<PAGE>
GLENBROOK PROVIDER VARIABLE LIFE
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, IL 60062
Telephone (800) 755-5275 Prospectus dated May 1, 2000
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This prospectus describes the "Glenbrook Provider Variable Life," a modified
single premium variable life insurance contract ("CONTRACT") offered by
Glenbrook Life and Annuity Company ("WE", "US", or the "COMPANY") for
prospective insured persons age 0-85. The Contract lets you, as the Contract
Owner, pay a significant single premium and, subject to restrictions, additional
premiums.
The Contracts are modified endowment contracts for federal income tax purposes,
except in certain cases described under "FEDERAL TAX MATTERS," page 21. You will
be taxed on any loan, distribution or other amount you receive from a modified
endowment contract during the life of the insured to the extent of any
accumulated income in the contract. Any amounts that are taxable distributions
will be subject to a 10% penalty, with certain exceptions.
The minimum initial premium we will accept is $10,000. We allocate premiums to
Glenbrook Life Variable Life Separate Account A ("VARIABLE ACCOUNT"). The
Variable Account will invest in shares of one or more mutual funds ("FUNDS"),
each of which has multiple investment portfolios ("PORTFOLIOS"). All of the
Funds which are described in this prospectus may not be available with your
Contract. Presently, the Variable Account invests in shares of the following
Funds:
<TABLE>
<S> <C> <C> <C>
- - AIM VARIABLE INSURANCE FUNDS
- DREYFUS STOCK INDEX FUND
- - AMERICAN CENTURY VARIABLE PORTFOLIOS
(VP), INC.
- DREYFUS VARIABLE INVESTMENT FUND (VIF)
- - THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC. - FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST(SM)
</TABLE>
There is no guaranteed minimum Account Value for a Contract. The Account Value
of your Contract will vary up or down to reflect the investment experience of
the Variable Sub-Accounts to which you have allocated premiums. You bear the
investment risk for all amounts so allocated. The Contract continues in effect
so long as its Cash Surrender Value is sufficient to pay the monthly charges
under the Contract ("MONTHLY DEDUCTION AMOUNT").
The Contracts provide for an Initial Death Benefit shown on the Contract Data
Page. The death benefit ("DEATH BENEFIT") payable under a Contract may be
greater than the Initial Death Benefit but, so long as the Contract continues in
effect and if no withdrawals are made, it will never be less than the Initial
Death Benefit. The Account Value will, and under certain circumstances the Death
Benefit of the Contract may, increase or decrease based on the investment
experience of the Portfolios to which you have allocated premiums. At the death
of the Insured, we will pay Death Benefit proceeds to the beneficiary.
It may not be to your advantage to purchase variable life insurance either as a
replacement for your current life insurance or if you already own a variable
life insurance contract.
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<TABLE>
<C> <S>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
</TABLE>
KLA13-4
1 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
<S> <C>
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Special Terms 3
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Summary 4
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The Company 9
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The Variable Account 9
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General 9
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Funds 9
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The Contract 11
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Application for a Contract 11
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Premiums 11
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Allocation of Premiums 12
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Accumulation Unit Values 12
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Deductions and Charges 13
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Monthly Deductions 13
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Cost of Insurance Charge 13
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Tax Expense Charge 13
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Administrative Expense Charge 14
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Other Deductions 14
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Mortality and Expense Risk Charge 14
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Annual Maintenance Fee 14
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Taxes Charged Against the Variable Account 14
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Charges Against the Funds 14
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Withdrawal Charge 14
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Due and Unpaid Premium Tax Charge 14
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Contract Benefits and Rights 15
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Death Benefit 15
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Accelerated Death Benefit 15
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Confinement Waiver Benefit 16
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Account Value 16
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Transfer of Account Value 16
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Dollar Cost Averaging 16
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Automatic Portfolio Rebalancing 17
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Access to Your Money 17
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Contract Loans 17
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Amount Payable on Surrender of the Contract 18
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</TABLE>
<TABLE>
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<CAPTION>
Page
<S> <C>
Partial Withdrawals 18
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Payment Options 18
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Maturity 19
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Lapse and Reinstatement 19
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Cancellation and Exchange Rights 19
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Suspension of Valuation, Payments and Transfers 19
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Last Survivor Contracts 19
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Other Matters 20
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Voting Rights 20
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Statements to Contract Owners 20
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Limit on Right to Contest 20
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Misstatement as to Age and Sex 21
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Beneficiary 21
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Assignment 21
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Dividends 21
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Distribution of the Contracts 21
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Safekeeping of the Variable Account's Assets 21
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Federal Tax Matters 21
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Introduction 21
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Taxation of the Company and the Variable Account 21
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Taxation of Contract Benefits 22
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Modified Endowment Contracts 22
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Diversification Requirements 23
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Ownership Treatment 23
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Additional Information About the Company 23
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Executive Officers and Directors of the Company 23
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Year 2000 25
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Legal Proceedings 25
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Legal Matters 25
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Registration Statement 25
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Experts 25
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Financial Information 26
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Financial Statements 27
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</TABLE>
2 - PROSPECTUS
<PAGE>
SPECIAL TERMS
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As used in this Prospectus, the following terms have the indicated meanings:
ACCOUNT VALUE: The aggregate value under a Contract of the Variable Sub-Accounts
and the Loan Account.
ACCUMULATION UNIT: An accounting unit of measure used to calculate the value of
a Variable Sub-Account.
AGE: The Insured's age at the Insured's last birthday.
CASH SURRENDER VALUE: The Cash Value less all Indebtedness and the annual
maintenance fee, if applicable.
CASH VALUE: The Account Value less any applicable withdrawal charges and due and
unpaid Premium Tax Charges.
CODE: The Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY: The same day and month as the Contract Date for each
subsequent year the Contract remains in force.
CONTRACT DATE: The date on or as of which coverage under a Contract becomes
effective and the date from which Contract Anniversaries, Contract Years and
Contract Months are determined.
CONTRACT OWNER: The person having rights to benefits under the Contract during
the lifetime of the Insured; the Contract Owner may or may not be the Insured.
CONTRACT YEARS: Annual periods computed from the Contract Date.
DEATH BENEFIT: The greater of (1) the Specified Amount or (2) the Account Value
on the date of death multiplied by the Death Benefit ratio as specified in the
Contract.
FREE WITHDRAWAL AMOUNT: The amount of a surrender or partial withdrawal that is
not subject to a withdrawal charge. This amount in any Contract Year is 15% of
total premiums paid.
FUNDS: The registered management investment companies in which assets of the
Variable Account may be invested.
INITIAL DEATH BENEFIT: The Initial Death Benefit under a Contract is shown on
the Contract Data page.
INDEBTEDNESS: All Contract loans, if any, and accrued loan interest.
INSURED: The person whose life is insured under a Contract.
LOAN ACCOUNT: An account in the Company's General Account, established for any
amounts transferred from the Variable Sub-Accounts for requested loans. The loan
account credits a fixed rate of interest that is not based on the investment
experience of the Variable Account.
MONTHLY ACTIVITY DATE: The day of each month on which the Monthly Deduction
Amount is deducted from the Account Value of the Contract. Monthly Activity
Dates occur on the same day of the month as the Contract Date. If there is no
date equal to the Monthly Activity Date in a particular month, the Monthly
Activity Date will be the last day of that month.
MONTHLY DEDUCTION AMOUNT: A deduction on each Monthly Activity Date for the cost
of insurance charge, a tax expense charge and an administrative expense charge.
SPECIFIED AMOUNT: The minimum death benefit under a Contract, equal to the
Initial Death Benefit on the Contract Date. Thereafter it may change in
accordance with the terms of the partial withdrawal and the subsequent premium
provisions of the Contract.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. The
value of the Fund is determined at the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The period between the close of regular trading on the New
York Stock Exchange on successive Valuation Days.
VARIABLE ACCOUNT: Glenbrook Life Variable Life Separate Account A, an account
established by the Company to separate the assets funding the Contracts from
other assets of the Company.
VARIABLE SUB-ACCOUNT: The subdivisions of the Variable Account used to allocate
a Contract Owner's Account Value, less Indebtedness, among the Portfolios of the
Funds.
3 - PROSPECTUS
<PAGE>
SUMMARY
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THE CONTRACT
The Contracts are life insurance contracts with death benefits, cash values, and
other traditional life insurance features. However, the Contracts are
"variable." Unlike the fixed benefits of ordinary whole life insurance, the
Account Value will increase or decrease based on the investment experience of
the Portfolios of the Funds to which you as the Contract Owner, have allocated
premiums. Similarly, the Death Benefit may increase or decrease under some
circumstances. Nevertheless, so long as the Contract remains in effect, the
Death Benefit will not decrease below the Initial Death Benefit if no
withdrawals are made. We credit the Contracts with units ("Accumulation Units")
to calculate cash values. You may transfer your Account Value among the Variable
Sub-Accounts.
We can issue the Contracts on either a single life or a "last survivor" basis.
For a discussion of how last survivor Contracts operate differently from single
life Contracts, see "Access to Your Money -- Last Survivor Contracts," page 19.
In some states, we issue the Contracts in the form of a group contract. In those
states, we will issue you a certificate evidencing your rights under the group
Contract. In certain states, we issue certificates under group Contracts issued
to the Financial Services Group Insurance Trust, an Illinois Trust. The terms
"Contract" and "Contract Owner", as used in this Prospectus, refer to and
include such a certificate and certificate owner, respectively.
THE VARIABLE ACCOUNT AND THE FUNDS
The Variable Account funds the variable life insurance Contracts offered by this
prospectus. The Variable Account is a unit investment trust registered as such
with the Securities and Exchange Commission, ("SEC") under the Investment
Company Act of 1940 ("1940 Act"). It consists of Variable Sub-Accounts, each
investing in a corresponding Portfolio.
Applicants should read the prospectuses for the Funds in connection with the
purchase of a Contract. The investment objectives of the Fund Portfolios are
briefly summarized below under "The Variable Account-Funds," page 9. Presently,
the Variable Account invests in shares of the following Funds:
- - A I M Advisors, Inc.
- - American Century Investment Management, Inc.
- - The Dreyfus Corporation
- - Fidelity Management & Research Company
- - Massachusetts Financial Services
The AIM FUND has eight available Portfolios:
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Utilities Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
The AMERICAN CENTURY FUNDS have two available Portfolios:
American Century VP Balanced
American Century VP International
The DREYFUS FUNDS have five available Portfolios:
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund
Dreyfus VIF Growth and Income
Dreyfus VIF Money Market
Dreyfus VIF Small Company Stock
The FIDELITY FUNDS have four available Portfolios:
Fidelity VIP Contrafund-Registered Trademark-
Fidelity VIP Equity-Income
Fidelity VIP Growth
Fidelity VIP High Income
The MFS FUND has two available Portfolios:
MFS Emerging Growth Series
MFS Limited Maturity Series*
* Note: As of May 1, 1999, the MFS Limited Maturity Series was closed to new
investments, including additions and transfers.
The assets of each Portfolio are accounted for separately from the other
Portfolios. Each has distinct investment objectives and policies, which the
accompanying prospectuses for the Funds describe.
PREMIUMS
The Contract requires you to pay an initial premium of at least $10,000. You may
make additional premium payments at any time, subject to the following
conditions:
- - only one payment is allowed in any Contract Year;
- - the minimum payment is $500;
- - the attained age of the Insured must be less than 86; and
- - absent submission of new evidence of insurability of the Insured, the maximum
additional payment permitted in a Contract Year is the "Guaranteed Additional
Payment."
4 - PROSPECTUS
<PAGE>
The Guaranteed Additional Payment is the lesser of (1) $5,000, or (2) a
percentage of the initial payment (5% for attained ages 40-70, and 0% for
attained ages 20-39 and 71-80).
Additional premium payments may require an increase in the "Specified Amount",
in order for the Contract to continue to meet requirements of the Internal
Revenue Code. The Specified Amount is the guaranteed minimum death benefit under
a Contract. We reserve the right to obtain satisfactory evidence of insurability
before accepting any additional premium payments requiring an increase in
Specified Amount. However, we also reserve the right to reject an additional
premium payment for any reason. You may make additional premium payments at any
time and in any amount necessary to avoid termination of the Contract.
DEATH BENEFIT
At the death of the Insured while the Contract is in force, we will pay the
Death Benefit (less any Indebtedness and due and unpaid Monthly Deduction
Amounts) to the beneficiary. The Death Benefit determined on the date of the
Insured's death is the greater of (1) the Specified Amount, or (2) the Account
Value multiplied by the Death Benefit ratio as found in the Contract. See
"Contract Benefits and Rights -- Death Benefit," page 15.
ACCOUNT VALUE
The Account Value of your Contract will increase or decrease to reflect (1) the
investment experience of the Portfolios underlying the Variable Sub-Accounts to
which you have allocated Account Value; (2) interest credited to the Loan
Account; and (3) deductions for the mortality and expense risk charge, the
Monthly Deduction Amount, and the annual maintenance fee. There is no minimum
guaranteed Account Value; you bear the risk of the investment in the Variable
Sub-Accounts. See "Contract Benefits and Rights -- Account Value," page 16.
CONTRACT LOANS
You may obtain one or both of two types of cash loans from the Company. Both
types of loans are secured by your Contract. The maximum amount available for
these loans is 90% of the Contract's Cash Value, less the sum of:
- - the amount of all loans existing on the date of the loan request (including
loan interest to the next Contract Anniversary),
- - any annual maintenance fee due on or before the next Contract Anniversary, and
- - any due and unpaid Monthly Deduction Amounts.
See "Access to Your Money -- Contract Loans," page 17.
LAPSE
Under certain circumstances a Contract may terminate if the Cash Surrender Value
on any Monthly Activity Date is less than the required Monthly Deduction Amount.
If that happens, we will give you (1) written notice and (2) a 61 day grace
period during which you may pay additional amounts to continue the Contract. See
"Assess to Your Money -- Contract Loans," page 17 and "Lapse and Reinstatement,"
page 19.
CANCELLATION AND EXCHANGE RIGHTS
You have a limited right to return your Contract for cancellation. The right to
return exists during what we call the "cancellation period." The cancellation
period is a number of days (which varies by state) as specified in your
contract. If you choose to return the Contract for cancellation, we may require
that you return it to us within the cancellation period following delivery of
the Contract to you. The Company will return to you within 7 days thereafter the
premiums paid for the Contract adjusted to reflect any investment gain or loss
resulting from allocation to the Variable Account prior to the date of
cancellation, unless state law requires a return of premium without such
adjustments. In those states where the Company is required to return the
premiums paid upon a cancellation of the Contract, the Company reserves the
right to allocate all premium payments made prior to the expiration of the
cancellation period to the Money Market Variable Sub-Account, if that procedure
has been approved by the state.
In addition, once the Contract is in effect you may be able to exchange it
during the first 24 months after its issuance for a non-variable permanent life
insurance contract on the life of the Insured without submitting proof of
insurability. We reserve the right to make such a contract available that is
offered by the Company's parent or any other affiliate of the company. See
"Access to Your Money -- Cancellation and Exchange Rights," page 19.
TAX CONSEQUENCES
The current Federal tax law generally excludes all Death Benefit payments from
the gross income of the Contract beneficiary. The Contracts generally will be
treated as modified endowment contracts. This status does not affect the
Contracts' classification as life insurance, nor does it affect the exclusion of
Death Benefit payments from gross income. However, loans, distributions or other
amounts received under a modified endowment contract prior to the Insured's
death are taxed to the extent of accumulated income in the Contract (generally,
the excess of Account Value over premiums paid) and may be subject to a 10%
penalty tax. See "Federal Tax Matters," page 21.
5 - PROSPECTUS
<PAGE>
PERSONALIZED ILLUSTRATIONS
The Company will furnish, upon request and at no charge, a personalized
illustration reflecting the proposed Insured's age, sex, and underwriting
classification. Where applicable, the Company will also furnish upon request an
illustration for a Contract that is not affected by the sex of the Insured.
These illustrations will be based, as appropriate, on the methodology and format
of the hypothetical illustrations that the Company has included in its
registration statement filed with the SEC for the Contracts. See "Additional
Information About the Company -- Registration Statement," page 25, for further
information.
FEES AND EXPENSES
The following tables are designed to help you understand the various fees and
expenses that you will incur, directly or indirectly, as a Contract owner. The
first table describes the Contract charges and deductions you will directly bear
under the Contracts. The second table describes the fees and expenses of the
Portfolios you will indirectly bear when you invest in the Contracts. For
further information, see "Deductions and Charges" on page 13.
CONTRACT CHARGES AND DEDUCTIONS
Account Value Charges (deducted monthly and shown as an annualized percentage of
Account Value): (1)
<TABLE>
<CAPTION>
Current(2) Maximum
Single Life Single Life
<S> <C> <C>
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Cost of Insurance Charge Standard:... Standard: 0.65% (Contract Years 1-10); Standard-Ranges from $0.06 per $1,000 of net amount
0.55% (Contract Years 11+) at risk (younger ages) up to $82.50 per $1,000 of net
amount at risk (age 99)
Special: 1.00% (Contract Years 1-10); Special-Ranges from $0.12 per $1,000 of net amount at
0.90% (contract Years 11+) risk (younger ages) up to $82.92 per $1,000 of net
amount at risk (age 99).
<CAPTION>
Joint Life Joint Life
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<S> <C> <C>
Standard: 0.30% (Contract Years 1-10); Standard-Ranges from $0.00015 per $1,000 of net
0.20% (Contract Years 11+) amount at risk (younger ages) up to $61.995 per
$1,000 of net amount at risk (age 99)
Special: 0.65% (Contract Years 1-10); Special-Ranges from $0.00061 per $1,000 of net amount
0.55% (Contract Years 11+) at risk (younger ages) up to $78.71083 per $1,000 of
net amount at risk (age 99).
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</TABLE>
<TABLE>
<S> <C>
Administrative Expense Charge............. 0.25%
Tax Expense Charge 0.40% (3)
Annual Separate Account Charges........... (deducted daily and shown as a percentage of average net
assets):
Mortality and Expense Risk Charge......... 0.90% Federal
Income Tax Charge......................... Currently none (4)
Annual Maintenance Fee:................... $35 (5)
Transfer Charges:......................... $10 (6)
Maximum Withdrawal Charge:................ 7.75% of initial premium withdrawn (7)
Due and Unpaid Premium Tax Charge:........ 2.25% of initial premium withdrawn (8)
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</TABLE>
(1) Except for the maximum or "guaranteed" cost of insurance charge, which is
expressed as a range of monthly costs per thousand dollars of net amount at
risk. The net amount at risk is the difference between the Death Benefit and
the Account Value. See "Deductions and Charges -- Monthly Deductions -- Cost
of Insurance Charge," page 13.
(2) The actual amount of insurance purchased will depend on the insured's age,
sex (where permitted) and rate class. See "Deductions and Charges -- Monthly
Deductions -- Cost of Insurance Charge," page 13. The current cost of
insurance charge under the Contracts will never exceed the guaranteed cost
of insurance charge shown in your Contract.
(3) This charge includes a premium tax deduction of 0.25%, and a federal tax
deduction of 0.15%, of Account Value. We assess this charge only during the
first 10 Contract Years. See "Deductions and Charges -- Monthly Deductions
-- Tax Expense Charge," page 13.
6 - PROSPECTUS
<PAGE>
(4) The Company does not currently assess a charge for federal income taxes that
may be attributable to the operations of the Variable Account, although it
may do so in the future. See "Deductions and Charges -- Other Deductions --
Taxes Charged Against the Variable Account," page 14.
(5) We waive this fee if total premiums paid are $50,000 or more.
(6) We do not impose this charge on the first 12 transfers in any Contract Year.
The Company reserves the right to assess a $10 charge for each transfer in
excess of 12 in any Contract Year, excluding transfers due to dollar cost
averaging.
(7) This charge applies only upon withdrawals of the initial premium paid at the
time of Contract purchase, and it only applies to withdrawals in excess of
the Free Withdrawal Amount. It does not apply to withdrawals of any
additional payments paid under a Contract. The withdrawal charge declines to
0% over ten years. We impose it to cover a portion of the sales expense we
incur in distributing the Contracts. See "Deductions and Charges -- Other
Deductions -- Withdrawal Charge," page 14. We will not impose a withdrawal
charge on any withdrawal to the extent that aggregate withdrawal charges and
the federal tax portion of the tax expense charge imposed would otherwise
exceed 9% of total premiums paid prior to the withdrawal. See "Deductions
and Charges," page 13 and "Withdrawal Charge," page 14.
(8) This charge applies only upon withdrawals of the initial premium paid at the
time of Contract purchase. It does not apply to withdrawals of any
additional payments paid under a Contract. The charge for due and unpaid
premium tax declines to 0% over ten years and is imposed on full or partial
withdrawals in excess of the Free Withdrawal Amount.
7 - PROSPECTUS
<PAGE>
PORTFOLIO ANNUAL EXPENSES (AFTER VOLUNTARY REDUCTIONS AND REIMBURSEMENTS)
AS A PERCENTAGE OF PORTFOLIO AVERAGE DAILY NET ASSETS (1)
<TABLE>
<CAPTION>
Total Portfolio
Management 12b-1 Other Annual
Portfolio Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
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AIM V.I. Capital Appreciation Fund 0.62% N/A 0.11% 0.73%
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AIM V.I. Diversified Income Fund 0.60% N/A 0.23% 0.83%
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AIM V.I. Global Utilities Fund 0.65% N/A 0.49% 1.14%
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AIM V.I. Government Securities Fund 0.50% N/A 0.40% 0.90%
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AIM V.I. Growth Fund 0.63% N/A 0.10% 0.73%
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AIM V.I. Growth and Income Fund 0.61% N/A 0.16% 0.77%
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AIM V.I. International Equity Fund 0.75% N/A 0.22% 0.97%
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AIM V.I. Value Fund 0.61% N/A 0.15% 0.76%
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American Century VP Balanced (2) 0.90% N/A N/A 0.90%
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American Century VP International (2) 1.34% N/A N/A 1.34%
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The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% N/A 0.04% 0.79%
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Dreyfus Stock Index Fund 0.25% N/A 0.01% 0.26%
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Dreyfus VIF Growth & Income Portfolio 0.75% N/A 0.04% 0.79%
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Dreyfus VIF Money Market Portfolio 0.50% N/A 0.08% 0.58%
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Dreyfus VIF Small Company Stock Portfolio 0.75% N/A 0.22% 0.97%
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Fidelity VIP Contrafund-Registered Trademark-
Portfolio (Initial Class) (3) 0.58% N/A 0.09% 0.67%
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Fidelity VIP Equity-Income Portfolio (Initial Class)
(3) 0.48% N/A 0.09% 0.57%
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Fidelity VIP Growth Portfolio (Initial Class) (3) 0.58% N/A 0.08% 0.66%
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Fidelity VIP High Income Portfolio (Initial Class) 0.58% N/A 0.11% 0.69%
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MFS Emerging Growth Series (4) 0.75% N/A 0.09% 0.84%
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MFS Limited Maturity Series** (5) 0.55% N/A 0.45% 1.00%
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</TABLE>
** As of May 1, 1999, not available for new investments, including additions
and transfers.
(1) Figures shown are for the year ended December 31, 1999, except as otherwise
indicated.
(2) The fund has a stepped fee schedule. As a result, the fund's management fee
rate generally decreases as fund assets increase.
(3) A portion of the brokerage commissions that these Portfolios paid was used
to reduce the Portfolios' expenses. In addition, certain Portfolios, or
Fidelity Managment & Research Company on behalf of certain Portfolios, have
entered into arrangements with their custodian whereby credits realized as a
result of uninvested cash balances were used to reduce custodian expenses.
Including these reductions, total annual expenses would have been 0.65% for
Contrafund-Registered Trademark- Portfolio, 0.56% for Equity-Income
Portfolio, and 0.65% for Growth Portfolio
(4) This series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. The series may enter into other
such arrangements and directed brokerage arrangements, which would also have
the effect of reducing the series' expenses. "Other Expenses" do not take
into account these expense reductions, and are therefore higher than the
actual expenses of the series. Had these fee reductions been taken into
account, "Total Portfolio Annual Expenses" would be lower for this series
and would equal: 0.83% for Emerging Growth Series.
(5) MFS has contractually agreed, subject to reimbursement, to bear expenses for
this series such that the series' "Other Expenses" (after taking into
account the expense offset arrangement described in note 4 above), do not
exceed 0.45% of the average daily net assets of the series during the
current fiscal year. These contractual fee arrangements will continue until
at least May 1, 2001, unless changed with the consent of the board of
trustees which oversees the series. Absent such expense limitations, the
total annual expenses of the series would have been 2.48%.
8 - PROSPECTUS
<PAGE>
THE COMPANY
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The Company is the issuer of the Contract. It is a stock life insurance company
organized in 1998 under the laws of the State of Arizona. Previously, Glenbrook
was organized under the laws of the State of Illinois in 1992. The Company was
originally organized under the laws of Indiana in 1965. From 1965 to 1983, the
Company was known as "United Standard Life Assurance Company" and from 1983 to
1992, the Company was known as "William Penn Life Assurance Company of America."
The Company is licensed to operate in the District of Columbia and all states
except New York. The Company intends to market the Contract in those
jurisdictions in which it is licensed to operate. The Company's headquarters are
located at 3100 Sanders Road, Northbrook, Illinois 60062.
The Company is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company ("Allstate"), a stock property-liability insurance company
incorporated under the laws of the State of Illinois. All of the outstanding
capital stock of Allstate is owned by The Allstate Corporation (the
"Corporation").
Glenbrook and Allstate Life entered into a reinsurance agreement effective
June 5, 1992. Under the reinsurance agreement, Allstate Life reinsures
substantially all of Glenbrook's liabilities under its life insurance and
annuity contracts. The reinsurance agreement provides us with financial backing
from Allstate Life. However, it does not create a direct contractual
relationship between Allstate Life and you. In other words, the obligations of
Allstate Life under the reinsurance agreement are to Glenbrook; Glenbrook
remains the sole obligor under the Contract to you.
THE VARIABLE ACCOUNT
- -------------------------------------------------------------------
GENERAL
The Company established the Variable Account on January 15, 1996. The Variable
Account is a segregated asset account under Arizona law. The Variable Account is
organized as a unit investment trust and registered as such with the SEC under
the 1940 Act. The Variable Account meets the definition of "separate account"
under federal securities law. Under Arizona law, the assets of the Variable
Account are held exclusively for the benefit of Contract Owners and persons
entitled to payments under the Contracts. The assets of the Variable Account are
not chargeable with liabilities arising out of any other business which the
Company may conduct.
FUNDS
The Variable Account will invest in shares of one or more Funds. The Funds are
registered with the SEC under the 1940 Act as open-end, series, management
investment companies. Registration of the Funds does not involve supervision of
their management, investment practices or policies by the SEC. The Funds'
Portfolios are designed to provide investment vehicles for variable insurance
contracts of various insurance companies, in addition to the Variable Account.
The Funds available for investment by the Variable Account are listed below.
<TABLE>
<CAPTION>
Portfolio: Each Portfolio Seeks: Investment Advisor:
- ----------------------------------------------- ----------------------------------------------- ---------------------------
<S> <C> <C>
AIM VARIABLE INSURANCE FUNDS*
AIM V.I. Capital Appreciation Fund Growth of capital A I M Advisors, Inc.
AIM V.I. Diversified Income Fund A high level of current income
AIM V.I. Global Utilities Fund A high total return
AIM V.I. Government Securities Fund A high level of current income consistent with
a reasonable concern for safety of principal
AIM V.I. Growth Fund Growth of capital
AIM V.I. Growth and Income Fund Growth of capital with a secondary objective of
current income
AIM V.I. International Equity Fund Long-term growth of capital
AIM V.I. Value Fund Long-term growth of capital and income as a
secondary objective
</TABLE>
9 - PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
Portfolio: Each Portfolio Seeks: Investment Advisor:
- ----------------------------------------------- ----------------------------------------------- ---------------------------
<S> <C> <C>
AMERICAN CENTURY VARIABLE PORTFOLIOS (VP), INC.
American Century VP Balanced Long-term capital growth and current income American Century Investment
Management, Inc.
American Century VP International Long-term capital growth
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX FUND; AND THE DREYFUS VARIABLE INVESTMENT FUND
(VIF) (COLLECTIVELY, THE DREYFUS FUNDS)
The Dreyfus Socially Responsible Growth Capital growth and, secondarily, current income The Dreyfus Corporation
Fund, Inc.
Dreyfus Stock Index Fund To match the total return of the Standard &
Poor's 500 Composite Stock Price Index
Dreyfus VIF Growth & Income Portfolio Long-term capital growth, current income and
growth of income, consistent with reasonable
investment risk
Dreyfus VIF Money Market Portfolio A high level of current income as is consistent
with the preservation of capital and the
maintenance of liquidity
Dreyfus VIF Small Company Stock Portfolio Investment returns (consisting of capital
appreciation and income) that are greater than
the total return performance of stocks
represented by the Russell 2500(TM) Stock Index
(Russell 2500)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Fidelity VIP Contrafund-Registered Trademark- Long-term capital appreciation Fidelity Management &
Portfolio Research Company
Fidelity VIP Equity-Income Portfolio Reasonable income
Fidelity VIP Growth Portfolio Capital appreciation
Fidelity VIP High Income Portfolio High level of current income while also
considering growth of capital
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST(SM)
MFS Emerging Growth Series Long-term growth of capital Massachusetts Financial
Services ("MFS")
MFS Limited Maturity Series** Provide as high a level of current income as is
believed to be consistent with prudent
investment risk. Secondary objective is to
protect shareholders' capital.
</TABLE>
*A portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholder approval.
**As of May 1, 1999, not available for new investments, including additions and
transfers.
VARIABLE INSURANCE TRUST PORTFOLIOS MAY NOT BE MANAGED BY THE SAME PORTFOLIO
MANAGERS WHO MANAGE RETAIL MUTUAL FUNDS WITH SIMILAR NAMES. THESE PORTFOLIOS ARE
LIKELY TO DIFFER FROM RETAIL FUNDS IN ASSETS, CASH FLOW, AND TAX MATTERS.
ACCORDINGLY, THE HOLDINGS AND INVESTMENT RESULTS OF A PORTFOLIO CAN BE EXPECTED
TO BE HIGHER OR LOWER THAN THE INVESTMENT RESULTS OF RETAIL MUTUAL FUNDS.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
All dividends and capital gains distributions from the Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset value.
There is no assurance that the Portfolios will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Portfolios can be found in the current prospectuses for the
Funds.
You will find more complete information about the Portfolios, including the
risks associated with each Portfolio, in the Funds' prospectuses. You should
read the prospectuses for the Funds in conjunction with this prospectus.
YOU SHOULD READ THE FUND PROSPECTUSES CAREFULLY BEFORE YOU MAKE ANY DECISION
CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE SUB-
ACCOUNT.
It is conceivable that in the future it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
a Fund simultaneously. Although neither the Company nor any such Fund currently
foresees any such disadvantages either to variable life insurance or variable
annuity contract owners, the Company has been advised that each Fund's Board of
Directors or Trustees intends to monitor events in order to identify any
material conflicts between variable life and variable annuity contract owners
and to determine what action, if any, should be taken in response thereto. If
the Board of Directors or Trustees were to conclude that separate funds should
be established for variable life and variable annuity separate
10 - PROSPECTUS
<PAGE>
accounts, the Company may be required to bear the attendant expenses.
We reinvest all investment income of and other distributions to each Variable
Sub-Account arising from the corresponding Portfolio in shares of that Portfolio
at net asset value. The income and both realized and unrealized gains or losses
on the assets of each Variable Sub-Account are therefore separate and are
credited to or charged against the Variable Sub-Account without regard to
income, gains or losses from any other Variable Sub-Account or from any other
business of the Company. We will purchase shares in the Funds in connection with
premiums allocated to the corresponding Variable Sub-Account in accordance with
Contract Owners' directions. We will redeem shares in the Funds to meet Contract
obligations or make adjustments in reserves, if any.
The Company reserves the right, subject to compliance with the law as then in
effect, to make additions to, deletions from, or substitutions for the Fund
shares underlying the Variable Sub-Accounts. If shares of any of the Funds
should no longer be available for investment, or if, in the judgment of the
Company's management, further investment in shares of any Fund should become
inappropriate in view of the purposes of the Contracts, we may substitute shares
of another Fund for shares already purchased, or to be purchased in the future,
under the Contracts. We will not make any such substitution without notice to
Contract Owners and without prior approval of the SEC (to the extent such
approval is required by the 1940 Act).
We reserve the right to establish additional Variable Sub-Accounts of the
Variable Account, each of which would invest in shares of another Fund. Subject
to Contract Owner approval, the Company also reserves the right to end the
registration under the 1940 Act of the Variable Account or any other separate
accounts of which it is the depositor or to operate the Variable Account as a
management company under the 1940 Act.
Each Fund is subject to certain investment restrictions and policies which may
not be changed without the approval of a majority of the shareholders of the
Fund. See the prospectuses for the Funds for further information.
THE CONTRACT
- -------------------------------------------------------------------
APPLICATION FOR A CONTRACT
Individuals wishing to purchase a Contract must submit an application to the
Company. We will issue a Contract only on the lives of Insureds age 0-85 who
supply evidence of insurability satisfactory to the Company. Acceptance is
subject to the Company's underwriting rules, and we reserve the right to reject
an application for any lawful reason. If we do not issue a Contract, we will
return the premium. We will not change the terms or conditions of a Contract
without the consent of the Contract Owner.
Once we have received the initial premium and approved underwriting, we will
issue the Contract on the date we receive the final requirement for issue. In
the case of simplified underwriting, we will issue the Contract or deny coverage
within 3 business days of our receipt of premium. The Insured will be covered
under the Contract, however, as of the Contract Date. Since the Contract Date
will generally be the date we receive the initial premium, coverage under a
Contract may begin before we issue it. In addition to determining when coverage
begins, the Contract Date determines Monthly Activity Dates, Contract months,
and Contract Years.
If the initial premium is over the limits we establish from time to time
($1,000,000 as of the date of this Prospectus), we will not accept the initial
payment with the application. In other cases where we receive the initial
payment with the application, we will provide fixed conditional insurance during
the underwriting period according to the terms of a conditional receipt. The
fixed conditional insurance will be the insurance applied for, up to a maximum
that varies by age.
PREMIUMS
The Contract is designed to require a substantial initial premium payment and,
subject to certain conditions, to permit additional premium payments. The
initial premium payment purchases a Death Benefit initially equal to the
Contract's Specified Amount. The minimum initial payment is $10,000.
Under current underwriting rules, which are subject to change, proposed Insureds
are eligible for simplified underwriting without a medical examination if their
application responses and initial premium payments meet simplified underwriting
standards. Customary underwriting standards will apply to all other proposed
Insureds. The maximum
11 - PROSPECTUS
<PAGE>
initial premium currently permitted on a simplified underwriting basis varies
with the issue age of the insured according to the following table:
SIMPLIFIED UNDERWRITING
<TABLE>
<CAPTION>
ISSUE AGE MAXIMUM INITIAL PREMIUM
- --------- -----------------------
<S> <C>
0-34 Not available
35-44 $15,000
45-54 $30,000
55-64 $50,000
65-80 $100,000
Over age 80 Not available
</TABLE>
Additional premium payments may be made at any time, subject to the following
conditions:
- - only one additional premium payment may be made in any Contract Year;
- - each additional premium payment must be at least $500;
- - the attained age of the Insured must be less than 86; and
- - absent submission of new evidence of insurability of the Insured, the maximum
additional payment permitted in a Contract Year is the "Guaranteed Additional
Payment." The Guaranteed Additional Payment is the lesser of (1) $5,000, or
(2) a percentage of the initial payment (5% for attained ages 40-70, and 0%
for attained ages 20-39 and 71-85).
Additional premium payments may require an increase in Specified Amount in order
for the Contract to remain within the definition of a life insurance contract
under the Code. The Company reserves the right to obtain satisfactory evidence
of insurability upon any additional premium payments requiring an increase in
Specified Amount. However, we reserve the right to reject any additional premium
payment for any reason.
Unless you request otherwise in writing, we will apply any additional payment we
receive while a Contract loan exists first to reduce Indebtedness, and second,
as an additional premium payment, subject to the conditions described above.
You may pay additional premiums at any time and in any amount necessary to avoid
termination of the Contract without evidence of insurability.
ALLOCATION OF PREMIUMS
Upon completion of underwriting, we will either (1) issue a Contract, or (2)
deny coverage and return all premiums. If we issue a Contract, we will allocate
the initial premium payment, plus an amount equal to the interest that would
have been earned had the initial premium been invested in the Money Market
Variable Sub-Account since the date of receipt of the premium, according to the
initial premium allocation instructions specified on the application. We will
make this allocation on the date the Contract is issued. In the future, the
Company may allocate the initial premium to the Money Market Variable
Sub-Account during the cancellation period, in those states where state law
requires premiums to be returned upon exercise of the free-look right.
ACCUMULATION UNIT VALUES
The Accumulation Unit Value for each Variable Sub-Account will vary to reflect
the investment experience of the corresponding Portfolio. We will determine
those values on each Valuation Day by multiplying the Accumulation Unit Value of
the particular Variable Sub-Account on the preceding Valuation Day by the "Net
Investment Factor" for that Sub-Account for the Valuation Period then ended. The
Net Investment Factor for each Variable Sub-Account is determined by first
dividing (A) the net asset value per share of the corresponding Portfolio at the
end of the current Valuation Period (plus the per share dividends or capital
gains distributed by that Portfolio if the ex-dividend date occurs in the
Valuation Period then ended), by (B) the net asset value per share of the
corresponding Portfolio at the end of the immediately preceding Valuation
Period. We then subtract from the result an amount equal to the daily deductions
for mortality and expense risk charges imposed during the Valuation Period. You
should refer to the prospectuses for the Portfolios which accompany this
prospectus for a description of how the assets of each Portfolio are valued,
because that determination has a direct bearing on the Accumulation Unit Value
of the corresponding Variable Sub-Account (and therefore on your Account Value).
See "Contract Benefits and Rights -- Account Value," page 16.
We make all valuations in connection with a Contract, (e.g., with respect to
determining Account Value and Cash Surrender Value or with respect to
determining the number of Accumulation Units to be credited to a Contract with
each premium, other than the initial premium and additional premiums requiring
underwriting), on the date the request or payment is received in good order by
the Company at its home office. However, if such date is not a Valuation Day, we
will make the determination on the next succeeding date that is a Valuation Day.
SPECIALIZED USES OF THE CONTRACT: Because the Contract provides for an
accumulation of cash value as well as a death benefit, you can use the Contract
for various individual and business financial planning purposes. Purchasing the
Contract in part for such purposes entails certain risks. For example, if the
investment performance of Variable Sub-Accounts to which Account Value is
allocated is poorer than expected or if sufficient premiums are not paid, the
Contract may lapse or may not accumulate sufficient Account Value to fund the
purpose for which the Contract was purchased.
12 - PROSPECTUS
<PAGE>
Withdrawals and Contract loans may significantly affect current and future
Account Value, Cash Surrender Value, or Death Benefit proceeds. Depending upon
Variable Sub-Account investment performance and the amount of a Contract loan,
the loan may cause a Contract to lapse. Because the Contract is designed to
provide benefits on a long-term basis, before purchasing a Contract for a
specialized purpose you should consider whether the long-term nature of the
Contract is consistent with the purpose for which you are considering it. Using
a Contract for a specialized purpose may have tax consequences. (See "Federal
Tax Matters," page 21.)
DEDUCTIONS AND CHARGES
MONTHLY DEDUCTIONS
On each Monthly Activity Date including the Contract Date, we will deduct from
the Account Value attributable to the Variable Account an amount ("Monthly
Deduction Amount") to cover charges and expenses incurred in connection with a
Contract. We will deduct a portion of the Monthly Deduction Amount from each
Variable Sub-Account proportion to your Account Value allocated to that Variable
Sub-Account. The Monthly Deduction Amount will vary from month to month. If the
Cash Surrender Value is not sufficient to cover a Monthly Deduction Amount due
on any Monthly Activity Date, the Contract may lapse. See "Access to Your Money
- -- Contract Benefits and Rights -- Lapse and Reinstatement," page 19. The
following is a summary of the monthly deductions and charges which constitute
the Monthly Deduction Amount:
COST OF INSURANCE CHARGE: The cost of insurance charge covers the Company's
anticipated mortality costs for standard and special risks. Current cost of
insurance rates are lower after the 10th Contract Year. However, the current
cost of insurance charge, which we impose by deducting a specified percentage of
your Account Value, will not exceed the guaranteed cost of insurance charge.
This guaranteed charge is the maximum annual cost of insurance per $1,000 as
indicated in the Contract; multiplied by the difference between the Death
Benefit and the Account Value (both as determined on the Monthly Activity Date);
divided by $1,000; and divided by 12. For standard risks, the guaranteed cost of
insurance rate is based on the 1980 Commissioners Standard Ordinary Mortality
Table, age last birthday. (Unisex rates may be required in some states). A table
of guaranteed cost of insurance charges per $1,000 is included in each Contract;
however, the Company reserves the right to use rates less than those shown in
the table. We will assess special risks at a higher cost of insurance rate that
will, however, not exceed rates based on a multiple of the 1980 Commissioners
Standard Ordinary Mortality Table, age last birthday. The multiple will be based
on the Insured's substandard rating.
The maximum guaranteed cost of insurance charge rates are applied to the
difference between the Death Benefit determined on the Monthly Activity Date and
the Account Value on that same date prior to assessing the Monthly Deduction
Amount, because that difference is the amount for which we are at risk should
the Death Benefit be then payable. The Death Benefit as computed on a given date
is the greater of (1) the Specified Amount on that date, and (2) the Account
Value on that date multiplied by the applicable Death Benefit ratio. (For an
explanation of the Death Benefit, see "Contract Benefits and Rights" on page
15.)
Example:
<TABLE>
<S> <C> <C>
Specified Amount = $100,000
Account Value on the Monthly
Activity Date = $30,000
Insured's attained age = 45
Death Benefit ratio for age
45 = 2.15
</TABLE>
On the Monthly Activity Date in this example, the Death Benefit as then computed
would be $100,000, because the Specified Amount ($100,000) is greater than the
Account Value multiplied by the applicable Death Benefit ratio ($30,000 X 2.15 =
$64,500). Since the Account Value on that date is $30,000, the guaranteed
maximum cost of insurance charges per $1,000 would be applied to the difference
($100,000 - $30,000 = $70,000).
Assume that the Account Value in the above example was $50,000. The Death
Benefit would then be $107,500 (2.15 X $50,000), since this is greater than the
Specified Amount ($100,000). The maximum cost of insurance rates in that case
would be applied to ($107,500 - $50,000) = $57,500.
The level of Specified Amount that an initial premium will purchase will vary
based on age and sex. For example, a $10,000 initial premium paid by a male at
age 45 would result in a specified amount of $39,998. If a female age 65 paid a
$10,000 premium, the specified amount would be equal to $22,749.
Because the Account Value (and, as a result, the amount for which we are at risk
under a Contract) may vary from month to month, the cost of insurance charge may
also vary on each Monthly Activity Date. However, once we have assigned a risk
rating class to an Insured when the Contract is issued, that rating class will
not change if additional premium payments or partial withdrawals increase or
decrease the Specified Amount.
TAX EXPENSE CHARGE: We will deduct monthly from the Account Value a tax expense
charge equivalent to an annual rate of 0.40% for the first ten Contract Years.
This charge compensates us for premium taxes imposed by various states and local
jurisdictions and for federal taxes related to our
13 - PROSPECTUS
<PAGE>
receipt of premiums under the Contract. The charge includes a premium tax
deduction of 0.25% and a federal tax deduction of 0.15%. The 0.25% premium tax
deduction over ten Contract Years approximates the Company's average expenses
for state and local premium taxes (2.5%). Premium taxes vary, ranging from zero
to 3.5%. We impose the premium tax deduction regardless of a Contract Owner's
state of residence and, therefore, we assess it whether or not any premium tax
applies. The deduction may be higher or lower than any premium tax your state
imposes. However, we do not expect to make a profit from this deduction. The
0.15% federal tax deduction helps reimburse us for approximate expenses we incur
for federal taxes resulting from the application of Section 848 of the Code.
ADMINISTRATIVE EXPENSE CHARGE: We will deduct monthly from your Account Value an
administrative expense charge equivalent to an annual rate of 0.25%. This charge
compensates us for administrative expenses we incur in our administration of the
Variable Account and the Contracts.
We take all monthly deductions by canceling Accumulation Units of the Variable
Account under your Contract.
OTHER DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE: We will deduct from the Variable Account a
daily charge equivalent to an annual rate of 0.90% for the mortality risks and
expense risks we assume in relation to the Contracts. The mortality risk assumed
includes the risk that the cost of insurance charges specified in the Contract
will be insufficient to meet claims. We also assume a risk that the Death
Benefit will exceed the amount on which the cost of insurance charges were
based, because that determination is made on the Monthly Activity Date preceding
the death of an Insured. The expense risk we assume is that expenses we incur in
issuing and administering the Contracts will exceed the administrative charges
set in the Contract.
ANNUAL MAINTENANCE FEE: If the aggregate premiums paid on a Contract are less
than $50,000, we will deduct from your Account Value an annual maintenance fee
of $35 on each Contract Anniversary. This fee helps reimburse us for our
administrative and maintenance costs relating to the Contracts.
TAXES CHARGED AGAINST THE VARIABLE ACCOUNT: Currently, we make no charge to the
Variable Account for federal income taxes that may be attributable to the
operations of the Variable Account (as opposed to the federal tax related to the
receipt of premiums under the Contract). We may, however, impose such a charge
in the future. We may also assess charges for other taxes, if any, attributable
to the Variable Account or this class of Contracts.
CHARGES AGAINST THE FUNDS: The Variable Account purchases shares of the Funds at
net asset value. The net asset value of the Fund shares reflect Fund investment
management fees already deducted from the assets of the Funds. The Fund
investment management fees are a percentage of the average daily value of the
net assets of the Portfolios. See the "Fund Fees and Expenses" table on page 6.
WITHDRAWAL CHARGE: We may assess as withdrawal charge upon surrender of the
Contract and partial withdrawals in excess of the Free Withdrawal Amount. The
Free Withdrawal Amount in any Contract Year is 15% of total premiums paid. Any
Free Withdrawal Amount not taken in a Contract Year may not be carried forward
to increase the Free Withdrawal Amount in any subsequent year. Withdrawals in
excess of the Free Withdrawal Amount will be subject to a withdrawal charge as
set forth in the table below:
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
CONTRACT YEAR PREMIUM WITHDRAWN
- ------------- ---------------------
<S> <C>
1 7.75%
2 7.75%
3 7.75%
4 7.25%
5 6.25%
6 5.25%
7 4.25%
8 3.25%
9 2.25%
10+ 0.00%
</TABLE>
After the ninth Contract Year, we will impose no withdrawal charges. In
addition, we will not impose a withdrawal charge to the extent that aggregate
withdrawal charges and the federal tax portion of the tax expense charge imposed
would otherwise exceed 9% of total premiums paid prior to the withdrawal. The
withdrawal charge may be waived under certain circumstances if the Insured is
confined to a qualified long-term care facility or hospital. See "Access to Your
Money - Confinement Waiver Benefit" on page .
We impose the withdrawal charge to cover a portion of the expense we incur in
distributing the Contracts. This expense includes agents' commissions,
underwriting, and the costs associated with establishing policies.
DUE AND UNPAID PREMIUM TAX CHARGE: During the first nine Contract Years, a
charge for due and unpaid premium tax will be imposed on full or partial
withdrawals in excess
14 - PROSPECTUS
<PAGE>
of the Free Withdrawal Amount. This charge is shown below, as a percent of the
Account Value withdrawn:
<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
CONTRACT YEAR PREMIUM WITHDRAWN
- ------------- ---------------------
<S> <C>
1 2.25%
2 2.00%
3 1.75%
4 1.50%
5 1.25%
6 1.00%
7 0.75%
8 0.50%
9 0.25%
10+ 0.00%
</TABLE>
After the ninth Contract Year, no due and unpaid premium tax charge applies. We
guarantee that the percentages indicated above will not increase.
CONTRACT BENEFITS AND RIGHTS
- -------------------------------------------------------------------
DEATH BENEFIT
The Contracts provide for the payment of Death Benefit proceeds to the named
beneficiary when the Insured under the Contract dies. The proceeds payable to
the beneficiary equal the Death Benefit less the sum of:
- - any Indebtedness, and
- - any due and unpaid Monthly Deduction Amounts occurring during a Grace Period
(if applicable).
The Death Benefit equals the greater of (1) the Specified Amount, or (2) the
Account Value multiplied by the Death Benefit ratio. The Death Benefit ratios
vary according to the attained age of the Insured and are specified in the
Contract. Therefore, an increase in Account Value due to favorable investment
experience may increase the Death Benefit above the Specified Amount; and a
decrease in Account Value due to unfavorable investment experience may decrease
the Death Benefit (but not below the Specified Amount).
<TABLE>
<CAPTION>
EXAMPLES:
A B
----------------- -----------------
<S> <C> <C>
Specified Amount: $100,000 $100,000
Insured's Age: 45 45
Account Value on Date
of Death: $ 48,000 $ 34,000
Death Benefit Ratio 2.15 2.15
</TABLE>
In Example A, the Death Benefit equals $103,200, i.e., the greater of $100,000
(the Specified Amount) and $103,200 (the Account Value at the Date of Death of
$48,000, multiplied by the Death Benefit ratio of 2.15). This amount, less any
Indebtedness and due and unpaid Monthly Deduction Amounts, constitutes the
proceeds which we would pay to the beneficiary.
In Example B, the Death Benefit is $100,000, i.e., the greater of $100,000 (the
Specified Amount) and $73,100 (the Account Value of $34,000 multiplied by the
Death Benefit ratio of 2.15).
The beneficiary may (1) take all or part of the proceeds in cash, or (2) apply
the proceeds to an Income Plan. See "Payment Options," page 18.
ACCELERATED DEATH BENEFIT
If the Insured becomes terminally ill, you may request an accelerated Death
Benefit in an amount up to the lesser of (1) 50% of the Specified Amount on the
day we receive the request, and (2) $250,000 for all policies issued by the
Company that cover the Insured. "Terminally ill" means an illness or physical
condition of the Insured that, notwithstanding appropriate medical care, will
result in a life expectancy of 12 months or less. If the Insured is terminally
ill as the result of an illness, the accelerated Death Benefit is not available
unless the illness occurred at least 30 days after the issue date. If the
Insured is terminally ill as the result of an accident, the accelerated Death
Benefit is available if the accident occurred after the issue date. The minimum
amount of Death Benefit we will accelerate is $10,000.
We will pay benefits due under the accelerated Death Benefit provision upon
receipt of a written request from the Contract Owner and due proof that the
Insured has been diagnosed as terminally ill. We also reserve the right to
require supporting documentation of the diagnosis and to require (at our
expense) an examination of the Insured by a physician of our choice to confirm
the diagnosis. The amount of the payment will be the amount requested by the
Contract Owner, reduced by the sum of:
- - a 12 month interest discount to reflect the early payment;
15 - PROSPECTUS
<PAGE>
- - an administrative fee (not to exceed $250); and
- - a pro rata amount of any outstanding Contract loan and accrued loan interest.
After the payment has been made, we will reduce the Specified Amount, the
Account Value and any outstanding Contract loan on a pro rata basis.
Only one request for an accelerated Death Benefit per Insured is allowed. The
accelerated Death Benefit may not be available in all states. In addition, its
features may differ from those discussed above as required by state law. Please
refer to the Contract for further information.
CONFINEMENT WAIVER BENEFIT
Under the terms of an endorsement to the Contract, we will waive any withdrawal
charges on partial withdrawals and surrenders of the Contract while the Insured
is confined to a qualified long-term care facility or hospital (as defined in
the endorsement) for a period of more than 90 consecutive days beginning 30 days
or more after the issue date. You must request this waiver either during the
period of confinement or within 90 days after the Insured is discharged from
such confinement. The confinement must have been prescribed by a licensed
medical doctor or a licensed doctor of osteopathy, operating within the scope of
his or her license, and must be medically necessary. The prescribing doctor may
not be the Insured, the Contract Owner, or any spouse, child, parent,
grandchild, grandparent, sibling or in-law of the Contract Owner. "Medically
necessary" means appropriate and consistent with the diagnosis and which could
not have been omitted without adversely affecting the Insured's condition. The
confinement waiver benefit may not be available in all states. We reserve the
right to discontinue the offering of the confinement waiver benefit amendatory
endorsement upon the purchase of a new Contract.
ACCOUNT VALUE
We will compute the Account Value of a Contract on each Valuation Day. On the
Contract Date, the Account Value is equal to the initial premium less the
Monthly Deduction Amount for the first month. Thereafter, the Account Value will
vary to reflect the investment experience of the Funds, the value of the Loan
Account and the Monthly Deduction Amounts. There is no minimum guaranteed
Account Value.
The Account Value of a particular Contract is related to the Accumulation Unit
Value of the Variable Sub-Accounts to which premiums on the Contract have been
allocated. The Account Value on any Valuation Day is calculated by multiplying
the number of Accumulation Units credited to the Contract in each Variable
Sub-Account as of the Valuation Day by the then Accumulation Unit Value of that
Sub-Account and then adding the results for all the Variable Sub-Accounts
credited to the Contract to the value of the Loan Account. See "The Contract --
Accumulation Unit Values," page 12.
TRANSFER OF ACCOUNT VALUE
While the Contract remains in force and subject to the Company's transfer rules
then in effect, you may request that part or all of your Account Value in a
particular Variable Sub-Account be transferred to other Variable Sub-Accounts.
We reserve the right to impose a $10 charge on each such transfer in excess of
12 per Contract Year. However, there are no charges on transfers at the present
time. The minimum amount that can be transferred is shown on the Contract Data
page (currently, there is no minimum).
On days when the New York Stock Exchange ("NYSE") is open for trading, you may
make telephone transfer requests by calling 1 (800) 755-5275. We effect
telephone transfer requests that we receive before 4:00 p.m., Eastern Time, at
the next computed value. In the event that the NYSE closes early, i.e., before
4:00 p.m. Eastern Time, or in the event that the NYSE closes early for a period
of time but then reopens for trading on the same day, we will process telephone
transfer requests as of the close of the NYSE on that particular day. We will
not accept telephone requests received at any telephone number other than the
number that appears in this paragraph or received after the close of trading on
the NYSE.
Transfers by telephone may be made by the Contract Owner's agent of record or
attorney-in-fact pursuant to a power of attorney. Telephone transfers may not be
permitted in some states. The policy of the Company and its agents and
affiliates is that they will not be responsible for losses resulting from acting
upon telephone requests they reasonably believe are genuine. We will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine; otherwise, we may be liable for any losses due to unauthorized or
fraudulent instructions. The procedures we follow for transactions initiated by
telephone include requirements that callers on behalf of a Contract Owner
identify themselves and the Contract Owner by name and social security number or
other identifying information. All transfer instructions by telephone are tape
recorded.
As a result of a transfer, we will reduce the number of Accumulation Units
credited to the Variable Sub-Account from which the transfer is made by an
amount equal to the amount transferred, divided by the Accumulation Unit Value
of the Variable Sub-Account from which the transfer is made next computed after
we receive the transfer request. Similarly, we will increase the number of
Accumulation Units credited to the Variable Sub-Account to which the transfer is
made by an amount equal to the amount transferred, divided by the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive the
transfer request.
DOLLAR COST AVERAGING
You may make transfers automatically through Dollar Cost Averaging while the
Contract is in force. Dollar Cost Averaging permits you to transfer a specified
amount every month (or some other interval as may be determined by the Company)
from the Money Market Variable Sub-Account to any other Variable Sub-Account.
The theory of Dollar Cost
16 - PROSPECTUS
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Averaging is that, if purchases of equal dollar amounts are made at fluctuating
prices, the aggregate average cost per unit will be less than the average of the
unit prices on the same purchase dates. However, participation in the Dollar
Cost Averaging program does not assure you of a greater profit from your
purchases under the program; nor will it prevent or alleviate losses in a
declining market. We impose no additional charges upon participants in the
Dollar Cost Averaging program. Transfers under Dollar Cost Averaging are not
counted toward the 12 free transfers per Contract Year we currently permit.
AUTOMATIC PORTFOLIO REBALANCING
You may make transfers automatically through Automatic Portfolio Rebalancing
while the Contract is in force. Under our Automatic Portfolio Rebalancing
program, we will rebalance your Account Value in the Variable Sub-Accounts to
your desired allocation on a quarterly basis, determined from the first date
that you rebalance.
The allocation we use will be the allocation you initially selected, unless you
subsequently changed it. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive the written request. We are not responsible for
rebalancing that occurs prior to our receipt of the written request.
Example:
Assume that you want your initial purchase payment split among 2
Variable Sub-Accounts. You want 40% to be in the Fidelity VIP High
Income Fund and 60% to be in the AIM V.I. Growth Fund. Over the next 2
months the bond market does very well while the stock market performs
poorly. At the end of the first quarter, the Fidelity VIP High Income
Fund now represents 50% of your holdings because of its increase in
value. If you choose to have your holdings rebalanced quarterly, on the
first day of the next quarter, we would sell some of your units in the
Fidelity VIP High Income Fund and use the money to buy more units in the
AIM V.I. Growth Fund so that the percentage allocations would again be
40% and 60% respectively.
Transfers made under the Automatic Portfolio Rebalancing Program do not count
towards the 12 transfers you can make without paying a transfer fee, and are not
subject to a transfer fee.
Portfolio rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the better performing segments.
ACCESS TO YOUR MONEY
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CONTRACT LOANS
While the Contract is in force, you may obtain, without the consent of the
beneficiary (provided the designation of beneficiary is not irrevocable), one or
both of two types of cash loans from the Company. These types are Preferred
Loans (described below) and non-Preferred Loans. Both types of loans are secured
by your Contract. The maximum amount available for a loan is 90% of the
Contract's Cash Value, less the sum of:
- - the amount of all Contract loans existing on the date of the loan (including
loan interest to the next Contract Anniversary),
- - any due and unpaid Monthly Deduction Amounts, and
- - any annual maintenance fee due on or before the next Contract Anniversary.
We will transfer the loan amount to the Loan Account from the Variable
Sub-Accounts in proportion to your Account Value in each (unless you specify
otherwise). We will credit the amounts allocated to the Loan Account with
interest at the loan credited rate set forth in the Contract. Loans will bear
interest at rates we determine from time to time, but which will not exceed the
maximum rate indicated in the Contract (currently, 8% per year). The amount of
the Loan Account that equals the excess of the Account Value over the total of
all premiums paid under the Contract, net of any premiums returned due to
partial withdrawals, as determined on each Contract Anniversary, is considered a
"Preferred Loan." Preferred Loans bear interest at a rate not to exceed the
Preferred Loan rate set forth in the Contract. The difference between the value
of the Loan Account and the Indebtedness will be transferred from the Variable
Sub-Accounts (in proportion to your Account Value in each) to the Loan Account
on each Contract Anniversary. If the aggregate outstanding loan(s) and loan
interest secured by the Contract exceeds the Cash Value of the Contract, we will
give you written notice that, unless we receive an additional payment within 61
days to reduce the aggregate outstanding loan(s) secured by the Contract, the
Contract may lapse.
All or any part of any loan secured by a Contract may be repaid while the
Contract is still in effect. When loan repayments or interest payments are made,
the repayment will be allocated among the Variable Sub-Accounts in the same
percentages as apply to subsequent premium payments (unless you request a
different allocation). We will deduct from the Loan Account an amount equal to
the payment. Any outstanding loan at the end of a grace period must be repaid
17 - PROSPECTUS
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before we will reinstate the Contract. See "Contract Benefits and Rights --
Lapse and Reinstatement," page 19.
A loan, whether or not repaid, will have a permanent effect on the Account Value
because the investment results of each Variable Sub-Account will apply only to
the amount remaining in that Sub-Account. The longer a loan is outstanding, the
greater the effect is likely to be. The effect could be favorable or
unfavorable. If the Variable Sub-Accounts earn more than the annual interest
rate for amounts held in the Loan Account, a Contract Owner's Account Value will
not increase as rapidly as it would have had no loan been made. If the Variable
Sub-Accounts earn less than that rate, the Contract Owner's Account Value will
be greater than it would have been had no loan been made. Also, if not repaid,
the aggregate outstanding loan(s) will reduce the death benefit proceeds and
cash surrender value otherwise payable.
AMOUNT PAYABLE ON SURRENDER OF THE CONTRACT
While the Contract is in force, you may elect, without the consent of the
beneficiary (provided the designation of beneficiary is not irrevocable), to
fully surrender the Contract. Upon surrender, you will receive the Cash
Surrender Value determined as of the day we receive your written request or, if
later, the date you requested. The Cash Surrender Value equals the Cash Value
less the annual maintenance fee and any Indebtedness. We will pay the Cash
Surrender Value of the Contract within seven days of our receipt of the written
request or on the effective surrender date you requested, whichever is later.
The Contract will terminate on the date of our receipt of your written request,
or the date you request the surrender to be effective, whichever is later. For a
discussion of the tax consequences of surrendering the Contract, see "Federal
Tax Matters," page 21.
You may elect to apply the surrender proceeds to an Income Plan (see "Payment
Options," page 18).
PARTIAL WITHDRAWALS
While the Contract is in force, you may elect, by written request, to make
partial withdrawals of at least $50 from the Contract's Cash Surrender Value.
The Cash Surrender Value, after the partial withdrawal, must at least equal
$2,000; otherwise, we will treat the request as a request for full surrender.
The partial withdrawal will be deducted from the Variable Sub-Accounts in
proportion to your Account Value in each, unless you instruct otherwise. The
Specified Amount after the partial withdrawal will be the greater of:
- - the Specified Amount prior to the partial withdrawal reduced proportionately
to the reduction in Account Value; or
- - the minimum Specified Amount necessary in order to meet the definition of a
life insurance contract under section 7702 of the Code.
Partial withdrawals in excess of the Free Withdrawal Amount may be subject to a
withdrawal charge and any due and unpaid premium tax charges. See "Deductions
and Charges -- Other Deductions -- Withdrawal Charge" and "Due and Unpaid
Premium Tax Charge," page 14. For a discussion of the tax consequences of
partial withdrawals, see "Federal Tax Matters," page 21.
PAYMENT OPTIONS
The surrender proceeds or Death Benefit proceeds under the Contracts may be paid
in a lump sum, or you may apply the proceeds to one of our Income Plans. If the
amount to be applied to an Income Plan is less than $3,000 or if it would result
in an initial income payment of less than $20, we may require that the frequency
of income payments be decreased such that the income payments are greater than
$20 each, or we may elect to pay the amount in a lump sum. No surrender or
partial withdrawals are permitted after payments under an Income Plan commence.
We will pay interest on the proceeds from the date of the Insured's death to the
date payment is made or a payment option is elected. At such times, the proceeds
are not subject to the investment experience of the Variable Account.
The Income Plans are fixed annuities payable from our general account. They do
not reflect the investment experience of the Variable Account. We will determine
fixed annuity payments by multiplying the amount applied to the annuity by a
rate we determine, which is no less than the rate specified in the fixed payment
annuity tables in the Contract. The annuity payment will remain level for the
duration of the annuity. We may require proof of age and sex of the payee (and
joint payee, if applicable) before payments begin. We may also require proof
that such person(s) are living before any payment(s) are made.
The following options are available under the Contracts (we may offer other
payment options):
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS. The Company will make
payments for as long as the payee lives. If the payee dies before the selected
number of guaranteed payments have been made, the Company will continue to pay
the remainder of the guaranteed payments.
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. The
Company will make payments for as long as either the payee or Joint payee, named
at the time of Income Plan selection, is living. If both the payee and the Joint
payee die before the selected number of guaranteed payments have been made, the
18 - PROSPECTUS
<PAGE>
Company will continue to pay the remainder of the guaranteed payments.
The Company will make any other arrangements for income payments as may be
agreed on.
MATURITY
The Contracts have no maturity date.
LAPSE AND REINSTATEMENT
The Contract will remain in force until the Cash Surrender Value is insufficient
to cover a Monthly Deduction Amount due on a Monthly Activity Date. If that
happens, we give you written notice that if an amount shown in the notice (which
will be sufficient to cover the Monthly Deduction Amount(s) due) is not paid
within 61 days ("grace period"), there is a danger of lapse.
The Contract will continue through the grace period, but if no payment is
forthcoming, it will terminate at the end of the grace period. If the Insured
dies during the grace period, the proceeds payable under the Contract will be
reduced by the Monthly Deduction Amount(s) due and unpaid. See "Contract
Benefits and Rights -- Death Benefit," page 15.
If the Contract lapses, you may apply for reinstatement of the Contract by
paying the reinstatement premium (and any applicable charges) required under the
Contract. You must make a request for reinstatement within five years of the
date the Contract entered a grace period. If a loan was outstanding at the time
of lapse, we will require repayment of the loan before permitting reinstatement.
In addition, we reserve the right to require evidence of insurability
satisfactory to us. The reinstatement premium is equal to an amount sufficient
to:
- - cover all Monthly Deduction Amounts and annual maintenance fees due and unpaid
during the grace period, and
- - keep the Contract in force for three months after the date of reinstatement.
The Specified Amount upon reinstatement cannot exceed the Specified Amount of
the Contract at its lapse. The Account Value on the reinstatement date will
reflect the Account Value at the time of termination of the Contract plus the
premiums paid at the time of reinstatement. Withdrawal charges and due and
unpaid premium tax charges, cost of insurance, and tax expense charges will
continue to be based on the original Contract Date.
CANCELLATION AND EXCHANGE RIGHTS
You have a limited right to return a Contract for cancellation. This right to
return exists during what we call the cancellation period. The cancellation
period is a number of days which varies by state as specified in your contract.
If you choose to exercise this right, we may require that you must return the
Contract for cancellation by mail or personal delivery to the Company within the
cancellation period following delivery of the Contract to you. We will then
return to you within 7 days thereafter the sum of:
- - the Account Value on the Valuation date the returned Contract is received by
the Company or its agent; and
- - any deductions under the Contract or by the Funds for taxes, charges or fees.
Some states may require the Company to return the premiums paid for the returned
Contract.
Once the Contract is in effect, you may exchange it during the first 24 months
after its issuance for a non-variable permanent life insurance contract we offer
on the life of the Insured. The amount at risk to the Company (i.e., the
difference between the Death Benefit and the Account Value) under the new
contract will be equal to or less than the amount at risk to the Company under
the exchanged Contract on the date of exchange. Premiums under the new Contract
will be based on the same risk classification as the exchanged Contract. The
exchange is subject to adjustments in premiums and Account Value to reflect any
variance between the exchanged Contract and the new contract.
We reserve the right to make such a contract available that is offered by the
Company's parent or by any other affiliate of the Company.
SUSPENSION OF VALUATION, PAYMENTS AND TRANSFERS
We will suspend all procedures requiring valuation of the Variable Account
(including transfers, surrenders and loans) on any day the New York Stock
Exchange is closed or trading is restricted due to an existing emergency as
defined by the SEC, or on any day the SEC has ordered that the right of
surrender of the Contracts be suspended for the protection of Contract Owners,
until such condition has ended.
LAST SURVIVOR CONTRACTS
We offer the Contracts on either a single life or a "last survivor" basis.
Contracts sold on a last survivor basis operate in a manner almost identical to
the single life version. The most important difference is that the last survivor
version involves two Insureds and the proceeds are paid only on the death of the
last surviving Insured. The other significant differences between the last
survivor and single life versions are listed below:
Last survivor Contracts are offered for prospective insured persons age 18-85.
The cost of insurance charges under the last survivor Contracts are determined
in a manner that reflects the anticipated mortality of the two Insureds and the
fact that
19 - PROSPECTUS
<PAGE>
the Death Benefit is not payable until the death of the second Insured.
To qualify for simplified underwriting under a last survivor Contract, both
Insureds must meet the simplified underwriting standards.
- - For a last survivor Contract to be reinstated, both Insureds must be alive on
the date of reinstatement.
- - The Contract provisions regarding misstatement of age or sex, suicide and
incontestability apply to either Insured.
- - Additional tax disclosures applicable to last survivor Contracts are provided
in "Federal Tax Matters," page 21.
- - The Accelerated Death Benefit provision is only available upon terminal
illness of the last survivor.
- - The Confinement Waiver Benefit is available upon confinement of either
Insured.
OTHER MATTERS
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VOTING RIGHTS
In accordance with our view of presently applicable law, we will vote the shares
of the Funds at regular and special meetings of their shareholders in accordance
with instructions from Contract Owners (or their assignees, as the case may be)
having a voting interest in the Variable Account. We determine the number of
shares of a Portfolio held in a Variable Sub-Account that are attributable to
each Contract Owner by dividing the Contract Owner's interest in that Variable
Sub-Account by the per share net asset value of the corresponding Portfolio. We
will vote shares for which no instructions have been given and shares which are
not attributable to Contract Owners (i.e., shares we own) in the same proportion
as we vote shares for which we have received instructions. If the 1940 Act or
any rule promulgated thereunder should be amended, however, or if our present
interpretation should change and, as a result, we determine we are permitted to
vote the shares of the Funds in our own right, we may elect to do so.
We will determine the voting interests of the Contract Owner (or the assignee)
in the Funds as follows: Contract Owners are entitled to give us voting
instructions with respect to Portfolio shares attributable to them as described
above, determined on the record date for the shareholder meeting for that
Portfolio. Therefore, if a Contract Owner has taken a loan secured by the
Contract, amounts transferred from the Variable Sub-Account(s) to the Loan
Account in connection with the loan (see "Access to Your Money -- Contract
Loans," page 17) will not be considered in determining the voting interests of
the Contract Owner. You should review the prospectuses for the Funds which
accompany this prospectus to determine matters on which Fund shareholders may
vote.
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require us to vote the shares so as to
cause a change in the sub-classification or investment objective of one or more
of the Portfolios or to approve or disapprove an investment advisory contract
for any of the Portfolios.
In addition, we may disregard voting instructions in favor of changes initiated
by Contract Owners in the investment objectives or the investment adviser of the
Funds if we reasonably disapprove of such changes. We will disapprove a change
only if the proposed change would be contrary to state law or prohibited by
state regulatory authorities. If we do disregard voting instructions, we will
include a summary of that action and the reasons for it in the next periodic
report to Contract Owners.
STATEMENTS TO CONTRACT OWNERS
The Company will maintain all records relating to the Variable Account and the
Variable Sub-Accounts. At least once each Contract Year, we will send to each
Contract Owner a statement showing the coverage amount and the Account Value of
the Contract (indicating the number of Accumulation Units credited to the
Contract in each Variable Sub-Account and the corresponding Accumulation Unit
Value), and any outstanding loan secured by the Contract as of the date of the
statement. The statement will also show premium paid, Monthly Deduction Amounts
under the Contract since the last statement, and any other information required
by any applicable law or regulation.
LIMIT ON RIGHT TO CONTEST
We may not contest the validity of the Contract after it has been in effect
during the Insured's lifetime for two years from the Contract Date. If the
Contract is reinstated, the two-year period is measured from the date of
reinstatement. Any increase in the Specified Amount for which evidence of
insurability was obtained is contestable for two years from the effective date
of the increase. In addition, if the Insured dies by suicide while sane or self
destruction while insane in the two-year period after the Contract Date, or such
period
20 - PROSPECTUS
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as specified in state law, the benefit payable will be limited to the premiums
paid less any Indebtedness and partial withdrawals. If the Insured dies by
suicide while sane or self-destruction while insane in the two-year period
following an increase in the Specified Amount, the benefit payable with respect
to the increase will be limited to the additional premium paid for such
increase, less any Indebtedness and partial withdrawals.
MISSTATEMENT AS TO AGE AND SEX
If the age or sex of the Insured is incorrectly stated, the Death Benefit will
be appropriately adjusted as specified in the Contract.
BENEFICIARY
You name the beneficiary in your application for the Contract. You may change
the beneficiary (unless irrevocably named) during the Insured's lifetime by
written request to the Company. If no beneficiary is living when the Insured
dies, we will pay the proceeds to the Contract Owner if living; otherwise to the
Contract Owner's estate.
ASSIGNMENT
Unless required by state law, the Contract may not be assigned as collateral for
a loan or other obligation.
DIVIDENDS
No dividends will be paid under the Contracts.
DISTRIBUTION OF THE CONTRACTS
ALFS, Inc. ("ALFS"), 3100 Sanders Road, Northbrook Illinois, a wholly owned
subsidiary of Allstate Life, acts as the principal underwriter of the Contracts.
ALFS is registered as a broker-dealer under the Securities Exchange Act of 1934
and a member of the National Association of Securities Dealers, Inc. Contracts
are sold by registered representatives of unaffiliated broker-dealers or bank
employees who are licensed insurance agents appointed by the Company, either
individually or through an incorporated insurance agency and who have entered
into a selling agreement with ALFS and the Company to sell the Contracts. In
some states, Contracts may be sold by representatives or employees of banks
which may be acting as broker-dealers without separate registration under the
Securities Exchange Act of 1934, pursuant to legal and regulatory exceptions.
Commissions paid may vary, but in the aggregate are not anticipated to exceed
7.25% of any purchase payment. These commissions are intended to cover
distribution expenses. In addition, sales of the Contract may count toward
incentive program awards for the registered representative.
The underwriting agreement with ALFS provides for indemnification of ALFS by the
Company for liability to Contract Owners arising out of services rendered or
Contracts issued.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The assets of the Variable Account are held by the Company. The assets of the
Variable Account are kept physically segregated and held separate and apart from
the general account of the Company. The Company maintains records of all
purchases and redemptions of shares of the Funds.
FEDERAL TAX MATTERS
- -------------------------------------------------------------------
INTRODUCTION
The following discussion is general and is not intended as tax advice. The
Company makes no guarantee regarding the tax treatment of any Contract or
transaction involving a Contract. Federal, state, local and other tax
consequences of ownership or purchase of a life insurance policy depend upon
your circumstances. If you are concerned about any tax consequences with regard
to your individual circumstances, you should consult a qualified tax advisor.
TAXATION OF THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. The Separate Account is not an entity separate from
the Company and its operations form a part of the Company. As a consequence, the
Separate Account will not be taxed separately as a "Regulated Investment
Company" under Subchapter M of the Code. Investment income and realized capital
gains are automatically applied to increase reserves under the Contracts. Under
current federal tax law, the Company believes that the Separate Account
investment income and realized net capital gains will not be taxed to the extent
that such income and gains are applied to increase the reserves under the
Contracts. Generally, reserves are amounts that the Company is legally required
to accumulate and maintain in order to meet future obligations under the
Contracts. The Company does not anticipate that it will incur any federal income
tax liability attributable to the Separate Account. Therefore, we do not intend
to make provisions for any such taxes. If we are taxed on investment income or
capital gains of the Separate Account, then we may impose a
21 - PROSPECTUS
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charge against the Separate Account in order to make provisions for any such
taxes.
TAXATION OF CONTRACT BENEFITS
In order to qualify as a life insurance policy for federal income tax purposes,
the Contract must meet the definition of a life insurance policy set forth in
Section 7702 of the Code. Section 7702 limits the amount of premiums that may be
invested in a Contract that qualifies as life insurance. The Contract is
structured to meet the Section 7702 definition of a life insurance policy. This
means that the Death Benefit is excluded from the beneficiary's gross income
under Section 101(a) of the Code and you are not taxed on increases in the
Contract Value until a distribution occurs.
If a Contract fails to qualify as life insurance under Section 7702, the
Contract will not provide most of the tax advantages normally provided by life
insurance. The Company has the right to amend the Contracts to comply with any
future changes in the Code, any regulations or rulings under the Code and any
other requirements imposed by the Internal Revenue Service.
If you surrender the Contract, you are subject to income tax on the portion of
the distribution that exceeds the investment in the contract. The investment in
the contract is the gross premium paid for the Contract minus any amounts
previously received from the Contract if such amounts were properly excluded
from your gross income.
If the Contract is not treated as a modified endowment contract, then Contract
loans are not generally treated as taxable distributions, and you are generally
taxed on partial withdrawals to the extent the amount distributed exceeds the
investment in the contract. In certain situations, partial withdrawals, or
reduction in benefits during the first fifteen years of the Contract may result
in a taxable distribution before the investment in the contract is recovered.
Interest paid on a Contract loan is generally not deductible. Withdrawals and
loans from modified endowment contracts are subject to less favorable tax
treatment.
If you are Owner and Insured under the Policy, the Death Benefit will be
included in your gross estate for federal estate tax purposes if the proceeds
are payable to your estate. If the beneficiary is not your estate, but you
retain incidents of ownership in the Contract, the Death Benefit will also be
included in your gross estate. Examples of incidents of ownership include:
- - the right to change beneficiaries,
- - to assign the Contract,
- - to revoke an assignment,
- - to pledge the Contract, or
- - to obtain a Contract loan.
If you are Owner and Insured under the Contract, and you transfer all incidents
of ownership in the Contract, the Death Benefit will be included in your gross
estate if you die within three years from the date of the ownership transfer.
State and local estate and inheritance taxes may also apply. In addition,
certain transfers of the Contract or Death Benefit, either during life or at
death, to individuals two or more generations below the transferor may be
subject to the federal generation skipping transfer tax. This rule also applies
if the transfer is to a trust for the benefit of individuals two or more
generations below the transferor.
The Contract may be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. If you are contemplating the use
of a Contract in any of these arrangements, you should consult a qualified tax
advisor regarding the tax attributes of the particular arrangement.
MODIFIED ENDOWMENT CONTRACTS
A life insurance policy is treated as a "modified endowment contract" under
Section 7702A of the Tax Code if it meets the definition of life insurance in
Section 7702, but fails the "seven-pay" test of Section 7702A. The seven-pay
test provides that premiums cannot be paid at a rate more rapidly than that
allowed by the payment of seven annual premiums using specified computational
rules provided in Section 7702A. The large single premium permitted under the
Contract (which is equal to 100% of the "Guideline Single Premium" as defined in
Section 7702 of the Code) does not meet the specific computational rules for the
seven pay test provided in Section 7702A. Therefore, the Contract will generally
be treated as a modified endowment contract. An exchange under Section 1035 of
the Tax Code of a life insurance policy that is not a modified endowment
contract will not cause the new policy to be a modified endowment contract if no
additional premiums are paid. An exchange under Section 1035 of the Code of a
life insurance policy that is a modified endowment contract for a new life
insurance policy will always cause the new policy to be a modified endowment
contract.
A Contract that is classified as a modified endowment contract is generally
eligible for the beneficial tax treatment accorded to life insurance. The death
benefit is excluded from income and increases in Contract Value are not subject
to current taxation. If you receive any amount as a Contract loan from a
modified endowment contract, or assign or pledge any part of the value of the
Contract, such amount is treated as a distribution. Unlike other life insurance
policies, withdrawals and distributions made before the insured's death are
treated as taxable income first, then as recovery of
22 - PROSPECTUS
<PAGE>
investment in the contract. The taxable portion of any distribution from a
modified endowment contract is subject to a 10% penalty tax, except as follows:
- - distributions made on or after the date on which the taxpayer attains age
59 1/2;
- - distributions attributable to the taxpayer's becoming disabled (within the
meaning of Section 72(m)(7) of the Code);
- - or any distribution that is part of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life expectancies) of
such taxpayer and his or her beneficiary.
All modified endowment contracts that are issued within any calendar year to the
same owner by one company or its affiliates shall be treated as one modified
endowment contract in determining the taxable portion of any distributions.
DIVERSIFICATION REQUIREMENTS
For a Contract to qualify as a variable life insurance policy for federal tax
purposes, the investments in the Separate Account must be "adequately
diversified" consistent with standards under Treasury Department regulations. If
the investments in the Separate Account are not adequately diversified, the
Contract will not be treated as a variable life insurance policy for federal
income tax purposes. As a result, you will be taxed on the excess of the
Contract Value over the investment in the contract. Although the Company does
not have control over the Portfolios or their investments, we expect the
Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT
The IRS has stated that you will be considered the owner of Separate Account
assets if you possess incidents of ownership in those assets, such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, the Treasury Department announced that
the regulations do not provide guidance concerning circumstances in which
investor control of the Separate Account investments may cause an investor to be
treated as the owner of the Separate Account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the Separate Account.
Your rights under this Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of Separate
Account assets. For example, you have the choice to allocate premiums and
Contract values among more investment options. Also, you may be able to transfer
among investment options more frequently than in such rulings. These differences
could result in you being treated as the owner of the Separate Account. If this
occurs, income and gain from the Separate Account assets would be includible in
your gross income. The Company does not know what standards will be set forth in
any regulations or rulings which the Treasury Department may issue. It is
possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being considered
the federal tax owner of the assets of the Separate Account. However, we make no
guarantee that such modification to the Contract will be successful.
ADDITIONAL INFORMATION ABOUT THE COMPANY
- -------------------------------------------------------------------
The Company also acts as the sponsor for six other of its separate accounts that
are registered investment companies: Glenbrook Life and Annuity Company Variable
Annuity Account, Glenbrook Life and Annuity Company Separate Account A,
Glenbrook Life AIM Variable Life Separate Account A, Glenbrook Life Variable
Life Separate Account B, Glenbrook Life Scudder Variable Account (A), and
Glenbrook Life Multi-Manager Variable Account. The officers and employees of the
Company are covered by a fidelity bond in the amount of $5,000,000. No person
beneficially owns more than 5% of the outstanding voting stock of The Allstate
Corporation, of which the Company is an indirect wholly owned subsidiary.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers of the Company are listed below, with
information as to their ages, dates of election and principal business
occupations during the last five years (if other than their present business
occupations).
THOMAS J. WILSON, II, 43, PRESIDENT AND CHIEF OPERATING OFFICER (2000)* Also
Vice Chairman (1999), Director (1995-Present) and Senior Vice President (1999)
of Allstate Insurance Company; Director (1999) Allstate Life Financial Services,
Inc.; Director (1995-Present) and President (1999) Allstate Life Insurance
Company; Director (1999) and President (1998-Present) of Allstate Life Insurance
Company of New York; Director (1999) and Vice Chairman of
23 - PROSPECTUS
<PAGE>
Glenbrook Life and Annuity Company; Director (1999) Lincoln Benefit Life
Company; Director (1999) and Vice Chairman of Northbrook Life Insurance Company;
Director (1999) of Surety Life Insurance Company.
MICHAEL J. VELOTTA, 54, VICE PRESIDENT, SECRETARY, GENERAL COUNSEL, AND DIRECTOR
(1992)* Also Director and Secretary (1993-Present) of Allstate Life Financial
Services, Inc.; Director (1992-Present) Vice President, Secretary and General
Counsel (1993-Present) Allstate Life Insurance Company; Director (1992-Present)
Vice President, Secretary and General Counsel (1993-Present) Allstate Life
Insurance Company of New York; Director (1992-1997) Vice President, Secretary
and General Counsel (1993-1997) Glenbrook Life Insurance Company; Director and
Secretary (1995-Present) Laughlin Group Holdings, Inc.; Director (1992-Present)
and Assistant Secretary (1995-Present) Lincoln Benefit Life Company; Director
(1992-Present) Vice President, Secretary and General Counsel (1993-Present)
Northbrook Life Insurance Company; and Director and Assistant Secretary
(1995-Present) Surety Life Insurance Company.
JOHN R. HUNTER, 45, DIRECTOR (1996)* Also Assistant Vice President
(1990-Present) Allstate Life Insurance Company; Assistant Vice President
(1996-Present) Allstate Life Insurance Company of New York; President and Chief
Operating Officer (1998-Present) Allstate Life Financial Services Inc.; Director
(1996-1997) Glenbrook Life Insurance Company; and Director (1994-Present) and
Assistant Vice President (1990-Present) Northbrook Life Insurance Company.
G. CRAIG WHITEHEAD, 53, SENIOR VICE PRESIDENT AND DIRECTOR (1995)* Also
Assistant Vice President (1991-Present) Allstate Life Insurance Company;
Director (1994-1997) Assistant Vice President (1991-1997) Glenbrook Life
Insurance Company; Assistant Vice President (1992-Present) Secretary (1995)
Glenbrook Life and Annuity Company; Director (1995-Present) Laughlin Group
Holdings, Inc.
MARLA G. FRIEDMAN, 47, VICE PRESIDENT (1996)* Also Director (1991-Present) and
Vice President (1988-Present) Allstate Life Insurance Company; Director
(1993-1996) Allstate Life Financial Services, Inc.; Director (1997-Present), and
Assistant Vice President (1996-Present) Allstate Life Insurance Company of New
York; Director (1991-1996), President and Chief Operating Officer (1995-1996)
and Vice President (1990-1995) and (1996-1997) Glenbrook Life Insurance Company;
Director and Vice Chairman of the Board (1995-1996) Laughlin Group Holdings,
Inc.; and Director (1989-1996), President and Chief Operating Officer
(1995-1996) and Vice President (1996-Present) Northbrook Life Insurance Company.
KEVIN R. SLAWIN, 43, VICE PRESIDENT AND DIRECTOR (1996)* Also Assistant Vice
President and Assistant Treasurer (1995-1996) Allstate Insurance Company;
Director (1996-Present) and Assistant Treasurer (1995-1996) Allstate Life
Financial Services, Inc.; Director and Vice President (1996-Present) and
Assistant Treasurer (1995-1996) Allstate Life Insurance Company; Director and
Vice President (1996-Present) and Assistant Treasurer (1995-1996) Allstate Life
Insurance Company of New York; Director and Vice President (1996-1997) and
Assistant Treasurer (1995-1996 Glenbrook Life Insurance Company; Director
(1996-Present) and Assistant Treasurer (1995-1996) Laughlin Group Holdings,
Inc.; Director (1996-Present) Lincoln Benefit Life Company; Director and Vice
President (1996-Present) and Assistant Treasurer (1995-1996) Northbrook Life
Insurance Company; Director (1996-Present) Surety Life Insurance Company.
CASEY J. SYLLA, 57, CHIEF INVESTMENT OFFICER (1995)* Also Director
(1995-Present) Senior Vice President and Chief Investment Officer (1995-Present)
Allstate Insurance Company; Director (1995-Present) Chief Investment Officer
(1995-Present) Allstate Life Insurance Company; Chief Investment Officer
(1995-Present) Allstate Life Insurance Company of New York; Chief Investment
Officer (1995-1997) Glenbrook Life Insurance Company; and Director and Chief
Investment Officer (1995-Present) Northbrook Life Insurance Company.
JAMES P. ZILS, 49, TREASURER (1995)* Also Vice President and Treasurer
(1995-Present) Allstate Insurance Company; Treasurer (1995-Present) Allstate
Life Financial Services, Inc.; Treasurer (1995-Present) Allstate Life Insurance
Company; Treasurer (1995-Present) Allstate Life Insurance Company of New York;
Treasurer (1995-1997) Glenbrook Life Insurance Company; Treasurer (1995-Present)
Laughlin Group Holdings, Inc.; and Treasurer (1995-Present) Northbrook Life
Insurance Company.
SAMUEL H. PILCH, 53, CONTROLLER (1999)* Also Group Vice President and Contoller
(1999-Present); Vice President and Controller (1996-1999) Allstate Insurance
Company; Vice President and Controller (March 2000-Present), Controller
(1999-2000) Allstate Life Insurance Company; Controller (1999-Present) Allstate
Life Insurance Company of New York; Controller (1999-Present) Northbrook Life
Insurance Company.
KAREN C. GARDNER, 46, VICE PRESIDENT (1999)* Also Vice President-Tax
(March 2000-Present) Allstate Financial Services, LLC; Vice President
(1996-Present) Allstate Insurance Company; Vice President (1997-1998) Allstate
Life Financial Services, Inc.; Vice President (1996-Present) Allstate Life
Insurance Company; Vice President (1996-Present) Allstate Life insurance Company
of New York; Assistant Vice President (1996-Present) Lincoln Benefit Life
Company; Vice President (1996-Present) Northbrook Life
24 - PROSPECTUS
<PAGE>
Insurance Company; Assistant Vice President (1996-Present) Surety Life Insurance
Company.
TIMOTHY N. VANDER PAS, 39, DIRECTOR, ASSISTANT VICE PRESIDENT AND SENIOR VICE
PRESIDENT (1998)* Also Assistant Vice President (1998-Present) Allstate Life
Insurance Company; Assistant Vice President (1998-Present) Allstate Life
Insurance Company of New York; Director (1998-Present), Vice President and
Product Actuary (1995-1996), Assistant Vice President (1998-Present), Senior
Vice President and Director (1998-Present) Northbrook Life Insurance Company;
Director (1999-Present) Charter National Life Insurance Company; Director
(1999-Present) Intamerica Life Insurance Company.
SARAH R. DONAHUE, 51, DIRECTOR (1998)* Assistant Vice President (1993)* Also
Assistant Vice President (1993-Present) Allstate Life Insurance Company;
Director (1998-Present), First Vice President-Finance (1995-1997), Assistant
Vice President (1993-Present), Senior Vice President-Product Management
(1998-1999), First Vice President-Product Management (1997) Northbrook Life
Insurance Company.
BRENT H. HAMANN, 41, DIRECTOR (1998)* Also Vice President (1996-Present)
Allstate Life Financial Services, Inc.; Assistant Vice President (1999-Present)
Allstate Life Insurance Company; Director (1999-Present) Intramerica Life
Insurance Company.
YEAR 2000
Glenbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Glenbrook's older computer software programs
recognize only the last two digits of the year in any date, some software may
have failed to operate properly in or after the year 1999, if the software was
not reprogrammed or replaced ("Year 2000 Issue"). Glenbrook believes that many
of its counterparties and suppliers also had potential Year 2000 Issues which
could affect Glenbrook. In 1995, Allstate Insurance Company commenced a four
phase plan intended to mitigate and/or prevent the adverse effects of Year 2000
Issues. These strategies included normal development and enhancement of new and
existing systems, upgrades to operating systems already covered by maintenance
agreements, and modifications to existing systems to make them Year 2000
compliant. The plan also included Glenbrook actively working with its major
external counterparties and suppliers to assess their compliance efforts and
Glenbrook's exposure to them. Because of the accuracy of this plan, and its
timely completion, Glenbrook has experienced no material impacts on its results
of operations, liquidity or financial position due to the Year 2000 issue. Year
2000 costs are expensed as incurred.
LEGAL PROCEEDINGS
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. Management, after consultation with legal counsel, does not anticipate
the ultimate liability arising from such pending or threatened litigation to
have a material effect on the financial condition of the Company or the Variable
Account.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised the Company on
certain federal securities law matters. All matters of state law pertaining to
the Contracts, including the validity of the Contracts and the Company's right
to issue such Contracts under state insurance law, have been passed upon by
Michael J. Velotta, General Counsel of the Company.
REGISTRATION STATEMENT
We have filed a registration statement with respect to the Contracts with the
SEC under the Securities Act of 1933, as amended. This Prospectus does not
contain all information set forth in the registration statement, its amendments
and exhibits, to all of which reference is made for further information
concerning the Variable Account, the Funds, the Company, and the Contracts. The
exhibits to the registration statement include hypothetical illustrations of the
Contract that show how the Death Benefit, Account Value and Cash Surrender Value
could vary over an extended period of time assuming hypothetical gross rates of
return (i.e., investment income and capital gains and losses, realized or
unrealized) for the Variable Account equal to annual rates of 0%, 6%, and 12%,
an initial premium of $10,000, Insureds in the standard rating class, and based
on current and guaranteed Contract charges. Personalized illustrations provided
by the Company upon request will be based on the methodology and format of these
hypothetical illustrations as appropriate.
EXPERTS
The financial statements and related financial statement schedule of the Company
as of December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999, included in this prospectus, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of the Variable Account as of December 31, 1999, and
for each of the periods in the three years then ended included in this
prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
- ------------------------
*Date elected to current office.
25 - PROSPECTUS
<PAGE>
FINANCIAL INFORMATION
The financial statements of the Variable Account as of December 31, 1999 and for
each of the periods in the three years then ended, the financial statements and
related financial statement schedule of the Company as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999 and
the accompanying Independent Auditors' Reports appear in the pages that follow.
The financial statements and schedule of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contacts.
FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report........................................ F-1
Financial Statements:
Statements of Financial Position
December 31, 1999 and 1998..................................... F-2
Statements of Operations and Comprehensive Income for the Years
Ended
December 31, 1999, 1998 and 1997............................... F-3
Statements of Shareholder's Equity for the Years Ended
December 31, 1999, 1998 and 1997............................... F-4
Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997............................... F-5
Notes to Financial Statements....................................... F-6
Schedule IV -- Reinsurance for the Years Ended December 31, 1997,
1998 and 1997....................................................... F-12
</TABLE>
26 - PROSPECTUS
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Glenbrook Life and Annuity Company:
- --------------------------------------------------------------------------------
We have audited the accompanying Statements of Financial Position of Glenbrook
Life and Annuity Company (the "Company", an affiliate of The Allstate
Corporation) as of December 31, 1999 and 1998, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1999. Our audits also
included Schedule IV--Reinsurance. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV--Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2000
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
------------ ------------
($ IN THOUSANDS, EXCEPT PAR
VALUE DATA)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value (amortized cost
$94,173 and $87,415)..................................... $ 92,937 $ 94,313
Short-term................................................ 53,063 4,663
---------- ----------
Total investments......................................... 146,000 98,976
Cash........................................................ 9 --
Reinsurance recoverable from Allstate Life Insurance
Company................................................... 4,144,165 3,113,278
Deferred income taxes....................................... 293 --
Other assets................................................ 2,706 2,590
Separate Accounts........................................... 1,541,756 993,622
---------- ----------
TOTAL ASSETS.......................................... $5,834,929 $4,208,466
========== ==========
LIABILITIES
Reserve for life-contingent contract benefits............... 800 --
Contractholder funds........................................ 4,143,365 3,113,278
Current income taxes payable................................ 2,360 2,181
Deferred income taxes....................................... -- 2,499
Payable to affiliates, net.................................. 4,122 3,583
Separate Accounts........................................... 1,541,756 993,622
---------- ----------
TOTAL LIABILITIES..................................... 5,692,403 4,115,163
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 11)
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 10,000 and 4,200 shares
authorized, 5,000 and 4,200 shares issued and
outstanding............................................... 2,500 2,100
Additional capital paid-in.................................. 119,241 69,641
Retained income............................................. 21,588 17,079
Accumulated other comprehensive (loss) income:
Unrealized net capital (losses) gains..................... (803) 4,483
---------- ----------
Total accumulated other comprehensive (loss) income... (803) 4,483
---------- ----------
TOTAL SHAREHOLDER'S EQUITY............................ 142,526 93,303
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............ $5,834,929 $4,208,466
========== ==========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Net investment income..................................... $6,579 $6,231 $5,304
Realized capital gains and losses......................... 312 (5) 3,460
------ ------ ------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE............ 6,891 6,226 8,764
INCOME TAX EXPENSE.......................................... 2,382 2,182 3,078
------ ------ ------
NET INCOME.................................................. 4,509 4,044 5,686
------ ------ ------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER-TAX
Change in unrealized net capital gains and losses......... (5,286) 1,315 378
------ ------ ------
COMPREHENSIVE (LOSS) INCOME................................. $ (777) $5,359 $6,064
====== ====== ======
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year.................................. $ 2,100 $ 2,100 $ 2,100
Issuance of new shares of stock............................. 400 -- --
-------- ------- -------
Balance, end of year........................................ 2,500 2,100 2,100
-------- ------- -------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year.................................. 69,641 69,641 69,641
Capital contribution........................................ 49,600 -- --
-------- ------- -------
Balance, end of year........................................ 119,241 69,641 69,641
-------- ------- -------
RETAINED INCOME
Balance, beginning of year.................................. 17,079 13,035 7,349
Net income.................................................. 4,509 4,044 5,686
-------- ------- -------
Balance, end of year........................................ 21,588 17,079 13,035
-------- ------- -------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance, beginning of year.................................. 4,483 3,168 2,790
Change in unrealized net capital gains and losses........... (5,286) 1,315 378
-------- ------- -------
Balance, end of year........................................ (803) 4,483 3,168
-------- ------- -------
Total shareholder's equity.............................. $142,526 $93,303 $87,944
======== ======= =======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 4,509 $ 4,044 $ 5,686
Adjustments to reconcile net income to net cash provided by
operating activities
Amortization and other non-cash items................... (65) (24) 29
Realized capital gains and losses....................... (312) 5 (3,460)
Changes in:
Income taxes payable.................................. 235 1,590 240
Other operating assets and liabilities................ 264 915 961
-------- -------- --------
Net cash provided by operating activities............... 4,631 6,530 3,456
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales....................................... 9,049 1,966 1,405
Investment collections.................................... 4,945 7,123 14,217
Investment purchases...................................... (20,328) (15,250) (50,115)
Participation in Separate Accounts.......................... -- -- 13,981
Change in short-term investments, net....................... (48,288) (369) (2,944)
-------- -------- --------
Net cash used in investing activities................... (54,622) (6,530) (23,456)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock...................... 400 -- --
Capital contribution........................................ 49,600 -- 20,000
-------- -------- --------
Net cash provided by financing activities............... 50,000 -- 20,000
-------- -------- --------
NET INCREASE IN CASH........................................ 9 -- --
CASH AT THE BEGINNING OF YEAR............................... -- -- --
-------- -------- --------
CASH AT END OF YEAR......................................... $ 9 $ -- $ --
======== ======== ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
- -------------------------------------------------------------------
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Glenbrook Life and
Annuity Company (the "Company"), a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company
("AIC"), a wholly owned subsidiary of The Allstate Corporation (the
"Corporation"). These financial statements have been prepared in conformity with
generally accepted accounting principles.
NATURE OF OPERATIONS
The Company markets savings and life insurance products through banks and
securities firms. Savings products include deferred annuities and immediate
annuities without life contingencies. Deferred annuities include fixed rate,
market value adjusted, indexed and variable annuities. Life insurance consists
of interest-sensitive life and variable life insurance. In 1999, substantially
all of the Company's statutory premiums and deposits were from annuities.
Annuity contracts and life insurance policies issued by the Company are subject
to discretionary surrender or withdrawal by customers, subject to applicable
surrender charges. These policies and contracts are reinsured primarily with
ALIC (see Note 3), which invests premiums and deposits to provide cash flows
that will be used to fund future benefits and expenses.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may present an
increased level of competition for sales of the Company's products. Furthermore,
the market for deferred annuities and interest-sensitive life insurance is
enhanced by the tax incentives available under current law. Any legislative
changes which lessen these incentives are likely to negatively impact the demand
for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in the
capital markets.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control of these
non-affiliated entities with which the Company has alliances could negatively
impact the Company's sales.
The Company is authorized to sell life and savings products in all states except
New York, as well as in the District of Columbia. The top geographic locations
for statutory premiums and deposits for the Company were Florida, California,
Pennsylvania, Michigan, Texas, Illinois and New Jersey for the year ended
December 31, 1999. No other jurisdiction accounted for more than 5% of statutory
premiums and deposits. Substantially all premiums and deposits are ceded to ALIC
under reinsurance agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such writedowns are
included in realized capital gains and losses. Short-term investments are
carried at cost or amortized cost, which approximates fair value.
Investment income consists primarily of interest and short-term investment
dividends. Interest is recognized on an accrual basis and dividends are recorded
at the ex-dividend date. Interest income on mortgage-backed securities is
determined on the effective yield method, based on the estimated principal
repayments. Accrual of income is suspended for fixed income securities that are
in default or when the receipt of interest payments is in doubt. Realized
capital gains and losses are determined on a specific identification basis.
REINSURANCE RECOVERABLE
The Company has reinsurance agreements whereby substantially all contract
charges, credited interest, policy benefits and certain expenses are ceded to
ALIC. Such amounts are reflected net of such reinsurance in the statements of
operations and comprehensive income. Investment income earned on the assets
which support contractholder funds and the reserve for life-contingent contract
benefits is not included in the Company's financial statements as those assets
are owned and managed under terms of reinsurance agreements. Reinsurance
recoverable and the related reserve for life-contingent contract benefits and
contractholder funds
F-6
<PAGE>
are reported separately in the statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of the related contractholder account balance.
Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities, indexed annuities and immediate
annuities without life contingencies are considered investment contracts.
Deposits received for such contracts are reported as deposits to contractholder
funds. Contract charge revenue for investment contracts consists of charges
assessed against the contractholder account balance for contract administration
and surrenders. Contract benefits include interest credited and claims incurred
in excess of the related contractholder account balance.
Crediting rates for fixed rate and interest-sensitive life contracts are
adjusted periodically by the Company to reflect current market conditions.
Crediting rates for indexed annuities are based on an interest rate index, such
as LIBOR or an equity index, such as the S&P 500.
Investment contracts include variable annuity and variable life contracts which
are sold as Separate Accounts products. The assets supporting these products are
legally segregated and available only to settle Separate Accounts contract
obligations. Deposits received are reported as Separate Accounts liabilities.
The Company's contract charge revenue for these contracts consists of charges
assessed against the Separate Accounts fund balances for contract maintenance,
administration, mortality, expense and surrenders.
All contract charges, contract benefits and interest credited are reinsured.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates. Deferred income taxes arise primarily from
unrealized capital gains and losses on fixed income securities carried at fair
value and differences in the tax bases of investments.
SEPARATE ACCOUNTS
The Company issues deferred variable annuity and variable life contracts, the
assets and liabilities of which are legally segregated and recorded as assets
and liabilities of the Separate Accounts. Absent any contract provisions wherein
the Company contractually guarantees either a minimum return or account value to
the beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated objectives.
The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claim to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
Investment income and realized capital gains and losses of the Separate Accounts
accrue directly to the contractholders and therefore, are not included in the
Company's statements of operations and comprehensive income. Revenues to the
Company from the Separate Accounts consist of contract maintenance and
administration fees, and mortality, surrender and expense charges.
Prior to 1998, the Company had an ownership interest ("Participation") in the
Separate Accounts. The Company's Participation was carried at fair value and
unrealized gains and losses, net of deferred income taxes, were shown as a
component of shareholder's equity. Investment income and realized capital gains
and losses which arose from the Participation were included in the Company's
statements of operations and comprehensive income. The Company liquidated its
Participation during 1997, which resulted in a pretax realized capital gain of
$3.5 million.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to certain
variable annuity contract guarantees, is computed on the basis of assumptions as
to mortality, future investment yields, terminations and expenses at the time
the policy is issued. These assumptions include provisions for adverse deviation
and generally vary by such characteristics as type of coverage, year of issue
and policy duration. Detailed reserve assumptions and reserve interest rates are
outlined in Note 6.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life and
certain investment contracts. Deposits
F-7
<PAGE>
received are recorded as interest-bearing liabilities. Contractholder funds are
equal to deposits received, net of commissions, and interest credited to the
benefit of the contractholder less withdrawals, mortality charges, and
administrative expenses. Detailed information on crediting rates and surrender
and withdrawal protection on contractholder funds are outlined in Note 6.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." The SOP
provides guidance concerning when to recognize a liability for insurance-related
assessments and how those liabilities should be measured. Specifically,
insurance-related assessments should be recognized as liabilities when all of
the following criteria have been met: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. Adoption of this statement was not material to the
Company's results of operations or financial position.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements whereby substantially all contract
charges, credited interest, policy benefits and certain expenses are ceded to
ALIC and reflected net of such reinsurance in the statements of operations and
comprehensive income. Reinsurance recoverable and the related reserve for
life-contingent contract benefits and contractholder funds are reported
separately in the statements of financial position. The Company continues to
have primary liability as the direct insurer for risks reinsured.
Investment income earned on the assets which support contractholder funds and
the reserve for life-contingent contract benefits is not included in the
Company's financial statements as those assets are owned and managed under terms
of reinsurance agreements. The following amounts were ceded to ALIC under
reinsurance agreements.
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Contract charges $ 27,175 $ 19,009 $ 11,641
Credited interest, policy
benefits, and certain
expenses 253,945 218,008 179,954
</TABLE>
BUSINESS OPERATIONS
The Company utilizes services performed by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The Company is charged for the cost of these operating expenses
based on the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $26,555, $15,949, and $19,243 in 1999, 1998 and 1997, respectively. Of
these costs, the Company retains investment related expenses. All other costs
are ceded to ALIC under reinsurance agreements.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
Gross
Unrealized
Amortized ------------------- Fair
At December 31, 1999 Cost Gains Losses Value
-------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C>
U.S. government and
agencies $24,274 $1,260 $ -- $25,534
Municipal 1,656 -- (112) 1,544
Corporate 49,255 9 (2,022) 47,242
Mortgage-backed
securities 18,988 96 (467) 18,617
------- ------ ------- -------
Total fixed income
securities $94,173 $1,365 $(2,601) $92,937
======= ====== ======= =======
At December 31, 1998
U.S. government and
agencies $24,350 $4,308 $ -- $28,658
Municipal 656 24 -- 680
Corporate 33,009 1,575 (39) 34,545
Mortgage-backed
securities 29,400 1,047 (17) 30,430
------- ------ ------- -------
Total fixed income
securities $87,415 $6,954 $ (56) $94,313
======= ====== ======= =======
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- --------
<S> <C> <C>
Due after one year through five years $30,974 $31,085
Due after five years through ten years 32,583 30,911
Due after ten years 11,628 12,324
------- -------
75,185 74,320
Mortgage-backed securities 18,988 18,617
------- -------
Total $94,173 $92,937
======= =======
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
F-8
<PAGE>
NET INVESTMENT INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
----------------------- -------- -------- --------
<S> <C> <C> <C>
Fixed income securities $6,458 $6,151 $5,014
Short-term investments 230 183 231
Participation in Separate Accounts -- -- 161
------ ------ ------
Investment income, before expense 6,688 6,334 5,406
Investment expense 109 103 102
------ ------ ------
Net investment income $6,579 $6,231 $5,304
====== ====== ======
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
----------------------- -------- -------- --------
<S> <C> <C> <C>
Fixed income securities $ 312 $(5) $ (61)
Short-term investments -- -- 6
Participation in Separate Accounts -- -- 3,515
----- --- -------
Realized capital gains and losses 312 (5) 3,460
Income Taxes (109) 2 (1,211)
----- --- -------
Realized capital gains and losses,
after tax $ 203 $(3) $ 2,249
===== === =======
</TABLE>
Excluding calls and prepayments, gross gains of $370 were realized on sales of
fixed income securities during 1999, and gross losses of $58, $5 and $61 were
realized on sales of fixed income securities during 1999, 1998 and 1997,
respectively. There were no gross gains realized on sales of fixed income
securities during 1998 and 1997.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital losses on fixed income securities included in
shareholder's equity at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Gross
Cost/ Unrealized Unrealized
Amortized Fair ------------------- Net
Cost Value Gains Losses Losses
--------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Fixed income
securities $94,173 $92,937 $ 1,365 $(2,601) $(1,236)
======= ======= ======= =======
Deferred income taxes 433
-------
Unrealized net
capital losses $ (803)
=======
</TABLE>
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
Year Ended December 31, 1999 1998 1997
----------------------- -------- -------- --------
<S> <C> <C> <C>
Fixed income securities $(8,134) $2,024 $ 2,410
Participation in Separate Accounts -- -- (1,829)
Deferred income taxes 2,848 (709) (203)
------- ------ -------
(Decrease) increase in unrealized
net capital gains $(5,286) $1,315 $ 378
======= ====== =======
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value of $10,346
were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including reinsurance recoverable and deferred income taxes) and liabilities
(including interest-sensitive life insurance reserves) are not considered
financial instruments and are not carried at fair value. Other assets and
liabilities considered financial instruments, such as accrued investment income
and cash, are generally of a short-term nature. Their carrying values are
assumed to approximate fair value.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Fixed income
securities $ 92,937 $ 92,937 $ 94,313 $ 94,313
Short-term
investments 53,063 53,063 4,663 4,663
Separate Accounts 1,541,756 1,541,756 993,622 993,622
</TABLE>
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Short-term investments are highly
liquid investments with maturities of less than one year whose carrying value
are deemed to approximate fair value. Separate Accounts assets are carried in
the statements of financial position at fair value based on quoted market
prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1998 1999
----------------------- -----------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contractholder funds
on investment
contracts $4,156,964 $3,924,117 $3,130,228 $2,967,101
Separate Accounts 1,541,756 1,541,756 993,622 993,622
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges.
F-9
<PAGE>
The fair value of immediate annuities and annuities without life contingencies
with fixed terms is estimated using discounted cash flow calculations based on
interest rates currently offered for contracts with similar terms and durations.
Separate Accounts liabilities are carried at the fair value of the underlying
assets.
6. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, 1999 the reserve for life-contingent contract benefits consisted
of reserves for immediate annuities. The assumptions for mortality generally
utilized in calculating immediate annuity reserves is the 1983 group annuity
mortality table. Interest rate assumptions for immediate annuities vary from
3.5% to 7.2%. Other estimation methods used for immediate annuities include the
present value of contractually fixed benefits.
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Interest-sensitive life $ 9,503 $ 3,335
Fixed annuities:
Immediate annuities 17,856 12,643
Deferred annuities 4,116,006 3,097,300
---------- ----------
Total contractholder funds $4,143,365 $3,113,278
========== ==========
</TABLE>
Contractholder funds are equal to deposits received, net of commissions, and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 4.0% to 7.2% for interest-sensitive life contracts; 3.5% to 7.2% for
immediate annuities and 4.3% to 6.7% for deferred annuities. Withdrawal and
surrender charge protection includes: i) for interest-sensitive life, either a
percentage of account balance or dollar amount grading off generally over 20
years; and, ii) for deferred annuities not subject to a market value adjustment,
either a declining or a level percentage charge generally over nine years or
less. Approximately 1% of deferred annuities are subject to a market value
adjustment.
7. CORPORATION RESTRUCTURING
On November 10, 1999 the Corporation announced a series of strategic initiatives
to aggressively expand its selling and service capabilities. The Corporation
also announced that it is implementing a program to reduce expenses by
approximately $600 million. The reduction will result in the elimination of
approximately 4,000 current non-agent positions, across all employment grades
and categories by the end of 2000, or approximately 10% of the Corporation's
non-agent work force. The impact of the reduction in employee positions is not
expected to materially impact the results of operations of the Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and enhanced
marketing and advertising. As a result of the cost reduction program, the
Corporation recorded restructuring and related charges of $81 million pretax
during the fourth quarter of 1999. The Corporation anticipates that additional
pretax restructuring related charges of approximately $100 million will be
expensed as incurred throughout 2000. The Company's allocable share of these
expenses were immaterial in 1999 and are expected to be immaterial in 2000.
8. INCOME TAXES
For 1996, the Company filed a separate federal income tax return. Beginning in
1997, the Company joined the Corporation and its other eligible domestic
subsidiaries (the "Allstate Group") in the filing of a consolidated federal
income tax return and is party to a federal income tax allocation agreement (the
"Allstate Tax Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the
Company pays to or receives from the Corporation the amount, if any, by which
the Allstate Group's federal income tax liability is affected by virtue of
inclusion of the Company in the consolidated federal income tax return.
Effectively, this results in the Company's annual income tax provision being
computed, with adjustments, as if the Company filed a separate return.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears Roebuck & Co.
("Sears") and was, with its eligible domestic subsidiaries, included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. Effective June 30, 1995, the Corporation and Sears entered into a new
tax sharing agreement, which governs their respective rights and obligations
with respect to federal income taxes for all periods during which the
Corporation was a subsidiary of Sears, including the treatment of audits of tax
returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustment
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
F-10
<PAGE>
The components of the deferred income tax assets and liabilities at December 31,
are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred Assets
Unrealized net capital losses $ 433 $ --
----- -------
Total deferred assets 433 --
Deferred Liabilities
Difference in tax bases of investments (140) (84)
Unrealized net capital gains -- (2,415)
----- -------
Total deferred liabilities (140) (2,499)
----- -------
Net deferred asset (liability) $ 293 $(2,499)
===== =======
</TABLE>
Although realization is not assured, management believes it is more likely than
not that the deferred tax asset will be realized based on the assumptions that
certain levels of income will be achieved.
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current $2,326 $2,164 $3,037
Deferred 56 18 41
------ ------ ------
Total income tax expense $2,382 $2,182 $3,078
====== ====== ======
</TABLE>
The Company paid income taxes of $2,148, $592 and $2,839 in 1999, 1998 and 1997,
respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Other (.4) -- .1
---- ---- ----
Effective income tax rate 34.6% 35.0% 35.1%
==== ==== ====
</TABLE>
9. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $141,362 and $84,865 at December
31, 1999 and 1998, respectively. The Company's statutory net income was $4,179,
$4,698 and $3,636 for the years ended December 31, 1999, 1998 and 1997,
respectively.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the Arizona Department of
Insurance. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, Arizona, has passed legislation revising
various statutory accounting requirements to conform to codification. These
requirements are not expected to have a material impact on the statutory surplus
of the Company.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by the Company without the prior approval of the state
insurance regulator is limited to formula amounts based on net income and
capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 2000 without prior approval of the Arizona Department of Insurance is
$4,179.
RISK-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and interest rate risks. At December, 31 1999, RBC for the
Company was significantly above levels that would require regulatory action.
F-11
<PAGE>
10. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------- ------------------------------- -------------------------------
PRETAX TAX AFTER-TAX PRETAX TAX AFTER-TAX PRETAX TAX AFTER-TAX
-------- -------- --------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized capital gains and
losses:
- ----------------------------
Unrealized holding (losses)
gains arising during the
period $(7,822) $2,739 $(5,083) $2,019 $(707) $1,312 $4,034 $(1,412) $2,622
Less: reclassification
adjustments 312 (109) 203 (5) 2 (3) 3,453 (1,209) 2,244
------- ------ ------- ------ ----- ------ ------ ------- ------
Unrealized net capital
(losses) gains $(8,134) $2,848 $(5,286) $2,024 $(709) $1,315 $ 581 $ (203) $ 378
------- ------ ------- ------ ----- ------ ------ ------- ------
Other comprehensive (loss)
income $(8,134) $2,848 $(5,286) $2,024 $(709) $1,315 $ 581 $ (203) $ 378
======= ====== ======= ====== ===== ====== ====== ======= ======
</TABLE>
11. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATION AND LEGAL PROCEEDINGS
The Company's business is subject to the effects of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulations, removal of barriers preventing banks
from engaging in the securities and insurance business, tax law changes
affecting the taxation of insurance companies, the tax treatment of insurance
products and its impact on the relative desirability of various personal
investment vehicles, and proposed legislation to prohibit the use of gender in
determining insurance rates and benefits. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expenses
related to these funds have been immaterial. These expenses are ceded to ALIC
under reinsurance agreements.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate any exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization which advocates
ethical market conduct.
F-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Life insurance in force..................................... $23,586 $23,586 $ --
======= ======= =======
Premiums and contract charges:
Life and annuities........................................ $27,175 $27,175 $ --
======= ======= =======
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Life insurance in force..................................... $12,056 $12,056 $ --
======= ======= =======
Premiums and contract charges:
Life and annuities........................................ $19,009 $19,009 $ --
======= ======= =======
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Life insurance in force..................................... $ 4,095 $ 4,095 $ --
======= ======= =======
Premiums and contract charges:
Life and annuities........................................ $11,641 $11,641 $ --
======= ======= =======
</TABLE>
F-13
<PAGE>
GLENBROOK LIFE VARIABLE
LIFE SEPARATE ACCOUNT A
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND
FOR THE PERIODS ENDED DECEMBER 31, 1999,
DECEMBER 31, 1998 AND DECEMBER 31, 1997, AND
INDEPENDENT AUDITORS' REPORT
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Glenbrook Life and Annuity Company:
We have audited the accompanying statement of net assets of Glenbrook Life
Variable Life Separate Account A as of December 31, 1999 (including the assets
of each of the individual sub-accounts which comprise the Account as disclosed
in Note 1), and the related statements of operations and the statements of
changes in net assets for each of the periods in the three year period then
ended for each of the individual sub-accounts which comprise the Account. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1999 by correspondence with the
account custodians. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Glenbrook Life Variable Life Separate
Account A as of December 31, 1999 (including the assets of each of the
individual sub-accounts which comprise the Account), and the results of
operations for each of the individual sub-accounts and the changes in their net
assets for each of the periods in the three year period then ended in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27, 2000
F-2
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Allocation to Sub-Accounts investing in the AIM Variable
Insurance Funds:
Capital Appreciation, 2,172 shares (cost $65,069) $ 77,291
Diversified Income, 5,466 shares (cost $61,481) 54,987
Government Securities, 6,005 shares (cost $66,963) 63,838
Growth, 5,002 shares (cost $144,657) 161,318
Growth and Income, 7,011 shares (cost $177,124) 221,475
International Equity, 8,072 shares (cost $195,053) 236,422
Global Utilities, 797 shares (cost $14,680) 18,168
Value, 8,231 shares (cost $231,934) 275,725
Allocation to Sub-Accounts investing in the American Century
Variable Portfolios, Inc.:
American Century VP Balanced, 12,048 shares (cost $92,960) 93,853
American Century VP International, 16,861 shares (cost
$138,711) 210,757
Allocation to Sub-Accounts investing in the Dreyfus Variable
Investment Fund:
VIF Growth and Income, 10,980 shares (cost $240,371) 279,783
VIF Money Market, 669,239 shares (cost $669,239) 669,239
VIF Small Company Stock, 4,351 shares (cost $65,691) 72,621
Allocation to Sub-Account investing in the Dreyfus Socially
Responsible Growth Fund, Inc., 735 shares (cost $26,592) 28,733
Allocation to Sub-Account investing in the Dreyfus Stock
Index Fund, 5,108 shares (cost $184,340) 196,397
Allocation to Sub-Accounts investing in the Fidelity
Variable Insurance Products Fund:
VIP Equity-Income, 3,737 shares (cost $90,793) 96,084
VIP Growth, 6,067 shares (cost $263,864) 333,234
VIP High Income, 14,405 shares (cost $166,811) 162,925
Allocation to Sub-Account investing in the Fidelity Variable
Insurance Products Fund II:
VIP II Contrafund, 14,886 shares (cost $351,956) $ 433,926
Allocation to Sub-Accounts investing in the MFS Variable
Insurance Trust:
MFS Emerging Growth Series, 14,892 shares (cost $386,910) 565,018
MFS Limited Maturity Series, 6,289 shares (cost $63,816) 61,696
----------
Total Assets 4,313,490
LIABILITIES
Payable to Glenbrook Life and Annuity Company:
Accrued contract maintenance charges 1,019
----------
Net Assets $4,312,471
==========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM Variable Insurance Funds Sub-Accounts
---------------------------------------------------------------
Capital Government
Appreciation Diversfied Income Securities
------------------- ------------------- -------------------
1999 1998 (a) 1999 1998 (a) 1999 1998 (a)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,614 $ 475 $ 3,455 $ 2,906 $ 2,345 $ 53
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (150) (22) (432) (119) (417) (46)
------- ------ ------- ------- ------- -------
Net investment income (loss) 1,464 453 3,023 2,787 1,928 7
------- ------ ------- ------- ------- -------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 17,269 1,836 6,567 539 1,089 46,149
Cost of investments sold 15,743 2,682 7,124 563 1,051 44,965
------- ------ ------- ------- ------- -------
Net realized gains (losses) 1,526 (846) (557) (24) 38 1,184
------- ------ ------- ------- ------- -------
Change in unrealized gains (losses) 9,566 2,656 (3,815) (2,679) (3,190) 65
------- ------ ------- ------- ------- -------
Net gains (losses) on investments 11,092 1,810 (4,372) (2,703) (3,152) 1,249
------- ------ ------- ------- ------- -------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $12,556 $2,263 $(1,349) $ 84 $(1,224) $ 1,256
======= ====== ======= ======= ======= =======
</TABLE>
(a) For the Period Beginning July 23, 1998 and Ended December 31, 1998
See notes to financial statements.
F-4
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM Variable Insurance Funds Sub-Accounts
-----------------------------------------------------------------
Growth Growth and Income International Equity
------------------- ------------------- ---------------------
1999 1998 (a) 1999 1998 (a) 1999 1998 (a)
-------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 5,727 $ - $ 1,865 $ 824 $ 6,242 $ 137
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (205) - (888) (89) (432) (21)
------- ------ ------- ------- ------- ------
Net investment income (loss) 5,522 - 977 735 5,810 116
------- ------ ------- ------- ------- ------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 1,894 - 31,082 1,159 11,607 1,549
Cost of investments sold 1,864 - 25,574 2,747 10,357 1,662
------- ------ ------- ------- ------- ------
Net realized gains (losses) 30 - 5,508 (1,588) 1,250 (113)
------- ------ ------- ------- ------- ------
Change in unrealized gains (losses) 16,661 - 35,218 9,133 40,259 1,110
------- ------ ------- ------- ------- ------
Net gains (losses) on investments 16,691 - 40,726 7,545 41,509 997
------- ------ ------- ------- ------- ------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $22,213 $ - $41,703 $ 8,280 $47,319 $1,113
======= ====== ======= ======= ======= ======
</TABLE>
(a) For the Period Beginning July 23, 1998 and Ended December 31, 1998
See notes to financial statements.
F-5
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM Variable Insurance Funds Sub-Accounts
-----------------------------------------
Global Utilities Value
------------------- -------------------
1999 1998 (a) 1999 1998 (a)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 297 $ - $ 4,571 $ 3,133
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (40) - (1,105) (96)
------ ------ ------- -------
Net investment income (loss) 257 - 3,466 3,037
------ ------ ------- -------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 744 - 30,299 12,085
Cost of investments sold 621 - 28,904 3,054
------ ------ ------- -------
Net realized gains (losses) 123 - 1,395 9,031
------ ------ ------- -------
Change in unrealized gains (losses) 3,488 - 44,176 (385)
------ ------ ------- -------
Net gains (losses) on investments 3,611 - 45,571 8,646
------ ------ ------- -------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $3,868 $ - $49,037 $11,683
====== ====== ======= =======
</TABLE>
(a) For the Period Beginning July 23, 1998 and Ended December 31, 1998
See notes to financial statements.
F-6
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
American Century Variable Portfolios, Inc. Sub-Accounts
---------------------------------------------------------------
American Century VP
American Century VP Balanced International
------------------------------ ------------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 9,413 $ 149 $ - $ - $ 611 $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (592) (211) (1) (871) (137) -
------- ------- ---- ------- ------ ------
Net investment income (loss) 8,821 (62) (1) (871) 474 -
------- ------- ---- ------- ------ ------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 1,547 50,170 1 13,978 2,116 -
Cost of investments sold 1,606 50,835 1 12,621 3,626 -
------- ------- ---- ------- ------ ------
Net realized gains (losses) (59) (665) - 1,357 (1,510) -
------- ------- ---- ------- ------ ------
Change in unrealized gains (losses) (2,432) 3,202 122 68,906 3,140 -
------- ------- ---- ------- ------ ------
Net gains (losses) on investments (2,491) 2,537 122 70,263 1,630 -
------- ------- ---- ------- ------ ------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6,330 $ 2,475 $121 $69,392 $2,104 $ -
======= ======= ==== ======= ====== ======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-7
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dreyfus Variable Investment Fund Sub-Accounts
-----------------------------------------------------------
VIF Growth and Income VIF Money Market
--------------------------- -----------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
------- ------ -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $12,620 $1,606 $ - $12,649 $ 18,933 $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (2,105) (553) (1) (2,289) (1,563) -
------- ------ ------ ------- -------- ------
Net investment income (loss) 10,515 1,053 (1) 10,360 17,370 -
------- ------ ------ ------- -------- ------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 15,344 49,644 1 19,883 383,015 -
Cost of investments sold 11,796 52,675 1 19,883 383,015 -
------- ------ ------ ------- -------- ------
Net realized gains (losses) 3,548 (3,031) - - - -
------- ------ ------ ------- -------- ------
Change in unrealized gains (losses) 27,379 11,616 418 - - -
------- ------ ------ ------- -------- ------
Net gains (losses) on investments 30,927 8,585 418 - - -
------- ------ ------ ------- -------- ------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $41,442 $9,638 $ 417 $10,360 $ 17,370 $ -
======= ====== ====== ======= ======== ======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-8
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dreyfus Variable Investment Dreyfus Socially Responsible
Fund Sub-Accounts Growth Fund, Inc. Sub-Account
---------------------------- -------------------------------
Dreyfus Socially Responsible
VIF Small Company Stock Growth Fund, Inc.
---------------------------- -------------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ 57 $ - $ 960 $ 187 $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (426) (107) - (68) (2) -
------- ------- ------ ------ ----- ------
Net investment income (loss) (426) (50) - 892 185 -
------- ------- ------ ------ ----- ------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 3,631 1,023 - 543 2 -
Cost of investments sold 4,921 1,064 - 164 2 -
------- ------- ------ ------ ----- ------
Net realized gains (losses) (1,290) (41) - 379 - -
------- ------- ------ ------ ----- ------
Change in unrealized gains (losses) 8,468 (1,538) - 1,898 (130) -
------- ------- ------ ------ ----- ------
Net gains (losses) on investments 7,178 (1,579) - 2,277 (130) -
------- ------- ------ ------ ----- ------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6,752 $(1,629) $ - $3,169 $ 55 $ -
======= ======= ====== ====== ===== ======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-9
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity Variable
Dreyfus Stock Index Insurance Products Fund
Fund Sub-Account Sub-Accounts
-------------------- -----------------------
Dreyfus Stock
Index Fund VIP Equity-Income
-------------------- -----------------------
1999 1998 (a) 1999 1998 (a)
-------- --------- --------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,574 $ - $2,321 $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (337) (9) (536) (89)
------- ------ ------ -------
Net investment income (loss) 1,237 (9) 1,785 (89)
------- ------ ------ -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 8,496 9,660 2,429 10,305
Cost of investments sold 8,087 9,877 1,314 9,686
------- ------ ------ -------
Net realized gains (losses) 409 (217) 1,115 619
------- ------ ------ -------
Change in unrealized gains (losses) 12,060 (3) 1,098 4,194
------- ------ ------ -------
Net gains (losses) on investments 12,469 (220) 2,213 4,813
------- ------ ------ -------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $13,706 $ (229) $3,998 $ 4,724
======= ====== ====== =======
</TABLE>
(a) For the Period Beginning July 23, 1998 and Ended December 31, 1998
See notes to financial statements.
F-10
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity Variable Insurance Products Fund Sub-Accounts
-----------------------------------------------------------
VIP Growth VIP High Income
---------------------------- ----------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $15,326 $ 2 $ - $11,022 $ 1 $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (1,716) (236) (1) (1,329) (611) -
------- ------- ---- ------- ------- ------
Net investment income (loss) 13,610 (234) (1) 9,693 (610) -
------- ------- ---- ------- ------- ------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 20,409 51,708 1 31,076 13,115 -
Cost of investments sold 18,389 52,151 1 33,322 13,714 -
------- ------- ---- ------- ------- ------
Net realized gains (losses) 2,020 (443) - (2,246) (599) -
------- ------- ---- ------- ------- ------
Change in unrealized gains (losses) 58,040 11,013 317 1,625 (5,511) -
------- ------- ---- ------- ------- ------
Net gains (losses) on investments 60,060 10,570 317 (621) (6,110) -
------- ------- ---- ------- ------- ------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $73,670 $10,336 $316 $ 9,072 $(6,720) $ -
======= ======= ==== ======= ======= ======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-11
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity Variable Insurance MFS Variable Insurance
Products Fund II Sub-Account Trust Sub-Accounts
---------------------------- -----------------------------
VIP II Contrafund MFS Emerging Growth Series
---------------------------- -----------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 7,319 $ 174 $ - $ - $ 181 $ -
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (2,180) (381) - (1,316) (147) -
------- ------- ------ -------- ------- ------
Net investment income (loss) 5,139 (207) - (1,316) 34 -
------- ------- ------ -------- ------- ------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 27,304 6,364 - 14,592 3,421 -
Cost of investments sold 23,848 6,966 - 11,167 4,113 -
------- ------- ------ -------- ------- ------
Net realized gains (losses) 3,456 (602) - 3,425 (692) -
------- ------- ------ -------- ------- ------
Change in unrealized gains (losses) 62,113 19,856 - 167,660 10,447 -
------- ------- ------ -------- ------- ------
Net gains (losses) on investments 65,569 19,254 - 171,085 9,755 -
------- ------- ------ -------- ------- ------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $70,708 $19,047 $ - $169,769 $ 9,789 $ -
======= ======= ====== ======== ======= ======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-12
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MFS Variable Insurance
Trust Sub-Accounts
----------------------------
MFS Limited Maturity Series
----------------------------
1999 1998 1997 (b)
------- ------- --------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 3,446 $ 1,545 $3,220
Charges from Glenbrook Life and Annuity Company:
Mortality and expense risk (561) (214) (1)
------- ------- ------
Net investment income (loss) 2,885 1,331 3,219
------- ------- ------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 26,137 50,220 1
Cost of investments sold 25,713 57,662 1
------- ------- ------
Net realized gains (losses) 424 (7,442) -
------- ------- ------
Change in unrealized gains (losses) (2,168) 49 -
------- ------- ------
Net gains (losses) on investments (1,744) (7,393) -
------- ------- ------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,141 $(6,062) $3,219
======= ======= ======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-13
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM Variable Insurance Funds Sub-Accounts
------------------------------------------------------------
Capital Government
Appreciation Diversified Income Securities
------------------ ------------------ ------------------
1999 1998 (a) 1999 1998 (a) 1999 1998 (a)
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,464 $ 453 $ 3,023 $ 2,787 $ 1,928 $ 7
Net realized gains (losses) 1,526 (846) (557) (24) 38 1,184
Change in unrealized gains (losses) 9,566 2,656 (3,815) (2,679) (3,190) 65
------- ------- ------- ------- ------- ------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 12,556 2,263 (1,349) 84 (1,224) 1,256
------- ------- ------- ------- ------- ------
FROM CAPITAL TRANSACTIONS
Deposits - - - - - -
Benefit payments - - - - - -
Payments on termination - - - - - -
Contract administration charges (399) (40) (379) (107) (851) (11)
Transfers among the sub-accounts
and with the Fixed Account - net 47,327 15,566 11,800 44,924 63,812 842
------- ------- ------- ------- ------- ------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 46,928 15,526 11,421 44,817 62,961 831
------- ------- ------- ------- ------- ------
INCREASE (DECREASE) IN NET ASSETS 59,484 17,789 10,072 44,901 61,737 2,087
NET ASSETS AT BEGINNING OF PERIOD 17,789 - 44,901 - 2,087 -
------- ------- ------- ------- ------- ------
NET ASSETS AT END OF PERIOD $77,273 $17,789 $54,973 $44,901 $63,824 $2,087
======= ======= ======= ======= ======= ======
</TABLE>
(a) For the Period Beginning July 23, 1998 and Ended December 31, 1998
See notes to financial statements.
F-14
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM Variable Insurance Funds Sub-Accounts
-----------------------------------------------------------------
Growth Growth and Income International Equity
------------------- ------------------- ---------------------
1999 1998 (a) 1999 1998 (a) 1999 1998 (a)
-------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 5,522 $ - $ 977 $ 735 $ 5,810 $ 116
Net realized gains (losses) 30 - 5,508 (1,588) 1,250 (113)
Change in unrealized gains (losses) 16,661 - 35,218 9,133 40,259 1,110
-------- ------ -------- ------- -------- -------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 22,213 - 41,703 8,280 47,319 1,113
-------- ------ -------- ------- -------- -------
FROM CAPITAL TRANSACTIONS
Deposits - - - - - -
Benefit payments - - - - - -
Payments on termination - - - - - -
Contract administration charges (284) - (1,540) (185) (796) (50)
Transfers among the sub-accounts
and with the Fixed Account - net 139,351 - 120,070 53,095 172,553 16,227
-------- ------ -------- ------- -------- -------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 139,067 - 118,530 52,910 171,757 16,177
-------- ------ -------- ------- -------- -------
INCREASE (DECREASE) IN NET ASSETS 161,280 - 160,233 61,190 219,076 17,290
NET ASSETS AT BEGINNING OF PERIOD - - 61,190 - 17,290 -
-------- ------ -------- ------- -------- -------
NET ASSETS AT END OF PERIOD $161,280 $ - $221,423 $61,190 $236,366 $17,290
======== ====== ======== ======= ======== =======
</TABLE>
(a) For the Period Beginning July 23, 1998 and Ended December 31, 1998
See notes to financial statements.
F-15
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AIM Variable Insurance Funds Sub-Accounts
--------------------------------------------
Global Utilities Value
-------------------- ---------------------
1999 1998 (a) 1999 1998 (a)
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 257 $ - $ 3,466 $ 3,037
Net realized gains (losses) 123 - 1,395 9,031
Change in unrealized gains (losses) 3,488 - 44,176 (385)
------- ------ -------- -------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 3,868 - 49,037 11,683
------- ------ -------- -------
FROM CAPITAL TRANSACTIONS
Deposits - - - -
Benefit payments - - - -
Payments on termination - - - -
Contract administration charges (45) - (1,768) (198)
Transfers among the sub-accounts
and with the Fixed Account - net 14,341 - 159,561 57,345
------- ------ -------- -------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 14,296 - 157,793 57,147
------- ------ -------- -------
INCREASE (DECREASE) IN NET ASSETS 18,164 - 206,830 68,830
NET ASSETS AT BEGINNING OF PERIOD - - 68,830 -
------- ------ -------- -------
NET ASSETS AT END OF PERIOD $18,164 $ - $275,660 $68,830
======= ====== ======== =======
</TABLE>
(a) For the Period Beginning July 23, 1998 and Ended December 31, 1998
See notes to financial statements.
F-16
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
American Century Variable Portfolios, Inc. Sub-Accounts
-------------------------------------------------------------
American Century VP
American Century VP Balanced International
----------------------------- -----------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 8,821 $ (62) $ (1) $ (871) $ 474 $ -
Net realized gains (losses) (59) (665) - 1,357 (1,510) -
Change in unrealized gains (losses) (2,432) 3,202 122 68,906 3,140 -
------- -------- ------- -------- ------- -------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 6,330 2,475 121 69,392 2,104 -
------- -------- ------- -------- ------- -------
FROM CAPITAL TRANSACTIONS
Deposits - (50,288) - - - -
Benefit payments - - - - - -
Payments on termination - - - (395) - -
Contract administration charges (1,197) (383) (69) (1,847) (327) -
Transfers among the sub-accounts
and with the Fixed Account - net 41,969 44,444 50,428 86,364 55,416 -
------- -------- ------- -------- ------- -------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 40,772 (6,227) 50,359 84,122 55,089 -
------- -------- ------- -------- ------- -------
INCREASE (DECREASE) IN NET ASSETS 47,102 (3,752) 50,480 153,514 57,193 -
NET ASSETS AT BEGINNING OF PERIOD 46,728 50,480 - 57,193 - -
------- -------- ------- -------- ------- -------
NET ASSETS AT END OF PERIOD $93,830 $ 46,728 $50,480 $210,707 $57,193 $ -
======= ======== ======= ======== ======= =======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-17
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dreyfus Variable Investment Fund Sub-Accounts
--------------------------------------------------------------------
VIF Growth and Income VIF Money Market
------------------------------ -----------------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
-------- -------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 10,515 $ 1,053 $ (1) $ 10,360 $ 17,370 $ -
Net realized gains (losses) 3,548 (3,031) - - - -
Change in unrealized gains (losses) 27,379 11,616 418 - - -
-------- -------- ------- ----------- ---------- -------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 41,442 9,638 417 10,360 17,370 -
-------- -------- ------- ----------- ---------- -------
FROM CAPITAL TRANSACTIONS
Deposits - (50,411) - 2,092,222 1,203,422 -
Benefit payments - - - - - -
Payments on termination - - - - - -
Contract administration charges (3,549) (1,043) (69) (3,585) (3,492) (103)
Transfers among the sub-accounts
and with the Fixed Account - net 62,137 170,468 50,686 (1,739,876) (982,780) 75,543
-------- -------- ------- ----------- ---------- -------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 58,588 119,014 50,617 348,761 217,150 75,440
-------- -------- ------- ----------- ---------- -------
INCREASE (DECREASE) IN NET ASSETS 100,030 128,652 51,034 359,121 234,520 75,440
NET ASSETS AT BEGINNING OF PERIOD 179,686 51,034 - 309,960 75,440 -
-------- -------- ------- ----------- ---------- -------
NET ASSETS AT END OF PERIOD $279,716 $179,686 $51,034 $ 669,081 $ 309,960 $75,440
======== ======== ======= =========== ========== =======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-18
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dreyfus Variable Investment Dreyfus Socially Responsible
Fund Sub-Accounts Growth Fund, Inc. Sub-Account
---------------------------- ------------------------------
Dreyfus Socially Responsible
VIF Small Company Stock Growth Fund, Inc.
---------------------------- ------------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
------- ------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (426) $ (50) $ - $ 892 $ 185 $ -
Net realized gains (losses) (1,290) (41) - 379 - -
Change in unrealized gains (losses) 8,468 (1,538) - 1,898 (130) -
------- ------- ------ ------- ------ -------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 6,752 (1,629) - 3,169 55 -
------- ------- ------ ------- ------ -------
FROM CAPITAL TRANSACTIONS
Deposits - - - - - -
Benefit payments - - - - - -
Payments on termination (337) - - - - -
Contract administration charges (868) (199) - (135) (8) -
Transfers among the sub-accounts
and with the Fixed Account - net 40,982 27,903 - 20,935 4,710 -
------- ------- ------ ------- ------ -------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 39,777 27,704 - 20,800 4,702 -
------- ------- ------ ------- ------ -------
INCREASE (DECREASE) IN NET ASSETS 46,529 26,075 - 23,969 4,757 -
NET ASSETS AT BEGINNING OF PERIOD 26,075 - - 4,757 - -
------- ------- ------ ------- ------ -------
NET ASSETS AT END OF PERIOD $72,604 $26,075 $ - $28,726 $4,757 $ -
======= ======= ====== ======= ====== =======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-19
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity Variable
Dreyfus Stock Index Insurance Products Fund
Fund Sub-Account Sub-Accounts
------------------- ------------------------
Dreyfus Stock
Index Fund VIP Equity-Income
------------------- ------------------------
1999 1998 (a) 1999 1998 (a)
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,237 $ (9) $ 1,785 $ (89)
Net realized gains (losses) 409 (217) 1,115 619
Change in unrealized gains (losses) 12,060 (3) 1,098 4,194
-------- ----- ------- -------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 13,706 (229) 3,998 4,724
-------- ----- ------- -------
FROM CAPITAL TRANSACTIONS
Deposits - - - -
Benefit payments - - - -
Payments on termination - - - -
Contract administration charges (631) - (963) (174)
Transfers among the sub-accounts
and with the Fixed Account - net 183,275 226 44,552 43,924
-------- ----- ------- -------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 182,644 226 43,589 43,750
-------- ----- ------- -------
INCREASE (DECREASE) IN NET ASSETS 196,350 (3) 47,587 48,474
NET ASSETS AT BEGINNING OF PERIOD (3) - 48,474 -
-------- ----- ------- -------
NET ASSETS AT END OF PERIOD $196,347 $ (3) $96,061 $48,474
======== ===== ======= =======
</TABLE>
(a) For the Period Beginning July 23, 1998 and Ended December 31, 1998
See notes to financial statements.
F-20
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity Variable Insurance Products Fund Sub-Accounts
------------------------------------------------------------
VIP Growth VIP High Income
----------------------------- -----------------------------
1997 1997
1999 1998 (b) 1999 1998 (b)
-------- ---------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 13,610 $ (234) $ (1) $ 9,693 $ (610) $ -
Net realized gains (losses) 2,020 (443) - (2,246) (599) -
Change in unrealized gains (losses) 58,040 11,013 317 1,625 (5,511) -
-------- -------- ------- -------- -------- --------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 73,670 10,336 316 9,072 (6,720) -
-------- -------- ------- -------- -------- --------
FROM CAPITAL TRANSACTIONS
Deposits - (50,886) - - - -
Benefit payments - - - - - -
Payments on termination (370) - - - - -
Contract administration charges (3,189) (481) (69) (2,218) (1,190) -
Transfers among the sub-accounts
and with the Fixed Account - net 163,745 89,147 50,937 41,301 122,642 -
-------- -------- ------- -------- -------- --------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 160,186 37,780 50,868 39,083 121,452 -
-------- -------- ------- -------- -------- --------
INCREASE (DECREASE) IN NET ASSETS 233,856 48,116 51,184 48,155 114,732 -
NET ASSETS AT BEGINNING OF PERIOD 99,300 51,184 - 114,732 - -
-------- -------- ------- -------- -------- --------
NET ASSETS AT END OF PERIOD $333,156 $ 99,300 $51,184 $162,887 $114,732 $ -
======== ======== ======= ======== ======== ========
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-21
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fidelity Variable Insurance MFS Variable Insurance
Products Fund II Sub-Account Trust Sub-Accounts
------------------------------ -----------------------------
VIP II Contrafund MFS Emerging Growth Series
------------------------------ -----------------------------
1999 1998 1997 (b) 1999 1998 1997 (b)
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 5,139 $ (207) $ - $ (1,316) $ 34 $ -
Net realized gains (losses) 3,456 (602) - 3,425 (692) -
Change in unrealized gains (losses) 62,113 19,856 - 167,660 10,447 -
-------- -------- ------ -------- ------- ------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 70,708 19,047 - 169,769 9,789 -
-------- -------- ------ -------- ------- ------
FROM CAPITAL TRANSACTIONS
Deposits - - - - - -
Benefit payments - - - - - -
Payments on termination (352) - - (390) - -
Contract administration charges (3,900) (782) - (2,321) (274) -
Transfers among the sub-accounts
and with the Fixed Account - net 221,086 128,016 - 345,016 43,295 -
-------- -------- ------ -------- ------- ------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 216,834 127,234 - 342,305 43,021 -
-------- -------- ------ -------- ------- ------
INCREASE (DECREASE) IN NET ASSETS 287,542 146,281 - 512,074 52,810 -
NET ASSETS AT BEGINNING OF PERIOD 146,281 - - 52,810 - -
-------- -------- ------ -------- ------- ------
NET ASSETS AT END OF PERIOD $433,823 $146,281 $ - $564,884 $52,810 $ -
======== ======== ====== ======== ======= ======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-22
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MFS Variable Insurance
Trust Sub-Accounts
-----------------------------
MFS Limited Maturity Series
-----------------------------
1999 1998 1997 (b)
------- -------- --------
<S> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 2,885 $ 1,331 $ 3,219
Net realized gains (losses) 424 (7,442) -
Change in unrealized gains (losses) (2,168) 49 -
------- -------- -------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 1,141 (6,062) 3,219
------- -------- -------
FROM CAPITAL TRANSACTIONS
Deposits - (50,119) -
Benefit payments - - -
Payments on termination - - -
Contract administration charges (1,326) (399) (69)
Transfers among the sub-accounts
and with the Fixed Account - net 1,880 60,482 52,935
------- -------- -------
CHANGE IN NET ASSETS RESULTING
FROM CAPITAL TRANSACTIONS 554 9,964 52,866
------- -------- -------
INCREASE (DECREASE) IN NET ASSETS 1,695 3,902 56,085
NET ASSETS AT BEGINNING OF PERIOD 59,987 56,085 -
------- -------- -------
NET ASSETS AT END OF PERIOD $61,682 $ 59,987 $56,085
======= ======== =======
</TABLE>
(b) For the Period Beginning December 29, 1997 and Ended December 31, 1997
See notes to financial statements.
F-23
<PAGE>
GLENBROOK LIFE VARIABLE LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
Glenbrook Life Variable Life Separate Account A (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of Glenbrook
Life and Annuity Company ("Glenbrook Life"). The assets of the Account are
legally segregated from those of Glenbrook Life. Glenbrook Life is wholly
owned by Allstate Life Insurance Company, a wholly owned subsidiary of
Allstate Insurance Company, which is wholly owned by The Allstate
Corporation.
Glenbrook Life issues the Glenbrook Provider Variable Life contract, the
deposits of which are invested at the direction of the contractholders in
the sub-accounts that comprise the Account. Absent any contract provisions
wherein Glenbrook Life contractually guarantees either a minimum return or
account value to the beneficiaries of the contractholders in the form of a
death benefit, the contractholders bear the investment risk that the
sub-accounts may not meet their stated objectives. The sub-accounts invest
in the following underlying mutual fund portfolios (collectively the
"Funds"):
AIM VARIABLE INSURANCE FUNDS
Capital Appreciation
Diversified Income
Government Securities
Growth
Growth and Income
International Equity
Global Utilities
Value
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
American Century VP Balanced
American Century VP International
DREYFUS VARIABLE INVESTMENT FUND
VIF Growth and Income
VIF Money Market
VIF Small Company Stock
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS STOCK INDEX FUND
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Equity-Income
VIP Growth
VIP High Income
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Contrafund
MFS VARIABLE INSURANCE TRUST
MFS Emerging Growth Series
MFS Limited Maturity Series
Glenbrook Life provides insurance and administrative services to the
policyholders for a fee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices at December 31, 1999.
INVESTMENT INCOME - Investment income consists of dividends declared by the
Funds and is recognized on the ex-dividend date.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included in the tax return of Glenbrook Life.
Glenbrook Life is taxed as a life insurance company under the Code. No
federal income taxes are allocable to the Account as the Account did not
generate taxable income.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
F-24
<PAGE>
3. EXPENSES
MONTHLY DEDUCTIONS - Glenbrook Life charges each contractholder monthly for
cost of insurance, tax expense and administrative expense. The cost of
insurance is based upon several variables, including the contractholder's
death benefit and the Account value. Tax expense is charged at an annual
rate equal to .40% of the Account value for the first ten contract years.
Glenbrook Life deducts a monthly administration fee equal to .25% per annum
of Account value.
MORTALITY AND EXPENSE RISK CHARGE - Glenbrook Life assumes mortality and
expense risks related to the operations of the Account and deducts charges
daily at a rate equal to .90% per annum of the daily net assets of the
Account. The mortality and expense risk charge covers insurance benefits
available with the contract and certain expenses of the contract. It also
covers the risk that the current charges will not be sufficient in the
future to cover the cost of administering the contract.
ANNUAL MAINTENANCE FEE - Glenbrook Life deducts an annual maintenance fee of
$35 on each contract anniversary. This charge will be waived on contracts
with an aggregate premium amount of $50,000.
F-25
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
UNIT ACTIVITY DURING 1999:
------------------------------------ ACCUMULATION
UNITS OUTSTANDING UNITS UNITS UNITS OUTSTANDING UNIT VALUE
DECEMBER 31, 1998 ISSUED REDEEMED DECEMBER 31, 1999 DECEMBER 31, 1999
----------------- ------- -------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in the AIM Variable Insurance
Funds Sub-Accounts:
Capital Appreciation 1,948 4,095 (947) 5,096 $15.16
Diversified Income 680 5,725 (652) 5,753 9.55
Government Securities 4,843 1,567 (83) 6,327 10.09
Growth - 11,026 (147) 10,879 14.82
Growth and Income 7,440 12,149 (4,312) 15,277 14.49
International Equity 2,795 15,726 (2,003) 16,518 14.31
Global Utilities - 1,374 (54) 1,320 13.76
Value 9,892 16,104 (6,330) 19,666 14.02
Investments in the American Century Variable
Portfolios Inc. Sub-Accounts:
American Century VP Balanced 3,990 3,456 (101) 7,345 12.77
American Century VP International 4,986 7,399 (1,087) 11,298 18.65
Investments in the Dreyfus Variable
Investment Fund Sub-Accounts:
VIF Growth and Income 15,705 6,105 (974) 20,836 13.42
VIF Money Market 14,798 47,226 (1,303) 60,721 11.02
VIF Small Company Stock 2,600 4,475 (470) 6,605 10.99
Investment in the Dreyfus Socially
Responsible Growth Fund, Inc. Sub-Account: 419 1,483 (10) 1,892 15.19
Investment in the Dreyfus Stock Index Fund
Sub-Account: - 15,920 (713) 15,207 12.91
Investments in the Fidelity Variable
Insurance Products Fund Sub-Accounts:
VIP Equity-Income 4,801 4,319 (90) 9,030 10.64
VIP Growth 6,832 11,253 (1,259) 16,826 19.80
VIP High Income 11,362 6,572 (2,885) 15,049 10.82
Investment in Fidelity Variable Insurance
Products Fund II Sub-Account:
VIP II Contrafund 10,692 16,876 (1,817) 25,751 16.85
Investments in the MFS Variable Insurance
Trust Sub-Accounts:
MFS Emerging Growth Series 3,815 20,286 (801) 23,300 24.24
MFS Limited Maturity Series 11,505 2,222 (8,031) 5,696 10.83
</TABLE>
Units relating to accrued contract maintenance charges are included in units
redeemed.
F-26
