FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-90272
33-84480
33-50884
NORTHBROOK LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
ILLINOIS 36-3001527
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive offices)
(Zip Code)
847/402-2400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes../X/.. No
Indicate the number of shares of each of the issuer's classes of common
stock, as of September 30, 1996; there were 25,000 shares of common capital
stock outstanding, par value $100 per share all of which shares are held by
Allstate Life Insurance Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Position As Of
September 30, 1996(Unaudited)and December 31, 1995 3
Statements of Operations
Three Months Ended September 30, 1996
and September 30, 1995 (Unaudited)
Nine Months Ended September 30, 1996
and September 30, 1995 (Unaudited) 4
Statements of Cash Flows
Nine Months Ended September 30, 1996
and September 30, 1995(Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signature Page
2
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
($ in thousands) (Unaudited)
<S> <C> <C>
Assets
Investments
Fixed income securities available for sale, at
fair value (amortized cost $63,728 and $59,142) $ 64,781 $ 63,229
Short-term 6,318 8,049
Total investments 71,099 71,278
Reinsurance recoverable from Allstate Life
Insurance Company 2,516,065 2,636,981
Cash 55 87
Net receivable from Allstate Life Insurance Company 4,173 6,183
Other assets 3,867 2,164
Separate Accounts 3,998,290 3,354,910
Total assets $6,593,549 $6,071,603
Liabilities
Reserve for life insurance policy benefits $ 141,303 $ 139,509
Contractholder funds 2,374,764 2,497,278
Current income taxes 182 233
Deferred income taxes 1,739 2,798
Separate Accounts 3,998,290 3,354,910
Total liabilities 6,516,278 5,994,728
Shareholder's equity
Common stock, $100 par value, 25,000 shares
authorized, issued and outstanding 2,500 2,500
Additional capital paid-in 56,600 56,600
Unrealized net capital gains 684 2,657
Retained income 17,487 15,118
Total shareholder's equity 77,271 76,875
Total liabilities and shareholder's equity $6,593,549 $6,071,603
</TABLE>
See notes to financial statements.
3
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) 1996 1995 1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Net investment income $ 1,243 $ 1,311 $ 3,650 $ 3,720
Realized capital gains and losses - - (22) 67
Income from operations before income tax
expense 1,243 1,311 3,628 3,787
Income tax expense 424 440 1,259 1,314
Net income $ 819 $ 871 $ 2,369 $ 2,473
--------- ---------- --------- ---------
</TABLE>
See notes to financial statements.
4
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
<S> <C> <C>
Nine Months Ended
September 30,
($ in thousands) 1996 1995
(Unaudited)
Cash flows from operating activities
Net income $ 2,369 $ 2,473
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, amortization and other non-cash items 571 563
Realized capital losses and (gains) 22 (67)
Net change in reserve for policy benefits and
contractholder funds 196 (859)
Change in deferred income taxes 1 (2,744)
Changes in other operating assets and liabilities ( 421) 395
Net cash provided by (used in) operating activities 2,738 (239)
Cash flows from investing activities
Fixed income securities available for sale
Proceeds from sales 2,320 5,423
Investment collections 5,873 4,864
Investment purchases (12,694) (8,575)
Change in short-term investments, net 1,731 (1,532)
Net cash (used in) provided by investing activities (2,770) 180
Net (decrease) in cash (32) (59)
Cash at beginning of period 87 59
----------- -------------
Cash at end of period $ 55 $ 0
----------- -------------
</TABLE>
See notes to financial statements.
5
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Northbrook Life Insurance Company (the "Company") is wholly owned by
Allstate Life Insurance Company ("Allstate Life"), which is wholly owned
by Allstate Insurance Company, a wholly-owned subsidiary of The Allstate
Corporation.
The financial statements and notes as of September 30, 1996, and for the
three-month and nine-month periods ended September 30, 1996 and 1995 are
unaudited. These interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion
of management, necessary for the fair presentation of the financial
position, results of operations and cash flows for the interim periods.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Northbrook Life
Insurance Company Annual Report on Form 10K for 1995. The results of
operations for the interim periods should not be considered indicative of
results to be expected for the full year.
To conform with the 1996 presentation, certain items in the prior year's
financial statements have been reclassified.
2. Reinsurance
The Company reinsures substantially all business with Allstate Life.
Premiums and contract charges ceded to Allstate Life were $1.17 million
and $44.23 million for the nine-month period ended September 30, 1996 and
$2.18 million and $34.56 million for the nine-month period ended
September 30, 1995. Credited interest, policy benefits and other expenses
ceded to Allstate Life amounted to $161.74 million and $172.25 million
for the nine-month periods ended September 30, 1996 and 1995,
respectively. Investment income earned on the assets which support
contractholder funds was excluded from the Company's financial statements
as those assets were transferred to Allstate Life under the terms of
reinsurance treaties. Reinsurance ceded arrangements do not discharge the
Company as the primary insurer.
Included in Reinsurance recoverable from Allstate Life are fixed income
securities with a carrying value of $8.83 million and $10.33 million at
September 30, 1996 and December 31, 1995, respectively. These securities
support qualified contract liabilities issued in conjunction with certain
retirement plans. Under the terms of the modified coinsurance agreement,
the income related to these securities is ceded to Allstate Life, and is,
therefore, not included in the Company's statements of operations.
6
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion highlights significant factors influencing
results of operations and changes in financial position of Northbrook Life
Insurance Company (the "Company"). It should be read in conjunction with the
discussion and analysis and financial statements and notes thereto found under
Items 7 and 8 of Part II of the Northbrook Life Insurance Company Annual Report
on Form 10-K for the year ended December 31, 1995.
The Company, which is wholly owned by Allstate Life Insurance Company
("Allstate Life"), issues single and flexible premium fixed annuity contracts.
In addition, the Company issues flexible premium deferred variable annuity
contracts, the assets and liabilities of which are legally segregated and
reflected in the accompanying statements of financial position as the assets and
liabilities of the Separate Accounts. Dean Witter Reynolds Inc. is the sole
distributor of the Company's products and Dean Witter InterCapital Inc. manages
the funds in which the assets of the Separate Accounts are invested.
The Company reinsures all of its fixed annuity deposits and life insurance
in force with Allstate Life. Accordingly, the financial results reflected in the
Company's statements of operations do not include income related to those assets
that are transferred to Allstate Life or fixed income securities relating to
policies subject to a modified coinsurance agreement.
Separate Account assets and liabilities are carried at fair value in the
statements of financial position. Investment income and realized gains and
losses of the Separate Account investments accrue directly to the
contractholders (net of fees) and, therefore, are not included in the Company's
statements of operations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
($ in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net investment income $ 1,243 $ 1,311 $ 3,650 $ 3,720
Realized capital gains and losses,
after tax $ - $ - $ (14) $ 67
Net income $ 819 $ 871 $ 2,369 $ 2,473
Invested assets, at amortized cost $70,046 $65,003 $70,046 $65,003
------- ------- -------- --------
</TABLE>
7
<PAGE>
Pre-tax net investment income decreased 5.2% to $1.24 million for the
third quarter of 1996 compared to $1.31 million for the same period in 1995. For
the nine-month period ended September 30, 1996, pre-tax net investment income
decreased slightly compared with the same period in 1995. Income on a greater
amount of invested assets at amortized cost was offset by an increase in
investment expense. The overall portfolio yield declined slightly, as proceeds
from calls and maturities as well as positive cash flows from operations were
reinvested in securities yielding less than the average portfolio rate.
FINANCIAL POSITION
Total investments at September 30, 1996 decreased $18 thousand to $71.10
million from $71.28 million at December 31, 1995 as positive cash flows
generated from operations were offset by a decrease of $3.03 million in the
unrealized gain on the fixed income securities portfolio. The decrease in
unrealized gains in the fixed income securities portfolio was due to the effect
of rising interest rates.
Contractholder funds decreased by $122.51 million as compared to December
31, 1995 and reinsurance recoverable from Allstate Life under reinsurance
treaties decreased by $120.92 million as compared to December 31, 1995,
reflecting fixed annuity contract surrenders, withdrawals and policyholder
transfers from fixed annuity contracts to variable annuity contracts.
Reinsurance recoverable from Allstate Life relates to policy benefit obligations
ceded to Allstate Life.
Separate Account assets and liabilities increased by $643.38 million as
compared to December 31, 1995. The increases were attributable to increased
sales of flexible premium deferred variable annuity contracts, favorable
investment performance of the Separate Account investment portfolios, and
policyholder transfers previously described.
LIQUIDITY AND CAPITAL RESOURCES
Under the terms of intercompany reinsurance agreements, assets of the
Company that relate to insurance in force, excluding Separate Account assets and
fixed income securities relating to policies subject to the modified coinsurance
agreement, are transferred to Allstate Life which maintains the investment
portfolios that support the Company's products.
8
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would materially
affect the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
(2) None
(3) (i) Articles of Incorporation*
(ii) By-laws*
(4) Form of Northbrook Life Insurance Company
Flexible Premium Deferred Annuity Contract
and Application**
(10) (i) Reinsurance Agreement between Northbrook
Life Insurance Company and Allstate Life
Insurance Company***
(ii) Modified Coinsurance Agreement between
Northbrook Life Insurance Company and Allstate
Life Insurance Company****
(11) None
(15) None
(18) None
(19) None
(22) None
(23) (a) Consent of Independent Public Accountants*****
(b) Consent of Attorneys******
(24) None
(27) Financial Data Schedule
(99) None
(b) Reports on 8-K
No reports on Form 8-K were filed during the third quarter of
1996.
9
<PAGE>
* Previously filed in Form N-4 Registration Statement No. 33-35412
dated June 14, 1990 and incorporated by reference.
** Previously filed in Form S-1 Registration Statement No. 33-90272
dated March 13, 1995 and incorporated by reference. Previously filed in Form
S-1 Registration Statement No. 33-67352 dated August 12, 1993 and incorporated
by reference. Previously filed in Form S-1 Registration Statement No. 33-
50884 dated August 14, 1992 and incorporated by reference.
*** Previously filed in Form S-1 Registration Statement No. 33-39268
dated March 6, 1991 and incorporated by reference.
**** Previously filed in Form S-1 Registration Statement No. 33-84480
dated March 8, 1995 and incorporated by reference.
***** Previously filed in Form S-1 Registration Statement No. 33-90272
dated April 2, 1996 and incorporated by reference. Previously filed in
Form S-1 Registration Statement No. 33-84480 dated April 4, 1996 and
incorporated by reference. Previously filed in Form S-1 Registration Statement
No. 33-50884 dated April 4, 1996 and incorporated by reference.
******Previously filed in Form S-1 Registration Statement No. 33-90272
dated March 13, 1995 and incorporated by reference. Previously filed in Form
S-1 Registration Statement No. 33-50884 dated August 14, 1992 and incorporated
by reference. Previously filed in Form S-1 Registration Statement No. 33-
84480 dated September 28, 1994 and incorporated by reference.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Northbrook Life Insurance Company
(Registrant)
November 13, 1996 /s/ LOUIS G. LOWER, II
------------------------ ----------------------
Date LOUIS G. LOWER, II
CHAIRMAN OF THE BOARD OF DIRECTORS
and CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
November 13, 1996 /s/KEVIN R. SLAWIN
------------------------ ----------------------
Date KEVIN R. SLAWIN
DIRECTOR and VICE PRESIDENT
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
STATEMENTS OF FINANCIAL POSITION AS OF SEP 30, 1996 (UNAUDITED) AND DEC
31, 1995, STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEP 30, 1996 AND
SEP 30, 1995 (UNAUDITED) AND NINE MONTHS ENDED SEP 30, 1996 AND SEP 30,
1995 (UNAUDITED), AND STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEP 30,
1996 AND SEP 30, 1995 (UNAUDITED), AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS)
</LEGEND>
<CIK> 0000716791
<NAME> NORTHBROOK LIFE INSURANCE COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 64,781
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 71,099
<CASH> 55
<RECOVER-REINSURE> 2,516,065
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 6,593,549
<POLICY-LOSSES> 141,303
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 2,374,764
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500
<OTHER-SE> 74,771
<TOTAL-LIABILITY-AND-EQUITY> 6,593,549
0
<INVESTMENT-INCOME> 3,650
<INVESTMENT-GAINS> (22)
<OTHER-INCOME> 0
<BENEFITS> 0
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 3,628
<INCOME-TAX> 1,259
<INCOME-CONTINUING> 2,369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,369
<EPS-PRIMARY> 94.76
<EPS-DILUTED> 94.76
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
