matching your contract and endorsement form numbers to the form numbers in the chart below.
| Form Numbers for Individual Contracts |
Issue Dates | |
| Death Benefit Version 1 A801-BD(Q Rev. 3/97)-3 with no death benefit endorsement A801-BD(NQ Rev. 3/97)-3 with no death benefit endorsement |
Applies to all individual contracts issued before November 11, 2000, and to contracts in certain states after that date | |
| Death Benefit Version 2 and Version 2E A801-BD(Q Rev. 3/97)-3 with 2000 Death Benefit Endorsement (E1802100NW) A801-BD(NQ Rev. 3/97)-3 with 2000 Death Benefit Endorsement (E1802100NW) |
Applies to individual contracts issued in certain states after November 11, 2000 | |
| Note: Death Benefit Version 2E will apply to your Contract only if you selected the optional enhanced death benefit when you purchased your Contract. |
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| Death Benefit Version 3 A801-BD(Q Rev. 3/97)-3 with 2003 Death Benefit Endorsement (E1807503NW) A801-BD(NQ Rev. 3/97)-3 with 2003 Death Benefit Endorsement (E1807503NW) P1809003NW P1809103NW |
Applies to most individual contracts issued on or after June 1, 2003 | |
Group Contracts. If you are the owner of a master group Spirit Contract, you can determine whether Version 1 or Version 3 applies to your group Contract by matching your master group contract and endorsement form numbers to the form numbers in the chart below.
If you are a participant under a master group Spirit Contract, the version of the Death Benefit that applies to the master group Contract also applies to your certificate. If you have questions about which version of the Death Benefit applies, you may contact the owner of the master group Contract, or you may contact us at P.O. Box 5423, Cincinnati, Ohio 45201-5423 or call us at 1-800-789-6771.
Note: If a certificate was issued to a participant on or after June 1, 2003, the date on which the certificate was issued does not determine which version of the Death Benefit applies.
| Form Numbers for Master Group Contracts |
Issue Dates | |
| Death Benefit Version 1 G801-BD(97)-3 with no death benefit endorsement G801-BD(04)-3 with no death benefit endorsement |
Applies to all master group Contracts issued before June 1, 2003, and to certain master group Contracts issued after that date, and to all certificates issued to participants under those particular master group Contracts | |
| Death Benefit Version 3 G801-BD(97)-3 with 2003 Death Benefit Endorsement (E2007803NW) G801-BD(97)-3 with 2003 Death Benefit Endorsement (E2008003NW) P20086003NW |
Applies to certain master group Contracts issued on or after June 1, 2003, and all certificates issued to participants under those particular master group Contracts | |
| Spirit Supplement 08/13 | Page 1 of 5 |
Death Benefit Amount (Version 1)
Scenario A: If you die before age 80 and before the Annuity Commencement Date, the death benefit will be an amount equal to the largest of the following three amounts:
| 1) | The Account Value on the Death Benefit Valuation Date; |
| 2) | The total Purchase Payment(s), with interest at three percent (3%) per year compounded annually, less any withdrawals and any contingent deferred sales charges that applied to those amounts; or |
| 3) | The largest Account Value on any Contract anniversary after the fourth Contract anniversary and prior to the Death Benefit Valuation Date, less any withdrawals after such Account Value was determined and any contingent deferred sales charges that applied to those amounts. |
Scenario B: If you die after age 80 and before the Annuity Commencement Date, the death benefit will be an amount equal to the largest of the following three amounts:
| 1) | The Account Value on the Death Benefit Valuation Date; |
| 2) | The total Purchase Payment(s), with interest at three percent (3%) per year compounded annually through the Contract anniversary prior to your 80th birthday, less any withdrawals and any contingent deferred sales charges that applied to those amounts; or |
| 3) | The largest Account Value on any Contract anniversary after the fourth Contract anniversary and prior to your 80th birthday, less any withdrawals after such Account Value was determined and any contingent deferred sales charges that applied to those amounts. |
Scenario C: If your Contract was issued to you after age 80 and you die before the Annuity Commencement Date, the death benefit will be the greater of:
| 1) | The Account Value on the Death Benefit Valuation Date; or |
| 2) | The total Purchase Payment(s), less any withdrawals and any contingent deferred sales charges that applied to those amounts. |
The Death Benefit Amount will be reduced by any premium tax or other tax that is applicable. It will also be reduced by any outstanding loans.
The Death Benefit Amount will be allocated among the Subaccounts and the Fixed Account options. This allocation will occur as of the Death Benefit Valuation Date. It will be made in the same proportion as the value of each option bears to the total Account Value immediately before that date.
Example of Determination of Death Benefit Amount for Version 1—Scenario A. This example is intended to help you understand how a withdrawal impacts the Death Benefit amount and how the Version 3 Death Benefit amount is calculated.
This example assumes:
| • | your total Purchase Payments equal $100,000 and our Account Value is $90,000, |
| • | the “largest Account Value” is $140,000, and |
| • | you withdraw $10,000 from the Contract, and you are left with an Account Value of $80,000. |
It also assumes that, for purposes of calculating the Death Benefit Amount, total Purchase Payments will be increased by interest in the amount of $42,576, which represents interest at an annual effective rate of 3% for 15 years.
Step One: Calculate the Purchase Payment amount, increased by interest and reduced for withdrawals.
| Purchase Payments |
$ | 100,000 | ||
| Plus interest |
+42,576 | |||
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| Purchase Payments increased by interest |
142,576 | |||
| Less reduction for withdrawals |
–10,000 | |||
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| Purchase Payments increased by interest and and reduced for withdrawals |
$ | 132,576 |
Step Two: Calculate the largest Account Value amount, reduced for withdrawals.
| Largest Account Value |
$ | 140,000 | ||
| Less reduction for withdrawals |
–10,000 | |||
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| Largest Account Value reduced for withdrawals |
$ | 130,000 |
Step Three: Determine the Death Benefit amount.
Immediately after the withdrawal, the applicable amounts are:
| • Account Value |
$ | 80,000 | ||
| • reduced Purchase Payments, increased by interest |
$ | 132,576 | ||
| • reduced largest Account Value |
$ | 130,000 |
Immediately after the withdrawal, the reduced Purchase Payments plus interest of $132,576 is greater than the reduced largest Account Value of $130,000 and the Account Value of $80,000, so the Death Benefit amount would be $132,576.
| Spirit Supplement 08/13 | Page 2 of 5 |
Death Benefit Amount (Version 2)
The Death Benefit will equal the greatest of:
| 1) | the Account Value on the Death Benefit Valuation Date; or |
| 2) | the Minimum Death Benefit; or |
| 3) | the Historic High Value; |
The reduction for a withdrawal will be the same percentage as the percentage reduction in the Account Value. A withdrawal from the Contract may result in a reduction of the Death Benefit that is greater than the amount of the withdrawal. The Death Benefit Amount will be reduced by any premium tax or other tax that is applicable. It will also be reduced by any outstanding loans.
The Death Benefit Amount will be allocated among the Subaccounts and the Fixed Account options. This allocation will occur as of the Death Benefit Valuation Date. It will be made in the same proportion as the value of each option bears to the total Account Value immediately before that date.
Minimum Death Benefit. The Minimum Death Benefit is equal to total Purchase Payments, reduced proportionally for withdrawals, and increased by interest, if any. This reduction will be in the same proportion that the Account Value was reduced on the date of the withdrawal.
| • | If the Owner dies before Age 80, interest compounds daily, at an effective annual interest rate of 3%, to the Death Benefit Valuation Date. |
| • | If the Owner dies on or after his 80th birthday, interest compounds daily, at an effective annual interest rate of 3%, to the Contract anniversary prior to the 80th birthday. |
| • | No interest will be added if the Owner was Age 80 before this Contract was issued. |
Historic High Value. The Historic High Value is equal to the High Value, reduced proportionally for withdrawals taken after the High Value was reached. This reduction will be in the same proportion that the Account Value was reduced on the date of the withdrawal.
High Value. The High Value is the largest Account Value on the fifth or any subsequent Contract anniversary, but before the Death Benefit Valuation Date and prior to Age 80. If this Contract was issued after the Owner’s 75th birthday, there is no High Value. This means there is no Historic High Value.
Example of Determination of Death Benefit Amount for Version 2. This example is intended to help you understand how a withdrawal impacts the Death Benefit amount and how the Version 2 Death Benefit amount is calculated.
This example assumes:
| • | your total Purchase Payments equal $100,000 and your Account Value is $90,000, |
| • | the “High Value” is $140,000, and |
| • | you withdraw $10,000 from the Contract, and you are left with an Account Value of $80,000. |
It also assumes that, for purposes of calculating the Death Benefit Amount, total Purchase Payments will be increased by interest in the amount of $42,576, which represents interest at an annual effective rate of 3% for 15 years.
Step One: Calculate the proportional reduction in the Purchase Payment amount.
| 1 – |
$80,000 | Account Value immediately after withdrawal | = 11.1111% | Percentage Reduction |
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| $90,000 | Account Value immediately before withdrawal |
| $100,000 | Purchase Payments | x 11.1111% | Percentage Reduction | = $11,111 | Proportional Reduction |
Step Two: Calculate the Minimum Death Benefit (reduced Purchase Payment amount, increased by interest).
| Purchase Payments |
$ | 100,000 | ||
| Less proportional reduction for withdrawals |
–11,111 | |||
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| Purchase Payments reduced for withdrawals |
88,889 | |||
| Plus interest |
+42,576 | |||
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| Minimum Death Benefit |
$ | 131,465 |
Step Three: Calculate the proportional reduction in the High Value.
| 1 – |
$80,000 | Account Value immediately after withdrawal | = 11.1111% | Percentage Reduction |
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| $90,000 | Account Value immediately before withdrawal |
| $140,000 | High Value | x 11.1111% | Percentage Reduction | = $15,556 | Proportional Reduction |
| Spirit Supplement 08/13 | Page 3 of 5 |
Step Four: Calculate the Historic High Value amount, which is the same as the reduced High Value amount.
| High Value |
$ | 140,000 | ||
| Less proportional reduction for withdrawals |
–15,556 | |||
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| Historic High Value |
$ | 124,444 |
Step Five: Determine the Death Benefit amount.
Immediately after the withdrawal, the applicable amounts are:
| • Account Value |
$ | 80,000 | ||
| • Minimum Death Benefit |
$ | 131,465 | ||
| • Historic High Value |
$ | 124,444 |
Immediately after the withdrawal, the Minimum Death Benefit of $131,465 is greater than the Historic High Value of $124,444 and the Account Value of $80,000, so the Death Benefit amount would be $131,465.
Death Benefit Amount (Version 2E)
See Appendix C for information about Death Benefit Amount (Version 2E).
Death Benefit Amount (Version 3)
The Death Benefit will equal the greatest of:
| 1) | the Account Value on the Death Benefit Valuation Date; or |
| 2) | the total of all your Purchase Payments, reduced proportionally for partial surrenders; or |
| 3) | the Historic High Value. |
The reduction for a withdrawal will be the same percentage as the percentage reduction in the Account Value. A withdrawal from the Contract may result in a reduction of the Death Benefit that is greater than the amount of the withdrawal. The Death Benefit Amount will be reduced by any premium tax or other tax that is applicable. It will also be reduced by any outstanding loans.
The Death Benefit Amount will be allocated among the Subaccounts and Fixed Account options. This allocation will occur as of the Death Benefit Valuation Date. It will be made in the same proportion as the value of each option bears to the total account value immediately before that date.
Historic High Value. The Historic High Value is equal to the lesser of (1) 200% of the total Purchase Payments, reduced proportionally for withdrawals; and (2) the High Value, reduced proportionally for withdrawals taken after the High Value was reached.
High Value. The High Value is the largest Account Value on the fifth or any subsequent Contract anniversary, but before the Death Benefit Valuation Date and prior to Age 65.
| • | If the Contract was issued after the Owner’s 60th birthday, there is no High Value. |
| • | If the Death Benefit Valuation Date is before the fifth Contract anniversary, then there is no High Value. |
| • | If there is no High Value then there is no Historic High Value. |
Example of Determination of Death Benefit Amount for Version 3. This example is intended to help you understand how a withdrawal impacts the Death Benefit amount and how the Version 1 Death Benefit amount is calculated.
This example assumes:
| • | your total Purchase Payments equal $100,000 and your Account Value is $90,000, |
| • | the “High Value” is $140,000, and |
| • | you withdraw $10,000 from the Contract, and you are left with an Account Value of $80,000. |
Step One: Calculate the proportional reduction in the Purchase Payments.
| 1 – |
$80,000 | Account Value immediately after withdrawal | = 11.1111% | Percentage Reduction |
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| $90,000 | Account Value immediately before withdrawal |
| $100,000 | Purchase Payments | x 11.1111% | Percentage Reduction | = $11,111 | Proportional Reduction |
| Spirit Supplement 08/13 | Page 4 of 5 |
Step Two: Calculate the reduced Purchase Payment amount.
| Purchase Payments |
$ | 100,000 | ||
| Less proportional reduction for withdrawals |
–11,111 | |||
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| Purchase Payments reduced for withdrawals |
$ | 88,889 |
Step Three: Calculate the proportional reduction in the High Value.
| 1 – |
$80,000 | Account Value immediately after withdrawal | = 11.1111% | Percentage Reduction |
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| $90,000 | Account Value immediately before withdrawal |
| $140,000 | High Value | X 11.1111% | Percentage Reduction | = $15,556 | Proportional Reduction |
Step Four: Calculate the reduced High Value amount.
| High Value |
$ | 140,000 | ||
| Less proportional reduction for withdrawals |
–15,556 | |||
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| High Value reduced for withdrawals |
$ | 124,444 |
Step Five: Calculate the proportional reduction in the 200% Purchase Payment amount.
| 1 – |
$80,000 | Account Value immediately after withdrawal | = 11.1111% | Percentage Reduction |
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| $90,000 | Account Value immediately before withdrawal |
| $200,000 | 200% Purchase Payments |
x 11.1111% | Percentage Reduction | = $22,222 | Proportional Reduction |
Step Six: Calculate the reduced 200% Purchase Payment amount.
| 200% Purchase Payments |
$ | 200,000 | ||
| Less proportional reduction for withdrawals |
–22,222 | |||
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| 200% Purchase Payments reduced for withdrawals |
$ | 177,778 |
Step Seven: Determine the Death Benefit amount.
Immediately after the withdrawal, the applicable amounts are:
| • Account Value |
$ | 80,000 | ||
| • reduced Purchase Payments amount |
$ | 88,889 | ||
| • reduced High Value amount |
$ | 124,444 | ||
| • reduced 200% Purchase Payments amount |
$ | 177,778 |
First, determine the Historic High Value by comparing the reduced High Value amount and the reduced 200% Purchase Payment amount. Immediately after the withdrawal, the reduced High Value of $124,444 is less than the reduced 200% Purchase Payments of $177,778. As a result, the Historic High Value is the reduced High Value of $124,444.
Next, compare the Account Value, the reduced Purchase Payment amount, and the Historic High Value amount. Immediately after the withdrawal, the Historic High Value of $124,444 is greater than both the reduced Purchase Payments of $88,889 and the Account Value of $80,000, so the Death Benefit amount would be $124,444.
| Spirit Supplement 08/13 | Page 5 of 5 |