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If I wanted to support a claim such as yours about dividends, I would do an IUL model run on actual historical data both with and without dividends included.
OK, knock yourself out. Let's see your formula for options valuation sans dividends.

This is going to be interesting.

Heh. By now, everyone should know that my spreadsheet is easy to tweak. You knew that, Dave, right?
Oh, and options valuations have no more to do with IUL figures than Tibetan yak-milk futures do. ;-)

Jan 1982 start, Jan 2012 end. \$16,800 initial deposit, \$150 monthly.
This start date is the median for SPX 30 year returns.

IUL: 0.22 bps fees, 0% load

No dividend definition: Credit= annual price gain, limited by floor & cap.

With dividend definition: Credit= annual price gain plus dividend, limited by floor & cap.

`0% floor 12% capFinal values:w/o div: \$320,135           w/div: \$371,8970% floor, 16% capw/o div: \$452,331           w/div: \$565,746For comparison with B&Hno floor, no cap:w/o div: \$318,713           w/div: \$584,817S&P B&H w/o div: \$330,029   w/div: \$633,781----------The Allianz Pro+ Illustration:cash value at yr# 30: \$324,963`

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Based on this, it appears that dividends are NOT included in the IUL returns.
1) The no-floor, no-cap IUL and the B&H are close for both with and without dividends. The difference is due to the different expense ratios.

2) The B&H w/o div is very close to the illustration's value, lending credence that the calibration is probably correct. Note that the 1982 start is the median 30 year return, and the illustration claims to be representative and thus implicity near the median.

3) The final values *with* dividends are substantially higher than the same parameters *without* dividends. And are substantially higher than the illustration.

4) When comparing numbers with the illustration, it appears that the illustration has 0% floor and 12% cap. If the cap was 16% the yr 30 CV would be much higher.
Although it *could* be that the illustration uses 16% cap and a blended load that amounts to about 28%.

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