The Putnam Allstate Advisor
3100 Sanders Road
Northbrook, Illinois 60062
Telephone Number: 1-800-390-1277 Prospectus dated October 2, 2000
Allstate Life Insurance Company ("Allstate") is offering the following
individual and group flexible premium deferred variable annuity contracts (each,
a "Contract"):
o Putnam Allstate Advisor
o Putnam Allstate Advisor Apex (formerly known as Putnam Allstate
Advisor - A)
This prospectus contains information about each Contract that you
should know before investing. Please keep it for future reference. Contracts may
not be available in all states or through your sales representative. Please
check with your sales representative for details.
Each Contract currently offers several investment alternatives
("investment alternatives"). The investment alternatives include up to 3 fixed
account options ("Fixed Account Options"), depending on the Contract, and
include 27 variable sub-accounts ("Variable Sub-Accounts") of the Allstate Life
Insurance Company Separate Account A ("Variable Account"). Each Variable
Sub-Account invests exclusively in the class IB shares of one of the following
mutual fund portfolios ("Funds") of Putnam Variable Trust:
<TABLE>
<CAPTION>
<S> <C> <C>
Putnam VT American Government Income Fund Putnam VT International New Opportunities Fund
Putnam VT Asia Pacific Growth Fund Putnam VT Investors Fund
Putnam VT Capital Appreciation Fund Putnam VT Money Market Fund
Putnam VT Diversified Income Fund Putnam VT New Opportunities Fund
Putnam VT The George Putnam Fund of Boston Putnam VT New Value Fund
Putnam VT Global Asset Allocation Fund Putnam VT OTC & Emerging Growth Fund
Putnam VT Global Growth Fund Putnam VT Research Fund
Putnam VT Growth and Income Fund Putnam VT Small Cap Value Fund
Putnam VT Growth Opportunities Fund Putnam VT Technology Fund
Putnam VT Health Sciences Fund Putnam VT Utilities Growth and Income Fund
Putnam VT High Yield Fund Putnam VT Vista Fund
Putnam VT Income Fund Putnam VT Voyager Fund
Putnam VT International Growth Fund Putnam VT Voyager Fund II
Putnam VT International Growth and Income Fund
</TABLE>
We (Allstate) have filed a Statement of Additional Information, dated
October 2, 2000, with the Securities and Exchange Commission ("SEC"). It
contains more information about each Contract and is incorporated herein by
reference, which means that it is legally a part of this prospectus. Its table
of contents appears on page 38 of this prospectus. For a free copy, please write
or call us at the address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
The Securities and Exchange Commission has not approved or
disapproved the securities described in this prospectus, nor
has it passed on the accuracy or the adequacy of this
prospectus. Any one 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.
1 PROSPECTUS
<PAGE>
Table of Contents
Page
Overview
Important Terms 3
The Contracts At a Glance 5
How the Contracts Work 8
Expense Table 9
Financial Information 13
Contract Features
The Contracts 14
Purchases 15
Contract Value 16
Investment Alternatives 17
The Variable Sub-Accounts 17
The Fixed Account 18
Transfers 18
Expenses 20
Access to Your Money 24
Income Payments 25
Death Benefits 30
Other Information
More Information 32
Taxes 34
Performance Information 37
Statement of Additional Information Table of Contents 38
Appendix A A-1
Appendix B B-1
Appendix C C-1
Appendix D D-1
2 PROSPECTUS
<PAGE>
Important Terms This prospectus uses a number of important terms that you may
not be familiar with. The index below identifies the page that describes each
term. The first use of each term in this prospectus appears in highlights.
Page(s)
Accumulation Phase 8
Accumulation Unit 16
Accumulation Unit Value 16
Allstate ("We") 1
Annuitant 14
Automatic Additions Program 15
Automatic Fund Rebalancing Program 20
Beneficiary 14
Cancellation Period 5
*Contract 1
Contract Anniversary 5
Contract Owner ("You") 8
Contract Value 16
Contract Year 7
Dollar Cost Averaging Program 18
Due Proof of Death 30
Enhanced Beneficiary Protection Option 30
Fixed Account Options 1
Free Withdrawal Amount 22
Funds 1
Guarantee Period 18
Income Base 28
Income Plan 25
Investment Alternatives 1
Issue Date 8
Maximum Anniversary Value 30
Payout Phase 8
Payout Start Date 25
Retirement Income Guarantee Rider 27
Right to Cancel 15
SEC 1
Settlement Value 31
Standard Fixed Account Option 18
Systematic Withdrawal Program 24
Valuation Date 15
Variable Account 1
Variable Sub-Account 1
* In certain states a Contract may be available only as a group Contract.
If you purchase a group Contract, we will issue you a certificate that
represents your ownership and that summarizes the provisions of the
group Contract. References to "Contract" in this prospectus include
certificates, unless the context requires otherwise. References to
"Contract" also include both Contracts listed on the cover page of this
prospectus, unless otherwise noted. However, we administer each
Contract separately.
3 PROSPECTUS
<PAGE>
Overview of Contracts The Contracts offer many of the same basic features and
benefits. They differ primarily with respect to the charges imposed, as follows:
o The Putnam Allstate Advisor Contract has a mortality and
expense risk charge of 1.25%, an annual contract maintenance
charge of $30, a withdrawal charge of up to 7% with a 7 year
withdrawal charge period, and an annual Free Withdrawal
Amount.
o The Putnam Allstate Advisor Apex Contract has a front-end
sales charge of up to 5.75% of purchase payments, a lower
mortality and expense risk charge (0.80%), no contract
maintenance charge, a lower withdrawal charge (0.50%) with a
shorter withdrawal charge period (1 year), but no Free
Withdrawal Amount.
Other differences between the Contracts relate to the available withdrawal
charge waivers. For a side-by-side comparison of these differences, please turn
to Appendix D of this prospectus.
4 PROSPECTUS
<PAGE>
The Contracts at a Glance
The following is a snapshot of the Contracts. Please
read the remainder of this prospectus for more information.
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Flexible Payments You can purchase each Contract with as little
as $1,000 ($500 for Qualified Contracts, which are Contracts
issued with a qualified plan). You can add to your Contract as
often and as much as you like, but each subsequent payment must
be at least $500 ($50 for automatic payments). We reserve the
right to accept a lesser initial purchase payment amount. We may
limit the amount of any additional purchase payment to a maximum
of $1,000,000. You must maintain a minimum account size of
$1,000.
Right to Cancel You may cancel your Contract within 20 dayS of receipt or any
longer period as your state may require ("Cancellation Period"). Upon
cancellation, we will return your purchase payments adjusted,to the
extent federal or state law permits, to reflect the investment
experience of any amounts allocated to the Variable Account.
Expenses Each Fund pays expenses that you will bear indirectly if you invest in a
Variable Sub-Account. You also will bear the following expenses:
Putnam Allstate Advisor Contracts
---------------------------------
o Annual mortality and expense risk charge equal to 1.25% of average daily
net assets
o Annual contract maintenance charge of $30 (waived in certain cases)
o Withdrawal charges ranging from 0% to 7% of purchase payments withdrawn
(with certain exceptions)
Putnam Allstate Advisor Apex Contracts
--------------------------------------
o Annual mortality and expense risk charge equal to 0.80% of average daily
net assets
o Front end sales charge ranging from 5.75% to 0.50% of the amount of
purchase payments
o Withdrawal charge equal to 0.50% of purchase payments withdrawn during the
first Contract Year (currently only assessed on Contracts that have total
purchase payments of at least $1,000,000)
All Contracts
-------------
o An additional 0.15% applies to the annual mortality and expense risk charge
if you select the Enhanced Beneficiary Protection Option
o If you select a Retirement Income Guarantee Rider you would pay an
additional fee at the annual rate of 0.05% or 0.30% (depending on the option
you select) of the Income Base in effect on a Contract anniversary ("Contract
Anniversary")
o Transfer fee equal to 0.50% of the amount transferred after 12th transfer
in any Contract year
o State premium tax (if your state imposes one)
5 PROSPECTUS
<PAGE>
Investment Alternatives Each Contract offers several investment alternatives including:
o 3 Fixed Account Options that credit interest at rates we guarantee, and
o 27 Variable Sub-Accounts investing in Funds offering professional money
management by Putnam Investment Management, Inc.
To find out current rates being paid on the Fixed Account Option(s), or to
find out how the Variable Sub-Accounts have performed, please call us at
1-800-390-1277.
Special Services For your convenience, we offer these special services:
o Automatic Fund Rebalancing Program
o Automatic Additions Program
o Dollar Cost Averaging Program
o Systematic Withdrawal Program
Income Payments You can choose fixed income payments, variable
income payments, or a combination of the two. You can receive
your income payments in one of the following ways:
o life income with guaranteed payments
o a joint and survivor life income with guaranteed payments
o guaranteed payments for a specified period
o combination life income and guaranteed
payments for a specified period
o combination joint and survivor life income
and guaranteed payments for a specified period
o life income with cash refund
o joint life income with cash refund
o life income with installment refund
o joint life income with installment refund Allstate
also offers two Retirement Income Guarantee Riders
that allow you to lock in a dollar amount that you can
apply towards fixed income payments.
Death Benefits If you die before income payments begin, we will pay the
death benefit described in the Contract. We also offer an
Enhanced Beneficiary Protection Option.
6 PROSPECTUS
<PAGE>
Transfers Before the Payout Start Date, you may transfer
your Contract Value among the investment alternatives, with
certain restrictions. The minimum amount you may transfer is
$100 or the amount remaining in the investment alternative,
if less.
A charge may apply after the 12th transfer in each Contract
year ("Contract Year"), which we measure from the date we
issue your Contract or a Contract Anniversary.
Withdrawals You may withdraw some or all of your Contract
Value at anytime during the Accumulation Phase and during
the Payout Phase in certain cases. In general, you must
withdraw at least $50 at a time ($1,000 during the Payout
Phase). A 10% federal tax penalty may apply if you withdraw
before you are 59 1'2 years old. A withdrawal charge also
may apply.
</TABLE>
7 PROSPECTUS
<PAGE>
How the Contracts Work
Each Contract basically works in two ways.
First, each Contract can help you (we assume you are the "Contract Owner") save
for retirement because you can invest in up to 30 investment alternatives and
pay no federal income taxes on any earnings until you withdraw them. You do this
during what we call the "Accumulation Phase" of the Contract. The Accumulation
Phase begins on the date we issue your Contract (we call that date the "Issue
Date") and continues until the Payout Start Date, which is the date we apply
your money to provide income payments. During the Accumulation Phase, you may
allocate your purchase payments to any combination of the Variable Sub-Accounts
and/or Fixed Account Options. If you invest in a Fixed Account Option, you will
earn a fixed rate of interest that we declare periodically. If you invest in any
of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Funds.
Second, each Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "Income Plans")
described on page 25. You receive income payments during what we call the
"Payout Phase" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Funds. The amount of money you accumulate under
your Contract during the Accumulation Phase and apply to an Income Plan will
determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT PHASE
DATE DATE
You buy You save You start receiving income You can receive Or you can receive
a Contract for payments or receive a income payments income payments for
retirement lump sum payment for a set period life
</TABLE>
Other income payment options are also available (See "Income Payments")
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if there is none, the
Beneficiary will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner or, if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-390-1277 if you have any question about how the
Contracts work.
8 PROSPECTUS
<PAGE>
Expense Table The table below lists the expenses that you will bear directly or
indirectly when you buy a Contract. The table and the examples that follow do
not reflect premium taxes that may be imposed by the state where you reside. For
more information about Variable Account expenses, see "Expenses," below. For
more information about Fund expenses, please refer to the accompanying
prospectus for the Funds.
Contract Owner Transaction Expenses
Sales Charge Imposed on Purchases (as a percentage of purchase payments)
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Contract:
Putnam Allstate Advisor None
Putnam Allstate Advisor Apex: Purchase Payment Amount Sales Charge Percentage
Less than $50,000 5.75%
At least $50,000 but less than $100,000 4.50%
At least $100,000 but less than $250,000 3.50%
At least $500,000 but less than $1,000,000 2.00%
At least $1,000,000 0.50%
</TABLE>
Withdrawal Charge (as a percentage of purchase payments withdrawn)*
Contract: Number of Complete Years Since We Received Payment
Being Withdrawn/Applicable Charge:
Putnam Allstate Advisor 0 1 2 3 4 5 6 7+
7% 7% 6% 5% 4% 3% 2% 0%
Putnam Allstate Advisor Apex 0 1+
0.5%** 0%
Annual Contract Maintenance Charge
Contract:
Putnam Allstate Advisor $30***
Putnam Allstate Advisor Apex None
Transfer Fee 0.50% of the amount transferred****
* Under Putnam Allstate Advisor Contracts, each Contract Year, you may
withdraw up to the Free Withdrawal Amount offered under your Contract
without incurring a withdrawal charge. See "Withdrawal Charges," for
more information.
** Currently assessed on Contracts that have total purchase payments
of at least $1,000,000.
*** Waived in certain cases. See "Expenses."
**** Applies solely to the 13th and subsequent transfers within a Contract
Year, excluding transfers due to dollar cost averaging and automatic
fund rebalancing.
Variable Account Annual Expenses (as a percentage of average daily net asset
value deducted from each Variable Sub-Account)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Contract Mortality and Administrative Charge Total Variable
Expense Risk Charge* Account Annual
Expenses
Putnam Allstate Advisor 1.25% 0.00% 1.25%
Putnam Allstate Advisor Apex 0.80% 0.00% 0.80%
</TABLE>
* If you select the Enhanced Beneficiary Protection Option, the mortality
and expense risk charge will be an additional 0.15%.
Retirement Income Guarantee Rider Expenses If you select a Retirement Income
Guarantee Rider, you would pay an additional fee at the annual rate of 0.05% or
0.30% (depending on the Option you select) of the Income Base in effect on a
Contract Anniversary. See "Retirement Income Guarantee Riders" for details.
9 PROSPECTUS
<PAGE>
Fund Annual Expenses (After Voluntary Reductions and Reimbursements) (as a
percentage of Fund average daily net assets)(1)
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<S> <C> <C>
Fund Management Rule 12b-1 Other Total Annual
Fee Fee Expenses Fund Expenses
Putnam VT American Government Income Fund(2) 0.41% 0.15% 0.49% 1.05%
Putnam VT Asia Pacific Growth Fund 0.80% 0.15% 0.33% 1.28%
Putnam VT Capital Appreciation Fund 0.65% 0.15% 0.27% 1.07%
Putnam VT Diversified Income Fund 0.68% 0.15% 0.10% 0.93%
Putnam VT The George Putnam Fund of Boston 0.65% 0.15% 0.18% 0.98%
Putnam VT Global Asset Allocation Fund 0.65% 0.15% 0.12% 0.92%
Putnam VT Global Growth Fund 0.61% 0.15% 0.12% 0.88%
Putnam VT Growth and Income Fund 0.46% 0.15% 0.04% 0.65%
Putnam VT Growth Opportunities Fund 0.70% 0.15% 0.20% 1.05%
Putnam VT Health Sciences Fund 0.70% 0.15% 0.13% 0.98%
Putnam VT High Yield Fund 0.65% 0.15% 0.07% 0.87%
Putnam VT Income Fund 0.60% 0.15% 0.07% 0.82%
Putnam VT International Growth Fund 0.80% 0.15% 0.22% 1.17%
Putnam VT International Growth and Income Fund 0.80% 0.15% 0.18% 1.13%
Putnam VT International New Opportunities Fund 1.08% 0.15% 0.33% 1.56%
Putnam VT Investors Fund 0.63% 0.15% 0.08% 0.86%
Putnam VT Money Market Fund 0.41% 0.15% 0.08% 0.64%
Putnam VT New Opportunities Fund 0.54% 0.15% 0.05% 0.74%
Putnam VT New Value Fund 0.70% 0.15% 0.10% 0.95%
Putnam VT OTC & Emerging Growth Fund(3) 0.53% 0.15% 0.37% 1.05%
Putnam VT Research Fund(3) 0.54% 0.15% 0.31% 1.00%
Putnam VT Technology Fund 1.00% 0.15% 0.19% 1.34%
Putnam VT Small Cap Value Fund 0.53% 0.15% 0.76% 1.44%
Putnam VT Utilities Growth and Income Fund 0.65% 0.15% 0.06% 0.86%
Putnam VT Vista Fund 0.65% 0.15% 0.10% 0.90%
Putnam VT Voyager Fund 0.53% 0.15% 0.04% 0.72%
Putnam VT Voyager Fund II 0.70% 0.15% 0.30% 1.15%
</TABLE>
(1) Figures shown in the table are based on the Funds' last fiscal year
ended December 31, 1999, except that the figures for the Putnam VT
Small Cap Value Fund, which commenced operations on April 30, 1999, and
Putnam VT American Government Income Fund and Putnam VT Growth
Opportunities Fund, which commenced operations on January 31, 2000,
Putnam VT Technology Fund, which commenced operations on June 14, 2000,
and Putnam VT Capital Appreciation Fund and Putnam VT Voyager Fund II,
which commenced operations on September 1, 2000, are based on estimates
for the Funds' current fiscal year. Figures shown in the table include
amounts paid through expense offset and brokerage service arrangements.
See the Funds' prospectus for more information about Rule 12b-1 fees
payable under the Funds' distribution plan.
(2) Absent voluntary reductions and reimbursements, the estimated
management fees, Rule 12b-1 fees, other expenses, and total annual fund
expenses for the Putnam VT American Government Income Fund expressed as
a percentage of average net assets of the Fund would have been as
follows:
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Putnam VT American Government Income Fund 0.65% 0.15% 0.49% 1.29%
(3) Absent voluntary reductions and reimbursements for certain Funds (but
including amounts paid through expense offset and brokerage service
arrangements), management fees, Rule 12b-1 fees, other expenses, and
total annual Fund expenses expressed as a percentage of average net
assets of the Funds would have been as follows:
Putnam VT OTC & Emerging Growth Fund 0.70% 0.15% 0.37% 1.22%
Putnam VT Research Fund 0.65% 0.15% 0.31% 1.11%
</TABLE>
10 PROSPECTUS
<PAGE>
Example 1
The example below shows the dollar amount of expenses that you would
bear directly or indirectly if you:
o invested $1,000 in a Variable Sub-Account,
o earned a 5% annual return on your investment,
o surrendered your Contract, or began receiving income payments
for a specified period of less than 120 months, at the end of
each time period (no withdrawal charge is included in the
calculations for the Putnam Allstate Advisor Apex Contracts
because no withdrawal charge applies after one year);
o elect the Enhanced Beneficiary Protection Option; and
o elect Retirement Income Guarantee Rider 2(assuming Income
Base B).
The example assumes that any fund expense waivers or reimbursement
arrangements described in the footnotes above are in effect for the time periods
presented below. The example does not include any taxes or tax penalties you may
be required to pay if you surrender your Contract.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Sub-Account Putnam Allstate Putnam Allstate
Advisor Advisor Apex
1 Year 3 Years 1 Year 3 Years
Putnam American Government Income $88 $131 $80 $127
Putnam Asia Pacific Growth $91 $138 $82 $134
Putnam Capital Appreciation $89 $132 $80 $127
Putnam Diversified Income $87 $128 $79 $123
The George Putnam Fund $88 $129 $79 $125
Putnam Global Asset Allocation $87 $127 $79 $123
Putnam Global Growth $87 $126 $78 $122
Putnam Growth and Income $84 $119 $76 $115
Putnam Growth Opportunities $88 $131 $80 $127
Putnam Health Sciences $88 $129 $79 $125
Putnam High Yield $87 $126 $78 $122
Putnam Income $86 $124 $78 $120
Putnam International Growth $90 $135 $81 $130
Putnam International Growth and Income $89 $134 $81 $129
Putnam International New Opportunities $94 $147 $85 $142
Putnam Investors $86 $126 $78 $121
Putnam Money Market $84 $119 $76 $115
Putnam New Opportunities $85 $122 $77 $118
Putnam New Value $87 $128 $79 $124
Putnam OTC & Emerging Growth $88 $131 $80 $127
Putnam Research $88 $130 $79 $125
Putnam Small Cap Value $92 $143 $84 $138
Putnam Technology $91 $140 $83 $135
Putnam Utilities Growth and Income $86 $126 $78 $121
Putnam Vista $87 $127 $79 $123
Putnam Voyager $85 $121 $77 $117
Putnam Voyager II $89 $132 $81 $130
</TABLE>
11 PROSPECTUS
<PAGE>
Example 2
Same assumptions as Example 1 above, except that you decide not to
surrender your Contract, or you began receiving income payments for at least 120
months if under an Income Plan for a specified period, at the end of each
period.
Sub-Account Putnam Allstate
Advisor
1 Year 3 Years
Putnam American Government Income $29 $89
Putnam Asia Pacific Growth $31 $96
Putnam Capital Appreciation $29 $89
Putnam Diversified Income $28 $85
The George Putnam Fund $28 $87
Putnam Global Asset Allocation $28 $85
Putnam Global Growth $27 $84
Putnam Growth and Income $25 $77
Putnam Growth Opportunities $29 $89
Putnam Health Sciences $28 $87
Putnam High Yield $27 $83
Putnam Income $27 $82
Putnam International Growth $30 $93
Putnam International Growth and Income $30 $91
Putnam International New Opportunities $34 $104
Putnam Investors $27 $83
Putnam Money Market $25 $76
Putnam New Opportunities $26 $79
Putnam New Value $28 $86
Putnam OTC & Emerging Growth $29 $89
Putnam Research $28 $87
Putnam Small Cap Value $33 $101
Putnam Technology $32 $98
Putnam Utilities Growth and Income $27 $83
Putnam Vista $27 $84
Putnam Voyager $26 $79
Putnam Voyager II $30 $92
Please remember that you are looking at examples and not a
representation of past or future expenses. Your actual expenses may be lower or
greater than those shown above. Similarly, your rate of return may be lower or
greater than 5%, which is not guaranteed. The above examples assume the election
of the Enhanced Beneficiary Protection Option and the Retirement Income
Guarantee Rider 2 and that Income Base B is applied. If one or both of these
features were not elected, the expense figures shown above would be slightly
lower. To reflect the contract maintenance charge in the examples (for Putnam
Allstate Advisor Contracts only), we estimated an equivalent percentage charge,
based on an assumed average Contract size of $45,000. The figures for the Putnam
Allstate Advisor Apex Contract assume a 5.75% sales charge.
12 PROSPECTUS
<PAGE>
Financial Information
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "Accumulation Unit."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "Accumulation Unit Value." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Accumulation Unit Values for Putnam Allstate Advisor and Putnam Allstate Advisor
Apex Contracts appear in Appendix C.
The financial statements of Allstate and the Variable Account appear in the
Statement of Additional Information.
13 PROSPECTUS
<PAGE>
The Contract
CONTRACT OWNER
Each Contract is an agreement between you, the Contract Owner, and Allstate, a
life insurance company. As the Contract Owner, you may exercise all of the
rights and privileges provided to you by the Contract. That means it is up to
you to select or change (to the extent permitted):
o the investment alternatives during the Accumulation and Payout Phases,
o the amount and timing of your purchase payments and
withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement
income,
o the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner or the Annuitant
dies, and
o any other rights that the Contract provides, including restricting income
payments to beneficiaries.
If you die, any surviving joint Contract Owner or, if none, the Beneficiary will
exercise the rights and privileges provided to them by the Contract. The
Contract cannot be jointly owned by both a non-natural person and a natural
person. The maximum age of any Contract owner on the Issue Date for the Contract
is 90. If you select the Enhanced Beneficiary Protection Option or a Retirement
Income Guarantee Rider, the maximum age of any owner on the date we issue the
Contract rider is 75.
You can use the Contract with or without a qualified plan. A qualified plan is a
retirement savings plan, such as an IRA or tax-sheltered annuity, that meets the
requirements of the Internal Revenue Code. Qualified plans may limit or modify
your rights and privileges under the Contract. We use the term "Qualified
Contract" to refer to a Contract issued with a qualified plan. See "Tax
Qualified Contracts" on page 36.
You may change the Contract Owner at any time. Once we have received a
satisfactory written request for a change of Contract Owner, the change will
take effect as of the date you signed it. We are not liable for any payment we
make or other action we take before receiving any written request for a change
from you.
ANNUITANT
The Annuitant is the individual whose age determines the latest Payout Start
Date and whose life determines the amount and duration of income payments (other
than under Income Plans with guaranteed payments for a specified period). You
may name a new Annuitant only upon the death of the current Annuitant. You may
designate a joint Annuitant, who is a second person on whose life income
payments depend, at the time you select an Income Plan. The maximum age of any
Annuitant on the Issue Date for each Contract is 90. If you select the Enhanced
Beneficiary Protection Option or a Retirement Income Guarantee Rider, the
maximum age of any Annuitant on the date we issue the Contract rider is 75.
If you select an Income Plan that depends on the Annuitant or a joint
Annuitant's life, we may require proof of age and sex before income payments
begin and proof that the Annuitant or joint Annuitant is still alive before we
make each payment.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract Owner if the sole surviving Contract Owner dies before
the Payout Start Date. If the sole surviving Contract Owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time by writing to us before income payments
begin, unless you have designated an irrevocable Beneficiary. We will provide a
change of Beneficiary form to be signed and filed with us. Any change will be
effective at the time you sign the written notice. Until we receive your written
notice to change a Beneficiary, we are entitled to rely on the most recent
Beneficiary information in our files. We will not be liable as to any payment or
settlement made prior to receiving the written notice. Accordingly, if you wish
to change your Beneficiary, you should deliver your written notice to us
promptly.
If you did not name a Beneficiary or unless otherwise provided in the
Beneficiary designation, if a Beneficiary predeceases the owner and there are no
other surviving Beneficiaries, the new Beneficiary will be:
o your spouse or, if he or she is no longer alive,
o your surviving children equally, or if you have no surviving children,
o your estate.
If more than one Beneficiary survives you, we will divide the death
benefit among your Beneficiaries according to your most recent written
instructions. If you have not given us written instructions, we will pay the
death benefit in equal amounts to the Beneficiaries. If one of the Beneficiaries
dies before you, we will divide the death benefit among the surviving
Beneficiaries.
14 PROSPECTUS
<PAGE>
MODIFICATION OF THE CONTRACT
Only an Allstate officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. No Beneficiary may assign benefits under the Contract until
they are due. We will not be bound by any assignment until the assignor signs it
and files it with us. We are not responsible for the validity of any assignment.
Federal law prohibits or restricts the assignment of benefits under many types
of retirement plans and the terms of such plans may themselves contain
restrictions on assignments. An assignment may also result in taxes or tax
penalties. You should consult with an attorney before trying to assign your
Contract.
Purchases
MINIMUM PURCHASE PAYMENTS
The minimum initial purchase payment for each Contract is $1,000 ($500 for
Qualified Contracts). All subsequent purchase payments under a Contract must be
$500 or more. You may make purchase payments at any time prior to the Payout
Start Date. The most we accept without our prior approval is $1 million. We
reserve the right to accept a lesser initial purchase payment amount. We reserve
the right to limit the availability of the investment alternatives for
additional investments. We also reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $50 or more per month by
automatically transferring money from your bank account. Please consult with
your sales representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payment among the investment alternatives. For Putnam Allstate Advisor
Apex Contracts, each purchase payment allocated to an investment alternative
will be reduced by the applicable sales charge. The allocation you specify on
your application will be effective immediately. All allocations must be in whole
percents that total 100% or in whole dollars. You can change your allocations by
calling 1-800-390-1277.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office.
We use the term "business day" to refer to each day Monday through Friday that
the New York Stock Exchange is open for business. We also refer to these days as
"Valuation Dates." Our business day closes when the New York Stock Exchange
closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your
purchase payment after 3 p.m. Central Time on any Valuation Date, we will credit
your purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
RIGHT TO CANCEL
You may cancel your Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or such
longer period that your state may require. You may return it by delivering it or
mailing it to us. If you exercise this "Right to Cancel," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation.
15 PROSPECTUS
<PAGE>
Contract Value
On the Issue Date, the Contract Value is equal to:
o your initial purchase payment for Putnam Allstate Advisor Contracts
o your initial purchase payment less applicable sales charge for Putnam Allstate
Advisor Apex Contracts
Thereafter, your Contract Value at any time during the Accumulation Phase is
equal to the sum of the value of your Accumulation Units in the Variable
Sub-Accounts you have selected, plus the value of your interest in the Fixed
Account Option(s) offered by your Contract.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. For Putnam Allstate Advisor Apex Contracts, please
remember that a sales charge will reduce the amount of the purchase payment
allocated. Withdrawals and transfers from a Variable Sub-Account would, of
course, reduce the number of Accumulation Units of that Sub-Account allocated to
your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
for each Contract will rise or fall to reflect:
o changes in the share price of the Fund in which the Variable Sub-Account
invests, and
o the deduction of amounts reflecting the mortality and expense risk charge, and
any provision for taxes that have accrued since we last calculated
the Accumulation Unit Value.
We determine withdrawal charges, Retirement Income Guarantee charges (if
applicable), transfer fees, and contract maintenance charges (if applicable)
separately for each Contract. They do not affect the Accumulation Unit Value.
Instead, we obtain payment of those charges and fees by redeeming Accumulation
Units. For details on how we compute Accumulation Unit Values, please refer to
the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account
for each Contract on each Valuation Date. We also determine separate sets of
Accumulation Unit Values for each Contract that reflect the cost of the Enhanced
Beneficiary Protection Option described on page below.
You should refer to the prospectus for the Funds that accompanies this
prospectus for a description of how the assets of each Fund are valued, since
that determination directly bears on the Accumulation Unit Value of the
corresponding Variable Sub-Account and, therefore, your Contract Value.
16 PROSPECTUS
<PAGE>
Investment Alternatives: The Variable Sub-Accounts You may allocate your
purchase payments to up to 27 Variable Sub-Accounts. Each Variable Sub-Account
invests in the shares of a corresponding Fund. Each Fund has its own investment
objective(s) and policies. We briefly describe the Funds below.
For more complete information about each Fund, including expenses and risks
associated with the Fund, please refer to the accompanying prospectus for the
Fund. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts. Putnam Investment Management, Inc.
("Putnam Management") serves as the investment adviser to each Fund.
<TABLE>
<CAPTION>
<S> <C> <C>
Fund: Each Fund Seeks:
Putnam VT American Government Income Fund High current income with preservation of capital as a
secondary objective
Putnam VT Asia Pacific Growth Fund Capital appreciation
Putnam VT Capital Appreciation Fund Capital appreciation
Putnam VT Diversified Income Fund High current income consistent with capital preservation
Putnam VT The George Putnam Fund of Boston To provide a balanced investment composed of a well
diversified portfolio of stocks and bonds that will
produce both capital growth and current income
Putnam VT Global Asset Allocation Fund A high level of long-term total return consistent with
preservation of capital
Putnam VT Global Growth Fund Capital appreciation
Putnam VT Growth and Income Fund Capital growth and current income
Putnam VT Growth Opportunities Fund Capital appreciation
Putnam VT Health Sciences Fund Capital appreciation
Putnam VT High Yield Fund High current income. Capital growth is a secondary
objective when consistent with high current income.
Putnam VT Income Fund Current income consistent with preservation of capital
Putnam VT International Growth Fund Capital growth
Putnam VT International Growth and Income Fund Capital growth. Current income is a secondary objective.
Putnam VT International New Opportunities Fund Long-term capital appreciation
Putnam VT Investors Fund Long-term growth of capital and any increased income that
results from this growth
Putnam VT Money Market Fund As high a rate of current income as Putnam Management
believes is consistent with preservation of capital and
maintenance of liquidity.
Putnam VT New Opportunities Fund Long-term capital appreciation
Putnam VT New Value Fund Long-term capital appreciation
Putnam VT OTC & Emerging Growth Fund Capital appreciation
Putnam VT Research Fund Capital appreciation
Putnam VT Small Cap Value Fund Capital appreciation
Putnam VT Technology Fund Capital appreciation
Putnam VT Utilities Growth and Income Fund Capital growth and current income
Putnam VT Vista Fund Capital appreciation
Putnam VT Voyager Fund Capital appreciation
Putnam VT Voyager Fund II Long-term growth of capital
</TABLE>
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Funds in which those Variable Sub-Accounts invest. You bear the investment
risk that the Funds might not meet their investment objectives. Shares of the
Funds are not deposits, or obligations of, or guaranteed or endorsed by any bank
and are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
17 PROSPECTUS
<PAGE>
Investment Alternatives: The Fixed Account
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options, including 2 Dollar
Cost Averaging Options and the Standard Fixed Account Option. We may offer
additional Fixed Account options in the future. We will credit a minimum annual
interest rate of 3% to money you allocate to any of the Fixed Account Options.
The Fixed Account Options may not be available in all states. In addition,
Allstate may limit the availability of the Standard Fixed Account Option. Please
consult with your representative for current information. The Fixed Account
supports our insurance and annuity obligations. The Fixed Account consists of
our general assets other than those in segregated asset accounts. We have sole
discretion to invest the assets of the Fixed Account, subject to applicable law.
Any money you allocate to the Fixed Account does not entitle you to share in the
investment experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
The Dollar Cost Averaging Fixed Account Options are two of the investment
alternatives that you can use to establish a Dollar Cost Averaging Program, as
described on page 19. These options allow you to allocate purchase payments to
the Fixed Account either for up to 6 months (the "6 Month Dollar Cost Averaging
Option") or for up to 12 months (the "12 Month Dollar Cost Averaging Option").
Your purchase payments will earn interest for the period you select at the
current rates in effect at the time of allocation. Rates may differ from those
available for the Standard Fixed Account Option described below. For Putnam
Allstate Advisor Apex Contracts, please remember that the applicable sales
charge will reduce the amount of your purchase payment allocated.
You must transfer all of your money out of the 6 or 12 Month Dollar Cost
Averaging Options to other investment alternatives in equal installments. At the
end of the applicable 6 or 12 month period, we will transfer any remaining
amounts in the 6 or 12 Month Dollar Cost Averaging Options to the Putnam Money
Market Variable Sub-Account unless you request a different investment
alternative. Transfers out of the 6 or 12 Month Dollar Cost Averaging Options do
not count towards the 12 transfers you can make without paying a transfer fee.
You may not transfer money from other investment alternatives to either the 6 or
12 Month Dollar Cost Averaging Options.
The 6 or 12 Month Dollar Cost Averaging Options may not be available in your
state. Please check with your representative for availability.
STANDARD FIXED ACCOUNT OPTION
Each purchase payment or transfer allocated to the Standard Fixed Account Option
earns interest at the current rate in effect at the time of allocation. For
Putnam Allstate Advisor Apex Contracts, please remember that the applicable
sales charge will reduce the amount of your purchase payment allocated.
We guarantee that rate for a period of years we call Guarantee Periods. We are
currently offering Guarantee Periods of 1 year in length. In the future we may
offer Guarantee Periods of different lengths or stop offering some Guarantee
Periods. You select a Guarantee Period for each purchase or transfer. After the
initial Guarantee Period, we will guarantee a renewal rate.
We will credit interest daily at a rate that will compound over the year to the
annual interest rate we guaranteed at the time of allocation.
Investment Alternatives: Transfers
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. We do not permit transfers into any Dollar Cost
Averaging Fixed Account Option. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below.
You may make 12 transfers per Contract Year without charge. A transfer fee equal
to 0.50% of the amount transferred applies to each transfer after the 12th
transfer in any Contract Year.
The minimum amount that you may transfer from the Standard Fixed Account Option
or a Variable Sub-Account is $100 or the total remaining balance in the Standard
Fixed Account Option or the Variable Sub-Account, if less. These limitations do
not apply to the 6-month or 12-month Dollar Cost Averaging Fixed Account
Options.
18 PROSPECTUS
<PAGE>
The most you can transfer from the Standard Fixed Account Option during any
Contract Year is the greater of (i) 30% of the Standard Fixed Account Option
balance as of the last Contract Anniversary or (ii) the greatest dollar amount
of any prior transfer from the Standard Fixed Account Option. This limitation
does not apply to the Dollar Cost Averaging Program. Also, if the interest rate
on any renewed Guarantee Period is at least one percentage point less than the
previous interest rate, you may transfer up to 100% of the monies receiving that
reduced rate within 60 days of the notification of the interest rate decrease.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. The Contract permits us to
defer transfers from the Fixed Account Options for up to 6 months from the date
we receive your request. If we decide to postpone transfers from any Fixed
Account Option for 30 days or more, we will pay interest as required by
applicable law. Any interest would be payable from the date we receive the
transfer request to the date we make the transfer.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. You may make transfers from the Variable
Sub-Accounts to increase the proportion of your income payments consisting of
fixed income payments if Income Plan 3 or the guaranteed payment portion of
Income Plans 4 and 5, described below, is in effect.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-390-1277. The cut off time
for telephone transfer requests is 3:00 p.m. Central time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange 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 Exchange on that particular day. We will not accept telephone
requests received from you at any telephone number other than the number that
appears in this paragraph or received after the close of trading on the
Exchange. If you own the Contract with a joint Contract Owner, unless we receive
contrary instructions, we will accept instructions from either you or the other
Contract Owner.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
EXCESSIVE TRADING LIMITS
We reserve the right to limit transfers in any Contract Year, or to refuse any
transfer request for a Contract Owner or certain Contract Owners, if:
o we believe, in our sole discretion, that excessive trading by such Contract
Owner or Owners, or a specific transfer request or group of transfer
requests, may have a detrimental effect on the Accumulation Unit Values of
any Variable Sub-Account or the share prices of the corresponding Funds or
would be to the disadvantage of other Contract Owners; or
o we are informed by one or more of the corresponding Funds that they intend to
restrict the purchase or redemption of Fund shares because of excessive
trading or because they believe that a specific transfer or group of
transfers would have a detrimental effect on the prices of Fund shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
DOLLAR COST AVERAGING PROGRAM
You may automatically transfer a set amount from any Variable Sub-Account or
from any Fixed Account Option available under your Contract to any of the other
Variable Sub-Accounts through our Dollar Cost Averaging Program. The Program is
available only during the Accumulation Phase.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost 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 this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
19 PROSPECTUS
<PAGE>
AUTOMATIC FUND REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Fund Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. Money you
allocate to the Fixed Account will not be included in the rebalancing.
We will rebalance your account quarterly, semi-annually, or annually. We will
measure these periods according to your instructions. We will transfer amounts
among the Variable Sub-Accounts to achieve the percentage allocations you
specify. You can change your allocations at any time by contacting us in writing
or by telephone. The new allocation will be effective with the first rebalancing
that occurs after we receive your written or telephone request. We are not
responsible for rebalancing that occurs prior to receipt of proper notice of
your request.
Example:
Assume that you want your initial purchase payment split among 2
Variable Sub-Accounts. You want 40% to be in the Putnam Income Variable
Sub-Account and 60% to be in the Putnam Global Growth Variable
Sub-Account. 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 Putnam Income Variable Sub-Account now represents 50% of
your holdings because of its increase in value. If you choose to have
your holdings in a Contract or Contracts rebalanced quarterly, on the
first day of the next quarter we would sell some of your units in the
Putnam Income Variable Sub-Account for the appropriate Contract(s) and
use the money to buy more units in the Putnam Global Growth Variable
Sub-Account so that the percentage allocations would again be 40% and
60% respectively.
The Automatic Fund Rebalancing Program is available only during the Accumulation
Phase. The transfers made under the program do not count towards the 12
transfers you can make without paying a transfer fee, and are not subject to a
transfer fee.
We may sometimes refer to this Program as the "Putnam Automatic Rebalancing
Program."
Fund 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.
Expenses
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
(Putnam Allstate Advisor Contracts only) During the Accumulation Phase, on each
Contract Anniversary, we will deduct a $30 contract maintenance charge from your
assets invested in the Putnam Money Market Variable Sub-Account. If there are
insufficient assets in that Variable Sub-Account, we will deduct the charge
proportionally from the other Variable Sub-Accounts. We also will deduct this
charge if you withdraw your entire Contract Value, unless your Contract
qualifies for a waiver. During the Payout Phase, we will deduct the charge
proportionately from each income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in billing and
collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and policy changes; proxy statements; calculating Accumulation Unit
Values and income payments; and issuing reports to Contract Owners and
regulatory agencies. We cannot increase the charge. We will waive this charge
if:
o your total Contract Value is greater than $50,000 on a Contract Anniversary or
on the Payout Start Date, or
o all of your money is allocated to the Fixed Account Options on a Contract
Anniversary or all income payments are fixed income payments.
We also reserve the right to waive this charge if you own more than one Contract
and the Contracts meet certain minimum dollar amount requirements. In addition,
we reserve the right to waive this charge for all Contracts.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily from the net assets you have
invested in the Variable Sub-Accounts. The annual rate of
the charge is:
o 1.25% for Putnam Allstate Advisor Contracts
o 0.80% for Putnam Allstate Advisor Apex Contracts
20 PROSPECTUS
<PAGE>
The mortality and expense risk charge is for all the insurance benefits
available with your Contract (including our guarantee of annuity rates and the
death benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then Allstate will bear the loss. If you select the Enhanced
Beneficiary Protection Option, the mortality and expense risk charge will
include an additional 0.15% for the Option.
Allstate reserves the right to raise the Enhanced Beneficiary Protection Option
charge to up to 0.25%. However, once your Option is in effect, Allstate cannot
change the fee that applies to your Contract. We charge the additional fee for
the Enhanced Beneficiary Protection Option to compensate us for the additional
risk that we accept by providing the Option.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both during the Accumulation
Phase and the Payout Phase.
RETIREMENT INCOME GUARANTEE CHARGE
We impose a separate charge for each Retirement Income Guarantee Rider. The
charges equal, on an annual basis, 0.05% of the income base for Retirement
Income Guarantee Rider 1 and 0.30% of the income base for Retirement Income
Guarantee Rider 2. We reserve the right to change the Rider fee. However, once
we issue your Rider, we cannot change the Rider fee that applies to your
Contract. The Rider 1 fee will never exceed 0.15% and the Rider 2 fee will never
exceed 0.50%. See "Retirement Income Guarantee Riders" for details.
TRANSFER FEE
We impose a fee upon transfers in excess of 12 during any Contract Year. The fee
is equal to 0.50% of the dollar amount transferred. We will not charge a
transfer fee on transfers that are part of a Dollar Cost Averaging Program or
Automatic Fund Rebalancing Program.
SALES CHARGE (Putnam Allstate Advisor Apex Contracts only)
We may assess a sales charge on all purchase payments ranging from 0.50% to
5.75% of the amount of the purchase payment. The sales charge percentage will
vary based upon the amount of the purchase payment(s) received. A schedule
showing how the sales charge is assessed appears on page 9, above.
We use the amounts obtained from the sales charge to pay sales commissions and
other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the sales charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including any profit which may arise from the mortality
and expense risk charge or any other charges or fee described above, to make up
any difference.
Reduction of Sales Charge. You may also be entitled to a reduced
sales charge if you (1) sign a letter of intent and invest a combined purchase
payment amount of $50,000 or more within a 13-month period; and/or (2) have
related contracts with us that qualify for rights of accumulation privileges.
See "Rights of Accumulation" below. In addition, no sales charge will apply to
purchase payments made under Contracts issued to employees of Allstate, certain
other eligible organizations, and to certain customers of participating
financial services corporations in conjunction with a new or existing asset
based brokerage account program such as a "wrap fee" or "fee based" program in
states where approved.
Letter of Intent:A letter of intent allows you to set your own investment goal
of $50,000 or more over a 13-month period. We base the sales charge on the
purchase payments you make during the 13-month period on your investment goal.
In essence, we reduce your sales charge on purchase payments made during the
13-month period as though you invested the total amount of purchase payments
(your investment goal) in one lump sum.
Example:
Assume as part of your Contract application you sign a letter of intent
indicating an investment goal of $50,000 over a 13-month period. The
sales charge corresponding to your investment goal is 4.50%. You make
an initial purchase payment of $20,000. We deduct a reduced sales
charge of 4.50% from your initial purchase payment. Two months later
you make a subsequent purchase payment of $30,000. We again deduct a
reduced sales charge of 4.50% from your purchase payment. Without a
letter of intent the sales charge for each purchase payment would have
been 5.75%.
You may elect to participate in the letter of intent program at any time.
However, we do not retroactively reduce sales charges on purchase payments made
before we receive your letter of intent. If you choose to participate in this
program at the time you apply for the Contract, you must complete the letter of
intent section on the application. If you elect to participate in the program
after your Contract is issued, you must complete the appropriate form. The
letter of intent form is available by calling our Annuity Service Center at
1-800-390-1277.
You are not obligated to reach your investment goal. If you do not achieve your
investment goal by the end of the 13-month period or upon a full surrender prior
to the end of
21 PROSPECTUS
<PAGE>
the 13-month period, we will deduct from your Contract the
difference between (1) the sales charge applicable to the actual amount of
purchase payments you made during the period and (2) the sales charge you
actually paid. These charges will be deducted from your Contract proportionately
from each investment alternative at the end of the 13-month period.
If you exceed your investment goal and reach the next breakpoint, the sales
charge deducted on the next payment is based on the next breakpoint level.
However, we do not retroactively reduce sales charges on previous purchase
payments.
At any time during the 13-month period, you may increase your investment goal.
You must inform us in writing. We include purchase payments received during the
90 days prior to your notice in determining the sales charge on purchase
payments made from the date of notice through the end of the original 13-month
period.
We reserve the right to modify, suspend or terminate this program at any time.
This program may not be available in all states.
Rights Of Accumulation:You may qualify for a reduced sales charge through rights
of accumulation. Rights of accumulation involves combining your current purchase
payment with your current Contract Value of your Putnam Allstate Advisor Apex
Contract and/or the current Contract Values of eligible related contracts. If
through accumulation you reach the next breakpoint level, we reduce your sales
charge accordingly.
Related contracts include certain other Putnam Allstate Advisor Apex Contracts
owned by you. There may be other requirements for qualification. For information
on which related contracts qualify for rights of accumulation privileges, please
contact your investment representative.
In order to use rights of accumulation to reduce your sales charge, for each
purchase payment, you or your investment representative must inform us in
writing of the related contracts.
The sales charge for purchase payments will be based on the breakpoint
corresponding to the sum of (1) your new purchase payment; and (2) your current
Contract Value; and (3) the current Contract Value(s) of your eligible related
contract(s).
Example:
Assume your Contract has a current Contract Value of $20,000. You have
a second Contract with us that qualifies for rights of accumulation
that has a current Contract Value of $25,000. You make a $5,000
purchase payment to your current Contract and include your rights of
accumulation number with your payment. To determine the sales charge
applicable to your purchase payment we first calculate the sum of (1)
your current Contract Value ($20,000); (2) the current Contract Value
of your related Contract ($25,000); and (3) your current purchase
payment ($5,000). The sum of these values is $50,000. We deduct the
sales charge corresponding to a $50,000 purchase payment, or 4.50%,
from your $5,000 purchase payment.
We reserve the right to modify, suspend or terminate this program at any time.
This program may not be available in all states.
WITHDRAWAL CHARGE
We may assess a withdrawal charge from the purchase payment(s) you withdraw. The
amount of the charge will depend on the number of years that have elapsed since
we received the purchase payment being withdrawn. A schedule showing the charge
applicable for each Contract appears on page 9, above. The Contracts differ in
the following respects:
Putnam Allstate Advisor Contracts
Under Putnam Allstate Advisor Contracts, you can withdraw up to the Free
Withdrawal Amount each Contract Year without paying the withdrawal charge. The
Free Withdrawal Amount is the greater of earnings not previously withdrawn, or
15% of purchase payments. Unused portions of this 15% "Free Withdrawal Amount"
are not carried forward to future Contract Years.
Putnam Allstate Advisor Apex Contracts
The withdrawal charge for Putnam Allstate Advisor Apex Contracts currently
applies only to Contracts that have total purchase payments of at least
$1,000,000. There is no Free Withdrawal Amount under Putnam Allstate Advisor
Apex Contracts.
All Contracts
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge, we will treat withdrawals as coming from the
oldest purchase payments first. We will not deduct a withdrawal charge when you
have withdrawn all purchase payments. However, for federal income tax purposes,
earnings are considered to come out first, which means you pay taxes on the
earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date (a withdrawal charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
o the death of the Contract Owner or Annuitant (unless the Settlement Value is
used);
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o withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
o withdrawals that qualify for one of the waivers described
below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax. You should
consult your own tax counsel or other tax advisers regarding any withdrawals.
THE FOLLOWING WAIVERS ARE AVAILABLE FOR PUTNAM ALLSTATE ADVISOR CONTRACTS ONLY.
Confinement Waiver. We will waive the withdrawal charge on any withdrawal taken
prior to the Payout Start Date under your Contract if the following conditions
are satisfied:
1) you or the Annuitant, if the Contract Owner is not a living individual, are
first confined to a long term care facility or a hospital for at least 90
consecutive days. You or the Annuitant must enter the long term care facility or
hospital at least 30 days after the Issue Date,
2) we receive your request for withdrawal and written proof of the stay no
later than 90 days following the end of your or the Annuitant's stay at the long
term care facility or hospital, and
3) a physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract). Terminal Illness Waiver.We will waive
the withdrawal charge on any withdrawal under your Contract taken prior to the
Payout Start Date if:
1) you or the Annuitant, if the Contract Owner is not a living individual, are
diagnosed by a physician as having a terminal illness (as defined in the
Contract) at least 30 days after the Issue Date, and
2) you provide adequate proof of diagnosis to us before or at the time you
request the withdrawal. Unemployment Waiver.We will waive the withdrawal charge
on one partial or full withdrawal from your Contract, if you meet the following
requirements:
1) you or the Annuitant, if the Contract Owner is not a living individual,
become unemployed at least one year after the Issue Date,
2) you or the Annuitant receive unemployment compensation (as defined in the
Contract) for at least 30 days as a result of that unemployment, and
3) you or the Annuitant claim this benefit within 180 days of your or the
Annuitant's initial receipt of unemployment compensation.
You may exercise this benefit once before the Payout Start Date.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
THESE WAIVERS ARE NOT AVAILABLE FOR PUTNAM ALLSTATE ADVISOR APEX CONTRACTS.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge because of these waivers, you still may
be required to pay taxes or tax penalties on the amount withdrawn. You should
consult your tax adviser to determine the effect of a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs including payment upon death.
We may some time in the future discontinue this practice and deduct premium
taxes from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, we deduct the charge for premium taxes from each
investment alternative in the proportion that the Contract Owner's value in the
investment alternative bears to the total Contract Value.
OTHER EXPENSES
Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Fund whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Funds. For a summary of current estimates of
those charges and expenses, see page 10 above. We may receive compensation from
the Funds' investment adviser, distributor, or their affiliates for
administrative services we provide to the Funds.
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Access to Your Money
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "Income Plans" on page 25.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our home office, less any applicable
withdrawal charges, income tax withholding, any applicable contract maintenance
charge, any applicable Retirement Guarantee Rider fee, and any premium taxes. We
will pay withdrawals from the Variable Account within 7 days of receipt of the
request, subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Option(s)
available under your Contract. To complete a partial withdrawal from the
Variable Account, we will cancel Accumulation Units in an amount equal to the
withdrawal and any applicable withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time. If you request a total
withdrawal, we may require that you return your Contract to us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1) the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted,
2) an emergency exists as defined by the SEC, or
3) the SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Option(s)
available under your Contract for up to 6 months or shorter period if required
by law. If we delay payment or transfer for 30 days or more, we will pay
interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. Please consult your sales representative or call us at 1-800-390-1277 for
more information. Depending on fluctuations in the value of the Variable
Sub-Accounts and the value of the Fixed Account Option(s) available under your
Contract, systematic withdrawals may reduce or even exhaust the Contract Value.
Income taxes may apply to systematic withdrawals. Please consult your tax
adviser before taking any withdrawal.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the Contract Value to less
than $1,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, less withdrawal and other charges and taxes.
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Income Payments
PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value to an Income
Plan. The Payout Start Date must be at least 30 days after the Issue Date and on
or before the later of:
o the Annuitant's 90th birthday, or
o the 10th Contract Anniversary.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments made on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years. Income payments to Beneficiaries may be
subject to restrictions established by the Contract owner. After the Payout
Start Date, and except as described below, you may not make withdrawals or
change your choice of Income Plan.
Currently nine Income Plans are available.
Each is available to provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The nine Income Plans are:
Income Plan 1 - Life Income with Guaranteed Payments.Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the selected number of guaranteed
income payments, we will continue to pay the remainder of the guaranteed income
payments as required by the Contract. In general, more guaranteed payments means
that each payment will be smaller than it would have been with a shorter
guarantee payment period.
Income Plan 2-Joint and Survivor Life Income with Guaranteed Payments.
Under this plan, we make periodic income payments for at least as long as either
the Annuitant or the joint Annuitant, named at the time the plan was selected,
is alive. If both the Annuitant and joint Annuitant die before we have made all
of the guaranteed income payments, we will continue to pay the remainder of the
guaranteed income payments as required by the Contract. You may elect a reduced
survivor plan of 50%, 66% or 75% of the payment amount. If you do not elect a
reduced survivor amount, the payments will remain at 100%. If you elect a
reduced survivor payment plan, the amount of each income payment initially will
be higher, but a reduction will take effect at the later of 1) the death of an
Annuitant; or 2) at the end of the guaranteed payment period.
Income Plan 3- Guaranteed Payments for a Specified Period. Under this plan, we
make periodic income payments for the period you have chosen. These payments do
not depend on the Annuitant's life. Income payments for less than 120 months may
be subject to a withdrawal charge. We will deduct the mortality and expense risk
charge from the assets of the Variable Sub-Accounts supporting this Plan even
though we may not bear any mortality risk. Income payments under Income Plan 3
are subject to the rules set forth in the Guaranteed Payment Plan section below.
Income Plan 4 -Combination Life Income and Guaranteed Payments for a Specified
Period. Under this plan, we make periodic income payments under two separate
coverages: a life annuity and a guaranteed payment annuity. A life annuity (one
that does not contain any guaranteed payment period) provides income payments
over the Annuitant's life. A guaranteed payment annuity provides income payments
over a specified period. The guaranteed payment annuity portion of Income Plan 4
is subject to the rules set forth in the Guaranteed Payment Plan section below.
Income Plan 5 -Combination Joint and Survivor Life Income and Guaranteed
Payments for a Specified Period. Under this plan, we make periodic income
payments under two separate coverages: a joint life and survivor annuity and a
guaranteed payment annuity. A joint life and survivor annuity (one that does not
contain any guaranteed payment period) provides income payments for at least as
long as either the Annuitant or joint Annuitant is alive. A guaranteed payment
annuity provides income payments over a specified period, and is subject to the
rules set forth in the Guaranteed Payment Plan section below. On the life
coverage, you may elect a reduced survivor plan of 50%, 66% or 75% of the
payment amount. If you do not elect a reduced survivor amount, then remaining
payments will remain at 100%. If you elect a reduced survivor payment plan, the
payments initially will be larger, but a reduction will take effect at the death
of an Annuitant.
Income Plan 6 -Life Income with Cash Refund. Under this plan, we make periodic
income payments until the death of the Annuitant. If the death of the Annuitant
occurs before the total amount applied to an Income Plan is paid out, we will
pay a lump sum payment of the remaining amount. Payments under this plan are
available only as fixed income payments.
Income Plan 7 -Joint Life Income with Cash Refund. Under this plan, we make
periodic income payments until the deaths of both the Annuitant and joint
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Annuitant. If the deaths of both the Annuitant and joint Annuitant occur before
the total amount applied to an Income Plan is paid out, we will pay a lump sum
payment of the remaining amount. Currently, a reduced survivor plan is not
available. Payments under this plan are available only as fixed income payments.
Income Plan 8 -Life Income with Installment Refund. Under this plan, we make
periodic income payments until the later of (1) the death of the Annuitant, or
(2) the total amount paid out under the annuity is equal to the total amount
applied to the Income Plan. If the death of the Annuitant occurs before the
total amount applied to an Income Plan is paid out, we will continue to make
payments in the same manner until any remaining payments are paid out. Payments
under this plan are available only as fixed income payments.
Income Plan 9-Joint Life Income with Installment Refund. Under this plan, we
make periodic income payments until the later of (1) the deaths of both the
Annuitant and joint Annuitant, or (2) the total amount paid out under the
annuity is equal to the total amount applied to the Income Plan. If the deaths
of both the Annuitant and joint Annuitant occur before the total amount applied
to an Income Plan is paid out, we will continue to make payments in the same
manner until any remaining payments are paid out. Currently, a reduced survivor
plan is not available. Payments under this plan are available only as fixed
income payments.
If you choose an Income Plan with payments that continue for the life of the
Annuitant or joint Annuitant, we may require proof of age and sex of the
Annuitant or joint Annuitant before starting income payments, and proof that the
Annuitant or joint Annuitant are alive before we make each payment. Please note
that under Income Plans 1 and 2, and the life annuity and joint life and
survivor annuity portion of Income Plans 4 and 5, respectively, if you elect to
take no minimum guaranteed payments, it is possible that the payee could receive
only one income payment if the Annuitant or any joint Annuitant both die before
the second income payment, or only two income payments if they die before the
third income payment, and so on.
Guaranteed Payment Plans.
For Income Plan 3 and the guaranteed payment annuity portion of Income Plans 4
and 5 ("guaranteed payment plans"):
o The minimum payment period you may choose is 5 years.
o If the oldest Annuitant is under age 70, you may choose a period up to age
100 subject to a maximum of 50 years.
o If the oldest Annuitant is age 70 or over, you may choose a period up to a
maximum of 30 years.
In general, the longer the guarantee period you select, the smaller each payment
will be.
You may make withdrawals from a guaranteed payment plan after the Payout Start
Date. You may terminate all or part of the income payments at any time and
receive a lump sum equal to their present value as of the close of the Valuation
Date (see Valuation Date above) on which we receive your request. To determine
the present value of any remaining variable income payments being withdrawn, we
use a discount rate equal to the assumed annual investment rate that we use to
compute such variable income payments. To determine the present value of any
fixed income payments being withdrawn, we discount each payment using our
currently applicable interest rates. The minimum amount you may withdraw under
this feature is $1,000. A withdrawal charge may apply. You may not make any
withdrawals after the Payout Start Date on the life annuity portion of Income
Plans 4 and 5.
During the guaranteed payment period, you may request to modify the length of
the payment period. Currently, we allow you to make this change once each
365-day period. We reserve the right to change this practice at any time without
prior notice. If you elect to change the length of the payment period, the new
payment period must be within the original maximum and minimum period you would
have been permitted to select on your original Payout Start Date. We may apply a
withdrawal charge.
If you change the length of your guaranteed payment period, we will compute the
present value of your remaining payments, using the same assumptions we would
use if you were terminating the guaranteed payment plan, as described above.
Then we adjust the size of the remaining guaranteed payments to equal what that
value would support based on those same assumptions and based on the revised
guarantee period. A shorter guarantee period will generally mean that each
payment is larger, while a longer guarantee period will generally mean that each
payment is smaller.
Under guaranteed payment plans, we currently allow you to change the frequency
of your payments. Any change in the frequency of payments takes effect on the
next payment date.
Changes to either the frequency of payments or length of a guaranteed payment
plan will result in a change to the payment amount and may change the amount of
each payment that is taxable to you.
Additional Information.We may make other Income Plans available. You may obtain
information about them by writing or calling us.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable
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income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, less applicable taxes, to your Income Plan on
the Payout Start Date. We can make income payments in monthly, quarterly,
semi-annual or annual installments, as you select. If the Contract Owner has not
made any purchase payments for at least 2 years preceding the Payout Start Date,
and the Contract Value is less than $2,000, or not enough to provide an initial
payment of at least $20, and state law permits, we may:
o terminate the Contract and pay you the Contract value, less any applicable
taxes, in a lump sum instead of the periodic payments you have chosen, or
o reduce the frequency of your payments so that each payment will be at
least $20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience or (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. The total
amount of your variable income payments may be more or less than your total
purchase payments because (a) variable income payments vary with the investment
results of the underlying Funds; and (b) under some of the income plans, we make
income payments only so long as an annuitant is alive or any applicable
guarantee payment period has not yet expired.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we used an assumed investment rate ("AIR", also known as benchmark
rate) of 3%. Currently, you may choose either a 6%, 5%, or 3% AIR per year. The
6% AIR may not be available in all states (check with your representative for
availability). Currently, if you do not choose one, the 5% AIR will
automatically apply. We reserve the right to offer other assumed investment
rates. If the actual net investment return of the Variable Sub-Accounts you
choose is less than the AIR, then the dollar amount of your variable income
payments will decrease. The dollar amount of your variable income payments will
increase, however, if the actual net investment return exceeds the AIR. The
dollar amount of the variable income payments stays level if the net investment
return equals the AIR. With a higher AIR, your initial income payment will be
larger than with a lower AIR. While income payments continue to be made,
however, this disparity will become smaller and, if the payments have continued
long enough, each payment will be smaller than if you had initially chosen a
lower AIR. Please refer to the Statement of Additional Information for more
detailed information as to how we determine variable income payments.
You may also elect a variable income payment stream consisting of level monthly
payments that are recalculated annually. You may elect level monthly payments at
or before your Payout Start Date. You cannot elect any fixed income payments
while variable level monthly payments are being made. We will determine the
amount of each annual payment as described above, place this amount in our
general account, and distribute it in level monthly payments. The sum of the
level payments will exceed the annual calculated amount because of an interest
rate factor we use, which may vary from year to year but will not be less than
2.0% per year. We do not allow withdrawals of the annual amount unless you make
a full or partial withdrawal request of the value of the remaining payments
under a guaranteed payment plan. If the Annuitant dies during the period of
level monthly payments, any life contingencies you chose will be the same as
under the income plan you chose. For example, if your income plan contains a
life only payment plan and the Annuitant dies during the year, the beneficiary
is not entitled to the remaining levelized monthly payments for that year.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1) deducting any applicable premium tax; and
2) applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we are
offering at that time.
We may defer making fixed income payments for a period of up to 6 months or
whatever shorter time state law may require. If we defer payments for 30 days or
more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
RETIREMENT INCOME GUARANTEE RIDERS
Currently, for Contract Owners and Annuitants up to and including age 75, you
have the option to add to your Contract one of two Retirement Income Guarantee
Riders (Rider 1 or Rider 2). Each Rider guarantees a minimum dollar amount (we
call the " guaranteed income benefit") to be applied to an Income Plan. You may
exercise this benefit up to your latest Payout Start Date. The Riders may not be
available in all states.
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Eligibility.To qualify for this benefit, you must meet the following conditions
as of the Payout Start Date:
o You must elect a Payout Start Date that is on or after the 10th anniversary of
the date we issued the Rider (the "Rider Date");
o The Payout Start Date must occur during the 30 day period following a Contract
Anniversary;
o You must elect to receive fixed income payments; and
o The Income Plan you have selected must provide for payments guaranteed for
either a single life or joint lives with a specified period of at least:
o 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied, or
o 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
Retirement Income Guarantee Rider 1.This Rider guarantees that the amount you
apply to an Income Plan will not be less than the total of your purchase
payments less any withdrawals and any
applicable taxes.
The current charge for this Rider, on an annual basis, is 0.05% multiplied by
the Income Base in effect on each Contract Anniversary. We deduct the fee only
from your assets in the Variable Sub-Account(s). In the case of a full
withdrawal of the Contract Value on any date other than the Contract
Anniversary, we will deduct from the amount paid upon withdrawal a Rider fee
equal to 0.05% multiplied by the Income Base immediately prior to the withdrawal
pro rated to reflect the number of months the Rider was in effect during the
current Contract Year.
We calculate the Income Base that we use to determine the value of the
guaranteed income benefit as follows:
1) On the Rider Date, the Income Base is equal to the Contract Value.
2) After the Rider Date, we recalculate the Income Base when a purchase payment
or withdrawal is made as follows:
(a) For purchase payments, the Income Base is equal to the most recently
calculated Income Base plus the purchase payment.
(b) For withdrawals, the Income Base is equal to the most recently calculated
Income Base reduced by a withdrawal adjustment, described below.
In the absence of any withdrawals or purchase payments, the Income Base
will be equal to the Contract Value as of the Rider Date.
The withdrawal adjustment is equal to (1) divided by (2), with the
result multiplied by (3), where:
1) = withdrawal amount,
2) = the Contract Value immediately prior to the withdrawal, and
3) = the most recently calculated Income Base.
See Appendix B for an example of how the withdrawal adjustment applies.
The guaranteed income benefit amount is determined by applying the
Income Base, less any applicable taxes, to the guaranteed rates for the Income
Plan that you select. On the Payout Start Date, the income payment will be the
greater of (i) the income payment produced by the guaranteed income benefit or
(ii) the income payment provided in the fixed amount income payment provision of
the Contract.
Retirement Income Guarantee Rider 2.This Rider guarantees that the amount you
apply to an Income Plan will not be less than the greater of Income Base A or
Income Base B described below.
The current annual charge for this Rider is 0.30% multiplied by the Income Base
in effect on each Contract Anniversary. We deduct the fee only from the Variable
Sub-Account(s) on a pro-rata basis. For the initial Contract Anniversary after
the Rider Date, the Rider Fee is equal to the number of full remaining months
from the Rider Date to the Contract Anniversary divided by twelve times .30%
with the result multiplied by the Income Base in effect on the Contract
Anniversary. In the case of a full withdrawal of the Contract Value on any date
other than the Contract Anniversary, we will deduct from the amount paid upon
withdrawal a Rider fee equal to 0.30% multiplied by the Income Base immediately
prior to the withdrawal pro rated to reflect the number of full months the Rider
was in effect during the current Contract Year. The Rider Fee will not be
deducted during the Payout Phase.
The Income Base is the greater of Income Base A and Income Base B. We determine
each Income Base as follows:
Income Base A. On the Rider Date, Income Base A is equal to the Contract Value.
After the RiderDate, we recalculate Income Base A as follows on the Contract
Anniversary and when a purchase payment or withdrawal is made:
1) For purchase payments, Income Base A is equal to the most recently
calculated Income Base plus the purchase payment.
2) For withdrawals, Income Base A is equal to the most recently calculated
Income Base reduced by a withdrawal adjustment.
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3) On each Contract Anniversary, Income Base A is equal to the greater of the
Contract Value on that date or the most recently calculated Income Base A.
In the absence of any withdrawals or purchase payments, Income Base A will be
equal to the greatest Contract Value as of the Rider Date and all Contract
Anniversary Contract Values between the Rider Date and the Payout Start Date. We
will recalculate Income Base A for purchase payments, for withdrawals and on
Contract Anniversaries until the first Contract Anniversary after the 85th
birthday of the oldest Contract Owner or, if no Contract Owner is a living
individual, the oldest Annuitant. After that date, we will recalculate Income
Base A for purchase payments and withdrawals.
Income Base B. On the Rider Date, Income Base B is equal to the Contract Value.
After the Rider Date, Income Base B, plus any subsequent purchase payments and
less a withdrawal adjustment for any subsequent withdrawals, will accumulate
daily at a rate equal to 5% per year until the first day of the month following
the oldest Contract Owner's or, if the Contract Owner is not a living
individual, the Annuitant's 85th birthday.
For purposes of computing Income Base A or B, the withdrawal adjustment is equal
to (1) divided by (2), with the result multiplied by (3), where:
1) = withdrawal amount,
2) = the Contract Value immediately prior to the withdrawal, and
3) = the most recently calculated Income Base.
See Appendix B for an example of how the withdrawal adjustment applies.
We determine the guaranteed income benefit amount by applying the Income Base,
less any applicable taxes, to the guaranteed rates for the Income Plan that you
select. On the Payout Start Date, the income payment will be the greater of (i)
the income payment provided by the guaranteed income benefit or (ii) the income
payment provided in the fixed amount income payment provision of the Contract.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
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Death Benefits
We will pay a death benefit if, prior to the Payout Start Date:
1) any Contract Owner dies, or
2) the Annuitant dies.
We will pay the death benefit to the new Contract Owner as determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiary. In the case of the death of the
Annuitant, we will pay the death benefit to the current Contract Owner.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest of
the following death benefit alternatives:
1) the Contract Value as of the date we determine the death benefit, or
2) the sum of all purchase payments payment (gross purchase payment in the case
of Putnam Allstate Advisor Apex Contracts), less withdrawals, or
3) the most recent Maximum Anniversary Value prior to the date we determine the
death benefit (see "Maximum Anniversary Value" below).
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date. A request for
payment of the death benefit must include Due Proof of Death. We will accept the
following documentation as "Due Proof of Death":
o a certified copy of a death certificate,
o a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
o other documentation as we may accept in our sole discretion.
Maximum Anniversary Value.On the Issue Date, the Maximum Anniversary Value is
equal to the initial purchase payment (gross purchase payment in the case of
Putnam Allstate Advisor Apex Contracts). After the Issue Date, we recalculate
the Maximum Anniversary Value when a purchase payment or withdrawal is made or
on a Contract Anniversary as follows:
1) For purchase payments, the Maximum Anniversary Value is equal to the most
recently calculated Maximum Anniversary Value plus the purchase payment (gross
purchase payment in the case of Putnam Allstate Advisor Apex Contracts).
2) For withdrawals, the Maximum Anniversary Value is equal to the most recently
calculated Maximum Anniversary Value reduced by a withdrawal adjustment, as
defined below.
3) On each Contract Anniversary, the Maximum Anniversary Value is equal to the
greater of the Contract Value or the most recently calculated Maximum
Anniversary Value.
In the absence of any withdrawals or purchase payments, the Maximum Anniversary
Value will be the greatest of all Contract Anniversary Contract Values on or
prior to the date we calculate the death benefit. For Putnam Allstate Advisor
Apex Contracts, the Contract Values are based on net purchase payments.
We will recalculate the Maximum Anniversary Value until the first Contract
Anniversary after the 80th birthday of the oldest Contract Owner or, if no
Contract Owner is a living individual, the Annuitant. After that date, we will
recalculate the Maximum Anniversary Value only for purchase payments and
withdrawals. The Maximum Anniversary Value will never be greater than the
maximum death benefit allowed by any applicable state non-forfeiture laws.
Withdrawal Adjustment.The withdrawal adjustment reduces the Maximum Anniversary
Value and the death benefit under the Enhanced Beneficiary Protection Option,
described below, by the same proportion as the withdrawal reduces the Contract
Value. The withdrawal adjustment is equal to (1) divided by (2), with the result
multiplied by (3), where:
(1) = the withdrawal amount,
(2) = the Contract Value immediately prior to the withdrawal, and
(3) = the value of the applicable death benefit alternative immediately
prior to the withdrawal.
See Appendix A for an example of a withdrawal adjustment.
ENHANCED BENEFICIARY PROTECTION OPTION
Currently, for Contract Owners and Annuitants up to and including age 75, the
Enhanced Beneficiary Protection Option is an optional benefit that you may
elect. If you elect the Option, the death benefit will be the greater of the
death benefit alternatives (1) through (3) listed above, or (4) the Enhanced
Beneficiary Protection Option. The Enhanced Beneficiary Protection Option may
not be available in all states.
We will issue a rider to your Contract if you elect the Option. The Enhanced
Beneficiary Protection Option on the date we issue the Contract rider ("Rider
Date") is equal to the Contract Value on that date. After the Rider Date, the
Enhanced Beneficiary Protection Option, plus any subsequent payments payment
(gross purchase payment in the case of Putnam Allstate Advisor Apex Contracts),
and less a withdrawal adjustment (computed as described above), will accumulate
daily at the rate of 5% per year until the earlier of:
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1) the date we determine the death benefit, or
2) the first Contract Anniversary following the 80th birthday of the oldest
Contract Owner or, if no Contract Owner is a living individual, the 80th
birthday of the oldest Annuitant.
We will determine the death benefit under the Enhanced Beneficiary Protection
Option in the same manner as described under "Death Benefit Amount."
DEATH BENEFIT PAYMENTS
Death of Contract Owner.Within 180 days of the date of your death, the new
Contract Owner may elect to:
1) receive the death benefit in a lump sum, or
2) apply an amount equal to the death benefit to one of the available Income
Plans described above. The Payout Start Date must be within one year of the date
of your death. Income payments must be:
(a) over the life of the new Contract Owner,
(b) for a guaranteed number of payments not to exceed the life
expectancy of the new Contract Owner, or
(c) over the life of new Contract Owner with a guaranteed
number of payments not to exceed the life expectancy of the
new Contract Owner.
Otherwise, the new Contract Owner will receive the Settlement Value. The
"Settlement Value" is the Contract Value, less any applicable withdrawal charge,
premium tax and, in the case of Putnam Allstate Advisor Contracts, contract
maintenance charge. The new Contract Owner may make a single withdrawal of any
amount within one year of the date of death without incurring a withdrawal
charge. We will calculate the Settlement Value as of the end of the Valuation
Date coinciding with the requested distribution date for payment or on the
mandatory distribution date of 5 years after the date of your death, whichever
is earlier. If we receive a request after 3 p.m. Central Time on a Valuation
Date, we will process the request as of the end of the following Valuation Date.
We are currently waiving the 180 day limit, but we reserve the right to enforce
the limitation in the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the new Contract Owner is your spouse, then he or she may elect one of the
options listed above or may continue the Contract in the Accumulation Phase as
if the death had not occurred. On the date the Contract is continued, the
Contract Value will equal the amount of the death benefit as determined as of
the Valuation Date on which we received Due Proof of Death (the next Valuation
Date if we receive Due Proof of Death after 3 p.m. Central Time). The Contract
may only be continued once. If the surviving spouse continues the Contract in
the Accumulation Phase, the surviving spouse may make a single withdrawal of any
amount within 1 year of the date of death without incurring a withdrawal charge.
Prior to the Payout Start Date, the death benefit of the continued Contract will
be the greater of:
o the sum of all purchase payments (gross purchase payments in the case of
Putnam Allstate Advisor Apex Contracts), less any withdrawals; or
o the Contract Value on the date we determine the death benefit; or
o the Maximum Anniversary Value as defined in the "Death Benefit Amount"
section, with the following changes:
o "Issue Date" is replaced by the date the Contract is continued,
o "initial purchase payment" is replaced with the death benefit as described at
the end of the Valuation Period during which we received Due Proof of Death.
For Contracts with the optional Enhanced Beneficiary Protection Option:
o the Enhanced Beneficiary Protection value as defined in the Rider, with the
following changes:
o "Rider Date" is replaced by the date the Contract is continued,
o "Contract Value" is replaced with the death benefit as described at the end of
the Valuation Period during which we received Due Proof of Death.
If the new Contract Owner is a corporation, trust, or other non-natural person,
then the new Contract Owner may elect, within 180 days of your death, to receive
the death benefit in a lump sum or may elect to receive the Settlement Value in
a lump sum within 5 years of death. We are currently waiving the 180 day limit,
but we reserve the right to enforce the limitation in the future.
Death of Annuitant.If the Annuitant who is not also the Contract Owner dies
prior to the Payout Start Date, the Contract Owner must elect one of the
applicable options described below.
If the Contract Owner is a natural person, the Contract Owner may elect to
continue the Contract as if the death had not occurred, or, if we receive Due
Proof of Death within 180 days of the date of the Annuitant's death, the
Contract Owner may choose to:
1) receive the death benefit in a lump sum; or
2) apply the death benefit to an Income Plan that must begin within 1 year of
the date of death.
If the Contract Owner elects to continue the Contract or to apply the death
benefit to an Income Plan, the new
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Annuitant will be the youngest Contract
Owner, unless the Contract Owner names a different Annuitant.
If the Contract Owner is a non-natural person, the non-natural Contract Owner
may elect, within 180 days of the Annuitant's date of death, to receive the
death benefit in a lump sum or may elect to receive the Settlement Value payable
in a lump sum within 5 years of the Annuitant's date of death. If the
non-natural Contract Owner does not make one of the above described elections,
the Settlement Value must be withdrawn by the non-natural Contract Owner on or
before the mandatory distribution date 5 years after the Annuitant's death. We
are currently waiving the 180 day limit, but we reserve the right to enforce the
limitation in the future.
More Information
ALLSTATE
Allstate is the issuer of the Contract. Allstate is an Illinois stock life
insurance company organized in 1957.
Allstate is licensed to operate in the District of Columbia, Puerto Rico, and
all states except New York. We intend to offer the Contract in those
jurisdictions in which we are licensed. Our home office is located at 3100
Sanders Road, Northbrook, Illinois, 60062.
Allstate is a wholly owned subsidiary of Allstate Insurance Company, a stock
property-liability insurance company incorporated under the laws of Illinois.
All of the outstanding capital stock of Allstate Insurance Company is owned by
The Allstate Corporation.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate. Standard & Poor's Insurance Rating
Services assigns an AA+ (Very Strong) financial strength rating and Moody's
assigns an Aa2 (Excellent) financial strength rating to Allstate. These ratings
do not reflect the investment performance of the Variable Account. We may from
time to time advertise these ratings in our sales literature.
VARIABLE ACCOUNT
Allstate established the Allstate Life Insurance Company Separate Account A on
January 27, 1999. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or Allstate.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Illinois law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Allstate.
The Variable Account consists of 27 Variable Sub-Accounts, each of which invests
in a corresponding Fund. We may add new Variable Sub-Accounts or eliminate one
or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Funds. We may use the Variable Account to fund our other
annuity contracts. We will account separately for each type of annuity contract
funded by the Variable Account.
THE FUNDS
Dividends and Capital Gain Distributions.We automatically reinvest all dividends
and capital gains distributions from the Funds in shares of the distributing
Funds at their net asset value.
Voting Privileges.As a general matter, you do not have a direct right to vote
the shares of the Funds held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Funds that we hold
directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Fund as of the record date of
the meeting. After the Payout Start Date the person receiving income payments
has the voting interest. The payee's number of votes will be determined by
dividing the reserve for such Contract allocated to the applicable Sub-Account
by the net asset value per share of the corresponding Fund. The votes decrease
as income payments are made and as the reserves for the Contract decrease.
32 PROSPECTUS
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We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Fund shares as we see fit without regard to voting
instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
Changes in Funds.If the shares of any of the Funds are no longer available for
investment by the Variable Account or if, in our judgment, further investment in
such shares is no longer desirable in view of the purposes of the Contract, we
may eliminate that Fund and substitute shares of another eligible investment
fund. Any substitution of securities will comply with the requirements of the
Investment Company Act of 1940. We also may add new Variable Sub-Accounts that
invest in additional mutual funds. We will notify you in advance of any change.
Conflicts of Interest.The Funds sell their shares to separate accounts
underlying both variable life insurance and variable annuity contracts. It is
conceivable that in the future it may be unfavorable for variable life insurance
separate accounts and variable annuity separate accounts to invest in the same
Fund. The board of directors of the Funds monitors for possible conflicts among
separate accounts buying shares of the Funds. Conflicts could develop for a
variety of reasons. For example, differences in treatment under tax and other
laws or the failure by a separate account to comply with such laws could cause a
conflict. To eliminate a conflict, the Funds' board of directors may require a
separate account to withdraw its participation in a Fund. A Fund's net asset
value could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account withdrawing because of a conflict.
THE CONTRACT
Distribution.Allstate Distributors, L.L.C. ("Allstate Distributors"), a
broker-dealer jointly owned by Allstate and Putnam Investments, will serve as
principal underwriter of the Contracts. Allstate Distributors is a registered
broker dealer under the Securities and Exchange Act of 1934, as amended,
("Exchange Act") 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
Allstate, either individually or through an incorporated insurance agency and
have entered into a selling agreement with Allstate Distributors to sell the
Contract.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commission paid on all Contract
sales will not exceed 8.5% of all purchase payments. From time to time, we may
pay or permit other promotional incentives, in cash or credit or other
compensation. The commission is intended to cover distribution expenses. In some
states, Contracts may be sold by representatives or employees of banks.
Allstate may pay Allstate Distributors a commission for distribution of the
Contracts. The underwriting agreement with Allstate Distributors provides that
we will reimburse Allstate Distributors for expenses incurred in distributing
the Contracts, including any liability to Contract Owners arising out of
services rendered or Contracts issued.
For Putnam Allstate Advisor Contracts issued to employees of Allstate and
certain other eligible organizations, and in lieu of Allstate paying any
commissions on sales of those Contracts, the Contract Owner will receive a
credit of 6% of the amount of each purchase payment that will be applied to each
purchase payment. Allstate will allocate this credit in the same allocation as
your most recent instruction. If you exercise your Right to Cancel your Contract
as described in this prospectus, we will return to you the amount you would have
received had there been no credit. Unless we are required by law to return your
purchase payments, this amount also will include any charges deducted that
reduced your Contract Value prior to cancellation, plus any investment gain on
the credit. The credit may not be available in all states. We do not consider
the credit to be an "investment in the contract" for income tax purposes.
For Putnam Allstate Advisor Apex Contracts issued to employees of Allstate and
certain other eligible organizations, and in lieu of Allstate paying any
commissions on sales of those Contracts, the sales charge will be waived.
Administration.We have primary responsibility for all administration of the
Contracts and the Variable Account.
We provide the following administrative services, among others:
o issuance of the Contracts;
o maintenance of Contract Owner records;
o Contract Owner services;
o calculation of unit values;
o maintenance of the Variable Account; and
o preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a
33 PROSPECTUS
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question about a periodic statement. We will investigate all complaints and make
any necessary adjustments retroactively, but you must notify us of a potential
error within a reasonable time after the date of the questioned statement. If
you wait too long, we will make the adjustment as of the date that we receive
notice of the potential error.
We will also provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may
impose different or additional conditions or limitations on withdrawals, waivers
of withdrawal charges, death benefits, Payout Start Dates, income payments, and
other Contract features. In addition, adverse tax consequences may result if
qualified plan limits on distributions and other conditions are not met. Please
consult your qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Allstate on
certain federal securities law matters. All matters of Illinois law pertaining
to the Contracts, including the validity of the Contracts and Allstate's right
to issue such Contracts under Illinois insurance law, have been passed upon by
Michael J. Velotta, General Counsel of Allstate.
Taxes
The following discussionis general and is not intended as tax advice. Allstate
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 receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral.Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1) the owner is a natural person,
2) the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3) Allstate is considered the owner of the Variable Account assets for federal
income tax purposes.
Non-natural Owners.As a general rule, annuity contracts
owned by non-natural persons such as corporations, trusts, or other entities are
not treated as annuity contracts for federal income tax purposes. The income on
such contracts is taxed as ordinary income received or accrued by the owner
during the taxable year. Please see the Statement of Additional Information for
a discussion of several exceptions to the general rule for contracts owned by
non-natural persons.
Diversification Requirements.For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the owner during the taxable year.
Although Allstate does not have control over the Funds or their investments, we
expect the Funds to meet the diversification requirements.
Ownership Treatment.The IRS has stated that you will be considered the owner of
Variable 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 Variable Account investments may cause an investor to be
treated as the owner of the Variable 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 the 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 alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income.
34 PROSPECTUS
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Allstate 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 Variable Account. However, we make no guarantee that such
modification to the Contract will be successful.
Taxation of Partial and Full Withdrawals.If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, 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 you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than five taxable years after the taxable year of the first
contribution to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the Contract Owner's death,
o attributable to the Contract Owner being disabled, or
o for a first time home purchase (first time home purchases subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments.Generally, the rule for income taxation of annuity
payments received from a nonqualified contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Level Monthly Variable Annuity Payments.You may have an option to
elect a variable income payment stream consisting of level monthly payments that
are recalculated annually. Although your levelized payment will be reported to
the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual payment is constructive
receipt of the entire annual payment. Thus, the total taxable amount for each
annual payment would be accelerated to the time of the first monthly payout and
reported in the tax year in which the first monthly payout is received.
Partial Commutation of Annuity Payments.The Federal tax treatment of Income
Payment Options is unclear in some respects. As a result, it is possible that a
greater or lesser portion of payments may be included in your taxable income
than described above or that we plan to report to the Internal Revenue Service.
The tax law is also unclear regarding the portion of any additional withdrawal
received after the Payout Start Date that is taxable, and thus it is also
possible that a greater or lesser portion of such a payment could be taxable
than the amount we determine.
Taxation of Annuity Death Benefits.Death of a Contract Owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1) if distributed in a lump sum, the amounts are taxed in the same manner as
a full withdrawal, or
2) if distributed under an Income Plan, the amounts are taxed in the same
manner as an income payment. Please see the Statement of Additional Information
for more detail on distribution at death requirements.
Penalty Tax on Premature Distributions.A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date
35 PROSPECTUS
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you attain age 59 1/2. However, no penalty tax is incurred on distributions:
1) made on or after the date the Contract Owner attains age 59 1/2,
2) made as a result of the Contract Owner's death or disability,
3) made in substantially equal periodic payments over the Contract Owner's
life or life expectancy,
4) made under an immediate annuity, or
5) attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
Substantially Equal Periodic Payments.With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other modification of the payment stream would violate the
requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or attaining age 59 1/2 would be subject to a 10% penalty
tax unless another exception to the penalty tax applies. The tax for the year of
the modification is increased by the penalty tax that would have been imposed
without the exception, plus interest for the years in which the exception was
used. Allstate believes such modifications would violate the substantially equal
periodic payments and immediate annuity exceptions to the 10% penalty tax.
Similar treatment may apply to additional withdrawals or other modifications of
the payment stream from Qualified Contracts. You should consult a competent tax
advisor prior to taking a withdrawal.
Aggregation of Annuity Contracts.All non-qualified deferred annuity contracts
issued by Allstate (or its affiliates) to the same Contract Owner during any
calendar year will be aggregated and treated as one annuity contract for
purposes of determining the taxable amount of a distribution.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable annuities held by such plans does not receive any additional tax
deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract. Generally, qualified
plans require minimum distributions upon reaching age 70 1'2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the contract. Not all income plans offered
under this annuity contract satisfy the requirements for minimum distributions.
Please see a competent tax advisor to make sure the qualified plan distribution
requirements for this annuity are satisfied. The income on qualified plan and
IRA investments is tax deferred and variable annuities held by such plans do not
receive any additional tax deferral. You should review the annuity features,
including all benefits and expenses, prior to purchasing a variable annuity in a
qualified plan or IRA. Allstate reserves the right to limit the availability of
the Contract for use with any of the Qualified Plans listed above.
Restrictions Under Section 403(b) Plans. Section 403(b) of the Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after 12/31/88, and all earnings on salary reduction
contributions, may be made only on or after the date the employee:
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
o on account of hardship (earnings on salary reduction contributions may not be
distributed on the account of hardship).
These limitations do not apply to withdrawals where Allstate is directed to
transfer some or all of the contract value to another 403(b) plan.
36 PROSPECTUS
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INCOME TAX WITHHOLDING
Allstate is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amou nts to an IRA or eligible retirement plan. Eligible rollover
distributions generally include all distributions from Qualified Contracts,
excluding IRAs, with the exception of:
1) required minimum distributions, or
2) a series of substantially equal periodic payments made over a period of at
least 10 years, or,
3) over the life (joint lives) of the participant (and beneficiary).
Allstate may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
Performance Information
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period. All performance advertisements will include, as applicable, standardized
yield and total return figures that reflect insurance charges, withdrawal
charges and the following (as applicable):
o contract maintenance charge for Putnam Allstate Advisor Contracts
o sales charge for Putnam Allstate Advisor Apex Contracts
Performance advertisements also may include total return figures that reflect
the deduction of insurance charges, but not withdrawal charges. The deduction of
such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Funds for the periods beginning with the inception dates of the Funds and
adjusted to reflect current Contract expenses. You should not interpret these
figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
37 POSPECTUS
<PAGE>
Statement of Additional Information
Table of Contents
Page
Additions, Deletions, or Substitutions of Investments 2
The Contracts 3
Performance Information 4
Calculation of Accumulation Unit Values 7
Calculation of Variable Income Payments 8
General Matters 9
Federal Tax Matters 10
Qualified Plans 12
Experts 15
Financial Statements 16
Appendix A A-1
Appendix B B-1
Appendix C C-1
Appendix D D-1
-----------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO
PROVIDE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN
THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
38 PROSPECTUS
<PAGE>
Appendix A
Withdrawal Adjustment Example - Death Benefits*
Issue Date: January 1, 2000
Initial Purchase Payment: $50,000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Death Benefit Amount
Type Beginning Transaction Contract Purchase Maximum Enhanced
of Contract Amount Value Payment Anniversary Beneficiary
Date Occurrence Value After Value Value Value
Occurrence
1/1/01 Contract Anniversary $55,000 - $55,000 $50,000 $55,000 $52,500
7/1/01 Partial Withdrawal $60,000 $15,000 $45,000 $35,000 $41,250 $40,347
</TABLE>
The following shows how we compute the adjusted death benefits in the example
above. Please note that the Purchase Payment Value is reduced by the amount of
the withdrawal, whereas the withdrawal adjustment reduces the Maximum
Anniversary Value and Enhanced Beneficiary Value by the same proportion as the
withdrawal reduces the Contract Value.
Purchase Payment Value Death Benefit
<TABLE>
<CAPTION>
<S> <C>
Partial Withdrawal Amount $15,000
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal $50,000
Adjusted Death Benefit $35,000
Maximum Anniversary Value Death Benefit
Partial Withdrawal Amount = (a) $15,000
Contract Value Immediately Prior to Partial Withdrawal = (b) $60,000
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal = (c) $55,000
Withdrawal Adjustment [(a)/(b)]*(c) $13,750
Adjusted Death Benefit $41,250
Enhanced Beneficiary Protection Value Death Benefit
Partial Withdrawal Amount = (a) $15,000
Contract Value Immediately Prior to Partial Withdrawal = (b) $60,000
Value of Death Benefit Amount Immediately Prior to Partial Withdrawal = (c) $53,796
(assumes half years worth of interest on $52,500
Withdrawal Adjustment [(a)/(b)]*(c) $13,449
Adjusted Death Benefit $40,347
</TABLE>
* For purposes of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum Anniversary
Value for both Contracts, net of applicable fees and charges. For Putnam
Allstate Advisor Apex Contract, the Purchase Payment Values and Enhanced
Beneficiary Values shown above are based on gross purchase payments (for the
Maximum Anniversary Value, please see the prospectus). Actual death benefit
amounts will differ due to the different fees and charges under each Contract.
Please remember that you are looking at an example and that your investment
performance may be greater or lower than the figures shown.
A-1
<PAGE>
Appendix B
Withdrawal Adjustment Example - Income Benefits*
Issue Date: January 1, 2000
Initial Purchase Payment: $50,000
<TABLE>
<CAPTION> Income Benefit Amount
<S> <C>
Type Beginning Transaction Contract Purchase Maximum 5%
of Contract Amount Value Payment Anniversary Roll-Up
Date Occurrence Value After Value Value Value
Occurrence
1/1/01 Contract Anniversary $55,000 - $55,000 $50,000 $55,000 $52,500
7/1/01 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $41,250 $40,347
</TABLE>
The following shows how we compute the adjusted income benefits in the example
above. Please note that the withdrawal adjustment reduces the Purchase Payment
Value, the Maximum Anniversary Value and the 5% Roll-Up Value by the same
proportion as the withdrawal reduces the Contract Value.
Purchase Payment Value Income Benefit
<TABLE>
<CAPTION>
<S> <C>
Partial Withdrawal Amount = (a) $15,000
Contract Value Immediately Prior to Partial Withdrawal = (b) $60,000
Value of Income Benefit Amount Immediately Prior to Partial Withdrawal = (c) $50,000
Withdrawal Adjustment [(a)/(b)]*(c) $12,500
Adjusted Income Benefit $37,500
Maximum Anniversary Value Income Benefit
Partial Withdrawal Amount = (a) $15,000
Contract Value Immediately Prior to Partial Withdrawal = (b) $60,000
Value of Income Benefit Amount Immediately Prior to Partial Withdrawal = (c) $55,000
Withdrawal Adjustment [(a)/(b)]*(c) $13,750
Adjusted Income Benefit $41,250
5% Roll-Up Value Income Benefit
Partial Withdrawal Amount = (a) $15,000
Contract Value Immediately Prior to Partial Withdrawal = (b) $60,000
Value of Income Benefit Amount Immediately Prior to Partial Withdrawal (assumes half years = (c) $53,796
worth of interest on $52,500)
Withdrawal Adjustment [(a)/(b)]*(c) $13,449
Adjusted Income Benefit $40,347
</TABLE>
* For purposes of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Vales and Maximum
Anniversary Values for all Contracts, net of applicable fees and
charges. For Putnam Allstate Advisor Apex Contracts, the Purchase
Payment Values and 5% Roll-Up Values shown above are based on gross
purchase payments (for the Maximum Anniversary Value, please see the
prospectus). Actual income benefit amounts will differ due to the
different fees and charges under each Contract. Please remember that
you are looking at an example and that your investment performance may
be greater or lower than the figures shown.
B-1
<PAGE>
Appendix C
Accumulation Unit Values for the Putnam Allstate Advisor Contracts for the
period April 30, 1999 (date Contracts first offered) through December 31, 1999
are set out below:
<TABLE>
<CAPTION>
Accumulation Unit Values and Number of Accumulation Units Outstanding for Each Variable Sub-Account*
<S> <C> <C> <C>
SUB-ACCOUNTS Basic Policy** With the Enhanced Beneficiary Protection
Option***
Asia Pacific Growth
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 17.436886 17.419179
Number of Units Outstanding, End of Period 241,341 32,678
Diversified Income
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 9.866141 9.856084
Number of Units Outstanding, End of Period 1,112,113 408,577
The George Putnam Fund of Boston
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 9.299008 9.289512
Number of Units Outstanding, End of Period 2,629,405 487,965
Global Asset Allocation
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 10.69758 10.686682
Number of Units Outstanding, End of Period 216,789 44,565
Global Growth
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 15.664991 15.649055
Number of Units Outstanding, End of Period 809,571 274,617
Growth and Income
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 9.171812 9.162457
Number of Units Outstanding, End of Period 10,446,547 3,225,308
Health Sciences
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 10.596764 10.58596
Number of Units Outstanding, End of Period 1,037,948 293,891
High Yield
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 9.933858 9.923723
Number of Units Outstanding, End of Period 688,505 223,608
Income
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 9.714014 9.7041
Number of Units Outstanding, End of Period 994,313 271,083
International Growth
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 14.427139 14.412463
Number of Units Outstanding, End of Period 1,416,491 429,465
International Growth and Income
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 10.968143 10.956967
Number of Units Outstanding, End of Period 515,493 136,651
International New Opportunities
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 18.134432 18.11602
Number of Units Outstanding, End of Period 389,045 133,941
Investors
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 12.167781 12.155375
Number of Units Outstanding, End of Period 5,517,617 1,309,524
C-1
<PAGE>
SUB-ACCOUNTS Basic Policy** With the Enhanced Beneficiary Protection
Option***
Money Market
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 10.231419 10.220995
Number of Units Outstanding, End of Period 1,261,646 386,731
New Opportunities
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 15.692325 15.676352
Number of Units Outstanding, End of Period 2,351,890 730,176
New Value
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 8.795115 8.786127
Number of Units Outstanding, End of Period 626,817 137,044
OTC & Emerging Growth
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 19.837583 19.817403
Number of Units Outstanding, End of Period 697,007 181,669
Research
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 11.597614 11.585792
Number of Units Outstanding, End of Period 1,575,893 369,070
Small Cap Value
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 10.301654 10.291145
Number of Units Outstanding, End of Period 451,498 140,296
Utilities Growth and Income
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 9.986611 9.976417
Number of Units Outstanding, End of Period 585,124 153,652
Vista
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 14.08793 14.073581
Number of Units Outstanding, End of Period 824,655 202,009
Voyager
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 14.325845 14.311263
Number of Units Outstanding, End of Period 6,006,888 1,752,111
</TABLE>
* No Accumulation Unit Values are shown for the Putnam VT American
Government Income and Growth Opportunities Sub-Accounts, because they were
offered as of February 4, 2000, the Putnam VT Technology Sub-Account, which
was first offered as of July 17, 2000, and the Putnam VT Capital
Appreciation and Voyager II Sub-Accounts, which were first offered as of
October 2, 2000.
** The Accumulation Unit Values in this column reflect a mortality and
expense risk charge of 1.25%.
*** The Accumulation Unit Values in this column reflect a mortality and
expense risk charge of 1.40%.
C-2
<PAGE>
Accumulation Unit Values for the Putnam Allstate Advisor Apex Contracts for the
period October 25, 1999 (date Contracts first offered) through December 31, 1999
are set out below:
<TABLE>
<CAPTION>
Accumulation Unit Values and Number of Accumulation Units Outstanding for Each Variable Sub-Account*
<S> <C> <C> <C>
SUB-ACCOUNTS Basic Policy** With the Enhanced Beneficiary Protection
Option***
Asia Pacific Growth
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 13.36408 13.360614
Number of Units Outstanding, End of Period 1,911 -
Diversified Income
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 10.191844 10.189182
Number of Units Outstanding, End of Period 409 -
The George Putnam Fund of Boston
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 9.777516 9.774957
Number of Units Outstanding, End of Period 2,578 -
Global Asset Allocation
Accumulation Unit Value, Beginning of Period 10.00000 10.00000
Accumulation Unit Value, End of Period 10.650241 10.647465
Number of Units Outstanding, End of Period - -
Global Growth
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 13.563279 13.559763
Number of Units Outstanding, End of Period 1,404 -
Growth and Income
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 9.685588 9.683049
Number of Units Outstanding, End of Period 11,859 1,229
Health Sciences
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 10.628529 10.625756
Number of Units Outstanding, End of Period 4,191 -
High Yield
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 10.379612 10.376902
Number of Units Outstanding, End of Period 691
Income
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 9.946392 9.943792
Number of Units Outstanding, End of Period - -
International Growth
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 12.85899 12.855652
Number of Units Outstanding, End of Period 5,440 -
International Growth and Income
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 10.576858 10.574094
Number of Units Outstanding, End of Period 1,515 -
International New Opportunities
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 14.530054 14.526295
Number of Units Outstanding, End of Period 2,774 -
Investors
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 11.613439 11.610406
Number of Units Outstanding, End of Period 7,389 -
C-3
<PAGE>
SUB-ACCOUNTS Basic Policy** With the Enhanced Beneficiary Protection
Option***
Money Market
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 10.074512 10.07188
Number of Units Outstanding, End of Period 938 -
New Opportunities
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 13.467912 13.464415
Number of Units Outstanding, End of Period 4,105 -
New Value
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 9.707587 9.705049
Number of Units Outstanding, End of Period - -
OTC & Emerging Growth
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 15.156053 15.15214
Number of Units Outstanding, End of Period 312 -
Research
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 11.061395 11.058511
Number of Units Outstanding, End of Period 3,617 808
Small Cap Value
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 10.775309 10.772498
Number of Units Outstanding, End of Period 2,352 -
Utilities Growth and Income
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 9.606396 9.603884
Number of Units Outstanding, End of Period 106 -
Vista
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 13.011521 13.008145
Number of Units Outstanding, End of Period 1,448 -
Voyager
Accumulation Unit Value, Beginning of Period 10.0000 10.00000
Accumulation Unit Value, End of Period 12.949953 12.946585
Number of Units Outstanding, End of Period 9,326 694
* No Accumulation Unit Values are shown for the Putnam VT American Government
Income and Growth Opportunities Sub-Accounts, because they were offered as of
February 4, 2000, the Putnam VT Technology Sub-Account, which was first offered
as of July 17, 2000, and the Putnam VT Capital Appreciation and Voyager II
Sub-Accounts, which were first offered as of October 2, 2000.
** The Accumulation Unit Values in this column reflect a mortality and expense
risk charge of 0.80%.
*** The Accumulation Unit Values in this column reflect a mortality and
expense risk charge of 0.95%.
</TABLE>
C-4
<PAGE>
Appendix D
Putnam Allstate Advisor Contract Comparison Chart
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Feature Advisor Advisor Apex
Sales Load None 5.75% - 0.50% of premiums
Contract Maintenance Charge $30 per year, full amount on surrender None
(waived in certain cases)
Mortality and Expense Risk Charge 1.25% 0.80%
(without optional benefit)
Free Withdrawal Amount greater of earnings not previously None
(each Contract Year) withdrawn, or 15% of purchase payments
Withdrawal Charge (measured from number of Year: 0 1 2 3 4 5 6 7+ Year: 0 1+
complete years since we received the %: 7 7 6 5 4 3 2 0 %: 0.5 0
purchase payment)(as a percentage of (currently only assessed on Contracts that
purchase payments withdrawn in excess of have total purchase payments of at least
the Free Withdrawal Amount) $1,000,000)
Withdrawal Charge Waivers Yes No
</TABLE>
D-1
<PAGE>
THE PUTNAM ALLSTATE ADVISOR CONTRACTS
Allstate Life Insurance Company Statement of Additional Information
3100 Sanders Road dated October 2, 2000
Northbrook, Illinois 60062
1-800-390-1277
This Statement of Additional Information supplements the information in the
prospectus for the following Contracts:
o Putnam Allstate Advisor
o Putnam Allstate Advisor Apex (formerly known as Putnam Allstate Advisor - A)
o Putnam Allstate Advisor Plus
o Putnam Allstate Advisor Preferred
Not all Contracts may be available in all states or through your sales
representative. Please check with your sales representative for details. This
Statement of Additional Information does not constitute an offer of any Contract
in such cases.
This Statement of Additional Information is not a prospectus. You should read it
with the prospectus dated October 2, 2000 for each Contract. You may obtain a
prospectus by calling or writing us at the address or telephone number listed
above.
For convenience, we use the terms "Contract" and "Contracts" to refer generally
to all four Contracts, except as specifically noted. In addition, this Statement
of Additional Information uses the same defined terms as the prospectus for each
Contract that we offer, except as specifically noted.
<PAGE>
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments
The Contracts
Performance Information
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
General Matters
Federal Tax Matters
Qualified Plans
Experts
Financial Statements
Appendix A A-1
Appendix B B-1
Appendix C C-1
Appendix D D-1
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
--------------------------------------------------------------------------------
We may add, delete, or substitute the Fund shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any Fund
with those of another Fund of the same or different mutual fund if the shares of
the Fund are no longer available for investment, or if we believe investment in
any Fund would become inappropriate in view of the purposes of the Variable
Account.
We will not substitute shares attributable to a Contract Owner's interest in a
Variable Sub-Account until we have notified the Contract Owner of the change,
and until the SEC has approved the change, to the extent such notification and
approval are required by law. Nothing contained in this Statement of Additional
Information shall prevent the Variable Account from purchasing other securities
for other series or classes of contracts, or from effecting a conversion between
series or classes of contracts on the basis of requests made by Contract Owners.
We also may establish additional Variable Sub-Accounts or series of Variable
Sub-Accounts. Each additional Variable Sub-Account would purchase shares in a
new Fund of the same or different mutual fund. We may establish new Variable
Sub-Accounts when we believe marketing needs or investment conditions warrant.
We determine the basis on which we will offer any new Variable Sub-Accounts in
conjunction with the Contract to existing Contract Owners. We may eliminate one
or more Variable Sub-Accounts if, in our sole discretion, marketing, tax or
investment conditions so warrant.
We may, by appropriate endorsement, change the Contract as we believe necessary
or appropriate to reflect any substitution or change in the Funds. If we believe
the best interests of persons having voting rights under the Contracts would be
served, we may operate the Variable Account as a management company under the
Investment Company Act of 1940 or we may withdraw its registration under such
Act if such registration is no longer required.
THE CONTRACTS
--------------------------------------------------------------------------------
The Contracts are primarily designed to aid individuals in long-term financial
planning. You can use them for retirement planning regardless of whether the
retirement plan qualifies for special federal income tax treatment.
PURCHASE OF CONTRACTS
We offer the Contracts to the public through banks as well as brokers licensed
under the federal securities laws and state insurance laws. ALFS, Inc. (formerly
known as Allstate Life Financial Services, Inc.) ("ALFS"), an affiliate of
Allstate, will serve as the principal underwriter for the Variable Account and
distribute the Contracts until May 1, 2000. Commission income of ALFS for the
last fiscal year is $61,588,893. Beginning May 1, 2000, Allstate Distributors,
L.L.C. ("Allstate Distributors"), a broker-dealer jointly owned by Allstate and
Putnam Investments, will serve as the principal underwriter for the Variable
Account and distribute the Contracts. The offering of the Contracts is
continuous. We do not anticipate discontinuing the offering of the Contracts,
but we reserve the right to do so at any time.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract Owner
contemplating any such exchange, rollover or transfer of a Contract should
contact a competent tax adviser with respect to the potential effects of such a
transaction.
<PAGE>
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
From time to time we may advertise the "standardized," "non-standardized," and
"adjusted historical" total returns of the Variable Sub-Accounts, as described
below. Please remember that past performance is not an estimate or guarantee of
future performance and does not necessarily represent the actual experience of
amounts invested by a particular Contract Owner. Also please note that the
performance figures shown do not reflect any applicable taxes.
STANDARDIZED TOTAL RETURNS
A Variable Sub-Account's standardized total return represents the average annual
total return of that Sub-Account over a particular period. We compute
standardized total return by finding the annual percentage rate that, when
compounded annually, will accumulate a hypothetical $1,000 purchase payment to
the redeemable value at the end of the one, five or ten year period, or for a
period from the date of commencement of the Variable Sub-Account's operations,
if shorter than any of the foregoing. We use the following formula prescribed by
the SEC for computing standardized total return:
1000(1 + T)n = ERV
where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000 payment
(plus $40 credit thereon for Putnam Allstate Advisor Plus
Contracts only) made at the beginning of 1, 5, or 10 year
periods or shorter period
n = number of years in the period
1000 = hypothetical $1,000 investment (plus $40 credit thereon
for Putnam Allstate Advisor Plus Contracts only)
When factoring in the withdrawal charge assessed upon redemption, we exclude the
Free Withdrawal Amount, which is the amount you can withdraw from the Contract
without paying a withdrawal charge. (The Free Withdrawal Amount is not
applicable with the Putnam Allstate Advisor Apex and Putnam Allstate Advisor
Preferred Contracts.) We also use the withdrawal charge that would apply upon
redemption at the end of each period. Thus, for example, when factoring in the
withdrawal charge for a one year standardized total return calculation, we would
use the withdrawal charge that applies to a withdrawal of a purchase payment
made one year prior. For Putnam Allstate Advisor Apex Contracts, we also assume
that the maximum sales charge of 5.75% is deducted from the initial $1,000
payment.
When factoring the contract maintenance charge (only applicable to the Putnam
Allstate Advisor Contract), we pro rate the charge by dividing (a) the contract
maintenance charge by (b) an assumed contract size of $45,000. We then multiply
the resulting percentage by a hypothetical $1,000 investment.
When factoring the charge for the optional Retirement Income Guarantee Rider 2,
we assume that Income Base B applies and that there are no additional purchase
payments or withdrawals.
The standardized total returns for the Variable Sub-Accounts, for the periods
ended December 31, 1999, are set out in Appendices A through D to this Statement
of Additional Information. The Putnam Allstate Advisor Apex, Putnam Allstate
Advisor Plus, and Putnam Allstate Advisor Preferred Contracts were first offered
to the public on October 25, 1999, February 4, 2000, and April 28, 2000,
respectively. Accordingly, performance shown for periods prior to those dates
reflects the performance of the Variable Sub-Accounts, adjusted to reflect the
current charges under the Contracts that would have applied had they been in
existence at the time.
<PAGE>
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote rates of return that reflect changes in the
values of each Variable Sub-Account's accumulation units. We may quote these
"non-standardized total returns" on an annualized, cumulative, year-by-year, or
other basis. These rates of return take into account asset-based charges, such
as the mortality and expense risk charge and administration charge. However,
these rates of return do not reflect withdrawal charges or the contract
maintenance charge under the Putnam Allstate Advisor Contracts. Such charges, if
reflected, would reduce the performance shown. Non-standardized total returns
also do not take into account the amount of any applicable Credit Enhancement
under the Putnam Allstate Advisor Plus Contracts. When factoring the charge for
the optional Retirement Income Guarantee Rider 2, we assume that Income Base B
applies and that there are no additional purchase payments or withdrawals.
Annualized returns reflect the rate of return that, when compounded annually,
would equal the cumulative rate of return for the period shown. We compute
annualized returns according to the following formula:
Annualized Return = (1 + r)1/n -1
Where:
r = cumulative rate of return for the period shown,
and:
n = number of years in the period.
The method of computing annualized rates of return is similar to that for
computing standardized performance, described above, except that rather than
using a hypothetical $1,000 investment and the ending redeemable value thereof,
we use the changes in value of an accumulation unit.
Cumulative rates of return reflect the cumulative change in value of an
accumulation unit over the period shown. Year-by-year rates of return reflect
the change in value of an accumulation unit during the course of each year
shown. We compute these returns by dividing the accumulation unit value at the
end of each period shown, by the accumulation unit value at the beginning of
that period, and subtracting one. We compute other total returns on a similar
basis.
We may quote non-standardized total returns for 1, 3, 5 and 10 year periods, or
period since inception of the Variable Sub-Account's operations, as well as
other periods, such as "year-to-date" (prior calendar year end to the day stated
in the advertisement); "year to most recent quarter" (prior calendar year end to
the end of the most recent quarter); the prior calendar year; and the "n" most
recent calendar years.
The non-standardized total returns for the Variable Sub-Accounts, for the
periods ended December 31, 1999, are set out in Appendices A through D to this
Statement of Additional Information. The Putnam Allstate Advisor Apex, Putnam
Allstate Advisor Plus, and Putnam Allstate Advisor Preferred Contracts were
first offered to the public on October 25, 1999, February 4, 2000, and April 28,
2000, respectively. Accordingly, performance shown for periods prior to those
dates reflects the performance of the Variable Sub-Accounts, adjusted to reflect
the current charges under the Contracts that would have applied had they been in
existence at the time.
ADJUSTED HISTORICAL TOTAL RETURNS
We may advertise the total return for periods prior to the date that the
Variable Sub-Accounts commenced operations. We calculate such "adjusted
historical total returns" using the same method that we use to compute
standardized total returns, except that instead of using the Variable
Sub-Account inception dates, we use the inception dates of the underlying Funds
and adjust such performance to reflect the current level of charges that apply
to the Variable Sub-Accounts under each Contract.
The adjusted historical total returns for the Variable Sub-Accounts, for the
periods ended December 31, 1999, for each Contract are set out in Appendices A
through D to this Statement of Additional Information.
<PAGE>
CALCULATION OF ACCUMULATION UNIT VALUES
-------------------------------------------------------------------------------
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Fund shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m. Central Time).
The Accumulation Unit Value of a Variable Sub-Account for any Valuation Period
equals the Accumulation Unit Value as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor (described below) for that
Sub-Account for the current Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor for a Valuation Period is a number representing the
change, since the last Valuation Period, in the value of Variable Sub-Account
assets per Accumulation Unit due to investment income, realized or unrealized
capital gain or loss, deductions for taxes, if any, and deductions for the
mortality and expense risk charge and administrative expense charge. We
determine the Net Investment Factor for each Variable Sub-Account for any
Valuation Period by dividing (A) by (B) and subtracting (C) from the result,
where:
(A) is the sum of:
(1) the net asset value per share of the Fund underlying the Variable
Sub-Account determined at the end of the current Valuation Period; plus,
(2) the per share amount of any dividend or capital gain distributions made
by the Fund underlying the Variable Sub-Account during the current
Valuation Period;
(B) is the net asset value per share of the Fund underlying the Variable
Sub-Account determined as of the end of the immediately preceding Valuation
Period; and
(C) is the mortality and expense risk charge corresponding to the portion of the
current calendar year that is in the current Valuation Period.
CALCULATION OF VARIABLE INCOME PAYMENTS
--------------------------------------------------------------------------------
We calculate the amount of the first variable income payment under an Income
Plan by applying the Contract Value allocated to each Variable Sub-Account less
any applicable premium tax charge deducted at the time, to the income payment
tables in the Contract. We divide the amount of the first variable annuity
income payment by the Variable Sub-Account's then current Annuity Unit value to
determine the number of annuity units ("Annuity Units") upon which later income
payments will be based. To determine income payments after the first, we simply
multiply the number of Annuity Units determined in this manner for each Variable
Sub-Account by the then current Annuity Unit value ("Annuity Unit Value") for
that Variable Sub-Account.
CALCULATION OF ANNUITY UNIT VALUES
Annuity Units in each Variable Sub-Account are valued separately and Annuity
Unit Values will depend upon the investment experience of the particular Fund in
which the Variable Sub-Account invests. We calculate the Annuity Unit Value for
each Variable Sub-Account at the end of any Valuation Period by:
o multiplying the Annuity Unit Value at the end of the immediately preceding
Valuation Period by the Variable Sub-Account's Net Investment Factor
(described in the preceding section) for the Period; and then
o dividing the product by the sum of 1.0 plus the assumed investment rate for
the Valuation Period.
The assumed investment rate adjusts for the interest rate assumed in the income
payment tables used to determine the dollar amount of the first variable income
payment, and is at an effective annual rate which is disclosed in the Contract.
We determine the amount of the first variable income payment paid under an
Income Plan using the income payment tables set out in the Contracts. The
Contracts include tables that differentiate on the basis of sex, except in
states or tax qualified plans that require the use of unisex tables.
<PAGE>
GENERAL MATTERS
--------------------------------------------------------------------------------
INCONTESTABILITY
We will not contest the Contract after we issue it.
SETTLEMENTS
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract Owner(s) death (or Annuitant's death if there is a
non-natural Contract Owner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the Fund shares held by
each of the Variable Sub-Accounts.
The Funds do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the Funds'
prospectuses for a more complete description of the custodian of the Funds.
PREMIUM TAXES
Applicable premium tax rates depend on the Contract Owner's state of residency
and the insurance laws and our status in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations, or judicial acts.
TAX RESERVES
We do not establish capital gains tax reserves for any Variable Sub-Account nor
do we deduct charges for tax reserves because we believe that capital gains
attributable to the Variable Account will not be taxable. However, we reserve
the right to deduct charges to establish tax reserves for potential taxes on
realized or unrealized capital gains.
<PAGE>
FEDERAL TAX MATTERS
-------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. WE MAKE
NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION
INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on the individual circumstances
of each person. If you are concerned about any tax consequences with regard to
your individual circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY
Allstate is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. Since the Variable Account is not an entity separate
from Allstate, and its operations form a part of Allstate, it will not be taxed
separately as a "Regulated Investment Company" under Subchapter M of the Code.
Investment income and realized capital gains of the Variable Account are
automatically applied to increase reserves under the Contract. Under existing
federal income tax law, Allstate believes that the Variable Account investment
income and capital gains will not be taxed to the extent that such income and
gains are applied to increase the reserves under the Contract. Accordingly,
Allstate does not anticipate that it will incur any federal income tax liability
attributable to the Variable Account, and therefore Allstate does not intend to
make provisions for any such taxes. If Allstate is taxed on investment income or
capital gains of the Variable Account, then Allstate may impose a charge against
the Variable Account in order to make provision for such taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that annuity contracts held by
a non-natural owner are not treated as annuity contracts for federal income tax
purposes. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity which holds the Contract as agent for a
natural person. However, this special exception will not apply in the case of an
employer who is the nominal owner of an annuity contract under a non-qualified
deferred compensation arrangement for its employees. Other exceptions to the
non-natural owner rule are: (1) Contracts acquired by an estate of a decedent by
reason of the death of the decedent; (2) certain Qualified Contracts; (3)
Contracts purchased by employers upon the termination of certain qualified
plans; (4) certain Contracts used in connection with structured settlement
agreements, and (5) Contracts purchased with a single premium when the annuity
starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax purposes,
the Contract must provide: (1) if any Contract Owner dies on or after the Payout
Start Date but before the entire interest in the Contract has been distributed,
the remaining portion of such interest must be distributed at least as rapidly
as under the method of distribution being used as of the date of the Owner's
death; (2) if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date of
the Owner's death. These requirements are satisfied if any portion of the
Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or over
a period not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Owner's death. If the Contract Owner's
designated Beneficiary is the surviving spouse of the Owner, the Contract may be
continued with the surviving spouse as the new Contract Owner. If the Contract
Owner is a non-natural person, then the Annuitant will be treated as the
Contract Owner for purposes of applying the distribution at death rules. In
addition, a change in the Annuitant on a Contract owned by a non-natural person
will be treated as the death of the Contract Owner.
<PAGE>
QUALIFIED PLANS
-------------------------------------------------------------------------------
The Contract may be used with several types of qualified plans. Allstate
reserves the right to limit the availability of the Contract for use with any of
the Qualified Plans listed below. The tax rules applicable to participants in
such qualified plans vary according to the type of plan and the terms and
conditions of the plan itself. Adverse tax consequences may result from excess
contributions, premature distributions, distributions that do not conform to
specified commencement and minimum distribution rules, excess distributions and
in other circumstances. Contract Owners and participants under the plan and
Annuitants and Beneficiaries under the Contract may be subject to the terms and
conditions of the plan regardless of the terms of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity. An IRA generally may
not provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid and the Contract's Cash Value. The Contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the Contract Value. It is possible that the death benefit could
be viewed as violating the prohibition on investment in life insurance contracts
with the result that the Contract would not be viewed as satisfying the
requirements of an IRA.
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth Individual
Retirement Annuity. Roth Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. "Qualified distributions" from Roth Individual
Retirement Annuities are not includible in gross income. "Qualified
distributions" are any distributions made more than five taxable years after the
taxable year of the first contribution to the Roth Individual Retirement
Annuity, and which are made on or after the date the individual attains age 59
1/2, made to a beneficiary after the owner's death, attributable to the owner
being disabled or for a first time home purchase (first time home purchases are
subject to a lifetime limit of $10,000). "Nonqualified distributions" are
treated as made from contributions first and are includible in gross income to
the extent such distributions exceed the contributions made to the Roth
Individual Retirement Annuity. The taxable portion of a "nonqualified
distribution" may be subject to the 10% penalty tax on premature distributions.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The taxable portion of a conversion or rollover distribution is
includible in gross income, but is exempted from the 10% penalty tax on
premature distributions. SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified employee
pension plans for their employees using the employees' individual retirement
annuities if certain criteria are met. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to their individual retirement annuities. Employers intending to use
the Contract in connection with such plans should seek competent advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS)
Sections 408(p) and 401(k) of the Code allow employers with 100 or fewer
employees to establish SIMPLE retirement plans for their employees. SIMPLE plans
may be structured as a SIMPLE retirement account using an employee's IRA to hold
the assets or as a Section 401(k) qualified cash or deferred arrangement. In
general, a SIMPLE plan consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to use the Contract in conjunction with SIMPLE plans should seek
competent tax and legal advice.
<PAGE>
TAX SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees of
certain types of tax-exempt organizations (specified in Section 501(c)(3) of the
Code) to have their employers purchase annuity contracts for them, and subject
to certain limitations, to exclude the purchase payments from the employees'
gross income. An annuity contract used for a Section 403(b) plan must provide
that distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee attains age 59 1/2, separates from service,
dies, becomes disabled or on the account of hardship (earnings on salary
reduction contributions may not be distributed for hardship). These limitations
do not apply to withdrawals where Allstate is directed to transfer some or all
of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of tax favored retirement plans for employees. The Self-Employed
Individuals Retirement Act of 1962, as amended, (commonly referred to as "H.R.
10" or "Keogh") permits self-employed individuals to establish tax favored
retirement plans for themselves and their employees. Such retirement plans may
permit the purchase of annuity contracts in order to provide benefits under the
plans.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION
DEFERRED COMPENSATION PLANS
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. To the extent the Contracts are used in connection with an
eligible plan, employees are considered general creditors of the employer and
the employer as owner of the Contract has the sole right to the proceeds of the
Contract. Generally, under the non-natural owner rules, such Contracts are not
treated as annuity contracts for federal income tax purposes. Under these plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. However, under a
Section 457 plan all the compensation deferred under the plan must remain solely
the property of the employer, subject only to the claims of the employer's
general creditors, until such time as made available to the employee or a
beneficiary.
<PAGE>
EXPERTS
-------------------------------------------------------------------------------
The consolidated financial statements of Allstate as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999 and
related financial statement schedules that appear in this Statement of
Additional Information 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 two years then ended that appear in this Statement of
Additional Information 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.
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The financial statements of the Variable Account, the financial statements of
Allstate and the related financial statement schedules and the accompanying
Independent Auditors' Reports appear in the pages that follow. The
financial statements and schedules of Allstate included herein should
be considered only as bearing upon the ability of Allstate to meet its
obligations under the Contacts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
ALLSTATE LIFE INSURANCE COMPANY:
We have audited the accompanying Consolidated Statements of Financial Position
of Allstate Life Insurance Company and subsidiaries (the "Company", an affiliate
of The Allstate Corporation) as of December 31, 1999 and 1998, and the related
Consolidated Statements of Operations, 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 I - Summary of Investments
other than Investments in Related Parties, Schedule III - Supplementary
Insurance Information, Schedule IV - Reinsurance, and Schedule V - Valuation
Allowance and Qualifying Accounts. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Allstate Life Insurance Company and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their 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 I - Summary of Investments other than Investments
in Related Parties, Schedule III - Supplementary Insurance Information, Schedule
IV - Reinsurance, and Schedule V - Valuation Allowance and Qualifying Accounts,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2000
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Life and annuity premiums (net of reinsurance ceded of $241,
$178 and $194) $ 838 $ 889 $ 955
Life and annuity contract charges 723 630 547
Property-liability insurance premiums (net of reinsurance
ceded of $3, $1 and $3) 289 268 275
Net investment income 2,265 2,139 2,118
Realized capital gains and losses 195 332 192
------ ------ -------
4,310 4,258 4,087
------ ------ -------
COSTS AND EXPENSES
Life and annuity contract benefits (net of reinsurance
recoveries of $161, $52 and $75) 1,251 1,225 1,239
Interest credited to contractholders' funds 1,260 1,190 1,167
Property-liability insurance claims and claims expense (net
of reinsurance recoveries of $36, $14 and $4) 222 195 179
Amortization of deferred policy acquisition costs 409 412 333
Operating costs and expenses 387 370 368
------ ------ -------
3,529 3,392 3,286
------ ------ -------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE 781 866 801
Income tax expense 270 310 284
------ ------ -------
NET INCOME $ 511 $ 556 $ 517
====== ====== =======
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
--------------------------------------------------------------------------------
($ IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
NET INCOME $ 511 $556 $517
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER-TAX
Changes in:
Unrealized net capital gains and losses (644) 73 250
Unrealized foreign currency translation adjustments 7 1 (8)
----- ---- ----
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER-TAX (637) 74 242
----- ---- ----
Comprehensive (loss) income $(126) $630 $759
===== ==== ====
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
--------------------------------------------------------------------------------
($ IN MILLIONS EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value (amortized
cost $27,354 and $24,630) $ 27,523 $ 26,858
Mortgage loans 3,801 3,285
Equity securities, at fair value (cost $503 and
$446) 743 748
Short-term 711 742
Policy loans 606 569
Other 25 26
------------ ------------
Total investments 33,409 32,228
Cash 71 109
Deferred policy acquisition costs 2,695 2,195
Reinsurance recoverables 495 254
Accrued investment income 394 360
Other assets 252 296
Separate Accounts 13,857 10,098
------------ ------------
TOTAL ASSETS $ 51,173 $ 45,540
============ ============
LIABILITIES
Contractholder funds $ 23,995 $ 21,133
Reserve for life-contingent contract benefits 7,148 7,601
Reserve for property-liability insurance claims and
claims expense 368 313
Unearned premiums 155 152
Payable to affiliates, net 51 59
Other liabilities and accrued expenses 854 940
Deferred income taxes 171 452
Separate Accounts 13,857 10,098
------------ ------------
TOTAL LIABILITIES 46,599 40,748
------------ ------------
COMMITMENTS AND CONTINGENT LIABILITIES(NOTE 10)
SHAREHOLDER'S EQUITY
Redeemable preferred stock - series A, $100 par
value, 1,500,000 shares authorized, 663,650 and
579,990 shares issued and outstanding 66 58
Redeemable preferred stock - series B, $100 par
value, 1,500,000 shares authorized, 1,170,000
shares issued and outstanding 117 117
Common stock, $227 and $214 par value, 23,800 and
22,700 shares authorized, issued and outstanding 5 5
Additional capital paid-in 617 617
Retained income 3,565 3,154
Accumulated other comprehensive income:
Unrealized net capital gains 220 864
Unrealized foreign currency translation
adjustments (16) (23)
------------ ------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 204 841
------------ ------------
TOTAL SHAREHOLDER'S EQUITY 4,574 4,792
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 51,173 $ 45,540
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
--------------------------------------------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
REDEEMABLE PREFERRED STOCK - SERIES A
Balance, beginning of year $ 58 $ 45 $ 32
Issuance of shares 8 13 13
------ ------ ------
Balance, end of year 66 58 45
------ ------ ------
REDEEMABLE PREFERRED STOCK - SERIES B
Balance, beginning of year $ 117 $ 117 $ 117
Issuance of shares - - -
------ ------ ------
Balance, end of year 117 117 117
------ ------ ------
COMMON STOCK
Balance, beginning of year $ 5 $ 4 $ 2
Issuance of shares - - 1
Adjustment to par value - 1 1
------ ------ ------
Balance, end of year 5 5 4
------ ------ ------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year $ 617 $ 618 $ 619
Adjustment to par value - (1) (1)
------ ------ ------
Balance, end of year 617 617 618
------ ------ ------
RETAINED INCOME
Balance, beginning of year $3,154 $2,706 $2,322
Net income 511 556 517
Dividends (100) (108) (133)
------ ------ ------
Balance, end of year 3,565 3,154 2,706
------ ------ ------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 841 $ 767 $ 525
Change in unrealized net capital gains and losses (644) 73 250
Change in unrealized foreign currency translation
adjustments 7 1 (8)
------ ------ ------
Balance, end of year 204 841 767
------ ------ ------
Total shareholder's equity $4,574 $4,792 $4,257
====== ====== ======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
($ IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 511 $ 556 $ 517
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization and other non-cash items (145) (118) (105)
Realized capital gains and losses (195) (332) (192)
Interest credited to contractholder funds 1,260 1,190 1,167
Changes in:
Policy benefit and other insurance reserves (3) (55) (55)
Unearned premiums 3 (11) (45)
Deferred policy acquisition costs (267) (252) (236)
Reinsurance recoverables (78) (39) (16)
Income taxes payable 73 27 38
Other operating assets and liabilities (91) 117 (36)
-------- ------- -------
Net cash provided by operating activities 1,068 1,083 1,037
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales
Fixed income securities 4,832 2,495 2,293
Equity securities 1,070 765 697
Real estate - 309 -
Investment collections
Fixed income securities 2,928 2,984 3,056
Mortgage loans 392 432 598
Investment purchases
Fixed income securities (10,261) (6,216) (6,267)
Equity securities (953) (529) (607)
Mortgage loans (906) (780) (409)
Change in short-term investments, net 10 (330) 172
Change in other investments, net (36) (95) 35
-------- ------- -------
Net cash used in investing activities (2,924) (965) (432)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of redeemable preferred stock 8 13 13
Contractholder fund deposits 5,594 3,275 2,657
Contractholder fund withdrawals (3,684) (3,306) (3,076)
Dividends paid (100) (108) (133)
-------- ------- -------
Net cash provided by (used in) financing activities 1,818 (126) (539)
-------- ------- -------
NET (DECREASE) INCREASE IN CASH (38) (8) 66
CASH AT BEGINNING OF YEAR 109 117 51
-------- ------- -------
CASH AT END OF YEAR $ 71 $ 109 $ 117
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. GENERAL
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Allstate Life Insurance Company ("ALIC") and its wholly owned subsidiaries
(collectively referred to as the "Company"). ALIC is wholly owned by
Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The
Allstate Corporation (the "Corporation"). These consolidated financial
statements have been prepared in conformity with generally accepted
accounting principles. All significant intercompany accounts and
transactions have been eliminated.
NATURE OF OPERATIONS
The Company is engaged principally in the life and savings business in the
United States. The Company owns a subsidiary, Allstate Insurance Company of
Canada ("AICC"), which operates in Canada and sells property-liability
insurance.
The Company's life and savings ("Life and Savings") segment markets a broad
line of life insurance and savings products countrywide, accounting for
approximately 97% of the Company's 1999 statutory premiums and deposits.
Statutory premiums and deposits are determined in accordance with accounting
principles prescribed or permitted by the insurance department of the
applicable domiciliary state and include premiums and deposits for all
products. Life insurance consists of traditional products, including term
and whole life, interest-sensitive life, immediate annuities with life
contingencies, variable life and indexed life insurance. Savings products
include deferred annuities and immediate annuities without life
contingencies. Deferred annuities include fixed rate, market value adjusted,
indexed and variable annuities. Group pension savings products include
contracts with fixed or indexed rates and fixed terms, such as guaranteed
investment contracts and funding agreements, and deferred and immediate
annuities also referred to as retirement annuities. In 1999, annuity
premiums and deposits represented approximately 79% of Life and Savings
total statutory premiums and deposits.
The Company is authorized to sell life and savings products in all 50
states, the District of Columbia and Puerto Rico. The Company is also
authorized to sell certain insurance products in various foreign countries.
The top geographic locations in the United States for statutory premiums and
deposits for the Life and Savings segment were California, Florida,
Illinois, and Pennsylvania for the year ended December 31, 1999. No other
jurisdiction accounted for more than 5% of statutory premiums and deposits
for Life and Savings. The Company distributes its life and savings products
using Allstate agents, which include life specialists and financial
advisors, as well as banks, independent agents, securities firms and through
direct response methods. 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 Life and Savings sales.
The Company's property-liability ("Property-Liability") segment is
principally engaged in private passenger auto and homeowners insurance in
Canada, writing approximately 3% of the Company's total 1999 statutory
premiums. Statutory premiums are determined in accordance with accounting
principles prescribed or permitted by the insurance department of the
applicable domiciliary province.
The Company distributes property-liability products in Canada. The top
provinces for statutory premiums earned by the Property-Liability segment
were Ontario, Quebec, Alberta, and New Brunswick for the year ended
December 31, 1999. No other province accounted for more than 5% of statutory
premiums earned for Property-Liability. The Company distributes
property-liability products through Allstate agents, primarily employee
agents, but also utilizes independent agents and specialized brokers to
expand market reach.
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 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.
7
<PAGE>
Additionally, traditional demutualization 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds, mortgage-backed and asset-backed
securities, and redeemable preferred stocks. All fixed income securities are
carried at fair value and may be sold prior to their contractual maturity
("available for sale"). The difference between the amortized cost and fair
value, net of deferred income taxes, certain life and annuity deferred
policy acquisition costs, and certain reserves for life-contingent contract
benefits, 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.
Mortgage loans are carried at outstanding principal balance, net of
unamortized premium or discount and valuation allowances. Valuation
allowances are established for impaired loans when it is probable that
contractual principal and interest will not be collected. Valuation
allowances for impaired loans reduce the carrying value to the fair value of
the collateral or the present value of the loan's expected future repayment
cash flows, discounted at the loan's original effective interest rate.
Valuation allowances on loans not considered to be impaired are established
based on consideration of the underlying collateral, borrower financial
strength, current and expected market conditions, and other factors.
Equity securities include common and non-redeemable preferred stocks and
real estate investment trusts which are carried at fair value and limited
partnerships which are recorded based on the equity method. The difference
between cost and fair value of equity securities, less deferred income
taxes, is reflected as a component of shareholder's equity.
Short-term investments are carried at cost or amortized cost, which
approximates fair value, and includes collateral received in connection with
securities lending activities.
Policy loans are carried at unpaid principal balances. Other investments
consist primarily of real estate investments, which are accounted for by the
equity method if held for investment, or depreciated cost, net of valuation
allowances, if the Company has an active plan to sell.
Investment income consists primarily of interest, dividends, and gains and
losses for certain derivative transactions. Interest is recognized on an
accrual basis and dividends are recorded at the ex-dividend date. Interest
income on mortgage-backed and asset-backed securities is determined on the
effective yield method, based on estimated principal repayments. Accrual of
income is suspended for fixed income securities and mortgage loans 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.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments include swaps, futures, forwards, and
options, including caps and floors. When derivatives meet specific criteria
they may be designated as accounting hedges and accounted for on either a
fair value, deferral, or accrual basis, depending upon the nature of the
hedge strategy, the method used to account for the hedged item and the
derivative used. Derivatives that are not designated as accounting hedges
are accounted for on a fair value basis.
If, subsequent to entering into a hedge transaction, the derivative becomes
ineffective (including if the hedged item is sold or otherwise extinguished
or the occurrence of a hedged anticipatory transaction is no longer
probable), the Company terminates the derivative position. Gains and losses
on these terminations are reported in realized capital gains and losses in
the period they occur. The Company may also terminate derivatives as a
result of other events or circumstances. Gains and losses on these
terminations are deferred and amortized over the remaining life of either
the hedge or the hedged item, whichever is shorter.
FAIR VALUE ACCOUNTING Under fair value accounting, realized and unrealized
gains and losses on derivatives are recognized in either earnings or
shareholder's equity when they occur.
The Company accounts for certain of its interest rate swaps, equity-indexed
options, equity-indexed futures, and foreign currency swaps and forwards as
hedges on a fair value basis when specific criteria are met. For swaps or
options, the derivative must reduce the primary market risk exposure (e.g.,
interest rate risk, equity price risk or foreign currency risk) of the
hedged item in conjunction with the specific hedge strategy; be designated
as a hedge at the inception of the
8
<PAGE>
transaction; and have a notional amount and term that does not exceed the
carrying value and expected maturity, respectively, of the hedged item. In
addition, options must have a reference index (e.g., S&P 500) that is the
same as, or highly correlated with, the reference index of the hedged item.
For futures or forward contracts, the derivative must reduce the primary
market risk exposure on an enterprise or transaction basis in conjunction
with the hedge strategy; be designated as a hedge at the inception of the
transaction; and be highly correlated with the fair value of, or interest
income or expense associated with, the hedged item at inception and
throughout the hedge period.
For such interest rate swaps, equity-indexed options, foreign currency
swaps, and forwards, changes in fair value are reported net of tax in
shareholder's equity, exclusive of interest accruals. Changes in fair value
of certain equity-indexed options are reflected as an adjustment of the
hedged item. Accrued interest receivable and payable on swaps are reported
in net investment income. Premiums paid for certain equity-indexed options
are reported as equity securities and amortized to net investment income
over the lives of the agreements.
The Company also has certain derivatives which are used for risk management
purposes for which hedge accounting is not applied and are therefore
accounted for on a fair value basis. These derivatives primarily consist of
equity-indexed instruments and certain interest rate futures. Based upon
certain interest rate or equity price risk reduction strategies, gains and
losses on these derivatives are recognized in net investment income,
realized gains or losses or interest credited to contractholders' balances
during the period on a current basis.
DEFERRAL ACCOUNTING Under deferral accounting, gains and losses on
derivatives are deferred and recognized in earnings in conjunction with
earnings on the hedged item. The Company accounts for interest rate futures
and certain foreign currency forwards as hedges using deferral accounting
for anticipatory investment purchases, sales and capital infusions, when the
criteria for futures and forwards (discussed above) are met. In addition,
anticipated transactions must be probable of occurrence and their
significant terms and characteristics identified.
Changes in fair values of these derivatives are initially deferred and
reported as other liabilities and accrued expenses. Once the anticipated
transaction occurs, the deferred gains or losses are considered part of the
cost basis of the asset and reported net of tax in shareholder's equity or
recognized as a gain or loss from disposition of the asset, as appropriate.
The Company reports initial margin deposits on futures in short-term
investments. Fees and commissions paid on these derivatives are also
deferred as an adjustment to the carrying value of the hedged item.
ACCRUAL ACCOUNTING Under accrual accounting, interest income or expense
related to the derivative is accrued and recorded as an adjustment to the
interest income or expense on the hedged item. The Company accounts for
certain interest rate swaps, caps and floors, and certain foreign currency
swaps as hedges on an accrual basis when the criteria for swaps or options
(discussed above) are met.
Premiums paid for interest rate caps and floors are reported as investments
and amortized to net investment income over the lives of the agreements.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS, AND INTEREST CREDITED
Traditional life insurance products consist principally of products with
fixed and guaranteed premiums and benefits, primarily term and whole life
insurance products. Premiums from these products are recognized as revenue
when due. Benefits are recognized in relation to such revenue so as to
result in the recognition of profits over the life of the policy and are
reflected in contract benefits.
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. Life and annuity contract charges consist 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.
Immediate annuities with life contingencies and single premium life
insurance products are limited payment contracts, as these contracts provide
insurance protection over a period that extends beyond the period during
which premiums are collected. Gross premiums in excess of the net premium on
limited payment contracts are deferred and recognized over the contract
period. Contract benefits are recognized in relation to such revenue so as
to result in the recognition of profits over the life of the policy.
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, immediate
annuities without life contingencies, certain guaranteed investment
contracts and funding agreements are considered investment
9
<PAGE>
contracts. Deposits received for such contracts are reported as deposits to
contractholder funds. Life and annuity contract charges for investment
contracts consist 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 annuities and interest sensitive life
contracts are adjusted periodically by the Company to reflect current market
conditions. Crediting rates for indexed annuities and indexed life products
are based on an interest rate index, such as LIBOR or an equity index, such
as the S&P 500.
Investment contracts also include variable annuity, variable life and
certain guaranteed investment 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. Life and annuity
contract charges for these contracts consist of charges assessed against the
Separate Accounts fund balances for contract maintenance, administration,
mortality, expense and surrenders.
Property-liability premiums written are deferred and earned on a pro rata
basis over the terms of the policies. The portion of premiums written
applicable to the unexpired terms of the policies is recorded as unearned
premiums. Claims and claims expense for property-liability include paid
losses and changes in claim reserves.
DEFERRED POLICY ACQUISITION COSTS
Certain costs which vary with and are primarily related to acquiring life
and savings business, principally agents' and brokers' remuneration, premium
taxes, certain underwriting costs and direct mail solicitation expenses, are
deferred and amortized into income. Deferred policy acquisition costs are
periodically reviewed as to recoverability and written down where necessary.
For traditional life insurance and limited payment contracts, these costs
are amortized in proportion to the estimated revenue on such business.
Assumptions relating to estimated revenue, as well as to all other aspects
of the deferred acquisition costs and reserve calculations, are determined
based upon conditions as of the date of policy issue and are generally not
revised during the life of the policy. Any deviations from projected
business inforce, resulting from actual policy terminations differing from
expected levels, and any estimated premium deficiencies change the rate of
amortization in the period such events occur. Generally, the amortization
period for these contracts approximates the estimated lives of the policies.
For interest-sensitive life and investment contracts, these costs are
amortized in proportion to the estimated gross profits on such business over
the estimated lives of the contract periods. Gross profits are determined at
the date of policy issue and comprise estimated investment, mortality,
expense margins and surrender charges. Assumptions underlying the gross
profits are periodically updated to reflect actual experience, and changes
in the amount or timing of estimated gross profits will result in
adjustments to the cumulative amortization of these costs.
The present value of future profits inherent in acquired blocks of insurance
is classified as a component of deferred policy acquisition costs. The
present value of future profits is amortized over the life of the blocks of
insurance using current crediting rates.
To the extent unrealized gains or losses on fixed income securities carried
at fair value would result in an adjustment of estimated gross profits had
those gains or losses actually been realized, the related unamortized
deferred acquisition costs, including the present value of future profits,
are adjusted together with unrealized net capital gains included in
shareholder's equity.
Certain costs which vary with and are primarily related to acquiring
property-liability insurance business, principally agents' remuneration,
premium taxes and inspection costs, are deferred and amortized to income as
premiums are earned. Future investment income is considered in determining
the recoverability of deferred policy acquisition costs.
REINSURANCE RECOVERABLE
In the normal course of business, the Company seeks to limit aggregate and
single exposure to losses on large risks by purchasing reinsurance from
other insurers (see Note 8). The amounts reported in the consolidated
statements of financial position include amounts billed to reinsurers on
losses paid as well as estimates of amounts expected to be recovered from
reinsurers on incurred losses that have not yet been paid. Reinsurance
recoverables on unpaid losses are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Insurance liabilities, including life
contingent policy reserves, are reported gross of reinsurance recoverables.
Prepaid reinsurance premiums are deferred and reflected in income in a
manner consistent with the recognition of premiums on the reinsured
contracts. Reinsurance does not extinguish the Company's primary liability
10
<PAGE>
under the policies written and therefore reinsurers and amounts recoverable
therefrom are regularly evaluated by the Company and allowances for
uncollectible reinsurance are established as appropriate.
INCOME TAXES
The income tax provision is calculated under the liability method. 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. The principal assets and liabilities giving rise to such
differences are insurance reserves and deferred policy acquisition costs.
Deferred income taxes also arise from unrealized capital gains and losses on
equity securities and fixed income securities carried at fair value, and
unrealized foreign currency translation adjustments.
SEPARATE ACCOUNTS
The Company issues deferred variable annuities, variable life contracts and
certain guaranteed investment contracts, the assets and liabilities of which
are legally segregated and recorded as assets and liabilities of the
Separate Accounts. Absent any guarantees 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, variable annuity and
variable life contractholders bear the investment risk that the Separate
Accounts' funds may not meet their stated investment 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 consolidated statements of
operations. Revenues to the Company from the Separate Accounts consist of
contract maintenance and administration fees, and mortality, surrender and
expense risk charges.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group policies
and contracts that include an investment component, including most fixed
annuities, interest-sensitive life policies and certain other investment
contracts. Deposits 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 7.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to
traditional life insurance, group retirement annuities and immediate
annuities with life contingencies 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, which for traditional life
insurance are applied using the net level premium method, 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 7. To the extent that
unrealized gains on fixed income securities would result in a premium
deficiency had those gains actually been realized, the related increase in
reserves is recorded as a reduction of the unrealized net capital gains
included in shareholder's equity.
PROPERTY-LIABILITY CLAIMS AND CLAIMS EXPENSE
The property-liability reserve for claims and claims expense is the
estimated amount necessary to settle both reported and unreported claims of
insured property-liability losses, based upon the facts in each case and the
Company's experience with similar cases. Estimated amounts of salvage and
subrogation are deducted from the reserve for claims and claims expense. The
establishment of appropriate reserves, including reserves for catastrophes,
is an inherently uncertain process. Reserve estimates are regularly reviewed
and updated, using the most current information available. Any resulting
adjustments are reflected in current operations (see Note 7). These
adjustments may be material.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to invest, commitments to extend mortgage loans and credit
guarantees have only off-balance-sheet risk because their contractual
amounts are not recorded in the Company's consolidated statements of
financial position. The contractual amounts and fair values of these
instruments are outlined in Note 5.
11
<PAGE>
FOREIGN CURRENCY TRANSLATION
The Company has a foreign subsidiary, AICC, where the local currency is
deemed to be the functional currency in which AICC operates. The financial
statements of AICC are translated into U.S. dollars at the exchange rate in
effect at the end of a reporting period for assets and liabilities and at
the average exchange rates during the period for results of operations. The
unrealized gains or losses from the translation of the net assets are
recorded as unrealized foreign currency translation adjustments, and
included in accumulated other comprehensive income in the consolidated
statements of financial position. Changes in unrealized foreign currency
translation adjustments are included in other comprehensive income. Gains
and losses from foreign currency transactions are reported in operating
costs and expenses and have not been significant.
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.
PENDING ACCOUNTING STANDARDS
In June, 1999, the Financial Accounting Standards Board ("FASB") delayed the
effective date of Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
133 replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. This statement
requires that all derivatives be recognized on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives will either be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. Additionally, the change in
fair value of a derivative which is not effective as a hedge will be
immediately recognized in earnings. The delay was effected through the
issuance of SFAS 137, which extends the SFAS No. 133 requirements to fiscal
years beginning after June 15, 2000. As such, the Company expects to adopt
the provisions of SFAS No. 133 as of January 1, 2001. The impact of this
statement is dependent upon the Company's derivative positions and market
conditions existing at the date of adoption. Based on existing
interpretations of the requirements of SFAS No. 133, the impact of adoption
of this statement is not expected to be material to financial position,
however, may be material to results of operations.
3. RELATED PARTY TRANSACTIONS
BUSINESS OPERATIONS
The Company utilizes services performed and business facilities owned or
leased and operated by AIC in conducting its business activities. In
addition, ALIC and its domestic subsidiaries share the services of employees
with AIC. The Company reimburses AIC 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, retirement and other benefit programs
allocated to the Company were $199 million, $166 million, and $140 million
in 1999, 1998 and 1997, respectively. A portion of these expenses relate to
the acquisition of business which are deferred and amortized into income.
STRUCTURED SETTLEMENT ANNUITIES
The Company issued $61 million, $64 million and $52 million of structured
settlement annuities, a type of immediate annuity, in 1999, 1998 and 1997,
respectively, at prices determined based upon interest rates in effect at
the time of purchase, to fund structured settlements in matters involving
AIC. Of these amounts, $17 million, $23 million and $17 million relate to
structured settlement annuities with life contingencies and are included in
premium income for 1999, 1998, and 1997, respectively. In most cases, these
annuities were issued under a "qualified assignment," which means the
Company assumed AIC's obligation to make the future payments.
AIC has issued surety bonds, in return for premiums of $476 thousand, $469
thousand, $396 thousand in 1999, 1998 and 1997, respectively, to guarantee
the payment of structured settlement benefits assumed and funded by certain
annuity contracts issued by the Company (from both AIC and non-related
parties). The Company has entered into a General Indemnity Agreement
pursuant to which it has indemnified AIC for any losses associated with the
surety bonds and has granted AIC certain collateral security rights with
respect to the annuities and certain other rights in the event of any
defaults covered by the surety bonds.
12
<PAGE>
Reserves recorded by the Company for annuities related to the surety bonds
were $4.50 billion and $4.14 billion at December 31, 1999 and 1998,
respectively.
REINSURANCE TRANSACTIONS
The Company has entered into a modified coinsurance contract with Allstate
Reinsurance, Ltd. ("Allstate Re"), an affiliate of the Company, to cede 50%
of certain fixed annuity business issued under a distribution agreement with
PNC Bank NA. Under the terms of the contract, a trust has been established
to provide protection to the Company for ceded liabilities. This agreement
is continuous but may be terminated by either party with 60 days notice.
The Company has entered into a contract to reinsure 100% of all credit
insurance written by AIC. This agreement is continuous but may be terminated
by either party with 60 days notice.
The Company enters into certain intercompany reinsurance transactions with
its wholly owned subsidiaries within the Life and Savings segment. The
Company enters into these transactions in order to maintain underwriting
control and spread risk among various legal entities. These reinsurance
agreements have been approved by the appropriate regulatory authorities. All
significant intercompany transactions have been eliminated in consolidation.
At December 31, 1999, $1.98 billion of the Company's investments are held in
a trust for the benefit of Northbrook Life Insurance Company, a wholly owned
subsidiary, to permit it to meet policyholder obligations under its
reinsurance agreement with the Company.
AICC has entered into an excess of loss reinsurance agreement with AIC
covering certain property policies. Under the current contract, the
aggregate limit for which AIC would indemnify AICC for all loss occurrences
during the term of the current contract is $66 million. The amount has been
translated into U.S. dollars utilizing the exchange rate as of December 31,
1999.
Starting January 1, 1999, AICC has entered into a contract to reinsure
personal automobile business written by Pembridge Insurance Company
("Pembridge"), a subsidiary of the Corporation. Under the renewable excess
of loss contract, AICC reinsures Pembridge for personal auto business that
provides third party and accident coverages. For each loss occurrence, the
contract contains two layers of loss. In the first layer of loss protection,
losses in excess of $1 million up to $3 million will be covered by AICC. In
the second layer of loss protection, AICC covers losses in excess of the
first $3 million layer up to $7 million. For each loss occurrence, the
maximum amount AICC will indemnify Pembridge in both layers for third party
liability is $689 thousand. All amounts have been translated into U.S.
dollars utilizing the exchange rate as of December 31, 1999.
The impact to the Company's consolidated statement of operations from
related party reinsurance transactions are as follows:
($ in millions)
<TABLE>
<CAPTION>
ASSUMED: CEDED:
---------------------------- ----------------------------
CLAIMS AND CLAIMS CLAIMS AND CLAIMS
YEAR ENDED EXPENSE AND EXPENSE AND
DECEMBER 31, PREMIUMS CONTRACT BENEFITS PREMIUMS CONTRACT BENEFITS
------------------------ -------- ----------------- -------- -----------------
<S> <C> <C> <C> <C>
1999 $ 25 $23 $2 $ 1
1998 23 20 1 10
1997 117 15 2 -
</TABLE>
The reinsurance recoverable and reinsurance payable balances pertaining to
related party reinsurance agreements were not material at December 31, 1999
and 1998, respectively.
DEBT
The Company has entered into an intercompany loan agreement with the
Corporation. The amount of funds available to the Company at a given point
in time is dependent upon the debt position of the Corporation. There was no
outstanding balance at December 31, 1999 and 1998, respectively.
The Company has access to two credit facilities maintained by the
Corporation as a potential source of funds to manage short-term liquidity.
These include a $1.50 billion, five-year revolving line of credit, expiring
in 2001 and a $50 million, one-year revolving line of credit expiring in
2000. The ability of the Company to borrow from the five-year line of credit
is predicated upon AIC maintaining a specified statutory surplus level and
the Corporation's debt to equity ratio (as
13
<PAGE>
defined in the agreement) must not exceed a designated level. The Company
has not drawn upon either credit facility during 1999 or 1998.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for
fixed income securities are as follows:
($ in millions)
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ----------------- FAIR
COST GAINS LOSSES VALUE
--------- ------- ------- -------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
U.S. government and agencies $ 1,957 $ 225 $ (9) $ 2,173
Municipal 736 10 (15) 731
Corporate 16,059 430 (434) 16,055
Foreign government 536 15 (9) 542
Mortgage-backed securities 5,612 86 (110) 5,588
Asset-backed securities 2,389 6 (24) 2,371
Redeemable preferred stock 65 - (2) 63
------- ------ ----- -------
Total fixed income securities $27,354 $ 772 $(603) $27,523
======= ====== ===== =======
AT DECEMBER 31, 1998
U.S. government and agencies $ 2,022 $ 751 $ (1) $ 2,772
Municipal 552 47 - 599
Corporate 13,595 1,223 (76) 14,742
Foreign government 264 6 - 270
Mortgage-backed securities 5,773 237 (1) 6,009
Asset-backed securities 2,355 36 (6) 2,385
Redeemable preferred stock 69 12 - 81
------- ------ ----- -------
Total fixed income securities $24,630 $2,312 $ (84) $26,858
======= ====== ===== =======
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at
December 31, 1999:
($ in millions)
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- -------
<S> <C> <C>
Due in one year or less $ 693 $ 694
Due after one year through five years 5,519 5,538
Due after five years through ten years 6,425 6,291
Due after ten years 6,716 7,041
------- -------
19,353 19,564
Mortgage- and asset-backed securities 8,001 7,959
------- -------
Total $27,354 $27,523
======= =======
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments
by the issuers.
14
<PAGE>
($ in millions)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME 1999 1998 1997
YEAR ENDED DECEMBER 31, ------ ------ ------
<S> <C> <C> <C>
Fixed income securities $1,947 $1,860 $1,825
Mortgage loans 279 253 265
Equity securities 17 32 18
Other 67 40 46
------ ------ ------
Investment income, before expense 2,310 2,185 2,154
Investment expense 45 46 36
------ ------ ------
Net investment income $2,265 $2,139 $2,118
====== ====== ======
</TABLE>
($ in millions)
<TABLE>
<CAPTION>
REALIZED CAPITAL GAINS AND LOSSES 1999 1998 1997
YEAR ENDED DECEMBER 31, ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 11 $ 92 $ 43
Equity securities 94 59 123
Other investments 90 181 26
---- ---- ----
Realized capital gains and losses 195 332 192
Income taxes 69 121 67
---- ---- ----
Realized capital gains and losses, after-tax $126 $211 $125
==== ==== ====
</TABLE>
Excluding calls and prepayments, gross gains of $120 million, $68 million
and $41 million and gross losses of $109 million, $32 million and $44
million were realized on sales of fixed income securities during 1999, 1998
and 1997, respectively.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income and equity securities included
in shareholder's equity at December 31, 1999, are as follows:
($ in millions)
<TABLE>
<CAPTION>
GROSS UNREALIZED
COST/ ----------------- UNREALIZED
AMORTIZED COST FAIR VALUE GAINS LOSSES NET GAINS
-------------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Fixed income securities $27,354 $27,523 $ 772 $(603) $ 169
Equity securities 503 743 264 (24) 240
------- ------- ------ ----- -----
Total $27,857 $28,266 $1,036 $(627) 409
======= ======= ====== =====
Deferred income taxes, deferred policy
acquisition costs and other (189)
-----
Unrealized net capital gains $ 220
=====
</TABLE>
At December 31, 1998, equity securities had gross unrealized gains of
$320 million and gross unrealized losses of $18 million.
($ in millions)
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES 1999 1998 1997
YEAR ENDED DECEMBER 31, ------- ----- -----
<S> <C> <C> <C>
Fixed income securities $(2,059) $ 317 $ 743
Equity securities (62) (30) 116
------- ----- -----
Total (2,121) 287 859
Deferred income taxes, deferred policy acquisition costs
and other 1,477 (214) (609)
------- ----- -----
(Decrease) increase in unrealized net capital gains $ (644) $ 73 $ 250
======= ===== =====
</TABLE>
15
<PAGE>
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to other than
temporary declines in value of fixed income securities and equity
securities, and valuation allowances on mortgage loans were $20 million, $17
million and $15 million in 1999, 1998 and 1997, respectively.
MORTGAGE LOAN IMPAIRMENT
A mortgage loan is impaired when it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the
loan agreement.
The components of impaired loans at December 31 are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Impaired loans
With valuation allowances $25 $35
Less: valuation allowances (7) (9)
Without valuation allowances 11 36
--- ---
Net carrying value of impaired loans $29 $62
=== ===
</TABLE>
The net carrying value of impaired loans at December 31, 1999 and 1998
comprise $22 million and $60 million, respectively, measured at the fair
value of the collateral, and $7 million and $2 million, respectively,
measured at the present value of the loan's expected future cash flows
discounted at the loan's effective interest rate. Impaired loans without
valuation allowances include collateral dependent loans where the fair value
of the collateral is greater than the recorded investment in the loans.
Interest income is recognized on a cash basis for impaired loans carried at
the fair value of the collateral, beginning at the time of impairment. For
other impaired loans, interest is accrued based on the net carrying value.
The Company recognized interest income of $2 million, $5 million and $8
million on impaired loans during 1999, 1998 and 1997, respectively, of which
$2 million, $5 million and $7 million was received in cash during 1999, 1998
and 1997, respectively. The average balance of impaired loans was $43
million, $53 million and $103 million during 1999, 1998 and 1997,
respectively.
Valuation allowances for mortgage loans at December 31, 1999, 1998 and 1997,
were $13 million, $15 million and $32 million, respectively. For the years
ended December 31, 1998 and 1997, releases of mortgage loan valuation
allowances for dispositions of impaired mortgage loans were $1 million and
$8 million, respectively. No mortgage loans valuation allowances were
released due to dispositions of impaired mortgage loans during 1999. For the
years ended December 31, 1999, 1998 and 1997, net reductions to mortgage
loan valuation allowances were $2 million, $16 million, $25 million,
respectively.
INVESTMENT CONCENTRATION FOR COMMERCIAL MORTGAGE PORTFOLIOS AND OTHER
INVESTMENT INFORMATION
The Company's mortgage loans are collateralized by a variety of commercial
real estate property types located throughout the United States.
Substantially all of the commercial mortgage loans are non-recourse to the
borrower. The states with the largest portion of the commercial mortgage
loan portfolio are listed below. Except for the following, holdings in no
other state exceeded 5% of the portfolio at December 31, 1999:
(% OF COMMERCIAL MORTGAGE PORTFOLIO CARRYING VALUE)
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
California 20.6% 23.7%
Illinois 7.9 7.8
Florida 7.9 5.8
New York 7.4 9.2
Texas 5.8 4.9
New Jersey 5.7 4.1
Pennsylvania 5.1 4.9
</TABLE>
16
<PAGE>
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
(% OF COMMERCIAL MORTGAGE PORTFOLIO CARRYING VALUE)
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Office buildings 31.5% 26.5%
Retail 26.9 31.2
Apartment complex 17.2 17.1
Warehouse 16.8 17.0
Industrial 2.2 2.6
Other 5.4 5.6
------ ------
100.0% 100.0%
====== ======
</TABLE>
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1999, for loans that were not in foreclosure are as follows:
($ in millions)
<TABLE>
<CAPTION>
NUMBER CARRYING
OF LOANS VALUE PERCENT
-------- -------- -------
<S> <C> <C> <C>
2000 40 $ 239 6.3%
2001 50 214 5.6
2002 63 273 7.2
2003 71 282 7.4
2004 55 280 7.4
Thereafter 515 2,513 66.1
--- ------ ------
Total 794 $3,801 100.0%
=== ====== ======
</TABLE>
In 1999, $190 million of commercial mortgage loans were contractually due.
Of these, 81.4% were paid as due, 15.9% were refinanced at prevailing market
terms, 0.3% were foreclosed or are in the process of foreclosure, and 2.4%
were in the process of refinancing or restructuring discussions.
At December 31, 1999, there were no investments, excluding equity
securities, that were non-income producing during 1999.
At December 31, 1999, fixed income securities with a carrying value of $61
million were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets, incurs various financial liabilities and enters into agreements
involving derivative financial instruments and other off-balance-sheet
financial instruments. The fair value estimates of financial instruments
presented below are not necessarily indicative of the amounts the Company
might pay or receive in actual market transactions. Potential taxes and
other transaction costs have not been considered in estimating fair value.
The disclosures that follow do not reflect the fair value of the Company as
a whole since a number of the Company's significant assets (including
deferred policy acquisition costs and reinsurance recoverables) and
liabilities (including traditional life, interest-sensitive life and
property-liability reserves and deferred income taxes) are not considered
financial instruments and are not carried at fair value. Other assets and
liabilities considered financial instruments such as accrued investment
income and cash are generally of a short-term nature. Their carrying values
are assumed to approximate fair value.
17
<PAGE>
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Fixed income securities $27,523 $27,523 $26,858 $26,858
Mortgage loans 3,801 3,704 3,285 3,483
Equity securities 743 743 748 748
Short-term investments 711 711 742 742
Policy loans 606 606 569 569
Separate Accounts 13,857 13,857 10,098 10,098
</TABLE>
CARRYING VALUE AND FAIR VALUE INCLUDE THE EFFECTS OF DERIVATIVE FINANCIAL
INSTRUMENTS WHERE APPLICABLE.
Fair values for fixed income securities are based on quoted market prices
where available. Non-quoted securities are valued based on discounted cash
flows using current interest rates for similar securities. Equity securities
are valued based principally on quoted market prices. Mortgage loans are
valued based on discounted contractual cash flows. Discount rates are
selected using current rates at which similar loans would be made to
borrowers with similar characteristics, using similar properties as
collateral. Loans that exceed 100% loan-to-value are valued at the estimated
fair value of the underlying collateral. Short-term investments are highly
liquid investments with maturities of less than one year whose carrying
value are deemed to approximate fair value.
The carrying value of policy loans are deemed to approximate fair value. The
Separate Accounts assets are carried in the consolidated statements of
financial position at fair value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31,
are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Contractholder funds on investment contracts $18,587 $17,918 $16,757 $16,509
Separate Accounts 13,857 13,857 10,098 10,098
</TABLE>
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with
no stated maturities (single and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed
terms is estimated using discounted cash flow calculations based on interest
rates currently offered for contracts with similar terms and durations.
Separate Accounts liabilities are carried at the fair value of the
underlying assets.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments include swaps, futures, forwards and
options, including caps and floors. The Company primarily uses derivative
financial instruments to reduce its exposure to market risk (principally
interest rate, equity price and foreign currency risk) and in conjunction
with asset/liability management, in the Life and Savings segment. The
Company does not hold or issue these instruments for trading purposes.
18
<PAGE>
The following table summarizes the contract or notional amount, credit
exposure, fair value and carrying value of the Company's derivative
financial instruments at December 31, as follows:
($ in millions)
<TABLE>
<CAPTION>
1999
--------------------------------------------
CARRYING
CONTRACT VALUE
/NOTIONAL CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
--------- -------- ----- -------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swap agreements
Pay floating rate, receive fixed rate $ 409 $ 9 $ 7 $ 3
Pay fixed rate, receive floating rate 1,170 37 37 19
Pay floating rate, receive floating rate 71 - - -
Financial futures and forward contracts 2,466 - (1) 4
Interest rate cap and floor agreements 1,861 4 4 2
------ ---- ---- ----
Total interest rate contracts 5,977 50 47 28
EQUITY AND OTHER CONTRACTS
Options, warrants and financial futures 1,120 116 99 99
FOREIGN CURRENCY CONTRACTS
Foreign currency swap agreements 535 - (1) -
------ ---- ---- ----
Total derivative financial instruments $7,632 $166 $145 $127
====== ==== ==== ====
</TABLE>
($ in millions)
<TABLE>
<CAPTION>
1998
--------------------------------------------
CARRYING
CONTRACT VALUE
/NOTIONAL CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
--------- -------- ----- -------------
<S> <C> <C> <C> <C>
INTEREST RATE CONTRACTS
Interest rate swap agreements
Pay floating rate, receive fixed rate $ 474 $ 14 $ 30 $ 24
Pay fixed rate, receive floating rate 965 - (32) (17)
Pay floating rate, receive floating rate 73 - (1) -
Financial futures and forward contracts 227 - - -
Interest rate cap and floor agreements 3,049 2 2 3
------ ---- ---- ----
Total interest rate contracts 4,788 16 (1) 10
EQUITY AND OTHER CONTRACTS
Options, warrants and financial futures 723 205 205 205
FOREIGN CURRENCY CONTRACTS
Foreign currency swap agreements 79 - (3) (3)
------ ---- ---- ----
Total derivative financial instruments $5,590 $221 $201 $212
====== ==== ==== ====
</TABLE>
CREDIT EXPOSURE INCLUDES THE EFFECTS OF LEGALLY ENFORCEABLE MASTER NETTING
AGREEMENTS.
CREDIT EXPOSURE AND FAIR VALUE INCLUDE ACCRUED INTEREST WHERE APPLICABLE.
CARRYING VALUE IS REPRESENTATIVE OF DEFERRED GAINS AND LOSSES, UNAMORTIZED
PREMIUM, ACCRUED INTEREST AND/OR UNREALIZED GAINS AND LOSSES DEPENDING ON
THE ACCOUNTING FOR THE DERIVATIVE FINANCIAL INSTRUMENT.
The contract or notional amounts are used to calculate the exchange of
contractual payments under the agreements and are not representative of the
potential for gain or loss on these agreements.
Credit exposure represents the Company's potential loss if all of the
counterparties failed to perform under the contractual terms of the
contracts and all collateral, if any, became worthless. This exposure is
measured by the fair value of contracts with a positive fair value at the
reporting date reduced by the effect, if any, of master netting agreements.
19
<PAGE>
The Company manages its exposure to credit risk by utilizing highly rated
counterparties, establishing risk control limits, executing legally
enforceable master netting agreements and obtaining collateral where
appropriate. To date, the Company has not incurred any losses on derivative
financial instruments due to counterparty nonperformance.
Fair value is the estimated amount that the Company would receive (pay) to
terminate or assign the contracts at the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer and
exchange quotes are used to value the Company's derivatives.
INTEREST RATE SWAP AGREEMENTS involve the exchange, at specified intervals,
of interest payments calculated by reference to an underlying notional
amount. The Company generally enters into swap agreements to change the
interest rate characteristics of existing assets to more closely match the
interest rate characteristics of the corresponding liabilities.
The Company did not record any material deferred gains or losses on swaps
nor realize any material gains or losses on swap terminations in 1999, 1998
or 1997.
The Company paid a weighted average floating interest rate of 5.3% and 5.6%
and received a weighted average fixed interest rate of 7.1% and 6.8% in 1999
and 1998, respectively. The Company paid a weighted average fixed interest
rate of 5.7% and 6.5% and received a weighted average floating interest rate
of 5.0% and 6.0% in 1999 and 1998, respectively.
FINANCIAL FUTURES AND FORWARD CONTRACTS are commitments to either purchase
or sell designated financial instruments at a future date for a specified
price or yield. They may be settled in cash or through delivery. As part of
its asset/liability management, the Company generally utilizes futures and
forward contracts to manage its market risk related to fixed income
securities, equity securities, certain annuity contracts and anticipatory
investment purchases and sales. Futures and forwards used as hedges of
anticipatory transactions pertain to identified transactions which are
probable to occur and are generally completed within 90 days. Futures
contracts have limited off-balance-sheet credit risk as they are executed on
organized exchanges and require security deposits, as well as the daily cash
settlement of margins.
INTEREST RATE CAP AND FLOOR AGREEMENTS give the holder the right to receive
at a future date, the amount, if any, by which a specified market interest
rate exceeds the fixed cap rate or falls below the fixed floor rate, applied
to a notional amount. The Company purchases interest rate cap and floor
agreements to reduce its exposure to rising or falling interest rates
relative to certain existing assets and liabilities in conjunction with
asset/liability management.
EQUITY-INDEXED OPTION CONTRACTS AND EQUITY-INDEXED FINANCIAL FUTURES provide
returns based on a specified equity index applied to the instrument's
notional amount. The Company utilizes these instruments to achieve equity
appreciation, to reduce the market risk associated with certain annuity
contracts and for other risk management purposes. Where required,
counterparties post collateral to minimize credit risk.
DEBT WARRANTS provide the right to purchase a specified new issue of debt at
a predetermined price. The Company purchases debt warrants to protect
against long-term call risk.
FOREIGN CURRENCY CONTRACTS involve the future exchange or delivery of
foreign currency on terms negotiated at the inception of the contract. The
Company enters into these agreements primarily to manage the currency risk
associated with investing in securities and issuing obligations which are
denominated in foreign currencies.
Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. Market risk exists for all of the
derivative financial instruments that the Company currently holds, as these
instruments may become less valuable due to adverse changes in market
conditions. The Company mitigates this risk through established risk control
limits set by senior management. In addition, the change in the value of the
Company's derivative financial instruments designated as hedges is generally
offset by the change in the value of the related assets and liabilities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
A summary of the contractual amounts and fair values of off-balance-sheet
financial instruments at December 31, follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
CONTRACTUAL FAIR CONTRACTUAL FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----- ----------- -----
<S> <C> <C> <C> <C>
Commitments to invest $28 - $34 -
Commitments to extend mortgage loans 95 1 87 1
Credit guarantees 89 - 93 -
</TABLE>
20
<PAGE>
Except for credit guarantees, the contractual amounts represent the amount
at risk if the contract is fully drawn upon, the counterparty defaults and
the value of any underlying security becomes worthless. Unless noted
otherwise, the Company does not require collateral or other security to
support off-balance-sheet financial instruments with credit risk.
Commitments to invest generally represent commitments to acquire financial
interests or instruments. The Company enters into these agreements to allow
for additional participation in certain limited partnership investments.
Because the equity investments in the limited partnerships are not actively
traded, it is not practicable to estimate the fair value of these
commitments.
Commitments to extend mortgage loans are agreements to lend to a borrower
provided there is no violation of any condition established in the contract.
The Company enters these agreements to commit to future loan fundings at
predetermined interest rates. Commitments generally have fixed expiration
dates or other termination clauses. Commitments to extend mortgage loans,
which are secured by the underlying properties, are valued based on
estimates of fees charged by other institutions to make similar commitments
to similar borrowers.
Credit guarantees written represent conditional commitments to exchange
identified AAA or AA rated credit risk for identified A rated credit risk
upon bankruptcy or other event of default of the referenced credits. The
Company receives fees, which are reported in net investment income over the
lives of the commitments, for assuming the referenced credit risk. The
Company enters into these transactions in order to achieve higher yields
than if the referenced credits were directly owned.
The Company's maximum amount at risk, assuming bankruptcy or other default
of the referenced credits and the value of the referenced credits becomes
worthless, is the fair value of the identified AAA or AA rated securities.
The identified AAA or AA rated securities had a fair value of $88 million at
December 31, 1999. The Company includes the impact of credit guarantees in
its analysis of credit risk, and the referenced credits were current with
respect to their contractual terms at December 31, 1999
6. DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring business which were deferred and amortized for
the years ended December 31, 1999 and 1998 are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
YEAR ENDED DECEMBER 31: ------ ------
<S> <C> <C>
Balance, beginning of year $2,195 $1,992
Acquisition costs deferred 677 666
Amortization charged to income (366) (343)
Adjustment from unlocking (43) (69)
Effect on DPAC from unrealized gains/(losses) 231 (50)
Foreign currency translation 1 (1)
------ ------
Balance, end of year $2,695 $2,195
====== ======
</TABLE>
7. INSURANCE LIABILITIES
At December 31, the reserve for life-contingent contract benefits consists
of the following:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Immediate annuities:
Structured settlement annuities $4,254 $4,694
Other immediate annuities 1,513 1,669
Traditional life 1,267 1,125
Other 114 113
------ ------
Total reserve for life-contingent contract benefits $7,148 $7,601
====== ======
</TABLE>
The assumptions for mortality generally utilized in calculating reserves
include, the U.S. population with projected calendar year improvements and
age setbacks for impaired lives for structured settlement annuities; the
1983 group
21
<PAGE>
annuity mortality table for other immediate annuities; and actual Company
experience plus a provision for adverse deviation for traditional life.
Interest rate assumptions vary from 3.5% to 11.7% for immediate annuities
and 4.0% to 11.3% for traditional life. Other estimation methods used
include the present value of contractually fixed future benefits for
structured settlement annuities, the present value of expected future
benefits based on historical experience for other immediate annuities and
the net level premium reserve method using the Company's withdrawal
experience rates for traditional life.
Premium deficiency reserves are established, if necessary, and have been
recorded for certain immediate annuities with life contingencies, to the
extent the unrealized gains on fixed income securities would result in a
premium deficiency had those gains actually been realized. A liability of
$65 million and $933 million is included in the reserves for life-contingent
contract benefits with respect to this deficiency for the years ended
December 31, 1999 and 1998, respectively. The decrease in this liability in
1999 reflects declines in unrealized capital gains on fixed income
securities.
At December 31, contractholder funds consists of the following:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Interest-sensitive life $ 5,036 $ 4,395
Fixed annuities:
Immediate annuities 1,748 1,641
Deferred annuities 12,695 10,874
Guaranteed investment contracts 2,953 3,233
Other investment contracts 1,563 990
------- -------
Total contractholder funds $23,995 $21,133
======= =======
</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 8.5% for interest-sensitive life contracts; 3.5% to 10.0% for
immediate annuities; 1.6% to 26.2% for deferred annuities (which include
equity-indexed annuities that are hedged, see Note 2 and Note 5); 4.9% to
9.9% for guaranteed investment contracts and 5.3% to 6.6% for other
investment contracts. 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 10%
of deferred annuities are subject to a market value adjustment.
PROPERTY-LIABILITY CONTRACTS
For the Property-Liability segment, the Company establishes reserves for
claims and claims expense on reported and unreported claims of insured
losses. These reserve estimates are based on known facts and interpretation
of circumstances, including the Company's experience with similar cases and
historical trends involving claim payment patterns, loss payments, pending
levels of unpaid claims and product mix, as well as other factors including
court decisions, economic conditions and public attitudes. The effects of
inflation are implicitly considered in the reserving process.
The establishment of appropriate reserves, including reserves for
catastrophes, is an inherently uncertain process. The Company regularly
updates its reserve estimates as new facts become known and further events
occur which may impact the resolution of unsettled claims. Changes in prior
year reserve estimates, which may be material, are reflected in the results
of operations in the period such changes are determinable.
22
<PAGE>
Activity in the reserve for property-liability insurance claims and claims
expense is summarized as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1 $313 $348 $387
Less reinsurance recoverables 20 16 15
---- ---- ----
Net balance at January 1 293 332 372
Incurred claims and claims expense related to:
Current year 247 233 227
Prior years (25) (38) (48)
---- ---- ----
Total incurred 222 195 179
Claims and claims expense paid related to:
Current year 144 148 129
Prior years 73 64 73
---- ---- ----
Total paid 217 212 202
Foreign currency translation adjustment 17 (22) (17)
---- ---- ----
Net balance at December 31 315 293 332
Plus reinsurance recoverables 53 20 16
---- ---- ----
Balance at December 31 $368 $313 $348
==== ==== ====
</TABLE>
Incurred claims and claims expense represents the sum of paid losses and
reserve changes in the calendar year. This expense includes losses from
catastrophes of $6 million, $31 million and $6 million in 1999, 1998 and
1997, respectively. A "catastrophe" is defined by the Company as an event
that produces pretax losses before reinsurance in excess of $1 million, and
involves multiple first party policyholders. Catastrophes are an inherent
risk of the property-liability insurance business and could contribute to
material year-to-year fluctuations in the Company's results of operations
and financial position.
The level of catastrophe loss experienced in any year cannot be predicted
and could be material to results of operations and financial position.
Catastrophe exposures for AICC primarily comprise wind, hail, earthquakes,
and ice. The major areas in Canada with exposure to potential earthquake
losses include areas surrounding faults in British Columbia and Quebec. The
Company continues to evaluate alternative business strategies to more
effectively manage its exposure to catastrophe losses in these and other
areas.
Management believes that the reserve for claims and claims expense, net of
reinsurance recoverables, at December 31, 1999 and 1998 is appropriately
established in the aggregate and adequate to cover the ultimate net cost of
reported and unreported claims arising from losses which had occurred by
that date.
The Property-Liability segment has exposure to environmental, asbestos and
other mass tort claims that stem principally from commercial business
written from 1972 through 1985, including substantial general liabilities on
Canadian Fortune 500 equivalent companies. Reserves for environmental claims
were $4 million, net of reinsurance recoverables of $2 million, and $3
million at December 31, 1999 and 1998, respectively. Reserves for asbestos
claims were $2 million and $2 million at December 31, 1999 and 1998,
respectively.
Management believes its net loss reserves for environmental, asbestos and
other mass tort claims are appropriately established based on available
facts, technology, laws and regulations. However, due to the risks inherent
in major litigation and other uncertainties, the ultimate cost of these
claims may vary materially from the amounts currently recorded, resulting in
an increase in the loss reserves. In addition, while the Company believes
improved actuarial techniques and databases have assisted in its ability to
estimate environmental, asbestos and other mass tort net loss reserves,
these refinements may subsequently prove to be inadequate indicators of the
extent of probable loss. Due to the uncertainties and factors described
above, management believes it is not practicable to develop a meaningful
range for any such additional net loss reserves that may be required.
8. REINSURANCE
The Company purchases reinsurance to limit aggregate and single losses on
large risks. The Company continues to have primary liability as a direct
insurer for risks reinsured. Estimating amounts of reinsurance recoverable
is impacted by the
23
<PAGE>
uncertainties involved in the establishment of loss reserves. Failure of
reinsurers to honor their obligations could result in losses to the
Company.
The Company's Life and Savings' segment assumes risk from, and reinsures
certain of its risks to other reinsurers under yearly renewable term,
coinsurance, and modified coinsurance agreements. Yearly renewable term and
coinsurance agreements result in the passing of a portion of the risk to the
reinsurer. Generally, the reinsurer receives a proportionate amount of the
premiums less commissions and is liable for a corresponding proportionate
amount of all benefit payments. Modified coinsurance is similar to
coinsurance except that the cash and investments that support the liability
for contract benefits are not transferred to the assuming company, and
settlements are made on a net basis between the companies.
The Company cedes 90% of the mortality risk on certain term life policies to
a pool of ten reinsurers. Beginning in November, 1998, the Company cedes
mortality risk on new business in excess of $2 million per life for
individual coverage. For business sold prior to October, 1998, the Company
ceded mortality risk in excess of $1 million per life for individual life.
As of December 31, 1999 $102.15 billion of life insurance in force was ceded
to other companies.
During 1998, the Company entered into an administrative services agreement
with respect to a block of variable annuity contracts. Pursuant to the terms
of the agreement, the Company is to provide insurance contract
administration and financial services. As part of the agreement, the Company
assumed via coinsurance 100% of the general account portion of these
contracts (85% for business written in New York) with an aggregate account
value of $32 million as of December 31, 1999. The Company paid $65 million,
which was capitalized as present value of future profits and will be
subsequently amortized into income over 20 years, for the right to receive
future contract charges and fees on the block of variable annuity contracts,
which has an aggregate account value of $1.77 billion as of December 31,
1999. During 1999, the Company earned contract charges and fees assessed to
contractholders' fund balances of $15 million.
The Company's Property-Liability segment cedes certain of its risks to AIC
under excess of loss reinsurance agreements. These agreements provide that
for certain premiums, the Company will be reimbursed by AIC for losses in
excess of predetermined amounts. See Note 4 "Related Parties" for more
information on these agreements. The Property-Liability segment also ceded
certain commercial business risks under excess of loss agreements to third
party reinsurers. Although the Company stopped writing commercial business
in 1992, related claims continue to be submitted and settlements are
pending.
The Company has entered into reinsurance agreements in conjunction with the
disposition of certain blocks of business.
Amounts recoverable from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Management believes the recoverables are
appropriately established. No single reinsurer has a material obligation to
the Company nor is the Company's business substantially dependent upon any
reinsurance contract.
24
<PAGE>
The effects of reinsurance on premiums written and earned for the years
ended December 31, are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
LIFE AND ANNUITY PREMIUMS
Direct $1,042 $1,043 $1,032
Assumed 37 24 117
Ceded (241) (178) (194)
------ ------ ------
Life insurance premiums, net of reinsurance $ 838 $ 889 $ 955
====== ====== ======
LIFE AND ANNUITY CONTRACT CHARGES
Direct $ 706 $ 625 $ 547
Assumed 17 5 -
Ceded - - -
------ ------ ------
Life insurance contract charges, net of reinsurance $ 723 $ 630 $ 547
====== ====== ======
PROPERTY-LIABILITY PREMIUMS WRITTEN
Direct $ 317 $ 280 $ 276
Assumed 1 1 -
Ceded (3) (1) (3)
------ ------ ------
Property-Liability premiums written, net of reinsurance $ 315 $ 280 $ 273
====== ====== ======
PROPERTY-LIABILITY PREMIUMS EARNED
Direct $ 291 $ 268 $ 278
Assumed 1 1 -
Ceded (3) (1) (3)
------ ------ ------
Property-Liability premiums earned, net of reinsurance $ 289 $ 268 $ 275
====== ====== ======
</TABLE>
Reinsurance recoverables in the Company's consolidated statements of
financial position, at December 31, were as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Life and Savings $434 $230
Property-Liability 61 24
---- ----
Total $495 $254
==== ====
</TABLE>
9. 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.
25
<PAGE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
LEASES
The Company leases certain office facilities and computer equipment. Total
rent expense for all leases was $16 million, $18 million and $13 million in
1999, 1998 and 1997, respectively.
Minimum rental commitments under noncancelable operating leases with an
initial or remaining term of more than one year as of December 31, are as
follows:
($ in millions)
<TABLE>
<CAPTION>
1999
----
<S> <C>
2000 $ 5
2001 4
2002 3
2003 2
2004 1
---
$15
===
</TABLE>
SHARED MARKETS
As a condition of its license to do business in various Canadian provinces,
AICC is required to participate in mandatory property-liability shared
market mechanisms or pooling arrangements, which provide various insurance
coverages to individuals or other entities that otherwise are unable to
purchase such coverage voluntarily from private insurers. Underwriting
results related to these organizations have been immaterial to the results
of operations.
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.
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 regulation, controls on medical
care costs, 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 business in which claims for monetary
damages are asserted. In the opinion of management, the ultimate
responsibility, 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.
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's life insurance subsidiaries are members of the Insurance
Marketplace Standards Association, an organization which advocates ethical
market conduct.
11. INCOME TAXES
Eligible domestic subsidiaries of the Company (the "Allstate Life Group")
join with the Corporation (the "Allstate Group") in the filing of a
consolidated federal income tax return and are party to a federal income
tax allocation agreement (the "Allstate Tax Sharing Agreement"). Under the
Allstate Tax Sharing Agreement, the Allstate Life Group 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
Allstate Life Group in the consolidated federal income tax return.
Effectively, this
26
<PAGE>
results in the Allstate Life Group's annual income tax provision being
computed, with adjustments, as if the Allstate Life Group filed a separate
return. Foreign subsidiaries of the Company file a tax return in their
respective country.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears Roebuck &
Co. ("Sears") and, with its eligible domestic subsidiaries, was 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
Corporation's federal income tax returns through the 1993 tax year. Any
adjustments 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.
The components of the deferred income tax assets and liabilities at
December 31, are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
----- -------
<S> <C> <C>
DEFERRED ASSETS
Life and annuity reserves $ 606 $ 589
Other assets 86 115
----- -------
Total deferred assets 692 704
DEFERRED LIABILITIES
Deferred policy acquisition costs (722) (665)
Unrealized net capital gains (119) (463)
Other liabilities (22) (28)
----- -------
Total deferred liabilities (863) (1,156)
----- -------
Net deferred liability $(171) $ (452)
===== =======
</TABLE>
The components of income tax expense for the year ended December 31, are as
follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $213 $282 $272
Deferred 57 28 12
---- ---- ----
Total income tax expense $270 $310 $284
==== ==== ====
</TABLE>
The Company paid income taxes of $198 million, $284 million, and $180
million in 1999, 1998 and 1997, respectively. The Company had a current
income tax liability of $36 million and $24 million at December 31, 1999 and
1998, respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is
as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Dividends received deduction (1.3) (1.0) (.4)
Other .9 1.8 .9
----- ----- -----
Effective income tax rate 34.6% 35.8% 35.5%
===== ===== =====
</TABLE>
Prior to January l, 1984, the Company was entitled to exclude certain
amounts from taxable income and accumulate such amounts in a "policyholder
surplus" account. The balance in this account at December 31, 1999,
approximately $94 million, will result in federal income taxes payable of
$33 million if distributed by the Company. No provision for taxes has been
made as the Company has no plan to distribute amounts from this account. No
further additions to the account have been permitted since the Tax Reform
Act of 1984.
27
<PAGE>
12. PREFERRED STOCK
The Company has issued two series of non-voting, redeemable preferred
stock. Series A preferred stock was issued to a subsidiary of AIC, while
Series B preferred stock was issued directly to AIC. Both series of
preferred stock are redeemable at the option of the Company at any time
five years after the issuance date at a price of $100 per share plus
cumulative accrued and unpaid dividends. If the Company is liquidated or
dissolved, holders of the preferred stock will be entitled to payments of
$100 per share plus cumulative accrued and unpaid dividends.
For Series A preferred stock, the Company's Board of Directors declare and
pay a cash dividend from time to time, but not more frequently than
quarterly. The dividend is based on the three month LIBOR rate. Dividends of
$4 million, $3 million and $2 million were paid during 1999, 1998, and 1997,
respectively. Accrued and unpaid dividends were $349 thousand on Series A
preferred stock at December 31, 1999.
For Series B preferred stock, cash dividends of 6.9% per annum are payable
annually in arrears on the last business day of each year to the shareholder
of record on the immediately preceding business day. Dividends of
$8 million were paid in 1999, 1998 and 1997. There were no accrued and
unpaid dividends for Series B preferred stock at December 31, 1999.
13. STATUTORY FINANCIAL INFORMATION
The following table reconciles consolidated net income for the year ended
December 31, and shareholder's equity at December 31, as reported herein in
conformity with generally accepted accounting principles with combined
statutory net income and capital and surplus of ALIC and its domestic
subsidiaries, determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities:
($ in millions)
<TABLE>
<CAPTION>
SHAREHOLDER'S
NET INCOME EQUITY
--------------------- ---------------
1999 1998 1997 1999 1998
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Balance per generally accepted accounting principles $ 511 $ 556 $ 517 $4,574 $4,792
Undistributed net income of certain subsidiaries (5) (8) (11) (196) (179)
Unrealized gain/loss on fixed income securities - - - (284) (2,336)
Deferred policy acquisition costs (262) (254) (218) (2,675) (2,181)
Deferred income taxes 104 35 51 192 469
Employee benefits 1 (6) (6) (11) (4)
Reserves and non-admitted assets (72) 60 70 1,441 1,972
Other 27 3 (33) (471) (108)
----- ----- ----- ------ ------
Balance per statutory accounting practices $ 304 $ 386 $ 370 $2,570 $2,425
===== ===== ===== ====== ======
</TABLE>
AICC is a foreign subsidiary of the Company; accordingly, its net income is
not included in the statutory basis net income of the Company. However, the
Company's investment in AICC is reflected in the statutory capital and
surplus of the Company.
PERMITTED STATUTORY ACCOUNTING PRACTICES
ALIC and each of its domestic subsidiaries prepare their statutory financial
statements in accordance with accounting practices prescribed or permitted
by the insurance department of the applicable state of domicile. 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.
Certain domestic subsidiaries of the Company follow permitted statutory
accounting practices which differ from those prescribed by regulatory
authorities. The use of such permitted statutory accounting practices does
not have a significant impact on statutory surplus or statutory net income.
The NAIC's codification initiative has produced a comprehensive guide of
revised statutory accounting principles, which the Company will implement in
January 1, 2001. The requirements are not expected to have a material impact
on the statutory surplus of ALIC and its domestic subsidiaries.
28
<PAGE>
DIVIDENDS
The ability of ALIC to pay dividends is dependent on business conditions,
income, cash requirements of ALIC, receipt of dividends from its
subsidiaries and other relevant factors. The payment of shareholder
dividends by ALIC to AIC 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.
In the twelve month period beginning January 1, 1999, ALIC paid dividends of
$100 million. Based on 1999 ALIC statutory net income, the maximum amount of
dividends ALIC will be able to pay under Illinois insurance law without the
approval of Illinois Department of Insurance during 2000 is $267 million.
RISK-BASED CAPITAL
The NAIC has a standard for assessing the solvency of domestic 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 each of the Company's domestic
insurance subsidiaries was significantly above levels that would require
regulatory action.
14. BENEFIT PLANS
PENSION AND OTHER POSTRETIREMENT PLANS
Defined benefit pension plans, sponsored by AIC, cover domestic full-time
employees and certain part-time employees. Benefits under the pension plans
are based upon the employee's length of service, average annual compensation
and estimated social security retirement benefits. AIC's funding policy for
the pension plans is to make annual contributions in accordance with
accepted actuarial cost methods. The cost (benefit) to the Company included
in net income was $(1) million, $9 million, and $8 million for the pension
plans in 1999, 1998, 1997, respectively.
AIC also provides certain health care and life insurance benefits for
retired employees. Qualified employees may become eligible for these
benefits if they retire in accordance with AIC's established retirement
policy and are continuously insured under AIC's group plans or other
approved plans for ten or more years prior to retirement. AIC shares the
cost of the retiree medical benefits with retirees based on years of
service, with AIC's share being subject to a 5% limit on annual medical cost
inflation after retirement. AIC's postretirement benefit plans currently are
not funded. AIC has the right to modify or terminate these plans. The cost
to the Company included in net income was $1 million, $3 million and $3
million for postretirement benefits other than pension plans in 1999, 1998,
and 1997 respectively.
AICC has its own defined benefit pension plans which cover its full-time
employees and certain part-time employees. Benefits under the pension plans
are based upon the employee's length of service, average annual compensation
and estimated social security retirement benefits. AICC's funding policy for
the pension plans is to make annual contributions in accordance with
accepted actuarial cost methods. The net periodic benefit cost (benefit) for
AICC pension plans was $1 million, $(1) million and $(1) million for the
years ended December 31, 1999, 1998, and 1997, respectively. The projected
benefit obligation for the AICC pension plans was $108 million and $107
million at December 31, 1999 and 1998, respectively. The fair value of
pension plan assets supporting the projected benefit obligation was $130
million and $123 million at December 31, 1999 and 1998, respectively.
AICC also provides certain health care and life insurance benefits for
retired employees. Qualified employees may become eligible for these
benefits if they retire in accordance with AICC's established retirement
policy and are continuously insured under AICC's group plans or other
approved plans for ten or more years prior to retirement. AICC pays the cost
of the retiree medical benefits not provided by the government plans. AICC's
postretirement benefit plans are currently not funded. AICC has the right to
modify or terminate these plans. The net periodic benefit cost for AICC's
postretirement plans was $2 million for the years ended December 31, 1999,
1998, and 1997, respectively. The projected benefit obligation for the AICC
postretirement plans was $16 million and $17 million at December 31, 1999
and 1998, respectively.
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries, including the
Company are also eligible to become members of The Savings and Profit
Sharing Fund of Allstate Employees ("Allstate Plan"). The Corporation's
contributions are based on the Corporation's matching obligation and
performance.
29
<PAGE>
The Company paid $4 million, $12 million and $3 million in 1999, 1998 and
1997, respectively for profit sharing.
Employees of AICC participate in the Allstate Canada Employees' Profit
Sharing Program ("Allstate Canada Plan"). The Allstate Canada Plan is a cash
plan based on AICC's performance as well as the employees' level of
performance and length of service.
Profit sharing expense under the Allstate Canada Plan was $1 million,
$2 million, and $3 million in 1999, 1998, and 1997, respectively.
15. BUSINESS SEGMENTS
The Company's management is organized around products and services, and
this structure was considered in identifying its two reportable segments.
These segments and their respective operations are as follows:
Life and Savings markets a broad line of life and savings products primarily
in the United States. Life insurance products primarily include traditional
life, including term and whole-life, and interest-sensitive life insurance.
Savings products consist of fixed annuity products, including indexed,
market value adjusted and immediate annuities, as well as variable
annuities. Revenues generated outside the United States were immaterial with
respect to Life and Savings' total revenue for the years ended December 31,
1999, 1998 and 1997, respectively. The Company evaluates the results of this
segment based upon invested asset growth, face amounts of policies in force
and net income.
Property-Liability sells primarily private passenger auto and homeowners
insurance to individuals in Canada. The Company evaluates the results of
this segment based upon premium growth and underwriting results.
Management reviews assets at the Life and Savings and Property-Liability
levels for decision making purposes.
The accounting policies of the business segments are the same as those
described in Note 2. The effects of certain intersegment transactions are
excluded from segment performance evaluation and therefore eliminated in the
segment results.
Summarized revenue data for each of the Company's business segments for the
year ended December 31, are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998 1997
------ -------- ------
<S> <C> <C> <C>
REVENUES
LIFE AND SAVINGS
Premiums $ 838 $ 889 $ 955
Contract charges 723 630 547
Net investment income 2,239 2,113 2,074
Realized capital gains and losses 192 323 194
------ -------- ------
Total Life and Savings 3,992 3,955 3,770
PROPERTY-LIABILITY
Premiums earned 289 268 275
Net investment income 26 26 44
Realized capital gains and losses 3 9 (2)
------ -------- ------
Total Property-Liability 318 303 317
------ -------- ------
Consolidated $4,310 $ 4,258 $4,087
====== ======== ======
</TABLE>
30
<PAGE>
Summarized financial performance data for each of the Company's reportable
segments for the year ended December 31, are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
NET INCOME FROM OPERATIONS
LIFE AND SAVINGS
Premiums $ 838 $ 889 $ 955
Contract charges 723 630 547
Net investment income 2,239 2,113 2,074
Realized capital gains and losses 192 323 194
Contract benefits 1,251 1,225 1,239
Interest credited 1,260 1,190 1,167
Operating costs and expenses 712 702 619
------ ------ ------
Life and Savings income from operations before income
taxes 769 838 745
PROPERTY-LIABILITY
Underwriting income (loss) (17) (7) 14
Net investment income 26 26 44
Realized capital gains and losses 3 9 (2)
------ ------ ------
Property-Liability income from operations before income
taxes 12 28 56
------ ------ ------
Consolidated $ 781 $ 866 $ 801
====== ====== ======
</TABLE>
Additional significant financial performance data for each of the Company's
reportable segments for the year ended December 31, are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS
Life and Savings $367 $377 $298
Property-Liability 42 35 35
---- ---- ----
Consolidated $409 $412 $333
==== ==== ====
INCOME TAX EXPENSE
Life and Savings $265 $298 $257
Property-Liability 5 12 27
---- ---- ----
Consolidated $270 $310 $284
==== ==== ====
</TABLE>
Capital expenditures for long-lived assets are generally made by AIC. A
portion of the long-lived assets are leased by entities included in the Life
and Savings and Property-Liability segments.
31
<PAGE>
Summarized data for total assets and investments for each of the Company's
reportable segments as of December 31, are as follows:
($ in millions)
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
AT DECEMBER 31,
ASSETS
Life and Savings $50,463 $44,926
Property-Liability 710 614
------- -------
Consolidated $51,173 $45,540
======= =======
INVESTMENTS
Life and Savings $32,879 $31,749
Property-Liability 530 479
------- -------
Consolidated $33,409 $32,228
======= =======
</TABLE>
16. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax
basis for the year ended December 31, are as follows:
($ in millions)
<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
gains (losses) arising
during the period $(808) $283 $(525) $349 $(122) $227 $513 $(180) $333
Less: reclassification
adjustments 183 (64) 119 237 (83) 154 128 (45) 83
----- ---- ----- ---- ----- ---- ---- ----- ----
Unrealized net capital
gains (losses) (991) 347 (644) 112 (39) 73 385 (135) 250
UNREALIZED FOREIGN
CURRENCY TRANSLATION
ADJUSTMENTS:
Unrealized foreign
currency translation
adjustments arising
during the period 11 (4) 7 2 (1) 1 (12) 4 (8)
----- ---- ----- ---- ----- ---- ---- ----- ----
Other comprehensive
income $(980) $343 $(637) $114 $ (40) $ 74 $373 $(131) $242
===== ==== ===== ==== ===== ==== ==== ===== ====
</TABLE>
32
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1999
--------------------------------------------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
FAIR CARRYING
TYPE OF INVESTMENT COST VALUE VALUE
------------------ ------- ------- --------
<S> <C> <C> <C>
Fixed Income Securities, Available for Sale:
Bonds:
United States government, government agencies and
authorities $ 1,957 $ 2,173 $ 2,173
States, municipalities and political subdivisions 736 731 731
Foreign governments 536 542 542
Public utilities 1,704 1,750 1,750
Convertibles and bonds with warrants attached 458 519 519
All other corporate bonds 13,897 13,786 13,786
Mortgage-backed securities 5,612 5,588 5,588
Asset-backed securities 2,389 2,371 2,371
Redeemable preferred stocks 65 63 63
------- ------- -------
Total fixed income securities 27,354 $27,523 27,523
------- ======= -------
Equity Securities:
Common Stocks:
Public utilities 7 $ 6 6
Banks, trusts and insurance companies 22 31 31
Industrial, miscellaneous and all other 412 654 654
Nonredeemable preferred stocks 62 52 52
------- ------- -------
Total equity securities 503 $ 743 743
------- ======= -------
Mortgage loans on real estate 3,801 3,801
Policy loans 606 606
Other long-term investments 25 25
Short-term investments 711 711
------- -------
Total investments $33,000 $33,409
======= =======
</TABLE>
33
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
--------------------------------------------------------------------------------
($ IN MILLIONS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------
DEFERRED
POLICY RESERVES FOR CLAIMS,
ACQUISITION CLAIMS EXPENSE AND UNEARNED
SEGMENT COSTS CONTRACT BENEFITS PREMIUMS
------- ----------- -------------------- --------
<S> <C> <C> <C>
1999
Life and savings operations $2,675 $31,143 $ 18
Property-liability operations 20 368 137
------ ------- ----
Total $2,695 $31,511 $155
====== ======= ====
1998
Life and savings operations $2,181 $28,734 $ 47
Property-liability operations 14 313 105
------ ------- ----
Total $2,195 $29,047 $152
====== ======= ====
1997
Life and savings operations $1,982 $27,482 $ 64
Property-liability operations 10 349 100
------ ------- ----
Total $1,992 $27,831 $164
====== ======= ====
</TABLE>
34
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
--------------------------------------------------------------------------------
($ IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
CLAIMS,
PREMIUM CLAIMS
REVENUE EXPENSE AMORTIZATION OTHER
AND NET AND OF POLICY OPERATING PREMIUMS
CONTRACT INVESTMENT CONTRACT ACQUISITION COSTS AND WRITTEN
SEGMENT CHARGES INCOME BENEFITS COSTS EXPENSES (EXCLUDING LIFE)
------- -------- ---------- ----------- ------------ --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1999
Life and savings operations $1,561 $2,239 $2,511 $367 $345 $ -
Property-liability operations 289 26 222 42 42 315
------ ------ ------ ---- ---- ----
Total $1,850 $2,265 $2,733 $409 $387 $315
====== ====== ====== ==== ==== ====
1998
Life and savings operations $1,519 $2,113 $2,415 $377 $325 $ -
Property-liability operations 268 26 195 35 45 280
------ ------ ------ ---- ---- ----
Total $1,787 $2,139 $2,610 $412 $370 $280
====== ====== ====== ==== ==== ====
1997
Life and savings operations $1,502 $2,074 $2,406 $298 $321 $ -
Property-liability operations 275 44 179 35 47 273
------ ------ ------ ---- ---- ----
Total $1,777 $2,118 $2,585 $333 $368 $273
====== ====== ====== ==== ==== ====
</TABLE>
35
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
--------------------------------------------------------------------------------
($ in millions)
<TABLE>
<CAPTION>
PERCENT
OF
CEDED ASSUMED AMOUNT
GROSS TO OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
-------- --------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Life insurance in force $307,225 $102,153 $ 1 $205,073 0.0%
======== ======== ==== ========
Premiums and contract charges:
Life insurance $ 1,511 $ 221 $ 18 $ 1,308 1.4%
Accident-health insurance 237 20 36 253 14.2%
Property-liability insurance 291 3 1 289 0.3%
-------- -------- ---- --------
Total premiums and contract charges $ 2,039 $ 244 $ 55 $ 1,850 3.0%
======== ======== ==== ========
YEAR ENDED DECEMBER 31, 1998
Life insurance in force $276,029 $ 73,769 $ 7 $202,267 0.0%
======== ======== ==== ========
Premiums and contract charges:
Life insurance $ 1,433 $ 176 $ 5 $ 1,262 0.4%
Accident-health insurance 235 2 24 257 9.3%
Property-liability insurance 268 1 1 268 0.4%
-------- -------- ---- --------
Total premiums and contract charges. $ 1,936 $ 179 $ 30 $ 1,787 1.7%
======== ======== ==== ========
YEAR ENDED DECEMBER 31, 1997
Life insurance in force $247,048 $ 52,760 $144 $194,432 0.1%
======== ======== ==== ========
Premiums and contract charges:
Life insurance $ 1,427 $ 193 $ -- $ 1,234 --%
Accident-health insurance 152 1 117 268 43.7%
Property-liability insurance 278 3 -- 275 0.0%
-------- -------- ---- --------
Total premiums and contract charges $ 1,857 $ 197 $117 $ 1,777 6.6%
======== ======== ==== ========
</TABLE>
36
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE V - VALUATION ALLOWANCE AND QUALIFYING ACCOUNTS
--------------------------------------------------------------------------------
($ IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ADDITIONS DEDUCTIONS (1) OF PERIOD
----------- ---------- ----------- ---------- -------------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Allowance for estimated losses on mortgage
loans and real estate $15 $ 2 $ 4 $13
Allowance for deferred tax assets -- 1 -- 1
YEAR ENDED DECEMBER 31, 1998
Allowance for estimated losses on mortgage
loans and real estate $37 $ (16) $ 6 $15
YEAR ENDED DECEMBER 31, 1997
Allowance for estimated losses on mortgage
loans and real estate $72 $ (22) $13 $37
</TABLE>
(1) Deductions in allowance for estimated losses on mortgage loans include
amounts transferred to real estate. Deductions in allowance for reinsurance
recovered represent write-offs, net of recoveries, of amounts determined to
be uncollectible.
37
<PAGE>
ALLSTATE LIFE INSURANCE
COMPANY SEPARATE
ACCOUNT A
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND FOR THE
PERIOD FROM MAY 3, 1999 TO DECEMBER 31, 1999 AND INDEPENDENT
AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Allstate Life Insurance Company:
We have audited the accompanying statement of net assets of Allstate Life
Insurance Company 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 changes in
net assets for the period from May 3, 1999 (date of inception) to December 31,
1999 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Allstate Life Insurance Company 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 the period from May 3, 1999 (date of inception) to December 31,
1999 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27, 2000
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Allocation to Sub-Accounts investing in the Putnam Variable Trust:
Asia Pacific Growth, 278,466 shares (cost $3,789,956) $ 4,803,532
Diversified Income, 1,514,137 shares (cost $14,764,040) 15,005,098
The George Putnam Fund of Boston, 2,907,045 shares (cost $30,051,532) 29,012,305
Global Asset Allocation, 142,637 shares (cost $2,627,570) 2,795,686
Global Growth, 559,039 shares (cost $12,776,277) 17,000,389
Growth & Income, 4,691,832 shares (cost $128,157,309) 125,506,496
Health Sciences, 1,349,491 shares (cost $13,570,021) 14,156,162
High Yield, 818,296 shares (cost $8,868,651) 9,066,725
Income, 982,477 shares (cost $12,309,230) 12,290,785
International Growth, 1,234,900 shares (cost $21,528,251) 26,698,544
International Growth and Income, 470,967 shares (cost $6,838,545) 7,168,122
International New Opportunities, 409,062 shares (cost $7,108,499) 9,522,959
Investors, 5,495,714 shares (cost $71,619,605) 83,150,151
Money Market, 16,872,573 shares (cost $16,872,573) 16,872,573
New Opportunities, 1,114,500 shares (cost $36,579,176) 48,413,875
New Value, 566,900 shares (cost $6,938,279) 6,717,771
OTC & Emerging Growth, 765,986 shares (cost $12,690,975) 17,433,843
Research, 1,540,836 shares (cost $20,578,934) 22,604,065
Small Cap Value, 594,274 shares (cost $5,970,846) 6,121,017
Utilities Growth and Income, 435,290 shares (cost $7,511,540) 7,378,168
Vista, 701,266 shares (cost $12,342,960) 14,481,152
Voyager, 1,683,119 shares (cost $86,527,295) 111,271,035
----------------
Total Assets 607,470,454
LIABILITIES
Payable to Allstate Life Insurance Company
Accrued contract maintenance charges 68,839
----------------
Net Assets $ 607,401,615
================
</TABLE>
See notes to financial statements
2
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
--------------------------------------------------------------------------------------------
The George
Asia Putnam Fund Global
Pacific Diversified of Asset Global
Growth Income Boston Allocation Growth
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ - $ 603,870 $ 289 $ -
Charges from Allstate Life
Insurance Company:
Mortality and expense risk (8,332) (42,429) (88,415) (7,001) (39,047)
----------------- ----------------- ----------------- ----------------- -----------------
Net investment income (loss) (8,332) (42,429) 515,455 (6,712) (39,047)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales
of investments:
Proceeds from sales 19,811 36,175 156,014 7,214 109,185
Cost of investments sold 18,686 35,881 156,846 7,217 101,580
----------------- ----------------- ----------------- ----------------- -----------------
Net realized gains (losses) 1,125 294 (832) (3) 7,605
----------------- ----------------- ----------------- ----------------- -----------------
Change in unrealized gains (losses) 1,013,576 241,058 (1,039,227) 168,116 4,224,112
----------------- ----------------- ----------------- ----------------- -----------------
Net gains (losses) on
investments 1,014,701 241,352 (1,040,059) 168,113 4,231,717
----------------- ----------------- ----------------- ----------------- -----------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $1,006,369 $ 198,923 $ (524,604) $ 161,401 $4,192,670
================= ================= ================= ================= =================
</TABLE>
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
---------------------------------------------------------------------------------------------
Growth & Health High International
Income Sciences Yield Income Growth
------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ 4,849 $ - $ - $ -
Charges from Allstate Life
Insurance Company:
Mortality and expense risk (398,152) (38,903) (25,156) (35,910) (60,294)
------------------ ------------------ ------------------ ------------------ ------------------
Net investment income (loss) (398,152) (34,054) (25,156) (35,910) (60,294)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales
of investments:
Proceeds from sales 78,513 120,049 736,350 181,921 193,345
Cost of investments sold 126,369 122,899 727,602 182,722 182,340
------------------ ------------------ ------------------ ------------------ ------------------
Net realized gains (losses) (47,856) (2,850) 8,748 (801) 11,005
------------------ ------------------ ------------------ ------------------ ------------------
Change in unrealized gains (losses) (2,650,813) 586,141 198,074 (18,445) 5,170,293
------------------ ------------------ ------------------ ------------------ ------------------
Net gains (losses)
on investments (2,698,669) 583,291 206,822 (19,246) 5,181,298
------------------ ------------------ ------------------ ------------------ ------------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ (3,096,821) $ 549,237 $ 181,666 $ (55,156) $5,121,004
================== =================== ================= =================== =================
</TABLE>
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
----------------------------------------------------------------------------------------------
International International
Growth and New Money New
Income Opportunities Investors Market Opportunities
------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ - $ - $ 153,816 $ -
Charges from Allstate Life
Insurance Company:
Mortality and expense risk (19,894) (17,878) (217,860) (47,820) (108,364)
------------------ ------------------ ------------------ ------------------ ------------------
Net investment income (loss) (19,894) (17,878) (217,860) 105,996 (108,364)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales
of investments:
Proceeds from sales 463,154 373,826 129,574 3,625,107 20,054
Cost of investments sold 442,666 346,771 118,977 3,625,107 18,865
------------------ ------------------ ------------------ ------------------ ------------------
Net realized gains (losses) 20,488 27,055 10,597 - 1,189
------------------ ------------------ ------------------ ------------------ ------------------
Change in unrealized gains (losses) 329,577 2,414,460 11,530,546 - 11,834,699
------------------ ------------------ ------------------ ------------------ ------------------
Net gains (losses)
on investments 350,065 2,441,515 11,541,143 - 11,835,888
------------------ ------------------ ------------------ ------------------ ------------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 330,171 $2,423,637 $11,323,283 $ 105,996 $11,727,524
================== =================== ================= =================== =================
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
----------------------------------------------------------------------------------------------
OTC & Utilities
New Emerging Small Growth and
Value Growth Research Cap Value Income
------------------ ------------------ ------------------------------------ ------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ 36,702 $ 504,319 $ 17,808 $ -
Charges from Allstate Life
Insurance Company:
Mortality and expense risk (23,561) (30,805) (60,946) (17,840) (21,930)
------------------ ------------------ ------------------------------------ ------------------
Net investment income (loss) (23,561) 5,897 443,373 (32) (21,930)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales
of investments:
Proceeds from sales 511,204 244,974 104,735 343,642 57,562
Cost of investments sold 537,223 192,485 104,647 357,046 58,296
------------------ ------------------ ------------------------------------ ------------------
Net realized gains (losses) (26,019) 52,489 88 (13,404) (734)
------------------ ------------------ ------------------------------------ ------------------
Change in unrealized gains (losses) (220,508) 4,742,868 2,025,131 150,171 (133,372)
------------------ ------------------ ------------------------------------ ------------------
Net gains (losses)
on investments (246,527) 4,795,357 2,025,219 136,767 (134,106)
------------------ ------------------ ------------------------------------ ------------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ (270,088) $4,801,254 $2,468,592 $ 136,735 $ (156,036)
================== =================== ================= =================== =================
</TABLE>
See notes to financial statements.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
-------------------------------------------------------------------------------------------------------------
Putnam Variable Trust Sub-Accounts
---------------------------------------------
Vista Voyager
------------------ ------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 930,830 $ -
Charges from Allstate Life Insurance Company:
Mortality and expense risk (33,727) (273,748)
------------------ ------------------
Net investment income (loss) 897,103 (273,748)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 96,344 5,467
Cost of investments sold 89,711 7,862
------------------ ------------------
Net realized gains (losses) 6,633 (2,395)
------------------ ------------------
Change in unrealized gains (losses) 2,138,192 24,743,740
------------------ ------------------
Net gains (losses) on investments 2,144,825 24,741,345
------------------ ------------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $3,041,928 $24,467,597
================== ==================
</TABLE>
See notes to financial statements.
7
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
--------------------------------------------------------------------------------------------
The George
Asia Putnam Fund Global
Pacific Diversified of Asset Global
Growth Income Boston Allocation Growth
----------------- ------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (8,332) $ (42,429) $ 515,455 $ (6,712) $ (39,047)
Net realized gains (losses) 1,125 294 (832) (3) 7,605
Change in unrealized gains (losses) 1,013,576 241,058 (1,039,227) 168,116 4,224,112
----------------- ------------------ ------------------- ---------------- ------------------
Change in net assets resulting
from operations 1,006,369 198,923 (524,604) 161,401 4,192,670
----------------- ------------------ ------------------- --------------- ------------------
FROM CAPITAL TRANSACTIONS
Deposits 2,747,456 5,717,042 12,891,820 1,240,444 6,205,016
Benefit payments - (3,417) - - (378)
Payments on termination (11,734) (161,343) (304,746) (11,684) (63,561)
Contract maintenance charges (544) (1,700) (3,288) (317) (1,926)
Transfers among the sub-accounts
and with the Fixed Account - net 1,061,441 9,253,893 16,949,835 1,405,526 6,666,642
----------------- ------------------ ------------------- ---------------- ------------------
Change in net assets resulting
from capital transactions 3,796,619 14,804,475 29,533,621 2,633,969 12,805,793
----------------- ------------------ ------------------- ---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS 4,802,988 15,003,398 29,009,017 2,795,370 16,998,463
NET ASSETS AT BEGINNING OF PERIOD - - - - -
----------------- ------------------ ------------------- ---------------- ------------------
NET ASSETS AT END OF PERIOD $ 4,802,988 $ 15,003,398 $ 29,009,017 $ 2,795,370 $ 16,998,463
================= ================== =================== ================ =================
</TABLE>
See notes to financial statements.
8
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
---------------------------------------------------------------------------------------------
Growth & Health High International
Income Sciences Yield Income Growth
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (398,152) $ (34,054) $(25,156) $(35,910) $(60,294)
Net realized gains (losses) (47,856) (2,850) 8,748 (801) 11,005
Change in unrealized gains (losses) (2,650,813) 586,141 198,074 (18,445) 5,170,293
------------- ------------- ------------- ------------- -------------
Change in net assets resulting
from operations (3,096,821) 549,237 181,666 (55,156) 5,121,004
------------- ------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 66,564,874 6,876,229 4,841,415 4,349,939 11,178,109
Benefit payments (37,062) (15,210) - - -
Payments on termination (1,216,975) (92,242) (104,534) (95,887) (121,259)
Contract maintenance charges (14,223) (1,604) (1,027) (1,393) (3,025)
Transfers among the sub-accounts
and with the Fixed Account - net 63,292,481 6,838,148 4,148,178 8,091,890 10,520,690
------------- ------------- ------------- ------------- -------------
Change in net assets resulting
from capital transactions 128,589,095 13,605,321 8,884,032 12,344,549 21,574,515
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS 125,492,274 14,154,558 9,065,698 12,289,393 26,695,519
NET ASSETS AT BEGINNING OF PERIOD - - - - -
------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD $125,492,274 $14,154,558 $9,065,698 $ 12,289,393 $26,695,519
=============== ============== ============ =============== ============
</TABLE>
See notes to financial statements.
9
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
---------------------------------------------------------------------------------------------
International International
Growth and New Money New
Income Opportunities Investors Market Opportunities
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (19,894) $ (17,878) $ (217,860) $ 105,996 $ (108,364)
Net realized gains (losses) 20,488 27,055 10,597 - 1,189
Change in unrealized gains (losses) 329,577 2,414,460 11,530,546 - 11,834,699
----------- ----------- ----------- ----------- -----------
Change in net assets resulting
from operations 330,171 2,423,637 11,323,283 105,996 11,727,524
----------- ----------- ----------- ----------- -----------
FROM CAPITAL TRANSACTIONS
Deposits 3,618,618 3,838,306 36,262,504 10,542,789 21,115,643
Benefit payments - - (30,501) (670,189) (23,210)
Payments on termination (46,787) (23,171) (582,482) (551,414) (181,269)
Contract maintenance charges (812) (1,079) (9,423) (1,912) (5,486)
Transfers among the sub-accounts
and with the Fixed Account - net 3,266,120 3,284,187 36,177,347 7,445,391 15,775,186
----------- ----------- ----------- ----------- -----------
Change in net assets resulting
from capital transactions 6,837,139 7,098,243 71,817,445 16,764,665 36,680,864
----------- ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS 7,167,310 9,521,880 83,140,728 16,870,661 48,408,388
NET ASSETS AT BEGINNING OF PERIOD - - - - -
----------- ----------- ----------- ----------- -----------
NET ASSETS AT END OF PERIOD $7,167,310 $9,521,880 $83,140,728 $16,870,661 $48,408,388
============ ============ ============ ============ ============
</TABLE>
See notes to financial statements.
10
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
-------------------------------------------------------------------------------------
OTC & Utilities
New Emerging Small Growth and
Value Growth Research Cap Value Income
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (23,561) $ 5,897 $ 443,373 $ (32) $(21,930)
Net realized gains (losses) (26,019) 52,489 88 (13,404) (734)
Change in unrealized gains (losses) (220,508) 4,742,868 2,025,131 150,171 (133,372)
----------- ----------- ---------- ---------- ----------
Change in net assets resulting
from operations (270,088) 4,801,254 2,468,592 136,735 (156,036)
----------- ----------- ---------- ---------- ----------
FROM CAPITAL TRANSACTIONS
Deposits 4,631,791 7,611,399 10,121,156 3,738,103 3,637,575
Benefit payments - - (19,019) - (1,534)
Payments on termination (71,977) (58,463) (144,741) (41,066) (64,952)
Contract maintenance charges (761) (1,975) (2,562) (694) (836)
Transfers among the sub-accounts
and with the Fixed Account - net 2,428,045 5,079,652 10,178,077 2,287,245 3,963,115
----------- ----------- ---------- ---------- ----------
Change in net assets resulting
from capital transactions 6,987,098 12,630,613 20,132,911 5,983,588 7,533,368
----------- ----------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS 6,717,010 17,431,867 22,601,503 6,120,323 7,377,332
NET ASSETS AT BEGINNING OF PERIOD - - - - -
----------- ----------- ---------- ---------- ----------
NET ASSETS AT END OF PERIOD $6,717,010 $17,431,867 $22,601,503 $6,120,323 $7,377,332
=========== ============ ============ ============ ==========
</TABLE>
See notes to financial statements.
11
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD BEGINNING MAY 3, 1999 AND ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Putnam Variable Trust Sub-Accounts
---------------------------------------------
Vista Voyager
----------------- --------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 897,103 $ (273,748)
Net realized gains (losses) 6,633 (2,395)
Change in unrealized gains (losses) 2,138,192 24,743,740
----------------- --------------------
Change in net assets resulting from operations 3,041,928 24,467,597
----------------- --------------------
FROM CAPITAL TRANSACTIONS
Deposits 6,530,416 47,654,070
Benefit payments (3,766) (28,233)
Payments on termination (72,861) (760,755)
Contract maintenance charges (1,641) (12,609)
Transfers among the sub-accounts
and with the Fixed Account - net 4,985,435 39,938,356
----------------- --------------------
Change in net assets resulting
from capital transactions 11,437,583 86,790,829
----------------- --------------------
INCREASE (DECREASE) IN NET ASSETS 14,479,511 111,258,426
NET ASSETS AT BEGINNING OF PERIOD - -
----------------- --------------------
NET ASSETS AT END OF PERIOD $14,479,511 $ 111,258,426
================= ====================
</TABLE>
See notes to financial statements.
12
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION
Allstate Life Insurance Company 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
Allstate Life Insurance Company ("Allstate"). The assets of the Account
are legally segregated from those of Allstate. Allstate is a wholly owned
subsidiary of Allstate Insurance Company, which is wholly owned by The
Allstate Corporation.
Allstate issues the Putnam Allstate Advisor ("Advisor") and Putnam
Allstate Advisor A ("Advisor A") contracts, the deposits of which are
invested at the direction of contractholders in sub-accounts that comprise
the Account. Absent any contract provisions wherein Allstate 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 of the Putnam Variable Trust (the "Funds").
Asia Pacific Growth International New Opportunities
Diversified Income Investors
The George Putnam Fund of Boston Money Market
Global Asset Allocation New Opportunities
Global Growth New Value
Growth & Income OTC & Emerging Growth
Health Sciences Research
High Yield Small Cap Value
Income Utilities Growth and Income
International Growth Vista
International Growth and Income Voyager
Allstate provides insurance and administrative services to the
contractholders for a fee. Allstate also maintains a fixed account ("Fixed
Account"), to which contractholders may direct their deposits and receive
a fixed rate of return. Allstate has sole discretion to invest the assets
of the Fixed Account, subject to applicable law.
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.
13
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 with and taxed as a part of
Allstate. Allstate 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.
3. EXPENSES
CONTRACT MAINTENANCE CHARGE - Allstate deducts from the contractholder's
account an annual maintenance charge of $30 on each Advisor contract
anniversary and guarantees that this charge will not increase over the
life of the contract. This charge will be waived if certain conditions are
met. There is no contract maintenance charge on the Advisor A contract.
MORTALITY AND EXPENSE RISK CHARGE - Allstate assumes mortality and expense
risks related to the operations of the Account and deducts charges the
daily based on the average 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. Allstate guarantees that the amount of
this charge will not increase over the life of the contract. At the
contractholder's discretion, additional options, primarily death benefits,
may be purchased for an additional charge.
14
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Putnam Allstate Advisor
--------------------------------------------------------------------------------------
Unit activity during 1999:
---------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
May 3, 1999 Issued Redeemed December 31, 1999 December 31, 1999
------------------- ---------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Investments in the Putnam Variable
Trust Sub-Accounts:
Asia Pacific Growth - 242,895 (1,554) 241,341 $ 17.44
Diversified Income - 1,129,582 (17,469) 1,112,113 9.87
The George Putnam Fund of Boston - 2,668,746 (39,341) 2,629,405 9.30
Global Asset Allocation - 219,025 (2,236) 216,789 10.70
Global Growth - 818,866 (9,295) 809,571 15.66
Growth and Income - 10,579,710 (133,163) 10,446,547 9.17
Health Sciences - 1,054,327 (16,379) 1,037,948 10.60
High Yield - 757,423 (68,918) 688,505 9.93
Income - 1,020,041 (25,728) 994,313 9.71
International Growth - 1,437,326 (20,835) 1,416,491 14.43
International Growth and Income - 574,760 (59,267) 515,493 10.97
International New Opportunities - 422,689 (33,644) 389,045 18.13
Investors - 5,580,875 (63,258) 5,517,617 12.17
Money Market - 1,735,261 (473,615) 1,261,646 10.23
New Opportunities - 2,379,571 (27,681) 2,351,890 15.69
New Value - 642,694 (15,877) 626,817 8.80
OTC & Emerging Growth - 722,095 (25,088) 697,007 19.84
Research - 1,588,829 (12,936) 1,575,893 11.60
Small Cap Value - 471,685 (20,187) 451,498 10.30
Utilities Growth and Income - 592,529 (7,405) 585,124 9.99
Vista - 835,166 (10,511) 824,655 14.09
Voyager - 6,067,583 (60,695) 6,006,888 14.33
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
15
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
Putnam Allstate Advisor with Enhanced Beneficiary Protection
--------------------------------------------------------------------------------------
Unit activity during 1999:
---------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
May 3, 1999 Issued Redeemed December 31, 1999 December 31, 1999
------------------- ---------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Investments in the Putnam Variable
Trust Sub-Accounts:
Asia Pacific Growth - 33,423 (745) 32,678 $ 17.42
Diversified Income - 414,195 (5,618) 408,577 9.86
The George Putnam Fund of Boston - 513,469 (25,504) 487,965 9.29
Global Asset Allocation - 44,571 (6) 44,565 10.69
Global Growth - 284,398 (9,781) 274,617 15.65
Growth and Income - 3,298,917 (73,609) 3,225,308 9.16
Health Sciences - 302,531 (8,640) 293,891 10.59
High Yield - 238,503 (14,895) 223,608 9.92
Income - 286,146 (15,063) 271,083 9.70
International Growth - 439,462 (9,997) 429,465 14.41
International Growth and Income - 137,929 (1,278) 136,651 10.96
International New Opportunities - 137,537 (3,596) 133,941 18.12
Investors - 1,333,984 (24,460) 1,309,524 12.16
Money Market - 463,082 (76,351) 386,731 10.22
New Opportunities - 737,732 (7,556) 730,176 15.68
New Value - 190,246 (53,202) 137,044 8.79
OTC & Emerging Growth - 186,416 (4,747) 181,669 19.82
Research - 375,492 (6,422) 369,070 11.59
Small Cap Value - 165,987 (25,691) 140,296 10.29
Utilities Growth and Income - 156,153 (2,501) 153,652 9.98
Vista - 202,831 (822) 202,009 14.07
Voyager - 1,782,652 (30,541) 1,752,111 14.31
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
16
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
Putnam Allstate Advisor A
--------------------------------------------------------------------------------------
Unit activity during 1999:
---------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
May 3, 1999 Issued Redeemed December 31, 1999 December 31, 1999
------------------- ---------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Investments in the Putnam Variable
Trust Sub-Accounts:
Asia Pacific Growth - 1,911 - 1,911 $ 13.36
Diversified Income - 409 - 409 10.19
The George Putnam Fund of Boston - 2,578 - 2,578 9.78
Global Asset Allocation - - - - -
Global Growth - 1,404 - 1,404 13.56
Growth and Income - 11,861 (2) 11,859 9.69
Health Sciences - 4,191 - 4,191 10.63
High Yield - 691 - 691 10.38
Income - - - - -
International Growth - 5,441 (1) 5,440 12.86
International Growth and Income - 1,515 - 1,515 10.58
International New Opportunities - 2,774 - 2,774 14.53
Investors - 7,390 (1) 7,389 11.61
Money Market - 938 - 938 10.07
New Opportunities - 4,105 - 4,105 13.47
New Value - - - - -
OTC & Emerging Growth - 312 - 312 15.16
Research - 3,617 - 3,617 11.06
Small Cap Value - 2,352 - 2,352 10.78
Utilities Growth and Income - 106 - 106 9.61
Vista - 1,448 - 1,448 13.01
Voyager - 9,327 (1) 9,326 12.95
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
17
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
Putnam Allstate Advisor A with Enhanced Beneficiary Protection
--------------------------------------------------------------------------------------
Unit activity during 1999:
---------------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
May 3, 1999 Issued Redeemed December 31, 1999 December 31, 1999
------------------- ---------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Investments in the Putnam Variable
Trust Sub-Accounts:
Asia Pacific Growth - - - - $ -
Diversified Income - - - - -
The George Putnam Fund of Boston - - - - -
Global Asset Allocation - - - - -
Global Growth - - - - -
Growth and Income - 1,229 - 1,229 9.68
Health Sciences - - - - -
High Yield - - - - -
Income - - - - -
International Growth - - - - -
International Growth and Income - - - - -
International New Opportunities - - - - -
Investors - - - - -
Money Market - - - - -
New Opportunities - - - - -
New Value - - - - -
OTC & Emerging Growth - - - - -
Research - 808 - 808 11.06
Small Cap Value - - - - -
Utilities Growth and Income - - - - -
Vista - - - - -
Voyager - 694 - 694 12.95
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
18
<PAGE>
APPENDIX A
PUTNAM ALLSTATE ADVISOR CONTRACT
The performance figures shown reflect the deduction of current Contract charges,
which include a maximum withdrawal charge of 7% that declines to zero after 7
years (not shown for non-standardized total returns), an annual contract
maintenance charge of $30 (not shown for non-standardized total returns), and
total Variable Account annual expenses of:
o 1.25% (without any optional benefit riders), or
o 1.40% with the Enhanced Beneficiary Protection Option.
In addition, where Retirement Income Guarantee Rider 2 is included, the
performance shown reflects the deduction of the annual Rider fee equal to 0.30%
of the Income Base, assuming Income Base B is in effect and assuming no
additional purchase payments or withdrawals.
See the Expense Table in the Prospectus for more details.
Standardized Total Returns
Set out below are the standardized total returns for each Variable Sub-Account
(other than the Putnam American Government Income, Putnam Growth Opportunities,
Putnam Tecnology, Putnam Capital Appreciation and Putnam Voyager II Variable
Sub-Accounts) since its inception through December 31, 1999. All of the Variable
Sub-Accounts commenced operations on April 30, 1999 except for the Putnam
American Government Income and Putnam Growth Opportunities Variable
Sub-Accounts, which commenced operations on February 4, 2000, the Putnam
Technology Variable Sub-Account, which commenced operations on July 17, 2000,
and the Putnam Capital Appreciation and Putnam Voyager II Variable Sub-Accounts,
which commenced operations on October 2, 2000.
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or Retirement Income Guarantee Rider)
Variable Sub-Account Since Inception of Sub-Account
<S> <C>
Putnam American Government Income N/A
Putnam Asia Pacific Growth 117.40%
Putnam Capital Appreciation N/A
Putnam Diversified Income -10.76%
The George Putnam Fund -18.78%
Putnam Global Asset Allocation 1.43%
Putnam Global Growth 84.18%
Putnam Growth and Income -20.55%
Putnam Growth Opportunities N/A
Putnam Health Sciences -0.07%
Putnam High Yield -9.79%
Putnam Income -12.94%
Putnam International Growth 62.08%
Putnam International Growth and Income 5.51%
Putnam International New Opportunities 130.96%
Putnam Investors 24.22%
Putnam Money Market -5.47%
Putnam New Opportunities 84.68%
Putnam New Value -25.70%
Putnam OTC & Emerging Growth 165.19%
Putnam Research 15.20%
Putnam Small Cap Value -4.44%
Putnam Technology N/A
Putnam Utilities Growth and Income -9.03%
Putnam Vista 56.19%
Putnam Voyager 60.31%
Putnam Voyager II N/A
<PAGE>
(With the Enhanced Beneficiary Protection Option)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 117.05%
Putnam Capital Appreciation N/A
Putnam Diversified Income -10.91%
The George Putnam Fund -18.92%
Putnam Global Asset Allocation 1.27%
Putnam Global Growth 83.89%
Putnam Growth and Income -20.68%
Putnam Growth Opportunities N/A
Putnam Health Sciences -0.23%
Putnam High Yield -9.94%
Putnam Income -13.08%
Putnam International Growth 61.82%
Putnam International Growth and Income 5.34%
Putnam International New Opportunities 130.60%
Putnam Investors 24.02%
Putnam Money Market -5.62%
Putnam New Opportunities 84.39%
Putnam New Value -25.82%
Putnam OTC & Emerging Growth 164.78%
Putnam Research 15.02%
Putnam Small Cap Value -4.59%
Putnam Technology N/A
Putnam Utilities Growth and Income -9.18%
Putnam Vista 55.94%
Putnam Voyager 60.06%
Putnam Voyager II N/A
<PAGE>
(With Retirement Income Guarantee Rider 2)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 116.78%
Putnam Capital Appreciation N/A
Putnam Diversified Income -11.22%
The George Putnam Fund -19.23%
Putnam Global Asset Allocation 0.96%
Putnam Global Growth 83.60%
Putnam Growth and Income -20.99%
Putnam Growth Opportunities N/A
Putnam Health Sciences -0.55%
Putnam High Yield -10.25%
Putnam Income -13.39%
Putnam International Growth 61.52%
Putnam International Growth and Income 5.03%
Putnam International New Opportunities 130.34%
Putnam Investors 23.71%
Putnam Money Market -5.93%
Putnam New Opportunities 84.10%
Putnam New Value -26.13%
Putnam OTC & Emerging Growth 164.54%
Putnam Research 14.71%
Putnam Small Cap Value -4.91%
Putnam Technology N/A
Putnam Utilities Growth and Income -9.49%
Putnam Vista 55.64%
Putnam Voyager 59.76%
Putnam Voyager II N/A
<PAGE>
(With the Enhanced Beneficiary Protection Option and Retirement Income Guarantee Rider 2)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 116.44%
Putnam Capital Appreciation N/A
Putnam Diversified Income -11.37%
The George Putnam Fund -19.36%
Putnam Global Asset Allocation 0.79%
Putnam Global Growth 83.31%
Putnam Growth and Income -21.12%
Putnam Growth Opportunities N/A
Putnam Health Sciences -0.71%
Putnam High Yield -10.39%
Putnam Income -13.53%
Putnam International Growth 61.27%
Putnam International Growth and Income 4.86%
Putnam International New Opportunities 129.97%
Putnam Investors 23.52%
Putnam Money Market -6.09%
Putnam New Opportunities 83.81%
Putnam New Value -26.25%
Putnam OTC & Emerging Growth 164.12%
Putnam Research 14.52%
Putnam Small Cap Value -5.06%
Putnam Technology N/A
Putnam Utilities Growth and Income -9.64%
Putnam Vista 55.39%
Putnam Voyager 59.51%
Putnam Voyager II N/A
</TABLE>
Non-Standardized Total Returns
Set out below are the non-standardized total returns for each Variable
Sub-Account (other than the Putnam American Government Income, Putnam Growth
Opportunities, Putnam Technology, Putnam Capital Appreciation and Putnam Voyager
II Variable Sub-Accounts) since its inception through December 31, 1999. All of
the Variable Sub-Accounts commenced operations on April 30, 1999 except for the
Putnam American Government Income and Putnam Growth Opportunities Variable
Sub-Accounts, which commenced operations on February 4, 2000, the Putnam
Technology Variable Sub-Account, which commenced operations on July 17, 2000,
and the Putnam Capital Appreciation and Putnam Voyager II Variable Sub-Accounts,
which commenced operations on October 2, 2000. The non-standardized total
returns shown below do not reflect withdrawal charges or the $30 annual contract
maintenance charge that may be imposed under the Putnam Allstate Advisor
Contract. No non-standardized performance is shown for Contracts with Retirement
Income Guarantee Rider 2.
<PAGE>
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or Retirement Income Guarantee Rider)
Variable Sub-Account Since Inception of Sub-Account
<S> <C>
Putnam American Government Income N/A
Putnam Asia Pacific Growth 128.95%
Putnam Capital Appreciation N/A
Putnam Diversified Income -1.99%
The George Putnam Fund -10.26%
Putnam Global Asset Allocation 10.57%
Putnam Global Growth 95.17%
Putnam Growth and Income -12.08%
Putnam Growth Opportunities N/A
Putnam Health Sciences 9.02%
Putnam High Yield -0.98%
Putnam Income -4.23%
Putnam International Growth 72.64%
Putnam International Growth and Income 14.76%
Putnam International New Opportunities 142.73%
Putnam Investors 33.95%
Putnam Money Market 3.47%
Putnam New Opportunities 95.67%
Putnam New Value -17.41%
Putnam OTC & Emerging Growth 177.46%
Putnam Research 24.71%
Putnam Small Cap Value 4.53%
Putnam Technology N/A
Putnam Utilities Growth and Income -0.20%
Putnam Vista 66.63%
Putnam Voyager 70.84%
Putnam Voyager II N/A
(With the Enhanced Beneficiary Protection Option)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 128.60%
Putnam Capital Appreciation N/A
Putnam Diversified Income -2.14%
The George Putnam Fund -10.40%
Putnam Global Asset Allocation 10.40%
Putnam Global Growth 94.87%
Putnam Growth and Income -12.22%
Putnam Growth Opportunities N/A
Putnam Health Sciences 8.85%
Putnam High Yield -1.13%
Putnam Income -4.38%
Putnam International Growth 72.38%
Putnam International Growth and Income 14.59%
Putnam International New Opportunities 142.36%
Putnam Investors 33.75%
Putnam Money Market 3.31%
Putnam New Opportunities 95.38%
Putnam New Value -17.53%
Putnam OTC & Emerging Growth 177.04%
Putnam Research 24.52%
Putnam Small Cap Value 4.37%
Putnam Technology N/A
Putnam Utilities Growth and Income -0.35%
Putnam Vista 66.38%
Putnam Voyager 70.58%
Putnam Voyager II N/A
</TABLE>
<PAGE>
Adjusted Historical Total Returns
Set out below are the adjusted historical total returns for each Variable
Sub-Account (other than the Putnam American Government Income, Putnam Growth
Opportunities, Putnam Technology, Putnam Capital Appreciation and Putnam Voyager
II Variable Sub-Accounts) since the Fund's inception through December 31, 1999.
Adjusted historical total returns are computed in the same manner as
standardized total returns, except that the performance figures shown are based
on the Funds' historical performance since the inception of the Funds rather
than the inception of the Variable Sub-Accounts.
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or a Retirement Income Guarantee Rider)
Ten Years or
One Year Five Years Since Inception*
Variable Sub-Account
<S> <C> <C> <C>
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 98.49% N/A 12.19%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -5.54% 4.96% 3.36%
The George Putnam Fund -7.67% N/A -3.01%
Putnam Global Asset Allocation 4.35% 15.05% 10.67%
Putnam Global Growth 58.34% 25.35% 15.66%
Putnam Growth and Income -5.82% 17.43% 12.37%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -11.20% N/A -1.95%
Putnam High Yield -1.53% 6.83% 9.25%
Putnam Income -9.40% 5.34% 6.02%
Putnam International Growth 52.02% N/A 27.38%
Putnam International Growth and Income 16.78% N/A 15.39%
Putnam International New Opportunities 94.26% N/A 30.03%
Putnam Investors 22.34% N/A 23.48%
Putnam Money Market -2.62% 3.20% 3.46%
Putnam New Opportunities 60.97% 30.82% 28.33%
Putnam New Value -7.01% N/A 4.78%
Putnam OTC & Emerging Growth 117.61% N/A 59.21%
Putnam Research 20.08% N/A 33.54%
Putnam Small Cap Value N/A N/A -4.44%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -8.04% 15.16% 11.02%
Putnam Vista 44.66% N/A 28.27%
Putnam Voyager 50.03% 29.60% 20.57%
Putnam Voyager II N/A N/A N/A
--------------
* Each of the above Funds (Class IB shares) corresponding to the Variable
Sub-Accounts commenced operations on April 30, 1998, except for the Putnam VT
Diversified Income, Growth and Income, and International Growth Funds, which
commenced operations on April 6, 1998, the Putnam VT Research Fund, which
commenced operations September 30, 1998, the Putnam VT Small Cap Value Fund,
which commenced operations April 30, 1999, the Putnam VT American Government
Fund and Putnam VT Growth Opportunities Fund, which commenced operations on
January 31, 2000, the Putnam VT Technology Fund, which commenced operations on
June 14, 2000, and the Putnam VT Capital Appreciation and Putnam VT Voyager II
Funds, which commenced operations on September 1, 2000. For periods prior to the
inception dates of the Funds (Class IB shares), the performance shown is based
on the historical performance of the Funds (Class IA shares), adjusted to
reflect the current expenses of the Funds (Class IB shares). The inception dates
for the Funds (Class IA shares) are as follows:
Global Asset Allocation, Growth and Income, Income, High Yield, Money
Market, and Voyager commenced operations on February 1, 1988; Global
Growth commenced operations on May 1, 1990; Utilities Growth and Income
commenced operations on May 1, 1992; Diversified Income commenced
operations on September 15, 1993; New Opportunities commenced
operations on May 2, 1994; Asia Pacific Growth commenced operations on
May 1, 1995; International Growth, International Growth and Income,
International New Opportunities, New Value and Vista commenced
operations on January 2, 1997; The George Putnam Fund of Boston, Health
Sciences, Investors and OTC & Emerging Growth commenced operations on
April 30, 1998.
<PAGE>
(With the Enhanced Beneficiary Protection Option)*
Ten Years or
Variable Sub-Account One Year Five Years Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 98.18% N/A 12.02%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -5.69% 4.80% 3.20%
The George Putnam Fund -7.82% N/A -3.16%
Putnam Global Asset Allocation 4.19% 14.88% 10.50%
Putnam Global Growth 56.24% 24.87% 15.35%
Putnam Growth and Income -5.97% 17.25% 12.20%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -11.35% N/A -2.11%
Putnam High Yield -1.69% 6.66% 9.09%
Putnam Income -9.55% 5.18% 5.86%
Putnam International Growth 51.78% N/A 27.19%
Putnam International Growth and Income 16.59% N/A 15.21%
Putnam International New Opportunities 93.96% N/A 29.83%
Putnam Investors 22.15% N/A 23.29%
Putnam Money Market -2.78% 3.04% 3.31%
Putnam New Opportunities 60.72% 30.62% 28.13%
Putnam New Value -7.16% N/A 4.61%
Putnam OTC & Emerging Growth 117.27% N/A 58.96%
Putnam Research 19.89% N/A 33.33%
Putnam Small Cap Value N/A N/A -4.59%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -8.19% 14.99% 10.85%
Putnam Vista 44.44% N/A 28.07%
Putnam Voyager 49.79% 29.41% 20.38%
Putnam Voyager II N/A N/A N/A
</TABLE>
--------------
* Performance figures have been adjusted to reflect the current charge for
the Enhanced Beneficiary Protection Option as if that feature had been
available throughout the periods shown.
** The inception dates for the Funds appear in the first footnote to the
preceding table. For periods prior to the inception dates of the Funds
(Class IB shares), the performance shown is based on the historical
performance of the Funds (Class IA shares), adjusted to reflect the current
expenses of the Funds (Class IB shares). The inception dates for the Funds
(Class IA shares) are shown on the first note to the first table above.
<PAGE>
<TABLE>
<CAPTION>
(With Retirement Income Guarantee Rider 2)*
Ten Years or
One Year Five Years Since Fund
Variable Sub-Account Inception**
<S> <C> <C> <C>
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 98.17% N/A 11.79%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -5.86% 4.66% 2.98%
The George Putnam Fund -7.99% N/A -3.39%
Putnam Global Asset Allocation 4.04% 14.79% 10.38%
Putnam Global Growth 56.17% 24.78% 15.21%
Putnam Growth and Income -6.14% 17.20% 12.10%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -11.52% N/A -2.36%
Putnam High Yield -1.85% 6.54% 8.99%
Putnam Income -9.72% 5.04% 5.72%
Putnam International Growth 51.70% N/A 27.08%
Putnam International Growth and Income 16.46% N/A 15.09%
Putnam International New Opportunities 93.94% N/A 29.68%
Putnam Investors 22.03% N/A 23.11%
Putnam Money Market -2.94% 2.86% 3.11%
Putnam New Opportunities 60.65% 30.59% 28.08%
Putnam New Value -7.33% N/A 4.47%
Putnam OTC & Emerging Growth 117.29% N/A 58.78%
Putnam Research 19.76% N/A 33.00%
Putnam Small Cap Value N/A N/A -4.91%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -8.36% 14.92% 10.72%
Putnam Vista 44.35% N/A 27.98%
Putnam Voyager 49.71% 29.37% 20.33%
Putnam Voyager II N/A N/A N/A
</TABLE>
--------------
* Performance figures have been adjusted to reflect the current charge for
Retirement Income Guarantee Rider 2 as if that feature had been available
throughout the periods shown. For purposes of computing the Rider fee, we
assumed that Income Base B applied, that there were no additional purchase
payments or withdrawals, and that the Contract Issue Date coincided with
the inception date of the Fund (Class IA shares).
** The inception dates for the Funds appear in the first footnote to the first
table under Adjusted Historical Total Returns. For periods prior to the
inception dates of the Funds (Class IB shares, the performance shown is
based on the historical performance of the Funds (Class IA shares),
adjusted to reflect the current expenses of the Funds (Class IB shares).
The inception dates for the Funds (Class IA shares) are shown on the first
note to the first table above.
<PAGE>
<TABLE>
<CAPTION>
(With the Enhanced Beneficiary Protection Option and Retirement Income Guarantee Rider 2)*
Ten Years or
Variable Sub-Account One Year Five Years Since Fund Inception**
<S> <C> <C> <C>
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 97.86% N/A 11.62%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -6.01% 4.49% 2.81%
The George Putnam Fund -8.14% N/A -3.55%
Putnam Global Asset Allocation 3.87% 14.61% 10.21%
Putnam Global Growth 55.93% 24.59% 15.03%
Putnam Growth and Income -6.29% 17.02% 11.93%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -11.67% N/A -2.52%
Putnam High Yield -2.01% 6.37% 8.82%
Putnam Income -9.87% 4.87% 5.56%
Putnam International Growth 51.46% N/A 26.88%
Putnam International Growth and Income 16.27% N/A 14.91%
Putnam International New Opportunities 93.64% N/A 29.48%
Putnam Investors 21.83% N/A 22.91%
Putnam Money Market -3.10% 2.70% 2.95%
Putnam New Opportunities 60.40% 30.39% 27.88%
Putnam New Value -7.48% N/A 4.30%
Putnam OTC & Emerging Growth 116.95% N/A 58.53%
Putnam Research 19.57% N/A 32.79%
Putnam Small Cap Value N/A N/A -5.06%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -8.51% 14.74% 10.55%
Putnam Vista 44.12% N/A 27.78%
Putnam Voyager 49.47% 29.17% 20.15%
Putnam Voyager II N/A N/A N/A
--------------
</TABLE>
* Performance figures have been adjusted to reflect the current charge for
the Enhanced Beneficiary Protection Option and Retirement Income Guarantee
Rider 2 as if those features had been available throughout the periods
shown.
** The inception dates for the Funds appear in the first footnote to the first
table under Adjusted Historical Total Returns. For periods prior to the
inception dates of the Funds (Class IB shares), the performance shown is
based on the historical performance of the Funds (Class IA shares, adjusted
to reflect the current expenses of the Funds (Class IB shares). The
inception dates for the Funds (Class IA shares) are shown on the first note
to the preceding table.
<PAGE>
APPENDIX B
PUTNAM ALLSTATE ADVISOR APEX CONTRACT
Putnam Allstate Advisor Apex Contracts were first offered to the public on
October 25, 1999. Accordingly, performance shown for periods prior to that date
reflects the performance of the Variable Sub-Accounts, adjusted to reflect the
current charges under the Contracts that would have applied had they been in
existence at the time. These Contract charges include a maximum sales charge of
5.75% of purchase payments (not reflected in non-standardized total returns) and
total Variable Account annual expenses of:
o 0.80% (without any optional benefit riders), or
o 0.95% if you select the Enhanced Beneficiary Protection Option.
In addition, where Retirement Income Guarantee Rider 2 is included, the
performance shown reflects the deduction of the annual Rider fee equal to 0.30%
of the Income Base, assuming Income Base B is in effect and assuming no
additional purchase payments or withdrawals.
The performance shown does not reflect the maximum withdrawal charge of 0.50%,
which applies only during the first Contract Year and only to Contracts under
which purchase payments of at least a $1 million have been made. If such charge
were reflected, the performance shown would be lower.
See the Expense Table in the Prospectus for more details.
Standardized Total Returns
Set out below are the standardized total returns for each Variable Sub-Account
(other than the Putnam American Government Income, Putnam Growth Opportunities,
Putnam Technology, Putnam Capital Appreciation and Putnam Voyager II Variable
Sub-Accounts) since its inception through December 31, 1999. All of the Variable
Sub-Accounts commenced operations on April 30, 1999 except for the Putnam
American Government Income and Putnam Growth Opportunities Variable
Sub-Accounts, which commenced operations on February 4, 2000, the Putnam
Technology Variable Sub-Account, which commenced operations on July 17, 2000,
and the Putnam Capital Appreciation and Putnam Voyager II Variable Sub-Accounts,
which commenced operations on October 2, 2000.
<PAGE>
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or Retirement Income Guarantee Rider)
Variable Sub-Account Since Inception of Sub-Account
<S> <C>
Putnam American Government Income N/A
Putnam Asia Pacific Growth 281.10%
Putnam Capital Appreciation N/A
Putnam Diversified Income -20.80%
The George Putnam Fund -37.74%
Putnam Global Asset Allocation 2.21%
Putnam Global Growth 315.23%
Putnam Growth and Income -41.05%
Putnam Growth Opportunities N/A
Putnam Health Sciences 1.01%
Putnam High Yield -11.95%
Putnam Income -31.24%
Putnam International Growth 204.81%
Putnam International Growth and Income -1.80%
Putnam International New Opportunities 518.95%
Putnam Investors 68.85%
Putnam Money Market -25.94%
Putnam New Opportunities 298.59%
Putnam New Value -40.27%
Putnam OTC & Emerging Growth 690.43%
Putnam Research 27.32%
Putnam Small Cap Value 9.37%
Putnam Technology N/A
Putnam Utilities Growth and Income -43.79%
Putnam Vista 226.38%
Putnam Voyager 217.53%
Putnam Voyager II N/A
(With the Enhanced Beneficiary Protection Option)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 280.53%
Putnam Capital Appreciation N/A
Putnam Diversified Income -20.92%
The George Putnam Fund -37.83%
Putnam Global Asset Allocation 2.06%
Putnam Global Growth 314.61%
Putnam Growth and Income -41.14%
Putnam Growth Opportunities N/A
Putnam Health Sciences 0.86%
Putnam High Yield -12.09%
Putnam Income -31.34%
Putnam International Growth 204.35%
Putnam International Growth and Income -1.95%
Putnam International New Opportunities 518.02%
Putnam Investors 68.60%
Putnam Money Market -26.05%
Putnam New Opportunities 297.99%
Putnam New Value -40.36%
Putnam OTC & Emerging Growth 689.25%
Putnam Research 27.12%
Putnam Small Cap Value 9.21%
Putnam Technology N/A
Putnam Utilities Growth and Income -43.88%
Putnam Vista 225.89%
Putnam Voyager 217.05%
Putnam Voyager II N/A
<PAGE>
(With Retirement Income Guarantee Rider 2)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 275.87%
Putnam Capital Appreciation N/A
Putnam Diversified Income -22.22%
The George Putnam Fund -38.90%
Putnam Global Asset Allocation 0.46%
Putnam Global Growth 309.62%
Putnam Growth and Income -42.17%
Putnam Growth Opportunities N/A
Putnam Health Sciences -0.73%
Putnam High Yield -13.51%
Putnam Income -32.50%
Putnam International Growth 200.47%
Putnam International Growth and Income -3.50%
Putnam International New Opportunities 511.14%
Putnam Investors 66.19%
Putnam Money Market -27.28%
Putnam New Opportunities 293.16%
Putnam New Value -41.40%
Putnam OTC & Emerging Growth 680.86%
Putnam Research 25.21%
Putnam Small Cap Value 7.51%
Putnam Technology N/A
Putnam Utilities Growth and Income -44.86%
Putnam Vista 221.78%
Putnam Voyager 213.03%
Putnam Voyager II N/A
(With the Enhanced Beneficiary Protection Option and Retirement Income Guarantee Rider 2)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 275.31%
Putnam Capital Appreciation N/A
Putnam Diversified Income -22.34%
The George Putnam Fund -38.99%
Putnam Global Asset Allocation 0.31%
Putnam Global Growth 309.01%
Putnam Growth and Income -42.26%
Putnam Growth Opportunities N/A
Putnam Health Sciences -0.88%
Putnam High Yield -13.64%
Putnam Income -32.60%
Putnam International Growth 200.02%
Putnam International Growth and Income -3.65%
Putnam International New Opportunities 510.22%
Putnam Investors 65.94%
Putnam Money Market -27.40%
Putnam New Opportunities 292.57%
Putnam New Value -41.49%
Putnam OTC & Emerging Growth 679.69%
Putnam Research 25.02%
Putnam Small Cap Value 7.35%
Putnam Technology N/A
Putnam Utilities Growth and Income -44.95%
Putnam Vista 221.30%
Putnam Voyager 212.56%
Putnam Voyager II N/A
</TABLE>
<PAGE>
Non-Standardized Total Returns
Set out below are the non-standardized total returns for each Variable
Sub-Account (other than the Putnam American Government Income, Putnam Growth
Opportunities, Putnam Technology, Putnam Capital Appreciation and Putnam Voyager
II Variable Sub-Accounts) since its inception through December 31, 1999. All of
the Variable Sub-Accounts commenced operations on April 30, 1999 except for the
Putnam American Government Income and Putnam Growth Opportunities Variable
Sub-Accounts, which commenced operations on February 4, 2000, the Putnam
Technology Variable Sub-Account, which commenced operations on July 17, 2000,
and the Putnam Capital Appreciation and Putnam Voyager II Variable Sub-Accounts,
which commenced operations on October 2, 2000. The non-standardized total
returns shown below do not reflect the withdrawal charges that may be imposed
under the Putnam Allstate Advisor Apex Contracts. No non-standardized
performance is shown for Contracts with Retirement Income Guarantee Rider 2.
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or Retirement Income Guarantee Rider)
Variable Sub-Account Since Inception of Sub-Account
<S> <C>
Putnam American Government Income N/A
Putnam Asia Pacific Growth 436.60%
Putnam Capital Appreciation N/A
Putnam Diversified Income 11.64%
The George Putnam Fund -12.22%
Putnam Global Asset Allocation 44.05%
Putnam Global Growth 484.62%
Putnam Growth and Income -16.90%
Putnam Growth Opportunities N/A
Putnam Health Sciences 42.36%
Putnam High Yield 24.09%
Putnam Income -3.07%
Putnam International Growth 329.25%
Putnam International Growth and Income 38.39%
Putnam International New Opportunities 771.20%
Putnam Investors 137.88%
Putnam Money Market 4.39%
Putnam New Opportunities 461.20%
Putnam New Value -15.80%
Putnam OTC & Emerging Growth 1012.38%
Putnam Research 79.40%
Putnam Small Cap Value 54.13%
Putnam Technology N/A
Putnam Utilities Growth and Income -20.76%
Putnam Vista 359.60%
Putnam Voyager 347.14%
Putnam Voyager II N/A
(With the Enhanced Beneficiary Protection Option)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 435.79%
Putnam Capital Appreciation N/A
Putnam Diversified Income 11.47%
The George Putnam Fund -12.35%
Putnam Global Asset Allocation 43.83%
Putnam Global Growth 483.74%
Putnam Growth and Income -17.02%
Putnam Growth Opportunities N/A
Putnam Health Sciences 42.14%
Putnam High Yield 23.91%
Putnam Income -3.21%
Putnam International Growth 328.60%
Putnam International Growth and Income 38.18%
Putnam International New Opportunities 769.90%
Putnam Investors 137.52%
Putnam Money Market 4.24%
Putnam New Opportunities 460.36%
Putnam New Value -15.92%
Putnam OTC & Emerging Growth 1010.72%
Putnam Research 79.13%
Putnam Small Cap Value 53.90%
Putnam Technology N/A
Putnam Utilities Growth and Income -20.88%
Putnam Vista 358.91%
Putnam Voyager 346.47%
Putnam Voyager II N/A
</TABLE>
<PAGE>
Adjusted Historical Total Returns
Set out below are the adjusted historical total returns for each Variable
Sub-Account (other than the Putnam American Government Income, Putnam Growth
Opportunities, Putnam Technology, Putnam Capital Appreciation and Putnam Voyager
II Variable Sub-Accounts) since the Fund's inception through December 31, 1999.
Adjusted historical total returns are computed in the same manner as
standardized total returns, except that the performance figures shown are based
on the Funds' historical performance since the inception of the Funds rather
than the inception of the Variable Sub-Accounts.
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or a Retirement Income Guarantee Rider)
Ten Year or
Variable Sub-Account One Year Five Years Since Fund Inception**
<S> <C> <C> <C>
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 93.63% N/A 11.83%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -4.87% 4.66% 3.15%
The George Putnam Fund -6.89% N/A -2.40%
Putnam Global Asset Allocation 4.50% 14.55% 10.56%
Putnam Global Growth 53.86% 24.41% 15.40%
Putnam Growth and Income -5.14% 16.89% 12.26%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -10.23% N/A -1.40%
Putnam High Yield -1.07% 6.49% 9.15%
Putnam Income -8.53% 5.04% 5.92%
Putnam International Growth 49.63% N/A 26.54%
Putnam International Growth and Income 16.26% N/A 14.95%
Putnam International New Opportunities 89.63% N/A 29.12%
Putnam Investors 21.53% N/A 22.77%
Putnam Money Market -2.78% 2.81% 3.31%
Putnam New Opportunities 58.10% 30.09% 27.76%
Putnam New Value -6.26% N/A 4.76%
Putnam OTC & Emerging Growth 111.72% N/A 56.96%
Putnam Research 19.39% N/A 32.27%
Putnam Small Cap Value N/A N/A -3.86%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -7.24% 14.66% 10.72%
Putnam Vista 42.67% N/A 27.40%
Putnam Voyager 47.74% 28.88% 20.44%
Putnam Voyager II N/A N/A N/A
--------------
* Each of the above Funds (Class IB shares) corresponding to the Variable
Sub-Accounts commenced operations on April 30, 1998, except for the Putnam VT
Diversified Income, Growth and Income, and International Growth Funds, which
commenced operations on April 6, 1998, the Putnam VT Research Fund, which
commenced operations September 30, 1998, the Putnam VT Small Cap Value Fund,
which commenced operations April 30, 1999, the Putnam VT American Government
Fund and Putnam VT Growth Opportunities Fund, which commenced operations on
January 31, 2000, the Putnam VT Technology Fund which commenced operations on
June 14, 2000, and the Putnam VT Capital Appreciation and Putnam VT Voyager II
Funds, which commenced operations on September 1, 2000. For periods prior to the
inception dates of the Funds (Class IB shares), the performance shown is based
on the historical performance of the Funds (Class IA shares), adjusted to
reflect the current expenses of the Funds (Class IB shares). The inception dates
for the Funds (Class IA shares) are as follows:
Global Asset Allocation, Growth and Income, Income, High Yield, Money
Market, and Voyager commenced operations on February 1, 1988; Global Growth
commenced operations on May 1, 1990; Utilities Growth and Income commenced
operations on May 1, 1992; Diversified Income commenced operations on
September 15, 1993; New Opportunities commenced operations on May 2, 1994;
Asia Pacific Growth commenced operations on May 1, 1995; International
Growth, International Growth and Income, International New Opportunities,
New Value and Vista commenced operations on January 2, 1997; The George
Putnam Fund of Boston, Health Sciences, Investors and OTC & Emerging Growth
commenced operations on April 30, 1998.
<PAGE>
(With the Enhanced Beneficiary Protection Option)*
Variable Sub-Account One Year Five Years Ten Years or
Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 93.34% N/A 11.66%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -5.02% 4.51% 2.99%
The George Putnam Fund -7.03% N/A -2.55%
Putnam Global Asset Allocation 4.34% 14.38% 10.40%
Putnam Global Growth 53.63% 24.23% 15.22%
Putnam Growth and Income -5.28% 16.71% 12.09%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -10.37% N/A -1.55%
Putnam High Yield -1.22% 6.33% 8.98%
Putnam Income -8.67% 4.88% 5.76%
Putnam International Growth 49.40% N/A 26.35%
Putnam International Growth and Income 16.09% N/A 14.78%
Putnam International New Opportunities 89.34% N/A 28.92%
Putnam Investors 21.35% N/A 22.59%
Putnam Money Market -2.93% 2.66% 3.15%
Putnam New Opportunities 57.86% 29.89% 27.57%
Putnam New Value -6.40% N/A 4.60%
Putnam OTC & Emerging Growth 111.40% N/A 56.72%
Putnam Research 19.21% N/A 32.07%
Putnam Small Cap Value N/A N/A -4.00%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -7.38% 14.48% 10.55%
Putnam Vista 42.45% N/A 27.21%
Putnam Voyager 47.52% 28.69% 20.26%
Putnam Voyager II N/A N/A N/A
--------------
* Performance figures have been adjusted to reflect the current charge for
the Enhanced Beneficiary Protection Option as if that feature had been
available throughout the periods shown.
** The inception dates for the Funds appear in the first footnote to the
preceding table. For periods prior to the inception dates of the Funds
(Class IB shares, the performance shown is based on the historical
performance of the Funds (Class IA shares, adjusted to reflect the current
expenses of the Funds (Class IB shares). The inception dates for the Funds
(Class IA shares) are shown on the first note to the first table above.
<PAGE>
(With Retirement Income Guarantee Rider 2)*
Ten Years or
Variable Sub-Account One Year Five Years Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 93.33% N/A 11.44%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -5.17% 4.37% 2.78%
The George Putnam Fund -7.19% N/A -2.77%
Putnam Global Asset Allocation 4.20% 14.30% 10.28%
Putnam Global Growth 53.56% 24.14% 15.09%
Putnam Growth and Income -5.44% 16.66% 12.00%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -10.53% N/A -1.78%
Putnam High Yield -1.37% 6.21% 8.89%
Putnam Income -8.83% 4.75% 5.63%
Putnam International Growth 49.33% N/A 26.25%
Putnam International Growth and Income 15.96% N/A 14.66%
Putnam International New Opportunities 89.33% N/A 28.78%
Putnam Investors 21.23% N/A 22.42%
Putnam Money Market -3.08% 2.49% 2.96%
Putnam New Opportunities 57.80% 29.86% 27.51%
Putnam New Value -6.56% N/A 4.47%
Putnam OTC & Emerging Growth 111.42% N/A 56.55%
Putnam Research 19.09% N/A 31.76%
Putnam Small Cap Value N/A N/A -4.30%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -7.54% 14.42% 10.43%
Putnam Vista 42.37% N/A 27.12%
Putnam Voyager 47.44% 28.65% 20.21%
Putnam Voyager II N/A N/A N/A
--------------
* Performance figures have been adjusted to reflect the current charge for
Retirement Income Guarantee Rider 2 as if that feature had been available
throughout the periods shown. For purposes of computing the Rider fee, we
assumed that Income Base B applied, that there were no additional purchase
payments or withdrawals, and that the Contract Issue Date coincided with
the inception date of the Fund (Class IA shares).
** The inception dates for the Funds appear in the first footnote to the first
table under Adjusted Historical Total Returns. For periods prior to the
inception dates of the Funds (Class IB shares), the performance shown is
based on the historical performance of the Funds (Class IA shares),
adjusted to reflect the current expenses of the Funds (Class IB shares).
The inception dates for the Funds (Class IA shares are shown on the first
note to the first table above.
<PAGE>
(With the Enhanced Beneficiary Protection Option and Retirement Income Guarantee Rider 2)*
Ten Years or
Variable Sub-Account One Year Five Years Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 93.04% N/A 11.27%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -5.31% 4.21% 2.62%
The George Putnam Fund -7.33% N/A -2.91%
Putnam Global Asset Allocation 4.04% 14.12% 10.11%
Putnam Global Growth 53.33% 23.95% 14.91%
Putnam Growth and Income -5.58% 16.48% 11.83%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -10.67% N/A -1.93%
Putnam High Yield -1.52% 6.05% 8.73%
Putnam Income -8.96% 4.59% 5.47%
Putnam International Growth 49.10% N/A 26.06%
Putnam International Growth and Income 15.79% N/A 14.49%
Putnam International New Opportunities 89.04% N/A 28.59%
Putnam Investors 21.05% N/A 22.23%
Putnam Money Market -3.23% 2.33% 2.80%
Putnam New Opportunities 57.56% 29.66% 27.32%
Putnam New Value -6.70% N/A 4.31%
Putnam OTC & Emerging Growth 111.10% N/A 56.32%
Putnam Research 18.91% N/A 31.56%
Putnam Small Cap Value N/A N/A -4.44%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -7.68% 14.25% 10.26%
Putnam Vista 42.15% N/A 26.93%
Putnam Voyager 47.22% 28.46% 20.03%
Putnam Voyager II N/A N/A N/A
--------------
</TABLE>
* Performance figures have been adjusted to reflect the current charge for
the Enhanced Beneficiary Protection Option and Retirement Income Guarantee
Rider 2 as if those features had been available throughout the periods
shown.
** The inception dates for the Funds appear in the first footnote to the first
table under Adjusted Historical Total Returns. For periods prior to the
inception dates of the Funds (Class IB shares, the performance shown is
based on the historical performance of the Funds (Class IA shares),
adjusted to reflect the current expenses of the Funds (Class IB shares).
The inception dates for the Funds (Class IA shares are shown on the first
note to the preceding table.
<PAGE>
APPENDIX C
PUTNAM ALLSTATE ADVISOR PLUS CONTRACT
Putnam Allstate Advisor Plus Contracts were first offered to the public on
February 4, 2000. Accordingly, performance shown for periods prior to that date
reflects the performance of the Variable Sub-Accounts, adjusted to reflect the
current charges under the Contracts that would have applied had they been in
existence at the time. These Contract charges include a maximum withdrawal
charge of 8% that declines to zero after seven years (not reflected in
non-standardized total returns), and total Variable Account annual expenses of:
o 1.60% (without any optional benefit riders), or
o 1.75% with the Enhanced Beneficiary Protection Option.
In addition, where Retirement Income Guarantee Rider 2 is included, the
performance shown reflects the deduction of the annual Rider fee equal to 0.30%
of the Income Base, assuming Income Base B is in effect and assuming no
additional purchase payments or withdrawals.
The standardized total returns shown below also include the 4% credit
enhancement available under the Putnam Allstate Advisor Plus Contract.
See the Expense Table in the Prospectus for more details.
Standardized Total Returns
Set out below are the standardized total returns for each Variable Sub-Account
(other than the Putnam American Government Income, Putnam Growth Opportunities,
Putnam Technology, Putnam Capital Appreciation and Putnam Voyager II Variable
Sub-Accounts) since its inception through December 31, 1999. All of the Variable
Sub-Accounts commenced operations on April 30, 1999 except for the Putnam
American Government Income and Putnam Growth Opportunities Variable
Sub-Accounts, which commenced operations on February 4, 2000, the Putnam
Technology Variable Sub-Account, which commenced operations on July 17, 2000,
and the Putnam Capital Appreciation and Putnam Voyager II Variable Sub-Accounts,
which commenced operations on October 2, 2000.
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or Retirement Income Guarantee Rider)
Variable Sub-Account Since Inception of Sub-Account
<S> <C>
Putnam American Government Income N/A
Putnam Asia Pacific Growth 128.62%
Putnam Capital Appreciation N/A
Putnam Diversified Income -6.54%
The George Putnam Fund -14.99%
Putnam Global Asset Allocation 6.30%
Putnam Global Growth 97.81%
Putnam Growth and Income -16.84%
Putnam Growth Opportunities N/A
Putnam Health Sciences 4.72%
Putnam High Yield -5.51%
Putnam Income -8.83%
Putnam International Growth 70.24%
Putnam International Growth and Income 10.61%
Putnam International New Opportunities 142.91%
Putnam Investors 30.32%
Putnam Money Market -2.04%
Putnam New Opportunities 94.08%
Putnam New Value -22.27%
Putnam OTC & Emerging Growth 178.99%
Putnam Research 20.82%
Putnam Small Cap Value 0.13%
Putnam Technology N/A
Putnam Utilities Growth and Income -4.70%
Putnam Vista 64.03%
Putnam Voyager 68.38%
Putnam Voyager II N/A
<PAGE>
(With the Enhanced Beneficiary Protection Option)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 128.27%
Putnam Capital Appreciation N/A
Putnam Diversified Income -6.69%
The George Putnam Fund -15.13%
Putnam Global Asset Allocation 6.13%
Putnam Global Growth 97.80%
Putnam Growth and Income -16.98%
Putnam Growth Opportunities N/A
Putnam Health Sciences 4.55%
Putnam High Yield -5.67%
Putnam Income -8.98%
Putnam International Growth 69.97%
Putnam International Growth and Income 10.43%
Putnam International New Opportunities 142.53%
Putnam Investors 30.11%
Putnam Money Market -2.20%
Putnam New Opportunities 93.77%
Putnam New Value -22.39%
Putnam OTC & Emerging Growth 178.55%
Putnam Research 20.62%
Putnam Small Cap Value -0.02%
Putnam Technology N/A
Putnam Utilities Growth and Income -4.85%
Putnam Vista 63.77%
Putnam Voyager 68.11%
Putnam Voyager II N/A
(With Retirement Income Guarantee Rider 2)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 127.98%
Putnam Capital Appreciation N/A
Putnam Diversified Income -7.02%
The George Putnam Fund -15.45%
Putnam Global Asset Allocation 5.80%
Putnam Global Growth 97.19%
Putnam Growth and Income -17.31%
Putnam Growth Opportunities N/A
Putnam Health Sciences 4.22%
Putnam High Yield -6.00%
Putnam Income -9.31%
Putnam International Growth 69.66%
Putnam International Growth and Income 10.10%
Putnam International New Opportunities 142.25%
Putnam Investors 29.79%
Putnam Money Market -2.53%
Putnam New Opportunities 93.46%
Putnam New Value -22.72%
Putnam OTC & Emerging Growth 178.29%
Putnam Research 20.29%
Putnam Small Cap Value -0.35%
Putnam Technology N/A
Putnam Utilities Growth and Income -5.18%
Putnam Vista 63.45%
Putnam Voyager 67.79%
Putnam Voyager II N/A
<PAGE>
(With the Enhanced Beneficiary Protection Option and Retirement Income Guarantee Rider 2)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 127.62%
Putnam Capital Appreciation N/A
Putnam Diversified Income -7.18%
The George Putnam Fund -15.59%
Putnam Global Asset Allocation 5.63%
Putnam Global Growth 97.18%
Putnam Growth and Income -17.44%
Putnam Growth Opportunities N/A
Putnam Health Sciences 4.05%
Putnam High Yield -6.15%
Putnam Income -9.46%
Putnam International Growth 69.39%
Putnam International Growth and Income 9.92%
Putnam International New Opportunities 141.87%
Putnam Investors 29.58%
Putnam Money Market -2.69%
Putnam New Opportunities 93.16%
Putnam New Value -22.85%
Putnam OTC & Emerging Growth 177.85%
Putnam Research 20.10%
Putnam Small Cap Value -0.51%
Putnam Technology N/A
Putnam Utilities Growth and Income -5.34%
Putnam Vista 63.19%
Putnam Voyager 67.52%
Putnam Voyager II N/A
</TABLE>
Non-Standardized Total Returns
Set out below are the non-standardized total returns for each Variable
Sub-Account (other than the Putnam American Government Income, Putnam Growth
Opportunities, Putnam Technology, Putnam Capital Appreciation and Putnam Voyager
II Variable Sub-Accounts) since its inception through December 31, 1999. All of
the Variable Sub-Accounts commenced operations on April 30, 1999 except for the
Putnam American Government Income and Putnam Growth Opportunities Variable
Sub-Accounts, which commenced operations on February 4, 2000, the Putnam
Technology Variable Sub-Account, which commenced operations on July 17, 2000,
and the Putnam Capital Appreciaiton and Putnam Voyager II Variable Sub-Accounts,
which commenced operations on October 2, 2000. The non-standardized total
returns shown below do not include the 4% credit enhancement available under the
Putnam Allstate Advisor Plus Contract or the withdrawal charge that may be
imposed under the Contract. No non-standardized performance is shown for
Contracts with Retirement Income Guarantee Rider 2.
<PAGE>
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or Retirement Income Guarantee Rider)
Variable Sub-Account Since Inception of Sub-Account
<S> <C>
Putnam American Government Income N/A
Putnam Asia Pacific Growth 128.18%
Putnam Capital Appreciation N/A
Putnam Diversified Income -2.33%
The George Putnam Fund -10.58%
Putnam Global Asset Allocation 10.17%
Putnam Global Growth 98.57%
Putnam Growth and Income -12.39%
Putnam Growth Opportunities N/A
Putnam Health Sciences 8.63%
Putnam High Yield -1.33%
Putnam Income -4.57%
Putnam International Growth 72.04%
Putnam International Growth and Income 14.35%
Putnam International New Opportunities 141.89%
Putnam Investors 33.47%
Putnam Money Market 2.04%
Putnam New Opportunities 94.98%
Putnam New Value -17.70%
Putnam OTC & Emerging Growth 176.46%
Putnam Research 24.26%
Putnam Small Cap Value 4.17%
Putnam Technology N/A
Putnam Utilities Growth and Income -0.54%
Putnam Vista 66.04%
Putnam Voyager 70.24%
Putnam Voyager II N/A
(With the Enhanced Beneficiary Protection Option)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 127.84%
Putnam Capital Appreciation N/A
Putnam Diversified Income -2.48%
The George Putnam Fund -10.71%
Putnam Global Asset Allocation 10.00%
Putnam Global Growth 98.57%
Putnam Growth and Income -12.53%
Putnam Growth Opportunities N/A
Putnam Health Sciences 8.46%
Putnam High Yield -1.48%
Putnam Income -4.72%
Putnam International Growth 71.78%
Putnam International Growth and Income 14.18%
Putnam International New Opportunities 141.53%
Putnam Investors 33.27%
Putnam Money Market 1.89%
Putnam New Opportunities 94.69%
Putnam New Value -17.82%
Putnam OTC & Emerging Growth 176.04%
Putnam Research 24.07%
Putnam Small Cap Value 4.01%
Putnam Technology N/A
Putnam Utilities Growth and Income -0.69%
Putnam Vista 65.79%
Putnam Voyager 69.98%
Putnam Voyager II N/A
</TABLE>
<PAGE>
Adjusted Historical Total Returns
Set out below are the adjusted historical total returns for each Variable
Sub-Account (other than the Putnam American Government Income, Putnam Growth
Opportunities, Putnam Technology, Putnam Capital Appreciation and Putnam Voyager
II Variable Sub-Accounts) since the Fund's inception through December 31, 1999.
Adjusted historical total returns are computed in the same manner as
standardized total returns, except that the performance figures shown are based
on the Funds' historical performance since the inception of the Funds rather
than the inception of the Variable Sub-Accounts. The adjusted historical total
returns shown below include the 4% credit enhancement available under the Putnam
Allstate Advisor Plus Contract as well as the applicable withdrawal charge under
the Contract.
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or a Retirement Income Guarantee Rider)
Ten Years or
Variable Sub-Account One Year Five Years Since Fund Inception*
<S> <C> <C> <C>
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 105.16% N/A 12.59%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -2.68% 5.06% 3.48%
The George Putnam Fund -4.89% N/A -1.36%
Putnam Global Asset Allocation 7.57% 15.31% 10.75%
Putnam Global Growth 63.98% 25.81% 15.80%
Putnam Growth and Income -2.96% 17.72% 12.45%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -8.54% N/A -0.28%
Putnam High Yield 1.47% 6.96% 9.33%
Putnam Income -6.67% 5.45% 6.11%
Putnam International Growth 56.98% N/A 28.35%
Putnam International Growth and Income 20.45% N/A 16.17%
Putnam International New Opportunities 100.77% N/A 31.04%
Putnam Investors 26.22% N/A 25.71%
Putnam Money Market -0.38% 3.12% 3.48%
Putnam New Opportunities 66.25% 31.26% 28.72%
Putnam New Value -4.19% N/A 5.38%
Putnam OTC & Emerging Growth 124.94% N/A 62.22%
Putnam Research 23.87% N/A 36.93%
Putnam Small Cap Value N/A N/A 0.13%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -5.26% 15.42% 11.07%
Putnam Vista 49.35% N/A 29.25%
Putnam Voyager 54.91% 30.03% 20.65%
Putnam Voyager II N/A N/A N/A
--------------
* Each of the above Funds (Class IB shares) corresponding to the Variable
Sub-Accounts commenced operations on April 30, 1998, except for the Putnam VT
Diversified Income, Growth and Income, and International Growth Funds, which
commenced operations on April 6, 1998, the Putnam VT Research Fund, which
commenced operations September 30, 1998, the Putnam VT Small Cap Value Fund,
which commenced operations April 30, 1999, the Putnam VT American Government
Fund and Putnam VT Growth Opportunities Fund, which commenced operations on
January 31, 2000, the Putnam VT Technology Fund, which commenced operations on
June 14, 2000 and the Putnam VT Capital Appreciation and Putnam VT Voyager II
Funds, which commenced operations on September 1, 2000. For periods prior to the
inception dates of the Funds (Class IB shares, the performance shown is based on
the historical performance of the Funds (Class IA shares), adjusted to reflect
the current expenses of the Funds (Class IB shares). The inception dates for the
Funds (Class IA shares) are as follows:
Global Asset Allocation, Growth and Income, Income, High Yield, Money
Market, and Voyager commenced operations on February 1, 1988; Global Growth
commenced operations on May 1, 1990; Utilities Growth and Income commenced
operations on May 1, 1992; Diversified Income commenced operations on
September 15, 1993; New Opportunities commenced operations on May 2, 1994;
Asia Pacific Growth commenced operations on May 1, 1995; International
Growth, International Growth and Income, International New Opportunities,
New Value and Vista commenced operations on January 2, 1997; The George
Putnam Fund of Boston, Health Sciences, Investors and OTC & Emerging Growth
commenced operations on April 30, 1998.
<PAGE>
(With the Enhanced Beneficiary Protection Option and Retirement Income Guarantee Rider 2)*
Ten Years or
Variable Sub-Account One Year Five Years Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 104.51% N/A 12.00%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -3.16% 4.58% 2.92%
The George Putnam Fund -5.37% N/A -1.92%
Putnam Global Asset Allocation 7.07% 14.86% 10.29%
Putnam Global Growth 63.56% 25.35% 15.31%
Putnam Growth and Income -3.45% 17.30% 12.00%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -9.02% N/A -0.86%
Putnam High Yield 0.98% 6.49% 8.90%
Putnam Income -7.16% 4.96% 5.63%
Putnam International Growth 56.40% N/A 27.84%
Putnam International Growth and Income 19.93% N/A 15.68%
Putnam International New Opportunities 100.12% N/A 30.48%
Putnam Investors 25.68% N/A 25.12%
Putnam Money Market -0.88% 2.61% 2.96%
Putnam New Opportunities 65.66% 30.82% 28.26%
Putnam New Value -4.68% N/A 4.89%
Putnam OTC & Emerging Growth 124.25% N/A 61.52%
Putnam Research 23.34% N/A 36.16%
Putnam Small Cap Value N/A N/A -0.51%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -5.74% 14.99% 10.60%
Putnam Vista 48.79% N/A 28.75%
Putnam Voyager 54.33% 29.59% 20.22%
Putnam Voyager II N/A N/A N/A
--------------
* Performance figures have been adjusted to reflect the current charge for
the Enhanced Beneficiary Protection Option and Retirement Income Guarantee
Rider 2 as if those features had been available throughout the periods
shown.
** The inception dates for the Funds appear in the first footnote to the
preceding table. For periods prior to the inception dates of the Funds
(Class IB shares), the performance shown is based on the historical
performance of the Funds (Class IA shares), adjusted to reflect the current
expenses of the Funds (Class IB shares). The inception dates for the Funds
(Class IA shares) are shown on the first note to the preceding table.
<PAGE>
(With the Enhanced Beneficiary Protection Option)*
Variable Sub-Account One Year Five Years Ten Years or
Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 104.84% N/A 12.41%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -2.83% 4.89% 3.32%
The George Putnam Fund -5.04% N/A -1.52%
Putnam Global Asset Allocation 7.402 15.13% 10.58%
Putnam Global Growth 63.89% 25.64% 15.64%
Putnam Growth and Income -3.12% 17.54% 12.28%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -8.69% N/A -0.44%
Putnam High Yield 1.31% 6.79% 9.17%
Putnam Income -6.83% 5.28% 5.94%
Putnam International Growth 56.73% N/A 28.15%
Putnam International Growth and Income 20.26% N/A 15.99%
Putnam International New Opportunities 100.45% N/A 30.84%
Putnam Investors 26.01% N/A 25.51%
Putnam Money Market -0.55% 2.96% 3.33%
Putnam New Opportunities 65.99% 31.06% 28.52%
Putnam New Value -4.35% N/A 5.21%
Putnam OTC & Emerging Growth 124.58% N/A 61.96%
Putnam Research 23.67% N/A 36.71%
Putnam Small Cap Value N/A N/A -0.02%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -5.41% 15.24% 10.90%
Putnam Vista 49.12% N/A 29.05%
Putnam Voyager 54.66% 29.83% 20.46%
Putnam Voyager II N/A N/A N/A
--------------
* Performance figures have been adjusted to reflect the current charge for
the Enhanced Beneficiary Protection Option as if that feature had been
available throughout the periods shown.
** The inception dates for the Funds appear in the first footnote to the first
table under Adjusted Historical Total Returns. For periods prior to the
inception dates of the Funds (Class IB shares), the performance shown is
based on the historical performance of the Funds (Class IA shares),
adjusted to reflect the current expenses of the Funds (Class IB shares).
The inception dates for the Funds (Class IA shares) are shown on the first
note to the first table above.
<PAGE>
(With Retirement Income Guarantee Rider 2)*
Ten Years or
Variable Sub-Account One Year Five Years Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 104.83% N/A 12.18%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -3.00% 4.74% 3.09%
The George Putnam Fund -5.21% N/A -1.76%
Putnam Global Asset Allocation 7.24% 15.04% 10.46%
Putnam Global Growth 63.65% 25.52% 15.48%
Putnam Growth and Income -3.29% 17.48% 12.18%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -8.87% N/A -0.70%
Putnam High Yield 1.14% 6.66% 9.07%
Putnam Income -7.01% 5.13% 5.80%
Putnam International Growth 56.65% N/A 28.04%
Putnam International Growth and Income 20.12% N/A 15.86%
Putnam International New Opportunities 100.43% N/A 30.69%
Putnam Investors 25.89% N/A 25.33%
Putnam Money Market -0.72% 2.77% 3.12%
Putnam New Opportunities 65.92% 31.02% 28.46%
Putnam New Value -4.52% N/A 5.06%
Putnam OTC & Emerging Growth 124.61% N/A 61.78%
Putnam Research 23.54% N/A 36.38%
Putnam Small Cap Value N/A N/A -0.35%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -5.59% 15.17% 10.77%
Putnam Vista 49.02% N/A 28.95%
Putnam Voyager 54.58% 29.79% 20.41%
Putnam Voyager II N/A N/A N/A
--------------
</TABLE>
* Performance figures have been adjusted to reflect the current charge for
Retirement Income Guarantee Rider 2 as if that feature had been available
throughout the periods shown. For purposes of computing the Rider fee, we
assumed that Income Base B applied, that there were no additional purchase
payments or withdrawals, and that the Contract Issue Date coincided with
the inception date of the Fund (Class IA shares).
** The inception dates for the Funds appear in the first footnote to the first
table under Adjusted Historical Total Returns. For periods prior to the
inception dates of the Funds (Class IB shares, the performance shown is
based on the historical performance of the Funds (Class IA shares),
adjusted to reflect the current expenses of the Funds (Class IB shares).
The inception dates for the Funds (Class IA shares) are shown on the first
note to the first table above.
<PAGE>
APPENDIX D
PUTNAM ALLSTATE ADVISOR PREFERRED CONTRACT
Putnam Allstate Advisor Preferred Contracts were first offered to the public as
of the date of this Statement of Additional Information. Accordingly,
performance shown for periods prior to that date reflects the performance of the
Variable Sub-Accounts, adjusted to reflect the current charges under the
Contracts that would have applied had they been in existence at the time. These
Contract charges include a maximum withdrawal charge of 2% that declines to zero
after two years (not reflected in non-standardized total returns), and total
Variable Account annual expenses of:
o 1.65% (without any optional benefit riders), or
o 1.80% with the Enhanced Beneficiary Protection Option.
In addition, where Retirement Income Guarantee Rider 2 is included, the
performance shown reflects the deduction of the annual Rider fee equal to 0.30%
of the Income Base, assuming Income Base B is in effect and assuming no
additional purchase payments or withdrawals.
See the Expense Table in the Prospectus for more details.
Standardized Total Returns
Set out below are the standardized total returns for each Variable Sub-Account
(other than the Putnam American Government Income, Putnam Growth Opportunities,
Putnam Technology, Putnam Capital Appreciation and Putnam Voyager II Variable
Sub-Accounts) since its inception through December 31, 1999. All of the Variable
Sub-Accounts commenced operations on April 30, 1999 except for the Putnam
American Government Income and Putnam Growth Opportunities Variable
Sub-Accounts, which commenced operations on February 4, 2000, the Putnam
Technology Variable Sub-Account, which commenced operations on July 17, 2000,
and the Putnam Capital Appreciation and Putnam Voyager II Variable Sub-Accounts,
which commenced operations on October 2, 2000.
<PAGE>
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or Retirement Income Guarantee Rider)
Variable Sub-Account Since Inception of Sub-Account
<S> <C>
Putnam American Government Income N/A
Putnam Asia Pacific Growth 124.30%
Putnam Capital Appreciation N/A
Putnam Diversified Income -5.33%
The George Putnam Fund -13.49%
Putnam Global Asset Allocation 7.06%
Putnam Global Growth 94.94%
Putnam Growth and Income -15.28%
Putnam Growth Opportunities N/A
Putnam Health Sciences 5.53%
Putnam High Yield -4.34%
Putnam Income -7.54%
Putnam International Growth 68.46%
Putnam International Growth and Income 11.20%
Putnam International New Opportunities 137.94%
Putnam Investors 30.17%
Putnam Money Market -0.99%
Putnam New Opportunities 91.27%
Putnam New Value -20.53%
Putnam OTC & Emerging Growth 172.36%
Putnam Research 21.03%
Putnam Small Cap Value 1.11%
Putnam Technology N/A
Putnam Utilities Growth and Income -3.55%
Putnam Vista 62.51%
Putnam Voyager 66.67%
Putnam Voyager II N/A
(With the Enhanced Beneficiary Protection Option)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 123.96%
Putnam Capital Appreciation N/A
Putnam Diversified Income -5.48%
The George Putnam Fund -13.62%
Putnam Global Asset Allocation 6.89%
Putnam Global Growth 94.93%
Putnam Growth and Income -15.42%
Putnam Growth Opportunities N/A
Putnam Health Sciences 5.37%
Putnam High Yield -4.49%
Putnam Income -7.69%
Putnam International Growth 68.20%
Putnam International Growth and Income 11.03%
Putnam International New Opportunities 137.58%
Putnam Investors 29.96%
Putnam Money Market -1.14%
Putnam New Opportunities 90.98%
Putnam New Value -20.65%
Putnam OTC & Emerging Growth 171.94%
Putnam Research 20.84%
Putnam Small Cap Value 0.95%
Putnam Technology N/A
Putnam Utilities Growth and Income -3.70%
Putnam Vista 62.25%
Putnam Voyager 66.41%
Putnam Voyager II N/A
<PAGE>
(With Retirement Income Guarantee Rider 2)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 123.68%
Putnam Capital Appreciation N/A
Putnam Diversified Income -5.79%
The George Putnam Fund -13.94%
Putnam Global Asset Allocation 6.57%
Putnam Global Growth 94.35%
Putnam Growth and Income -15.73%
Putnam Growth Opportunities N/A
Putnam Health Sciences 5.05%
Putnam High Yield -4.80%
Putnam Income -8.00%
Putnam International Growth 67.90%
Putnam International Growth and Income 10.71%
Putnam International New Opportunities 137.31%
Putnam Investors 29.65%
Putnam Money Market -1.46%
Putnam New Opportunities 90.69%
Putnam New Value -20.97%
Putnam OTC & Emerging Growth 171.70%
Putnam Research 20.52%
Putnam Small Cap Value 0.63%
Putnam Technology N/A
Putnam Utilities Growth and Income -4.02%
Putnam Vista 61.95%
Putnam Voyager 66.11%
Putnam Voyager II N/A
(With the Enhanced Beneficiary Protection Option and Retirement Income Guarantee Rider 2)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 123.34%
Putnam Capital Appreciation N/A
Putnam Diversified Income -5.94%
The George Putnam Fund -14.07%
Putnam Global Asset Allocation 6.41%
Putnam Global Growth 94.34%
Putnam Growth and Income -15.86%
Putnam Growth Opportunities N/A
Putnam Health Sciences 4.89%
Putnam High Yield -4.95%
Putnam Income -8.15%
Putnam International Growth 67.64%
Putnam International Growth and Income 10.54%
Putnam International New Opportunities 136.95%
Putnam Investors 29.45%
Putnam Money Market -1.61%
Putnam New Opportunities 90.39%
Putnam New Value -21.09%
Putnam OTC & Emerging Growth 171.28%
Putnam Research 20.34%
Putnam Small Cap Value 0.48%
Putnam Technology N/A
Putnam Utilities Growth and Income -4.17%
Putnam Vista 61.70%
Putnam Voyager 65.85%
Putnam Voyager II N/A
</TABLE>
<PAGE>
Non-Standardized Total Returns
Set out below are the non-standardized total returns for each Variable
Sub-Account (other than the Putnam American Government Income, Putnam Growth
Opportunities, Putnam Technology, Putnam Capital Appreciation and Putnam Voyager
II Variable Sub-Accounts) since its inception through December 31, 1999. All of
the Variable Sub-Accounts commenced operations on April 30, 1999 except for the
Putnam American Government Income and Putnam Growth Opportunities Variable
Sub-Accounts, which commenced operations on February 4, 2000, the Putnam
Technology Variable Sub-Account, which commenced operations on July 17, 2000,
and the Putnam Capital Appreciation and Putnam Voyager II Variable Sub-Accounts,
which commenced operations on October 2, 2000. The non-standardized total
returns shown below do not reflect the withdrawal charge that may be imposed
under the Putnam Allstate Advisor Preferred Contract. No non-standardized
performance is shown for Contracts with Retirement Income Guarantee Rider 2.
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or Retirement Income Guarantee Rider)
Variable Sub-Account Since Inception of Sub-Account
<S> <C>
Putnam American Government Income N/A
Putnam Asia Pacific Growth 128.07%
Putnam Capital Appreciation N/A
Putnam Diversified Income -2.38%
The George Putnam Fund -10.62%
Putnam Global Asset Allocation 10.11%
Putnam Global Growth 98.57%
Putnam Growth and Income -12.44%
Putnam Growth Opportunities N/A
Putnam Health Sciences 8.57%
Putnam High Yield -1.38%
Putnam Income -4.62%
Putnam International Growth 71.95%
Putnam International Growth and Income 14.29%
Putnam International New Opportunities 141.77%
Putnam Investors 33.41%
Putnam Money Market 1.99%
Putnam New Opportunities 94.89%
Putnam New Value -17.74%
Putnam OTC & Emerging Growth 176.32%
Putnam Research 24.20%
Putnam Small Cap Value 4.11%
Putnam Technology N/A
Putnam Utilities Growth and Income -0.59%
Putnam Vista 65.96%
Putnam Voyager 70.15%
Putnam Voyager II N/A
<PAGE>
(With the Enhanced Beneficiary Protection Option)
Variable Sub-Account Since Inception of Sub-Account
Putnam American Government Income N/A
Putnam Asia Pacific Growth 127.73%
Putnam Capital Appreciation N/A
Putnam Diversified Income -2.53%
The George Putnam Fund -10.76%
Putnam Global Asset Allocation 9.94%
Putnam Global Growth 98.56%
Putnam Growth and Income -12.57%
Putnam Growth Opportunities N/A
Putnam Health Sciences 8.41%
Putnam High Yield -1.53%
Putnam Income -4.76%
Putnam International Growth 71.69%
Putnam International Growth and Income 14.12%
Putnam International New Opportunities 141.41%
Putnam Investors 33.20%
Putnam Money Market 1.83%
Putnam New Opportunities 94.59%
Putnam New Value -17.86%
Putnam OTC & Emerging Growth 175.90%
Putnam Research 24.01%
Putnam Small Cap Value 3.96%
Putnam Technology N/A
Putnam Utilities Growth and Income -0.74%
Putnam Vista 65.71%
Putnam Voyager 69.89%
Putnam Voyager II N/A
</TABLE>
<PAGE>
Adjusted Historical Total Returns
Set out below are the adjusted historical total returns for each Variable
Sub-Account (other than the Putnam American Government Income, Putnam Growth
Opportunities, Putnam Technology, Putnam Capital Appreciation and Putnam Voyager
II Variable Sub-Accounts) since the Fund's inception through December 31, 1999.
Adjusted historical total returns are computed in the same manner as
standardized total returns, except that the performance figures shown are based
on the Funds' historical performance since the inception of the Funds rather
than the inception of the Variable Sub-Accounts.
<TABLE>
<CAPTION>
(Without the Enhanced Beneficiary Protection Option or a Retirement Income Guarantee Rider)
Ten Years or
Variable Sub-Account One Year Five Years Since Fund Inception*
<S> <C> <C> <C>
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 101.70% N/A 12.28%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -1.93% 5.00% 3.23%
The George Putnam Fund -4.05% N/A -0.34%
Putnam Global Asset Allocation 7.92% 14.92% 10.26%
Putnam Global Growth 62.18% 25.17% 15.28%
Putnam Growth and Income -2.21% 17.26% 11.95%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -7.57% N/A 0.69%
Putnam High Yield 2.06% 6.83% 8.85%
Putnam Income -5.77% 5.37% 5.64%
Putnam International Growth 55.40% N/A 27.96%
Putnam International Growth and Income 20.29% N/A 16.24%
Putnam International New Opportunities 97.48% N/A 30.57%
Putnam Investors 25.84% N/A 25.60%
Putnam Money Market 0.26% 3.14% 3.03%
Putnam New Opportunities 64.31% 30.51% 27.99%
Putnam New Value -3.39% N/A 5.94%
Putnam OTC & Emerging Growth 120.71% N/A 60.79%
Putnam Research 23.58% N/A 36.74%
Putnam Small Cap Value N/A N/A 1.11%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -4.41% 15.03% 10.62%
Putnam Vista 48.07% N/A 28.83%
Putnam Voyager 53.41% 29.30% 20.11%
Putnam Voyager II N/A N/A N/A
--------------
* Each of the above Funds (Class IB shares) corresponding to the Variable
Sub-Accounts commenced operations on April 30, 1998, except for the Putnam VT
Diversified Income, Growth and Income, and International Growth Funds, which
commenced operations on April 6, 1998, the Putnam VT Research Fund, which
commenced operations September 30, 1998, the Putnam VT Small Cap Value Fund,
which commenced operations April 30, 1999, the Putnam VT American Government
Fund and Putnam VT Growth Opportunities Fund, which commenced operations on
January 31, 2000, the Putnam VT Technology Fund, which commenced operations on
June 14, 2000, and the Putnam VT Capital Appreciation and Putnam VT Voyager II
Funds, which commenced operations on September 1, 2000. For periods prior to the
inception dates of the Funds (Class IB shares, the performance shown is based on
the historical performance of the Funds (Class IA shares), adjusted to reflect
the current expenses of the Funds (Class IB shares). The inception dates for the
Funds (Class IA shares) are as follows:
Global Asset Allocation, Growth and Income, Income, High Yield, Money
Market, and Voyager commenced operations on February 1, 1988; Global
Growth commenced operations on May 1, 1990; Utilities Growth and
Income commenced operations on May 1, 1992; Diversified Income
commenced operations on September 15, 1993; New Opportunities
commenced operations on May 2, 1994; Asia Pacific Growth commenced
operations on May 1, 1995; International Growth, International Growth
and Income, International New Opportunities, New Value and Vista
commenced operations on January 2, 1997; The George Putnam Fund of
Boston, Health Sciences, Investors and OTC & Emerging Growth commenced
operations on April 30, 1998.
<PAGE>
(With the Enhanced Beneficiary Protection Option)*
Variable Sub-Account One Year Five Years Ten Years or
Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 101.39% N/A 12.11%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -2.08% 4.84% 3.07%
The George Putnam Fund -4.20% N/A -0.49%
Putnam Global Asset Allocation 7.75% 14.74% 10.10%
Putnam Global Growth 62.10% 25.01% 15.11%
Putnam Growth and Income -2.36% 17.08% 11.78%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -7.71% N/A 0.53%
Putnam High Yield 1.90% 6.67% 8.68%
Putnam Income -5.92% 5.21% 5.47%
Putnam International Growth 55.16% N/A 27.77%
Putnam International Growth and Income 20.11% N/A 16.06%
Putnam International New Opportunities 97.18% N/A 30.37%
Putnam Investors 25.64% N/A 25.40%
Putnam Money Market 0.10% 2.99% 2.87%
Putnam New Opportunities 64.06% 30.31% 27.80%
Putnam New Value -3.54% N/A 5.77%
Putnam OTC & Emerging Growth 120.37% N/A 60.55%
Putnam Research 23.39% N/A 36.53%
Putnam Small Cap Value N/A N/A 0.95%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -4.56% 14.85% 10.45%
Putnam Vista 47.84% N/A 28.63%
Putnam Voyager 53.17% 29.10% 19.93%
Putnam Voyager II N/A N/A N/A
--------------
* Performance figures have been adjusted to reflect the current charge for
the Enhanced Beneficiary Protection Option as if that feature had been
available throughout the periods shown.
** The inception dates for the Funds appear in the first footnote to the
preceding table. For periods prior to the inception dates of the Funds
(Class IB shares), the performance shown is based on the historical
performance of the Funds (Class IA shares), adjusted to reflect the current
expenses of the Funds (Class IB shares). The inception dates for the Funds
(Class IA shares) are shown on the first note to the first table above.
<PAGE>
(With Retirement Income Guarantee Rider 2)*
Variable Sub-Account One Year Five Years Ten Years or
Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 101.38% N/A 11.88%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -2.25% 4.70% 2.84%
The George Putnam Fund -4.37% N/A -0.72%
Putnam Global Asset Allocation 7.60% 14.66% 9.97%
Putnam Global Growth 61.87% 24.89% 14.96%
Putnam Growth and Income -2.52% 17.03% 11.68%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -7.88% N/A 0.28%
Putnam High Yield 1.74% 6.54% 8.58%
Putnam Income -6.09% 5.07% 5.33%
Putnam International Growth 55.08% N/A 27.66%
Putnam International Growth and Income 19.98% N/A 15.94%
Putnam International New Opportunities 97.16% N/A 30.22%
Putnam Investors 25.52% N/A 25.23%
Putnam Money Market -0.05% 2.81% 2.66%
Putnam New Opportunities 63.99% 30.27% 27.74%
Putnam New Value -3.71% N/A 5.63%
Putnam OTC & Emerging Growth 120.39% N/A 60.37%
Putnam Research 23.26% N/A 36.20%
Putnam Small Cap Value N/A N/A 0.63%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -4.73% 14.78% 10.32%
Putnam Vista 47.75% N/A 28.54%
Putnam Voyager 53.09% 29.06% 19.88%
Putnam Voyager II N/A N/A N/A
--------------
* Performance figures have been adjusted to reflect the current charge for
Retirement Income Guarantee Rider 2 as if that feature had been available
throughout the periods shown. For purposes of computing the Rider fee, we
assumed that Income Base B applied, that there were no additional purchase
payments or withdrawals, and that the Contract Issue Date coincided with
the inception date of the Fund (Class IA shares).
** The inception dates for the Funds appear in the first footnote to the first
table under Adjusted Historical Total Returns. For periods prior to the
inception dates of the Funds (Class IB shares), the performance shown is
based on the historical performance of the Funds (Class IA shares),
adjusted to reflect the current expenses of the Funds (Class IB shares).
The inception dates for the Funds (Class IA shares) are shown on the first
note to the first table above.
<PAGE>
(With the Enhanced Beneficiary Protection Option and Retirement Income Guarantee Rider 2)*
Variable Sub-Account One Year Five Years Ten Years or
Since Fund Inception**
Putnam American Government Income N/A N/A N/A
Putnam Asia Pacific Growth 101.08% N/A 11.71%
Putnam Capital Appreciation N/A N/A N/A
Putnam Diversified Income -2.40% 4.54% 2.68%
The George Putnam Fund -4.52% N/A -0.87%
Putnam Global Asset Allocation 7.43% 14.48% 9.80%
Putnam Global Growth 61.78% 24.72% 14.79%
Putnam Growth and Income -2.68% 16.85% 11.51%
Putnam Growth Opportunities N/A N/A N/A
Putnam Health Sciences -8.03% N/A 0.13%
Putnam High Yield 1.58% 6.38% 8.42%
Putnam Income -6.24% 4.91% 5.17%
Putnam International Growth 54.84% N/A 27.47%
Putnam International Growth and Income 19.79% N/A 15.77%
Putnam International New Opportunities 96.86% N/A 30.02%
Putnam Investors 25.32% N/A 25.03%
Putnam Money Market -0.20% 2.65% 2.50%
Putnam New Opportunities 63.74% 30.07% 27.54%
Putnam New Value -3.86% N/A 5.47%
Putnam OTC & Emerging Growth 120.05% N/A 60.12%
Putnam Research 23.07% N/A 35.99%
Putnam Small Cap Value N/A N/A 0.48%
Putnam Technology N/A N/A N/A
Putnam Utilities Growth and Income -4.88% 14.61% 10.15%
Putnam Vista 47.53% N/A 28.35%
Putnam Voyager 52.86% 28.86% 19.69%
Putnam Voyager II N/A N/A N/A
--------------
</TABLE>
*Performance figures have been adjusted to reflect the current charge
for the Enhanced Beneficiary Protection Option and Retirement Income Guarantee
Rider 2 as if those features had been available throughout the periods shown.
** The inception dates for the Funds appear in the first footnote to
the first table under Adjusted Historical Total Returns. For periods prior to
the inception dates of the Funds (Class IB shares), the performance shown is
based on the historical performance of the Funds (Class IA shares), adjusted to
reflect the current expenses of the Funds (Class IB shares). The inception dates
for the Funds (Class IA shares) are shown on the first note to the preceding
table.
