<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1997
REGISTRATION NO. 33-84480
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 3[X]
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
NORTHBROOK LIFE INSURANCE COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
ILLINOIS 6311
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
36-3001527
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
----------------
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
----------------
MICHAEL J. VELOTTA, ESQUIRE
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
NORTHBROOK LIFE INSURANCE COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(847) 402-2400
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
----------------
COPIES TO:
GREGOR B. MCCURDY, ESQ. CHRISTINE A. EDWARDS, ESQ.
ROUTIER AND JOHNSON, P.C. DEAN WITTER REYNOLDS, INC.
1700 K STREET N.W. TWO WORLD TRADE CENTER
SUITE 1003 NEW YORK, N.Y. 10048
WASHINGTON, D.C. 20006
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box [X].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT
CLASS OF AMOUNT OFFERING AGGREGATE OF
SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred Annuity Contracts and
Participating Interests therein * * * *
- ---------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
*A maximum aggregate offering price of $500,000,000 was previously
registered. No additional amount of securities is being registered by this
post-effective amendment to the registration statement.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(800) 654-2397
GROUP AND INDIVIDUAL DEFERRED ANNUITY CONTRACTS
DISTRIBUTED BY
DEAN WITTER REYNOLDS INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
---------------
This Prospectus describes the group and individual Flexible Premium Deferred
Annuity Contract ("Contract") offered by Northbrook Life Insurance Company
("Company"), a wholly owned subsidiary of Allstate Life Insurance Company.
Dean Witter Reynolds Inc. ("Dean Witter") is the principal underwriter and
distributor of the Contracts. In certain states the Contract is only available
as a group Contract. In these states a Certificate (hereinafter referred to as
"Contract"), which summarizes the provisions of the Master Group Policy issued
to Dean Witter, is issued to customers of Dean Witter.
The Contract has the flexibility to allow you to shape an annuity to fit
your particular needs. It is designed to aid you in your choice of short-term,
mid-term, or long-term financial planning and can be used for retirement
planning regardless of whether the plan qualifies for special federal income
tax treatment. Presently, the Company will accept an initial Purchase Payment
of $1,000, but reserves the right to increase this amount to no more than
$4,000 ($1,000 for a Qualified Contract). Additional Purchase Payments of
$1,000 or more may be added to the Contract.
Partial Withdrawals and surrenders under the Contract may be subject to a
Market Value Adjustment. Therefore, the Owner bears some investment risk under
the Contract.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPEC-
TUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE>
THE CONTRACTS MAY NOT BE AVAILABLE IN ALL STATES. PLEASE CHECK WITH YOUR
DEAN WITTER ACCOUNT EXECUTIVE FOR AVAILABILITY IN YOUR STATE.
At least once each Contract Year, the Company will send the Owner an annual
statement that contains certain information pertinent to the individual
Owner's Contract. The annual statement details values and specific Contract
data that applies to each particular Contract. The annual statement does not
contain financial statements of the Company, although the Company's financial
statements are on page F-1 of this prospectus. Our Company files annual and
quarterly reports and other information with the SEC. You may read and copy
any reports, statements or other information we file at the SEC's public
reference room in Washington, D.C. You can request copies of these documents
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public on the SEC
Internet site http://www.sec.gov.).
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GLOSSARY............................... 3
THE CONTRACTS.......................... 5
The Purchase of the Contract......... 5
The Accumulation Phase............... 6
The Parties to the Contract.......... 11
The Death Benefit Provisions......... 11
The Payout Phase..................... 12
AMENDMENT OF THE CONTRACTS............. 14
DISTRIBUTION OF THE CONTRACTS.......... 14
FEDERAL TAX MATTERS.................... 15
Introduction......................... 15
Taxation of the Company.............. 15
Taxation of Annuities in General..... 15
Qualified Plans...................... 16
THE COMPANY............................ 18
Business............................. 18
Reinsurance Agreement................ 18
Investments by the Company........... 18
SELECTED FINANCIAL DATA................ 20
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NORTHBROOK LIFE INSURANCE COMPANY MAN-
AGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................ 21
Results of Operations................ 21
Financial Position................... 21
Liquidity and Capital Resources...... 22
COMPETITION............................ 22
EMPLOYEES.............................. 22
PROPERTIES............................. 22
STATE AND FEDERAL REGULATION........... 23
EXECUTIVE OFFICERS AND DIRECTORS OF THE
COMPANY............................... 23
EXECUTIVE COMPENSATION................. 25
LEGAL PROCEEDINGS...................... 26
EXPERTS................................ 26
LEGAL MATTERS.......................... 26
FINANCIAL STATEMENTS................... F-1
APPENDIX A............................. A-1
</TABLE>
2
<PAGE>
GLOSSARY
Account Value--The Account Value is the sum of all Sub-Account Values.
Accumulation Phase--The Accumulation Phase is the first of two phases in the
life of the Contract. The Accumulation Phase begins on the Issue Date. The Ac-
cumulation Phase will continue until the Payout Start Date, unless the Con-
tract is terminated before that date.
Adjusted Account Value--The Account Value adjusted by the Market Value Ad-
justment less any applicable taxes. The Adjusted Account Value is only used in
the Payout Phase.
Age--Age on last birthday.
Annuitant--The person designated in the Contract whose life determines the
duration of Income Payments involving life contingencies. The Annuitant in-
cludes any Joint Annuitant.
Automatic Additions--Additional Purchase Payments of $1000 or more which are
made automatically from the Owner's bank account or Dean Witter Active
Assets(TM) Account. Automatic Additions are available monthly, quarterly,
semi-annually and annually.
Automatic Laddering Program--A program which allows the Owner to choose, in
advance, one renewal Guarantee Period for all renewing Sub-Accounts. The Owner
can participate in the Automatic Laddering Program at any time during the Ac-
cumulation Phase, including on the Issue Date. The Automatic Laddering Program
automatically continues and the Owner can discontinue participation upon writ-
ten notice to the Company.
Beneficiary--The person(s) designated in the Contract who, during the Accu-
mulation Phase, after the death of all Owners, may elect to receive the Death
Benefit or continue the Contract. If the sole surviving Owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed Income Payments
scheduled to continue.
Cash Surrender Value--The Cash Surrender Value is the Account Value adjusted
by any applicable Market Value Adjustment less any applicable Withdrawal
Charges and premium tax.
Company--The issuer of the Contract, Northbrook Life Insurance Company, is a
wholly owned subsidiary of Allstate Life Insurance Company, a wholly owned
subsidiary of Allstate Insurance Company ("Allstate"). Allstate is a wholly
owned subsidiary of The Allstate Corporation.
Contract/Certificate--The Northbrook Life Insurance Company flexible premium
deferred annuity contract, known as "The Custom Annuity Plus," that is de-
scribed in this prospectus.
Date of Death--The date that an Owner and/or Annuitant dies.
Death Benefit--The Death Benefit is the greater of: (1) the Account Value or
(2) the Cash Surrender Value.
Due Proof of Death--one of the following:
(a) A certified copy of a death certificate.
(b) A certified copy of a decree of a court of competent jurisdiction as
to the finding of death.
(c) Any other proof satisfactory to the Company.
Full Surrender--Termination of the Contract.
Guarantee Period--A period of years for which a specified effective annual
interest rate is guaranteed.
Income Payments--A series of periodic payments under an Income Plan. Income
Payments are made by the Company to the Owner during the Payout Phase of the
Contract.
3
<PAGE>
Income Plan--A plan which provides Income Payments during the Payout Phase
of the Contract.
Issue Date--The date the Contract becomes effective.
Joint Annuitant--The person, along with the Annuitant, whose life determines
the duration of Income Payments under a joint and last survivor annuity.
Market Value Adjustment--The Market Value Adjustment is the adjustment made
to the money distributed prior to the end of the Guarantee Period from one or
more Sub-Accounts under the Contract to reflect the impact of changes in in-
terest rates between the time each Sub-Account was established and the time of
distribution.
Non-Qualified Contracts--Contracts that do not qualify for special federal
tax treatment.
Owner--With respect to individual Contracts, the person designated as the
Owner in the Contract. With respect to group Contracts, the person designated
as the Owner in a group Certificate. The Owner will receive the Death Benefit
upon the death of the Annuitant, who is not also an Owner.
Partial Withdrawal--Disbursement of a portion of the Account Value.
Payout Phase--The Payout Phase is the second of the two phases in the life
of the Contract. It begins on the Payout Start Date.
Payout Start Date--The date Income Payments are to begin under the Contract.
Preferred Withdrawal Amount--A portion of the Account Value which may be an-
nually withdrawn from each Sub-Account without incurring a Withdrawal Charge
or a Market Value Adjustment.
Purchase Payments--The premiums paid by the Owner to the Company.
Qualified Contracts--Contracts issued under plans that qualify for special
federal income tax treatment.
Sub-Accounts--Sub-Accounts are distinguished by Guarantee Period(s) and the
dates the period(s) begins. Sub-Accounts are established when Purchase Pay-
ments are made; and when previous Sub-Accounts expire and a new Guarantee Pe-
riod is selected.
Sub-Account Value--The Sub-Account Value is the accumulation of funds allo-
cated to that Sub-Account and interest credited.
Systematic Withdrawals--Periodic Partial Withdrawals of $100 or more may be
deposited in a bank account or a Dean Witter Active Assets(TM) Account. Sys-
tematic Withdrawals are available monthly, quarterly, semi-annually and annu-
ally.
Withdrawal Charge--The charge that will be assessed by the Company on Full
Surrenders or Partial Withdrawals in excess of the Preferred Withdrawal
Amount.
4
<PAGE>
THE CONTRACTS
THE PURCHASE OF THE CONTRACT
1. WHAT IS THE PURPOSE OF THE CONTRACT?
The Contract described in this Prospectus is designed to aid you in your
choice of short-term, mid-term, or long-term financial planning and can be
used for retirement planning regardless of whether the plan qualifies for spe-
cial federal income tax treatment. The Contract has an Accumulation Phase and
a Payout Phase. The Accumulation Phase is the first of the two phases and be-
gins on the Issue Date and continues until the Payout Start Date. During the
Accumulation Phase, interest is credited to the Purchase Payment(s) and both a
cash withdrawal benefit and a Death Benefit are available. The Payout Phase
begins on the Payout Start Date and provides Income Payments under an Income
Plan. The Payout Phase continues until the Company makes the last payment as
provided by the Income Plan.
2. HOW IS A CONTRACT PURCHASED?
A Contract is purchased by submitting a Purchase Payment to an Account Exec-
utive of Dean Witter, the principal underwriter of the Contracts. Presently,
the Company will accept an initial Purchase Payment of $1,000, but reserves
the right to increase this amount to no more than $4,000 ($1,000 for a Quali-
fied Contract). The Owner must select the Guarantee Period(s) in which to al-
locate the Purchase Payment. Additional Purchase Payments of $1,000 or more
may be added to the Contract. Guarantee Periods will be offered at the
Company's discretion and may range from one to ten years. No less than $1,000
may be allocated to any one Guarantee Period. The Company will apply Purchase
Payments to the Contract within seven days of the receipt of the Purchase Pay-
ment and required issuing information. The Company reserves the right to limit
or increase the amount of Purchase Payments it will accept.
3. DOES THIS CONTRACT HAVE A FREE-LOOK PROVISION?
Yes. The Owner may cancel the Contract anytime within 20 days after the re-
ceipt of the Contract and receive a full refund of the entire Purchase Pay-
ment.
4. CAN ADDITIONS BE MADE TO THE CONTRACT AFTER THE INITIAL PURCHASE PAYMENT?
Yes, additional Purchase Payments may be made at any time during the Accumu-
lation Phase of the Contract. Subsequent Purchase Payments must be at least
$1,000 and may be made from a bank account or a Dean Witter Active AssetsTM
Account through Automatic Additions (the Automatic Additions Program is not
available for Qualified Contracts issued pursuant to a Dean Witter Custodial
Account). For each Purchase Payment, the Owner must select a Guarantee Peri-
od(s) to which the Purchase Payment will be allocated. The Company reserves
the right to limit the number of additional purchase payments.
5. ONCE A CONTRACT IS PURCHASED, HOW IS THE OWNER INFORMED AS TO THE STATUS OF
THE CONTRACT?
There are several ways an Owner may receive information about the Contract.
At least once a year, prior to the Payout Start Date, the Owner will be sent a
statement containing Account Value information of the Contract. The Owner may
also direct questions about the Contract to his/her Dean Witter Account Execu-
tive. Another option the Owner has is to call the Company's customer support
unit directly at 1-800-654-2397.
5
<PAGE>
THE ACCUMULATION PHASE
6. HOW IS INTEREST CREDITED TO THE CONTRACT?
Interest will be credited to initial Purchase Payments from the Issue Date.
Interest will be credited
to subsequent Purchase Payments from the date of receipt. No deductions are
made from Purchase Payments. Therefore, the full amount of every Purchase Pay-
ment is invested in a Sub-Account for accumulation of interest. Interest is
credited daily to each Guarantee Period in the Contract and is based upon the
interest rate of the Guarantee Period which has been chosen.
6
<PAGE>
The following example illustrates how a Sub-Account Value would grow given
an assumed Purchase Payment, Guarantee Period, and effective annual interest
rate. The effective annual interest rate is defined as the yield resulting
when interest credited at the underlying daily rate has compounded for a full
year.
EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD
<TABLE>
<S> <C>
Purchase Payment: .................................................. $10,000.00
Guarantee Period: .................................................. 5 years
Effective Annual Rate: ............................................. 4.50%
----------
</TABLE>
END OF CONTRACT YEAR:
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Beginning Sub-Account
Value $10,000.00
X (1 + Effective Annual
Rate) 1.045
----------
$10,450.00
==========
Sub-Account Value at end
of Contract $10,450.00
year 1 X (1 + Effective
Annual Rate) 1.045
----------
$10,920.25
==========
Sub-Account Value at end
of Contract $10,920.25
year 2 X (1 + Effective
Annual Rate) 1.045
----------
$11,411.66
==========
Sub-Account Value at end
of Contract $11,411.66
year 3 X (1 + Effective
Annual Rate) 1.045
----------
$11,925.19
==========
Sub-Account Value at end
of Contract
year 4 X (1 + Effective
Annual Rate)
Sub-Account Value at end of
Guarantee Period: $11,925.19
1.045
----------
$12,461.82
==========
</TABLE>
Total Interest Credited in Guarantee Period: $2,461.82 ($12,461.82 -
$10,000)
NOTE: The above illustration assumes no withdrawals of any amount during the
entire five year period. A Market Value Adjustment and Withdrawal Charge would
apply to any such interim withdrawal in excess of the Preferred Withdrawal
Amount. The hypothetical interest rates are for illustrative purposes only and
are not intended to predict future interest rates to be declared under the
Contract. Actual interest rates declared for any given Guarantee Period may be
more or less than those shown.
7
<PAGE>
The Company has no specific formula for determining the rate of interest
that it will declare initially or in the future. Such interest rates will be
reflective of investment returns available at the time of the determination.
In addition, the management of the Company may also consider various other
factors in determining interest rates, including regulatory and tax require-
ments, sales commissions and administrative expenses borne by the Company,
general economic trends, and competitive factors.
THE MANAGEMENT OF THE COMPANY WILL MAKE THE FINAL DETERMINATION AS TO THE
INTEREST RATES TO BE DECLARED. THE COMPANY CAN NEITHER PREDICT NOR GUARANTEE
FUTURE INTEREST RATES TO BE DECLARED.
7. WHAT HAPPENS TO THE SUB-ACCOUNT VALUE AT THE END OF A GUARANTEE PERIOD?
Prior to the end of a Guarantee Period, a notice will be mailed to the Owner
outlining the options available at the end of a Guarantee Period. Within 30
days after the end of a Guarantee Period the Owner may:
^ take no action and the Company will automatically renew the Sub-Account
Value to a Guarantee Period of the same duration to be established on
the day the previous Guarantee Period expired; or
^ notify the Company to apply the Sub-Account Value to a Guarantee Period
of a new duration to be established on the day the previous Guarantee
Period expired; or
^ receive a portion of the Sub-Account Value or the entire Sub-Account
Value through a Partial Withdrawal without incurring a Withdrawal Charge
or Market Value Adjustment. In this case, the amount withdrawn will be
deemed to have been renewed at the shortest Guarantee Period then being
offered with current interest credited from the date the Guarantee Pe-
riod expired.
8. IS IT POSSIBLE TO PRESELECT A RENEWAL GUARANTEE PERIOD AT THE POINT OF PUR-
CHASE?
Yes. The Automatic Laddering Program allows the Owner to choose, in advance,
one renewal Guarantee Period for all renewing Sub-Accounts. The Owner can se-
lect the Automatic Laddering Program at any time during the Accumulation
Phase, including on the Issue Date. The Automatic Laddering Program will con-
tinue until the Owner gives written notice to the Company.
9. CAN A PARTIAL WITHDRAWAL OR A FULL SURRENDER BE TAKEN AT ANY TIME?
Yes. As long as the Contract is still in the Accumulation Phase and has not
entered the Payout Phase, the Owner may withdraw money from the Contract or
surrender the Contract at any time (a Withdrawal Charge, a Market Value Ad-
justment and taxes may apply). Partial Withdrawals may be taken automatically
through Systematic Withdrawals (a Dean Witter Account Executive should be con-
sulted for information regarding Systematic Withdrawals). The Owner must spec-
ify the Sub-Account from which the withdrawal will be taken. If any Partial
Withdrawal reduces a Sub-Account Value to less than $1,000, the withdrawal
will be treated as a request to withdraw the entire Sub-Account Value. The
Company may defer payment of any Partial Withdrawal or Full Surrender for a
period not exceeding six months from the date of the receipt of the request.
10. IF A PARTIAL WITHDRAWAL OR FULL SURRENDER IS REQUESTED, HOW IS THE AMOUNT
RECEIVED DETERMINED?
The main component in determining the amount received by the Owner is the
amount which
8
<PAGE>
was requested, however, there may be adjustments to the requested amount. A
Withdrawal Charge may reduce the amount requested. A Market Value Adjustment
may apply which will reduce or increase the amount requested. Premium taxes
and federal income tax withholding may apply and would reduce the amount re-
quested. In summary:
The amount received by the Owner under a Partial Withdrawal or surrender re-
quest equals the amount requested less a Withdrawal Charge (if applicable)
plus or minus a Market Value Adjustment (if applicable) less premium taxes and
withholding (if applicable).
The questions which follow further clarify the components used in determin-
ing the amount received upon a Partial Withdrawal or Full Surrender.
11. UPON A FULL SURRENDER OF THE ENTIRE CONTRACT, IS IT POSSIBLE THAT THE MAR-
KET VALUE ADJUSTMENT AND WITHDRAWAL CHARGE COULD CAUSE THE AMOUNT RECEIVED
TO BE LESS THAN THE INITIAL PURCHASE PAYMENT AND ANY SUBSEQUENT PURCHASE
PAYMENTS?
No. This Contract contains a return of Purchase Payment guarantee which
states the amount received upon a Full Surrender is guaranteed never to be
less than the sum of the initial and any subsequent Purchase Payments less
amounts previously received (prior to withholding and the deduction of any
taxes if applicable). To the extent that premium taxes are assessed against
the Contract or income tax is withheld, the amount received upon a Full Sur-
render may be less than the initial and any subsequent Purchase Payments.
The renewal of any individual Sub-Account(s) within the entire Contract does
not in any way change the return of Purchase Payment guarantee provided by
this Contract. Upon Sub-Account renewal the return of Purchase Payment guaran-
tee will not be adjusted to include any accrued interest, but will continue to
apply to the initial and any subsequent Purchase Payments.
12. UPON A PARTIAL WITHDRAWAL OR FULL SURRENDER, IS THE ENTIRE AMOUNT RE-
QUESTED SUBJECT TO A WITHDRAWAL CHARGE AND A MARKET VALUE ADJUSTMENT?
No. Only amounts in excess of any remaining Preferred Withdrawal Amount
within a Sub-Account will be subject to a Withdrawal Charge and a Market Value
Adjustment. A Preferred Withdrawal Amount is available in every Sub-Account
year of a Guarantee Period and is equal to 10% of the Purchase Payment allo-
cated to the Guarantee Period. Any unused Preferred Withdrawal Amount in a
Sub-Account year may not be used to increase the Preferred Withdrawal Amount
in a subsequent Sub-Account year nor may it be used to increase the Preferred
Withdrawal Amount in another Guarantee Period.
In addition to the Preferred Withdrawal Amount, any amounts withdrawn from
Sub-Accounts which are within the first 30 days of their renewal Guarantee Pe-
riods will be completely free from any Withdrawal Charge and Market Value Ad-
justment.
13. WHAT IS THE WITHDRAWAL CHARGE UPON A PARTIAL WITHDRAWAL OR FULL SURRENDER?
The Withdrawal Charge is 6% of all amounts withdrawn or surrendered which
are not exempt from charge as discussed in question 12, above.
14. WHAT IS THE MARKET VALUE ADJUSTMENT UPON A PARTIAL WITHDRAWAL OR FULL SUR-
RENDER?
The Market Value Adjustment will be applied to all amounts withdrawn or sur-
rendered which are not exempt from adjustment as discussed in question 12.
9
<PAGE>
The Market Value Adjustment is to reflect the relationship between the cur-
rent effective annual interest rate for the duration remaining in the Guaran-
tee Period at the time of the request for Partial Withdrawal or Full Surren-
der, and the effective annual interest rate guaranteed for that Sub-Account.
Since current interest rates are based, in part, upon investment yields avail-
able at the time, the effect of the Market Value Adjustment will be closely
related to the levels of such yields. As such, the Owner bears some investment
risk under the Contract.
It is possible, therefore, that, should such yield increase significantly
from the time the Purchase Payment was made, coupled with the application of
the Withdrawal Charge, less premium taxes and withholding (if applicable), the
amount received by the Owner upon full surrender of the Contract would be less
than the Purchase Payment plus interest at the minimum guaranteed interest
rate under the Contract. HOWEVER, THE COMPANY GUARANTEES THAT THE AMOUNT RE-
CEIVED UPON SURRENDER WILL BE AT LEAST EQUAL TO THE PURCHASE PAYMENTS LESS ANY
PRIOR PARTIAL WITHDRAWALS.
Generally, if the effective annual interest rate for the Sub-Account is
lower than the applicable current effective annual interest rate (interest
rate for a duration equal to the time remaining in the Sub-Account), then the
Market Value Adjustment will result in a lower payment upon Partial Withdrawal
or Full Surrender. Similarly, if the effective annual interest rate for the
Sub-Account is higher than the applicable current effective annual interest
rate, then the Market Value Adjustment will result in a higher payment upon
Partial Withdrawal or Full Surrender.
For example, assume the Owner purchases a Contract and selects an initial
Guarantee Period of five years and the Company's effective annual rate for
that duration is 4.50%. Assume that at the end of 3 years, the Owner makes a
Partial Withdrawal. If the current interest rate for the 2 year Guarantee Pe-
riod is 4.80%, then the Market Value Adjustment will be negative, which will
result in a decrease in the amount payable to the Owner upon a Partial With-
drawal. Similarly, if the current interest rate for a 2 year Guarantee Period
is 4.20%, then the Market Value Adjustment will be positive, which will result
in an increase in the amount payable to the Owner upon the Partial Withdrawal.
The formula for calculating the Market Value Adjustment is set forth in Ap-
pendix A to this prospectus which also contains additional illustrations of
the application of the Market Value Adjustment.
15. THE IRS REQUIRES ANNUAL WITHDRAWALS TO BE TAKEN FROM QUALIFIED CONTRACTS
UPON ATTAINMENT OF AGE 70 1/2. WILL THESE WITHDRAWALS INCUR WITHDRAWAL
CHARGES AND MARKET VALUE ADJUSTMENTS?
No. Both the Withdrawal Charge and Market Value Adjustment will be waived on
withdrawals taken to satisfy IRS required distribution rules for this Con-
tract.
16. WHAT ARE THE TAX IMPLICATIONS ASSOCIATED WITH THE CONTRACT?
It varies based upon the Owner's circumstances. Generally, the two areas
which may give rise to a taxable situation are personal federal and state in-
come taxation and taxation of the Company.
With respect to personal federal and state income tax, an annuity contract
Owner who is a natural person is not taxed on increases in the Account Value
until a distribution occurs. For federal income tax purposes, distributions
include the receipt of proceeds from loans and an assignment or pledge of any
portion of the value of the Contract, as well as withdrawals, Income Payments,
or Death Benefits. In addition, personal federal and state income tax with-
holding may be deducted from Partial Withdrawal and Full Surrender payments.
10
<PAGE>
Amounts withheld for personal taxes do not necessarily represent the Owner's
entire income tax liability.
With respect to taxation of the Company, premium taxes and other applicable
taxes imposed on the Company may be deducted from the Contract's Purchase Pay-
ment or Account Value upon Full Surrender or annuitization of the Contract.
Current premium tax rates range from 0 to 3.5%, but are subject to change by
state regulation.
There are several exceptions to the above generalizations. More complete in-
formation can be found in the "Federal Tax Matters" section found on page 15
of this prospectus.
THE PARTIES TO THE CONTRACT
17. WHAT RIGHTS DOES AN OWNER HAVE IN THIS CONTRACT?
This Contract offers the Owner several rights. The Owner may:
^ receive any withdrawals or periodic Income Payments from the Contract,
unless the Owner has directed the Company to pay them to someone else;
^ name and change the Owner, Beneficiary, and Annuitant. The Annuitant can
be changed only if the Owner is a natural person;
^ assign interest in the Contract;
^ elect a Death Benefit option upon death of a co-owner or Annuitant; and
^ terminate the Contract.
The above may be subject to the rights of any irrevocable Beneficiary.
18. WHAT PURPOSE DOES THE ANNUITANT SERVE?
The Annuitant's life determines the latest Payout Start Date and the amount
of the Income Payments which will begin on the Payout Start Date. This Con-
tract requires an Annuitant at all times during the Accumulation Phase and on
the Payout Start Date. The Annuitant must be a natural person. A Death Benefit
may be payable upon the death of the Annuitant.
19. WHO IS THE BENEFICIARY TO THE CONTRACT?
The Beneficiary varies based upon who the Owner is, and the designation of
the parties to the Contract by the Owner.
If the Owner is a natural person, the Beneficiary will be determined from
the most recent written request of the Owner. If the Owner does not name a
Beneficiary or if the Beneficiaries named are no longer living, the Benefi-
ciary will be:
^ the Owner's spouse if living;
^ otherwise, the Owner's children, equally, if living;
^ otherwise, the Owner's estate.
If the Owner is a grantor trust, then the Beneficiary will be that same
grantor trust.
If the Owner is a non-natural person other than a grantor trust, the Owner
is also the Beneficiary, unless a different Beneficiary has been named.
20. WHAT PURPOSE DOES THE BENEFICIARY SERVE?
The Beneficiary becomes the new Owner if the sole surviving Owner dies prior
to the Payout Start Date. If the sole surviving Owner dies after the Payout
Start Date, the Beneficiary will receive any guaranteed Income Payments sched-
uled to continue.
THE DEATH BENEFIT PROVISIONS
21. UPON DEATH OF THE OWNER, WHO IS THE NEW OWNER OF THE CONTRACT?
The new Owner is any surviving joint Owner(s) or if none, the Beneficiary.
11
<PAGE>
22. UPON DEATH OF THE OWNER, WHAT OPTIONS DOES THE NEW OWNER HAVE?
In most cases, the new Owner of the Contract has the following three op-
tions:
^ receive the Cash Surrender Value within 5 years of the date of death; or
^ receive the Death Benefit in a lump sum. The Death Benefit is equal to
the greater of the Account Value or the Cash Surrender Value; or
^ apply the Death Benefit to an Income Plan with Income Payments beginning
within one year of the Date of Death. Income Payments must be made over
the life of the new Owner, or a period not to exceed the life expectancy
of the new Owner.
If the new Owner is the spouse of the deceased Owner, the new Owner may
elect to continue the Contract. See question 23, below.
If the new Owner is a non-natural person (other than a grantor trust), then
the Owner must receive the Death Benefit in a lump sum.
Deaths should be reported to the Company as quickly as possible. If the Com-
pany is not notified within 180 days of the date of death, the only option
available to the new Owner is to receive the Cash Surrender Value within 5
years of the date of death. Any remaining funds will be distributed at the end
of the 5-year period. The Contract should be referred to for the conditions
and stipulations which apply to each of the above options.
23. FOR A CONTRACT WITH SPOUSAL CO-OWNERS, WHAT HAPPENS TO THE CONTRACT UPON
THE DEATH OF ONE OF THE SPOUSES?
In addition to the options available in question 22, a surviving spousal
Owner has the following additional options:
^ continue the Contract as if the death had not occurred; and
^ if the Contract is continued, one withdrawal within the year of death is
allowed which will not be assessed a Withdrawal Charge (a Market Value
Adjustment will apply). The amount which may be withdrawn is limited
only by the amount of the available Death Benefit.
24. IF THE OWNER IS NOT THE ANNUITANT AND THE ANNUITANT DIES, WHAT HAPPENS TO
THE CONTRACT?
In most cases, the Owner has the following three options:
^ continue the Contract as if the death had not occurred. The new Annui-
tant will be the youngest Owner unless the Owner names a different Annu-
itant; or
^ receive the Death Benefit in a lump sum. The Death Benefit is equal to
the greater of the Account Value or the Cash Surrender Value; or
^ apply the Death Benefit to an Income Plan.
Deaths should be reported to the Company as quickly as possible. If the Com-
pany is not notified within 180 days of the date of death, the only option
available to the Owner is to continue the Contract as if the death had not oc-
curred. The Contract should be referred to for the conditions and stipulations
which apply to each of the above options.
THE PAYOUT PHASE
25. WHAT IS THE PAYOUT START DATE?
This is the date on which the Accumulation Phase ceases and the Payout Phase
begins. During the Payout Phase, the Owner receives Income Payments, based
upon an Income Plan selected by the Owner, from the Contract. The Payout Phase
will continue until the Company makes the last pay-
12
<PAGE>
ment as provided by the Income Plan chosen. The Owner may change the Payout
Start Date at any time by notifying the Company in writing of the change at
least 30 days before the scheduled Payout Start Date. The Payout Start Date
must be at least one month after the Issue Date and on or before the later of:
^ the Annuitant's 90th birthday; or
^ the 10th anniversary of the Contract's Issue Date.
Unless the Owner notifies the Company in writing requesting an earlier date,
the Payout Start Date will be the latest permissible date as outlined above.
The owner of a Qualified contract may be limited by the Plan under which the
contract is issued with regard to a Payout Start Date after age 70 1/2.
26. WHAT TYPES OF INCOME PLANS ARE AVAILABLE IN THE CONTRACT?
Income Payments are made under an Income Plan which may be chosen by the
Owner. The types of Income Plans which are available are as follows:
^ Life income with or without guaranteed payments. If the Annuitant dies
before all the guaranteed payments have been made, the remainder of the
guaranteed payments will be made to the Owner; or
^ Joint and survivor life income with or without guaranteed payments. If
both the Annuitant and Joint Annuitant die before the guaranteed pay-
ments have been made, the remainder of the guaranteed payments will be
made to the Owner; or
^ Guaranteed payments for a specified period. Payments under this option
do not depend on the continuation of the Annuitant's life.
Any period for which payments are guaranteed may range from 60 to 360
months. If any Owner dies, guaranteed Income Payments will continue as sched-
uled. Up to 30 days before the Payout Start Date, the Owner may change the In-
come Plan or request any other form of Income Plan agreeable to both the Com-
pany and the Owner. If the Company does not receive a written choice from the
Owner, the Income Plan will be life income with 120 monthly payments guaran-
teed. If an Income Plan is chosen which depends on the Annuitant's or Joint
Annuitant's life, proof of age will be required before Income Payments begin.
The Company reserves the right to accept other Income Plans.
27. HOW ARE THE INCOME PAYMENTS FROM AN INCOME PLAN DETERMINED?
To determine the Income Payments, the Adjusted Account Value will be applied
to the greater of:
^ payment plan rates declared by the Company; or
^ guaranteed payment plan rates as described in the Contract.
If the Adjusted Account Value is less than $2000, or if the monthly Income
Payments determined under the Income Plan are less than $20, the Company may
pay the Adjusted Account Value in a lump sum or change the payment frequency
to an interval which results in Income Payments of at least $20.
The Contracts are based on life annuity tables that provide for different
benefit payments to men and women of the same age (except in states which re-
quire unisex annuity tables). Nevertheless, in accordance with the U.S. Su-
preme Court's decision in Arizona Governing Committee v. Norris, in certain
employment-related situations, annuity tables that do not vary on the basis of
sex may be used. Accordingly, if the Contract is to be used in connection with
an employment-related retirement or benefit plan, consideration should be
given in consultation with legal counsel, to the impact of
13
<PAGE>
AMENDMENT OF THE CONTRACTS
DISTRIBUTION OF THE CONTRACTS
Norris on any such plan before making any contributions under these Contracts.
The dollar amount of Income Payments is generally affected by the duration of
the Income Plan selected. For example, if an Income Plan guaranteed for life is
chosen, the Income Payments may be greater or lesser than Income Payments under
an Income Plan for a specified period depending on the life expectancy of the
Annuitant. Also, the Company may require proof that the Annuitant or Joint An-
nuitant is still alive before the Company makes each payment that depends on
their continued life.
28. CAN PARTIAL WITHDRAWALS BE TAKEN FROM THE CONTRACT OR CAN THE CONTRACT BE
SURRENDERED ONCE IT HAS ENTERED THE PAYOUT PHASE?
No. After the Adjusted Account Value has been applied to an Income Plan on
the Payout Start Date, the Income Plan can not be changed, the exchange of the
Adjusted Account Value for an Income Plan can not be reversed, and no withdraw-
als can be made.
The Company reserves the right to amend the Contracts to meet the require-
ments of applicable federal or state laws or regulations. The Company will no-
tify the Owner of any such amendments.
The Contracts will be distributed exclusively by Dean Witter which serves as
the principal underwriter of the Contracts under a General Agency Agreement
with the Company.
Dean Witter is a wholly owned subsidiary of Dean Witter, Discover & Co.
("Dean Witter Discover"). Dean Witter is located at Two World Trade Center, New
York, New York, 10048. Dean Witter is a member of the New York Stock Exchange
and the National Association of Securities Dealers.
The Company may pay up to a maximum sales commission of 8% both upon sale of
the Contract and upon renewal of a Guarantee Period. In addition, sale of the
Contract may count toward incentive program awards for the Account Executive.
The General Agency Agreement between the Company and Dean Witter provides
that the Company will indemnify Dean Witter for certain damages that may be
caused by actions, statements or omissions by the Company.
14
<PAGE>
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax conse-
quences of ownership or receipt of distributions under an annuity contract de-
pend on he 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 THE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter
L of the Internal Revenue Code. The following discussion assumes that the Com-
pany is taxed as a life insurance company under Part I of Subchapter L.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL
In general, an annuity contract owned by a natural person is not taxed on
increases in the contract value until a distribution occurs. Annuity contracts
owned by non-natural persons are generally not treated as annuity contracts
for federal income tax purposes and the income on such contracts is taxed as
ordinary income received or accrued by the owner during the taxable year.
There are exceptions to the non-natural owner rule and you should discuss
these with your tax advisor.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal under a non-qualified contract, amounts
received are taxable to the extent the contract value, without regard to any
surrender charges, exceeds the investment in the contract. The contract value
is the sum of all sub-account values. No matter which sub-account a withdrawal
is made from, all sub-account values are combined and the total contract value
is used to determine the amount of taxable income. In the case of 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 bears
to the contract value, can be excluded from income. In the case of 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. If an individual transfers an annuity contract without full and ade-
quate consideration to a person other than the individual's spouse (or to a
former spouse incident to a divorce), the owner will be taxed on the differ-
ence between the contract value and the investment in the contract at the time
of transfer. Other than in the case of certain qualified contracts, any amount
received as a loan under a contract, and any assignment or pledge (or agree-
ment 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 payments received from an annuity
contract provides for the return of the owner's investment in the contract in
equal tax-free amounts over the payment period. The balance of each payment
received is taxable. In the case of fixed annuity payments, the amount ex-
cluded from income is determined by multiplying the payment by the ratio of
the investment in the contract (adjusted for any refund feature or period cer-
tain) to the total expected value of annuity payments for the term of the con-
tract.
TAXATION OF ANNUITY DEATH BENEFITS
Amounts may be distributed from an annuity contract because of the death of
an owner or an -
15
<PAGE>
nuitant. Generally, such amounts are includible 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 annuity option, the amounts are
taxed in the same manner as an annuity payment.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any premature distribu-
tion from a non-qualified annuity contract. The penalty tax generally applies
to any distribution made prior to the owner attaining age 59 1/2. However,
there should be no penalty tax on distributions to owners: (1) made on or af-
ter the owner attains age 59 1/2; (2) made as a result of the owner's death or
disability; (3) made in substantially equal periodic payments over life or
life expectancy; or (4) made under an immediate annuity. Similar rules apply
for distributions from qualified contracts.
AGGREGATION OF ANNUITY CONTRACTS
All non-qualified annuity contracts issued by the Company (or its affili-
ates) to the same owner during any calendar year will be aggregated and
treated as one annuity contract for purposes of determining the taxable amount
of a distribution.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax purpos-
es, an annuity contract must provide: (1) if any owner dies on or after the
annuity 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 owner dies prior to the annuity start date,
the entire interest in the contract will be distributed within five years af-
ter the date of the owner's death. These requirements are satisfied if any
portion of the owner's interest which 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 one year of the owner's death. If the owner's
designated beneficiary is the surviving spouse of the owner, the contract may
be continued with the surviving spouse as the new owner. If the owner of the
contract is a nonnatural person, then the annuitant will be treated as the
owner for purposes of applying the distribution at death rules. Also, a change
of annuitant on a contract owned by a nonnatural person will be treated as the
death of the owner.
QUALIFIED PLANS
This annuity contract may be used with several types of qualified plans. 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 dis-
tribution rules, excess distributions and in other circumstances. owners and
participants under the plan and annuitants and beneficiaries under the con-
tract may be subject to the terms and conditions of the plan regardless of the
terms of the contract.
TYPES OF QUALIFIED PLANS
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an in-
dividual retirement program known as an Individual Retirement Annuity. Indi-
vidual Retirement Annuities are subject to limitations on the amount that can
be contributed and on the time when distributions may commence. Certain dis-
tributions from other types of qualified plans may be "rolled over" on a tax-
deferred basis into an Individual Retirement Annuity.
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified employee
pension plans for
16
<PAGE>
their employees using the employees' individual retirement annuities if cer-
tain criteria are met. Under these plans the employer may, within specified
limits, make deductible contributions on behalf of the employees to their in-
dividual retirement annuities.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS)
Sections 408(p) and 401(k) of the Code allow employers with 100 or fewer em-
ployees 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 contributions made by employers. Employers intending to
use the contract in conjunction with SIMPLE plans should seek competent tax
and legal advice.
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 em-
ployees' 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 after 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).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to estab-
lish various types of tax favored retirement plans for employees. The Self-Em-
ployed 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 bene-
fits 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 pay-
ing current taxes. The employees must be participants in an eligible deferred
compensation plan. Generally, under the non-natural owner rules, such con-
tracts are not treated as annuity contracts for federal income tax purposes.
However, under these plans, contributions made for the benefit of the employ-
ees will not be includible in the employees' gross income until distributed
from the plan.
INCOME TAX WITHHOLDING
The Company is required to withhold federal income tax at a rate of 20% on
all "eligible rollover distributions" unless an individual elects to make a
"direct rollover" of such amounts to another qualified plan or Individual Re-
tirement Account or Annuity (IRA). 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 substan-
tially equal periodic payments made over a period of at least 10 years, or the
life (joint lives) of the participant (and beneficiary). For any distributions
from non-qualified annuity contracts, or distributions from qualified con-
tracts which are not considered eligible rollover distributions, the Company
may be required to withhold federal and state income taxes unless the recipi-
ent elects not to have taxes withheld and properly notifies the Company of
such election.
17
<PAGE>
THE COMPANY
BUSINESS
Incorporated in 1978 as a stock life insurance company under the laws of the
State of Illinois, the Company has done business continuously since that time
as "Northbrook Life Insurance Company." The Company issues group and individ-
ual annuities and life insurance.
The Company is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws
of Illinois. Allstate Life is a wholly owned subsidiary of Allstate Insurance
Company ("Allstate"), a stock property-liability insurance company incorpo-
rated under the laws of Illinois. With the exception of directors' qualifying
shares, all of the outstanding capital stock of Allstate is owned by The
Allstate Corporation ("Corporation"). On June 30, 1995, Sears, Roebuck and Co.
("Sears") distributed its 80.3% ownership in the Corporation to Sears common
shareholders through a tax-free dividend.
REINSURANCE AGREEMENT
The Company and Allstate Life entered into a reinsurance agreement, effec-
tive December 31, 1987, under which the Company automatically reinsures all of
its business with Allstate Life. Under the reinsurance agreement, Purchase
Payments under general account contracts are automatically transferred to and
become invested with the assets of Allstate Life, which accepts 100% of the
liability under such contracts. (See, "Management's Discussion and Analysis of
Financial Condition and Results of Operations", pg. 21). However, the obliga-
tions of Allstate Life under the reinsurance agreement are to the Company; the
Company remains the sole obligor under the Contracts to the Owners. Because
the reinsurance obligations of Allstate Life to the Company would be subordi-
nated by operation of current state insurance rehabilitation and liquidation
laws to the obligations of Allstate Life to its direct policyholders, Allstate
Life has established a trust arrangement involving the pledge of assets for
the benefit of the Company, in an amount at least equal to the net statutory
reserves under the Contracts, under the terms of which legal title to such as-
sets would transfer to the Company in the event that Allstate Life should be-
come impaired or insolvent. Such arrangement should have the effect of avoid-
ing the risk of subordination by operation of state insurance rehabilitation
and liquidation laws.
INVESTMENTS BY THE COMPANY
The Company's general account assets, like the general account assets of
other insurance companies including Allstate Life, must be invested in accor-
dance with applicable state laws. These laws govern the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject to
certain qualifications, in federal, state, and municipal obligations, corpo-
rate bonds, preferred stocks, real estate mortgages, real estate and certain
other investments. All of the Company's general account assets are available
to meet the Company's obligations.
The Company will primarily invest its general account assets in investment-
grade fixed income securities including the following:
Securities issued by the United States Government or its agencies or in-
strumentalities, which may or may not be guaranteed by the United States
Government;
Debt instruments, including, but not limited to, issues of or guaranteed by
banks or bank holding companies, and of corporations, which are deemed by
the Company's management to have qualities appropriate for inclusion in
this portfolio;
Commercial mortgages, mortgage-backed securities collateralized by real es-
tate mortgage
18
<PAGE>
loans, or securities collateralized by other assets, that are insured or
guaranteed by the Federal Home Loan Mortgage Association, the Federal Na-
tional Mortgage Association or the Government National Mortgage Associa-
tion, or that have an investment grade at time of purchase within the four
highest grades assigned by Moody's Investors Services, Inc. (Aaa, Aa, A or
Baa), Standard & Poor's Corporation (AAA, AA, A or BBB) or any other na-
tionally recognized rating service;
Commercial paper, cash, or cash equivalents, and other short-term invest-
ments having a maturity of less than one year that are considered by the
Company's management to have investment quality comparable to securities
having the ratings stated above.
In addition, interest rate swaps, futures, options, rate caps, and other
hedging instruments may be used solely for non-speculative hedging purposes.
Anticipated use of these financial instruments shall be limited to protecting
the value of portfolio sales or purchases, or to enhance yield through the
creation of a synthetic security.
In addition, the Company maintains certain unitized Separate Accounts which
invest in shares of an open-end investment company registered under the In-
vestment Company Act of 1940. These Separate Account assets, which relate to
the Company's variable annuity contracts, do not support the Company's obliga-
tions under the Contracts.
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus beginning on page F-1.
NORTHBROOK LIFE INSURANCE COMPANY
SELECTED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR-END FINANCIAL DATA 1996 1995 1994 1993 1992
- ----------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For The Years Ended
December 31:
Income Before Income
Tax
Expense............... $ 4,868 $ 4,849 $ 2,688 $ 3,257 $ 3,153
Net Income............. 3,202 3,163 1,733 2,507 2,965
As of December 31:
Total Assets.......... 6,916,030 6,071,603 5,764,233 5,886,038 5,623,675
</TABLE>
- -------
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under SFAS No. 115, fixed income securities
classified as available for sale are carried at fair value. The net effect of
adoption of this SFAS increased shareholder's equity at December 31, 1993 by
$747 thousand and did not have a material impact on net income.
20
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights significant factors influencing results
of operations and financial position of Northbrook Life Insurance Company (the
"Company"). It should be read in conjunction with the financial statements and
related notes.
The Company, which is wholly owned by Allstate Life Insurance Company
("ALIC"), markets life insurance contracts and annuity products through Dean
Witter Reynolds Inc., a wholly owned subsidiary of Dean Witter, Discover & Co.
The Company and ALIC have reinsurance agreements under which all contract
related transactions are transferred to ALIC. The Company's results of opera-
tions relate to the investment of those assets of the Company that are not
transferred to ALIC under the reinsurance agreements.
Separate Account assets and liabilities are carried at fair value in the
statements of financial position. Investment income and realized gains and
losses of the Separate Accounts accrue directly to the contractholders and,
therefore, are not included in the Company's statements of operations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Net investment income................................ $ 4,888 $ 4,782 $ 2,881
======= ======= =======
Realized capital gains and losses, after tax......... $ (13) $ 44 $ (125)
======= ======= =======
Net income........................................... $ 3,202 $ 3,163 $ 1,733
======= ======= =======
Fixed income securities, at amortized cost........... $65,500 $59,142 $61,581
======= ======= =======
</TABLE>
Net income increased $39 thousand in 1996 due to the increase in net invest-
ment income, and a slight decrease in the Company's effective income tax rate,
partially offset by realized capital losses. Net income increased $1.4 million
in 1995 reflecting the increase in net investment income and realized capital
gains.
As a result of the reinsurance agreements, the Company's results of opera-
tions include only investment income earned on its investment portfolio. Net
investment income increased by $106 thousand or 2.2% in 1996 compared to 1995.
The additional investment income was earned on a higher base of investments
arising from positive cash flows from operating activities, partially offset
by increased investment expense. In 1995, net investment income increased $1.9
million. This increase related to an increased level of investments which re-
sulted from a $25.0 million capital contribution from ALIC during December
1994.
Realized capital losses of $13 thousand after tax in 1996 are primarily re-
lated to the disposition of mortgage-backed securities, the proceeds of which
were used to acquire higher yielding investments. Realized capital gains after
tax were $44 thousand in 1995 compared to capital losses of $125 thousand in
1994. Overall, the market values of the Company's fixed income securities were
higher in 1995 than in 1994 due to declines in interest rates, which resulted
in gains in 1995 and losses in 1994 when certain fixed income securities were
sold in response to changes in market conditions.
FINANCIAL POSITION
<TABLE>
<CAPTION>
1996 1995
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
Fixed income securities, at fair value................... $ 67,479 $ 63,229
========== ==========
Short-term investments................................... $ 6,590 $ 8,049
========== ==========
Separate Account assets.................................. $4,354,783 $3,354,910
========== ==========
Contractholder funds..................................... $2,336,296 $2,497,278
========== ==========
Reinsurance recoverable from ALIC........................ $2,480,034 $2,636,981
========== ==========
</TABLE>
21
<PAGE>
The Company's fixed income securities portfolio consists of tax-exempt
municipal bonds, publicly traded corporate bonds, mortgage-backed securities
and U.S. government bonds. The Company generally holds its fixed income
securities for the long term, but has classified all of these securities as
available for sale to allow maximum flexibility in portfolio management. At
December 31, 1996, net unrealized capital gains on the fixed income securities
portfolio totaled $2.0 million compared to $4.1 million as of December 31,
1995. The decrease in the unrealized gain position is primarily attributable
to rising interest rates.
All of the Company's fixed income securities portfolio is rated investment
grade, with a National Association of Insurance Commissioners ("NAIC") rating
of 1 or a Moody's rating of Aaa, Aa or A.
At December 31, 1996 and 1995, $40.7 million and $46.7 million, respectively
of the fixed income portfolio were invested in mortgage-backed securities
("MBS"). At December 31, 1996, all of the MBS were investment grade and had
underlying collateral that is guaranteed by U.S. government entities.
MBS, however, are subject to interest rate risk as the duration and ultimate
realized yield are affected by the rate of repayment of the underlying mort-
gages. The Company attempts to limit interest rate risk by purchasing MBS
whose cost does not significantly exceed par value, and with repayment protec-
tion to provide a more certain cash flow to the Company. At December 31, 1996,
the amortized cost of the MBS portfolio was below par value by $1.6 million.
The Company closely monitors its fixed income portfolio for declines in
value that are other than temporary. Securities are placed on non-accrual sta-
tus when they are in default or when the receipt of interest payments is in
doubt.
The Company's short-term investment portfolio was $6.6 million and $8.0 mil-
lion at December 31, 1996 and 1995, respectively. Beginning in 1996, the Com-
pany invests all available cash balances in taxable and tax-exempt short-term
securities having a final maturity date or redemption date of one year or
less.
Contractholder funds decreased by $161.0 million and reinsurance recoverable
from ALIC under reinsurance agreements decreased by $156.9 million, reflecting
fixed annuity contract surrenders, withdrawals and benefits, as well as poli-
cyholder transfers from fixed annuity contracts to variable annuity contracts,
partially offset by interest credited to contractholders. Reinsurance recover-
able from ALIC relates to contract benefit obligations ceded to ALIC.
Separate Accounts increased by $1.00 billion attributable to sales of vari-
able annuity contracts, the favorable investment performance of the Separate
Account investment portfolios and transfers from fixed annuity contracts, par-
tially offset by variable annuity contract surrenders and withdrawals.
LIQUIDITY AND CAPITAL RESOURCES
Under the terms of intercompany reinsurance agreements, premiums and depos-
its, excluding those relating to Separate Accounts, are transferred to ALIC,
which maintains the investment portfolios supporting the Company's products.
The NAIC has a standard for assessing the solvency of insurance companies,
which is referred to as risk-based capital ("RBC"). The requirement consists
of a formula for determining each insurer's RBC and a model law specifying
regulatory actions if an insurer's RBC falls below specified levels. The RBC
formula for life insurance companies establishes capital requirements relating
to insurance risk, business risk, asset risk, and interest rate risk. At De-
cember 31, 1996, RBC for the Company was significantly above a level that
would require regulatory action.
PENDING ACCOUNTING STANDARDS
In June, 1996, the Financial Accounting Standards Board issued Statement of
Financial Ac-
22
<PAGE>
counting Standards No. 125, "Accounting for Transfers of Financial Assets and
Extinguishments of Liabilities." This standard distinguishes between transfers
of financial assets as sales versus financing transactions based upon relin-
quishment of control and addresses the accounting for securi-
tizations, securities lending, repurchase agreements and insubstance defea-
sance transactions. The requirements of this statement that were effective on
January 1, 1997 were adopted and are not expected to have a material impact on
the results of operations or financial position of the Company.
COMPETITION
The Company is engaged in a business that is highly competitive because of
the large number of stock and mutual life insurance companies and other enti-
ties competing in the sale of insurance and annuities. There are approximately
1,700 stock, mutual and other types of insurers in business in the United
States. Several independent rating agencies regularly evaluate life insurer's
claims-paying ability, quality of investments and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate Life which automatically reinsures
all net business of the Company. A.M. Best Company also assigns the Company
the rating of A+(r) because the Company automatically reinsures all business
with Allstate Life. Standard & Poor's Insurance Rating Services assigns AA+
(Excellent) to the Company's claims-paying ability and
Moody's assigns Aa3 (Excellent) financial strength rating to the Company. The
Company shares the same ratings of its parent, Allstate Life Insurance Compa-
ny.
EMPLOYEES
As of December 31, 1996, Northbrook Life had approximately 118 employees at
its Home Office in Northbrook, Illinois.
PROPERTIES
The Company occupies office space provided by Allstate Insurance Company in
Northbrook, Illinois. Expenses associated with these offices are allocated on
a direct and indirect basis to the Company.
STATE AND FEDERAL REGULATION
The insurance business of the Company is subject to comprehensive and de-
tailed regulation and supervision throughout the United States.
The laws of the various jurisdictions establish supervisory agencies with
broad administrative powers with respect to licensing to transact business,
overseeing trade practices, licensing agents, approving policy forms, estab-
lishing reserve requirements, fixing maximum interest rates on life insurance
policy loans and minimum rates for accumulation of surrender values, prescrib-
ing the form and content of required financial statements and regulating the
type and amounts of investments permitted. Each insurance company is required
to file detailed annual reports with supervisory agencies in each of the ju-
risdictions in which it does business and its operations and accounts are sub-
ject to examination by such agencies at regular intervals.
Under insurance guaranty fund law, in most states, insurers doing business
therein can be assessed up to prescribed limits for contract owner losses in-
curred as a result of company insolvencies. The amount of any future assess-
ments on the Company under these laws cannot be reasonably estimated. Most of
these laws do provide, however,
23
<PAGE>
that an assessment may be excused or deferred if it would threaten an insur-
er's own financial strength.
In addition, several states, including Illinois, regulate affiliated groups
of insurers, such as the Company and its affiliates, under insurance holding
company legislation. Under such laws, intercompany transfers of assets and
dividend payments from insurance subsidiaries may be subject to prior notice
or approval, depending on the size of such transfers and payments in relation
to the financial positions of the companies.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the busi-
ness in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regula-
tion, controls on medical care costs, removal of barriers preventing banks
from engaging in the insurance business, tax law changes affecting the taxa-
tion 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 insur-
ance and pension rates and benefits.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with infor-
mation as to their ages, dates of election and principal business occupations
during the last five years (if other than their present business occupations).
Except as otherwise indicated, the directors and executive officers of the
Company have been associated with the Company for more than five years in the
position shown or in other positions.
LOUIS G. LOWER, II, 51, Chief Executive Officer and Chairman of the Board
(1995)*
Also Director (1986-Present) and Senior Vice President (1995-Present) of
Allstate Insurance Company; Director (1991-Present) of Allstate Life Financial
Services, Inc.; Director (1986-Present) and President (1990-Present) Allstate
Life Insurance Company; Director (1983-Present) and Chairman of the Board
(1990-Present) of Allstate Life Insurance Company of New York; Chairman of the
Board of Directors and Chief Executive Officer (1995-Present), Chairman of the
Board of Directors and President (1990-1995) of Glenbrook Life Insurance
Company; Director (1992-Present), Chairman of the Board of Directors and Chief
Executive Officer (1995-Present) of Glenbrook Life and Annuity Company;
Director and Chairman of the Board (1995-Present) of Laughlin Group Holdings,
Inc.; Director and Chairman of the Board of Directors and Chief Executive
Officer (1989-Present) Lincoln Benefit Life Company; Chairman of the Board of
Directors and Chief Executive Officer (1995-Present) Surety Life Insurance
Company; and Trustee (1991-Present) and Vice President (1995-Present) The
Allstate Foundation.
PETER H. HECKMAN, 51, President, Chief Operating Officer and Director (1996)*
Also Director and Vice President (1988-Present) of Allstate Life Insurance
Company; Director (1990-1996), Vice President (1989-Present), Allstate Life
Insurance Company of New York; Director (1991-1993) of Allstate Life Financial
Services, Inc.; Director (1990-Present), President and Chief Operating Officer
(1996-Present), and Vice President (1990-1996), Glenbrook Life Insurance
Company; Director (1992-Present) President and Chief Operating Officer (1996-
Present), and was Vice President (1995-1996), Glenbrook Life and Annuity
Company; Director
24
<PAGE>
(1995-Present) and Vice Chairman of the Board (1996-Present) Laughlin Group
Holdings, Inc.; Director (1990-Present) and Vice Chairman of the Board (1996-
Present) Lincoln Benefit Life Company; and Director (1995-Present) and Vice
Chairman of the Board (1996-Present) Surety Life Insurance Company.
MICHAEL J. VELOTTA, 50, Vice President, Secretary, General Counsel, and
Director (1992)*
Also Director and Secretary (1993-Present) of Allstate Life Financial
Services, Inc.; Director (1992-Present) Vice President, Secretary and General
Counsel (1993-Present) Allstate Life Insurance Company; Director (1992-
Present) Vice President, Secretary and General Counsel (1993-Present) Allstate
Life Insurance Company of New York; Director (1992-Present) Vice President,
Secretary and General Counsel (1993-Present) Glenbrook Life Insurance Company;
Director (1992-Present) Vice President, Secretary and General Counsel (1993-
Present) Glenbrook Life and Annuity Company; Director and Secretary (1995-
Present) Laughlin Group Holdings, Inc.; Director (1992- Present) and Assistant
Secretary (1995-Present) Lincoln Benefit Life Company; and Director and
Assistant Secretary (1995-Present) Surety Life Insurance Company.
JOHN R. HUNTER, 41, Director (1996)*
Also Assistant Vice President (1990-Present) Allstate Life Insurance
Company; Assistant Vice President (1996-Present) Allstate Life Insurance
Company of New York; Director (1996-Present) Glenbrook Life Insurance Company;
and Director (1996-Present) and Senior Vice President-Product Management
(1995-Present) Glenbrook Life and Annuity Company.
MARLA G. FRIEDMAN, 43, Vice President (1996)*
Also Director (1991-Present) and Vice President (1988-Present) Allstate Life
Insurance Company; Director (1993-1996) Allstate Life Financial Services,
Inc.; Assistant Vice President (1996-Present) Allstate Life Insurance Company
of New York; Director (1995-1996) Allstate Settlement Corporation; Director
(1991-1996), President and Chief Operating Officer (1995-1996) and Vice
President (1990-1995) and (1996-Present) Glenbrook Life Insurance Company;
Director (1992-1996), President and Chief Operating Officer (1995-1996) and
Vice President (1992-1995) and (1996-Present) Glenbrook Life and Annuity
Company; and Director and Vice Chairman of the Board (1995-1996) Laughlin
Group Holdings, Inc.
KAREN C. GARDNER, 43, Vice President (1996)*
Vice President (1996-Present) Allstate Insurance Company; Vice President
(1996- Present) Allstate Life Insurance Company; Vice President (1996-Present)
Allstate Life Insurance Company of New York; Vice President (1996-Present)
Glenbrook Life Insurance Company; Vice President (1996-Present) Laughlin Group
Holdings, Inc.; Assistant Vice President (1996-Present) Lincoln Benefit Life
Company; Vice President (1996-Present) Northbrook Life Insurance Company;
Assistant Vice President (1996-Present) Surety Life Insurance Company. Prior
to 1996 she was a Partner (1975-1996) Ernst & Young LLP.
KEVIN R. SLAWIN, 39, Director and Vice President (1996)*
Also Assistant Vice President and Assistant Treasurer (1995-1996) Allstate
Insurance Company; Director (1996-Present) and Assistant Treasurer (1995-1996)
Allstate Life Financial Services, Inc.; Director and Vice President (1996-
Present) and Assistant Treasurer (1995-1996) Allstate Life Insurance Company;
Director and Vice President (1996-Present) and Assistant Treasurer (1995-1996)
Allstate Life Insurance Company of New York; Director and Vice President
(1996-Present) and Assistant Treasurer (1995-1996) Glenbrook Life Insurance
Company; Vice President (1996-Present) and Assistant Treasurer (1995-
25
<PAGE>
1996) Glenbrook Life and Annuity Company; Director (1996-Present) and
Assistant Treasurer (1995-1996) Laughlin Group Holdings, Inc.; Director (1996-
Present) Lincoln Benefit Life Company; Director (1996-Present) Surety Life
Insurance Company; Assistant Treasurer and Director (1994-1995) Sears Roebuck
and Co.; and Treasurer and First Vice President (1986-1994) Sears Mortgage
Corporation.
CASEY J. SYLLA, 53, Chief Investment Officer and Director (1995)*
Also Director (1995-Present) Senior Vice President and Chief Investment
Officer (1995-Present) Allstate Insurance Company; Director (1995-Present)
Chief Investment Officer (1995-Present) Allstate Life Insurance Company; Chief
Investment Officer (1995-Present) Allstate Life Insurance Company of New York;
Chief Investment Officer (1995-Present) Glenbrook Life Insurance Company;
Chief Investment Officer (1995-Present) Glenbrook Life and Annuity Company;
Prior to 1995 he was Senior Vice President and Executive Officer-Investments
(1992-1995) of Northwestern Mutual Life Insurance Company.
JAMES P. ZILS, 46, Treasurer (1995)*
Also Vice President and Treasurer (1995-Present) Allstate Insurance Company;
Treasurer (1995-Present) Allstate Life Financial Services, Inc.; Treasurer
(1995-Present) Allstate Life Insurance Company; Treasurer (1995-Present)
Allstate Life Insurance Company of New York; Treasurer (1995-Present)
Glenbrook Life Insurance Company; Treasurer (1995-Present) Glenbrook Life and
Annuity Company; and Treasurer (1995-Present) Laughlin Group Holdings, Inc.
Prior to 1995 he was Vice President of Allstate Life Insurance Company. Prior
to 1993 he held various management positions.
*Date elected to current office.
EXECUTIVE COMPENSATION
Executive officers of the Company also serve as officers of Allstate Life
and receive no compensation directly from the Company. Some of the officers
also serve as officers of other companies affiliated with the Company. Alloca-
tions have been made as to each individual's time devoted to his or her duties
as an executive officer of the Company. The allocated cash compensation of all
officers of the Company as a group for services rendered in all capacities to
the Company during 1996 totalled $341,607.66. Directors of the Company receive
no compensation in addition to their compensation as employees of the Company.
Shares of the Company and Allstate Life are not directly owned by any direc-
tor or officer of the Company. The percentage of shares of The Allstate Corpo-
ration beneficially owned by any director, and by all directors and officers
of the Company as a group, does not exceed one percent of the class outstand-
ing.
26
<PAGE>
SUMMARY COMPENSATION TABLE
(ALLSTATE LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ --------------------- --------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) AWARD(S) SARS(#) ($) ($)
------------------ ---- -------- -------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis G. Lower, II...... 1996 $436,800 $246,781 $10,246 0 $18,258 0 $5,250(1)
Chief Executive Officer 1995 $416,000 $266,175 $17,044 $199,890 N/A $411,122 $5,250(1)
and Chairman of the 1994 $389,050 $ 43,973 $26,990 $170,660 N/A 0 $1,890(1)
Board of Directors
</TABLE>
- -------
(1) Amount received by Mr. Lower which represents the value allocated to his
account from employer contributions under The Savings and Profit Sharing
Fund of Allstate Employees and prior to 1996, The Profit Sharing Fund and
its predecessor, The Savings and Profit Sharing Fund of Sears employees.
LEGAL PROCEEDINGS
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary damages are asserted. Man-
agement, after consultation with legal counsel, does not anticipate the ulti-
mate liability arising from such pending or threatened litigation to have a
material effect on the financial condition of the Company.
EXPERTS
The financial statements and financial statement schedule of the Company in-
cluded in this prospectus have been audited by Deloitte & Touche LLP, Two Pru-
dential Plaza, 180 N. Stetson Avenue, Chicago IL 60601-6779, independent
auditors, as stated in their report appearing herein, and are included in re-
liance upon the report of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the federal securities laws applicable to
the issue and sale of the Contracts have been passed upon by Routier and John-
son, P.C., of Washington, D.C. All matters of Illinois law pertaining to the
Contracts, including the validity of the Contracts and the Company's right to
issue such Contracts under Illinois insurance law, have been passed upon by
Michael J. Velotta, General Counsel of the Company.
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
NORTHBROOK LIFE INSURANCE COMPANY:
We have audited the accompanying Statements of Financial Position of
Northbrook Life Insurance Company (the "Company") as of December 31, 1996 and
1995, and the related Statements of Operations, Shareholder's Equity and Cash
Flows for each of the three years in the period ended December 31, 1996. Our
audits also included Schedule IV--Reinsurance. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Northbrook Life Insurance Company as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. Also, in our
opinion, Schedule IV--Reinsurance, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 21, 1997
F-1
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value (amortized
cost $65,500 and $59,142)........................... $ 67,479 $ 63,229
Short-term........................................... 6,590 8,049
---------- ----------
Total investments.................................. 74,069 71,278
Reinsurance recoverable from Allstate Life Insurance
Company............................................... 2,480,034 2,636,981
Cash................................................... -- 87
Net receivable from Allstate Life Insurance Company.... 4,505 6,183
Other assets........................................... 2,639 2,164
Separate Accounts...................................... 4,354,783 3,354,910
---------- ----------
Total assets....................................... $6,916,030 $6,071,603
========== ==========
LIABILITIES
Reserve for life-contingent contract benefits.......... $ 143,346 $ 139,509
Contractholder funds................................... 2,336,296 2,497,278
Income taxes payable................................... 814 233
Deferred income taxes.................................. 2,085 2,798
Separate Accounts...................................... 4,354,783 3,354,910
---------- ----------
Total liabilities.................................. 6,837,324 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........................... 1,286 2,657
Retained income........................................ 18,320 15,118
---------- ----------
Total shareholder's equity......................... 78,706 76,875
---------- ----------
Total liabilities and shareholder's equity......... $6,916,030 $6,071,603
========== ==========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1996 1995 1994
------ ------ ------
($ IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Net investment income.................................. $4,888 $4,782 $2,881
Realized capital gains and losses...................... (20) 67 (193)
------ ------ ------
Income before income tax expense......................... 4,868 4,849 2,688
Income tax expense....................................... 1,666 1,686 955
------ ------ ------
Net income............................................... $3,202 $3,163 $1,733
====== ====== ======
</TABLE>
See notes to financial statements.
F-3
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Common stock......................................... $ 2,500 $ 2,500 $ 2,500
------- ------- -------
Additional capital paid-in
Balance, beginning of year......................... 56,600 56,600 31,600
Capital contribution............................... -- -- 25,000
------- ------- -------
Balance, end of year............................... 56,600 56,600 56,600
------- ------- -------
Unrealized net capital gains
Balance, beginning of year......................... 2,657 (1,553) 747
Net (decrease) increase............................ (1,371) 4,210 (2,300)
------- ------- -------
Balance, end of year............................... 1,286 2,657 (1,553)
------- ------- -------
Retained income
Balance, beginning of year......................... 15,118 11,955 10,222
Net income......................................... 3,202 3,163 1,733
------- ------- -------
Balance, end of year............................... 18,320 15,118 11,955
------- ------- -------
Total shareholder's equity....................... $78,706 $76,875 $69,502
======= ======= =======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
------------------------
1996 1995 1994
------- ------ -------
($ IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income......................................... $ 3,202 $3,163 $ 1,733
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Amortization and other non-cash items............ 782 903 640
Realized capital losses (gains).................. 20 (67) 193
(Decrease) increase in life-contingent contract
benefits and contractholder funds............... (198) 113 (58)
Change in deferred income taxes.................. 24 608 (114)
Changes in other operating assets and
liabilities..................................... 864 (2,705) (3,835)
------- ------ -------
Net cash provided by (used in) operating
activities.................................... 4,694 2,015 (1,441)
------- ------ -------
Cash flows from investing activities
Fixed income securities
Proceeds from sales.............................. 3,522 5,423 1,256
Investment collections........................... 5,770 7,108 7,626
Investment purchases............................. (15,532) (9,843) (36,071)
Change in short-term investments, net.............. 1,459 (4,675) 3,475
------- ------ -------
Net cash used in investing activities.......... (4,781) (1,987) (23,714)
------- ------ -------
Cash flows from financing activities
Capital contribution............................... -- -- 25,000
------- ------ -------
Net cash provided by financing activities...... -- -- 25,000
------- ------ -------
Net (decrease) increase in cash...................... (87) 28 (155)
Cash at beginning of year............................ 87 59 214
------- ------ -------
Cash at end of year.................................. $ -- $ 87 $ 59
======= ====== =======
</TABLE>
See notes to financial statements.
F-5
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Northbrook Life
Insurance Company (the "Company"), a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company
("AIC"), a wholly owned subsidiary of The Allstate Corporation (the
"Corporation"). On June 30, 1995, Sears, Roebuck and Co. ("Sears") distributed
its 80.3% ownership in the Corporation to Sears common shareholders through a
tax-free dividend (the "Distribution"). These financial statements have been
prepared in conformity with generally accepted accounting principles.
To conform with the 1996 presentation, certain items in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets life insurance contracts and various annuity products in
the United States through Dean Witter Reynolds Inc. ("Dean Witter") (see Note
4), a wholly owned subsidiary of Dean Witter, Discover & Co. ("Dean Witter
Discover"). Life insurance contracts sold by the Company include universal life
and other interest-sensitive life products. Annuities include deferred
annuities, such as variable annuities and fixed rate single and flexible
premium annuities, and immediate annuities.
Annuity and life insurance contracts issued by the Company are subject to
discretionary withdrawal or surrender by the contractholder, subject to
applicable surrender charges. These contracts are reinsured with ALIC (see Note
3), which invests premiums and deposits to create cash flows that will fund
future benefits and expenses. In order to support competitive credited rates,
ALIC adheres to a basic philosophy of matching assets with related liabilities
to limit interest rate risk, while maintaining adequate liquidity and a prudent
and diversified level of credit risk.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal
legislation and regulation which would allow banks greater participation in
securities and insurance businesses, which could present an increased level of
competition for sales of the Company's annuity contracts. 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 market for
these products.
The Company is authorized to sell life and annuity products in all states
except New York, as well as the District of Columbia and Puerto Rico. The top
geographic locations for statutory premiums earned are California, Florida,
Texas and Pennsylvania for the year ended December 31, 1996. No other
jurisdiction accounted for more than 5% of statutory premiums. All premiums and
contract charges are ceded to ALIC under reinsurance agreements.
F-6
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All
fixed income securities are carried at fair value and may be sold prior to
their contractual maturity ("available for sale"). The difference between
amortized cost and fair value, net of deferred income taxes, is reflected as a
component of shareholder's equity. Provisions are recognized for declines in
the value of fixed income securities that are other than temporary. Such
writedowns are included in realized capital gains and losses.
Short-term investments are carried at cost which approximates fair value.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments.
Accrual of income is suspended for fixed income securities that are in default
or when the receipt of interest payments is in doubt. Realized capital gains
and losses are determined on a specific identification basis.
RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES
Revenues on interest-sensitive life insurance contracts are comprised of
contract charges and fees, and are recognized when assessed against the
policyholder account balance. Revenues on annuities, which are considered
investment contracts, include contract charges and fees for contract
administration and surrenders. These revenues are recognized when levied
against the contract balances.
REINSURANCE
The Company and ALIC have reinsurance agreements under which all premiums and
deposits are transferred to ALIC. Premiums, contract charges, credited interest
and policy benefits are ceded and reflected net of such cessions in the
statements of operations. The amounts shown in the Company's statements of
operations relate to the investment of those assets of the Company that are not
transferred to ALIC under reinsurance agreements. Reinsurance recoverable and
the related reserve for life-contingent contract benefits and contractholder
funds are reported separately in the statements of financial position. The
Company continues to have primary liability as the direct insurer for risks
reinsured.
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 and the enacted tax
regulations. Deferred income taxes also arise from unrealized capital gains or
losses on fixed income securities carried at fair value.
F-7
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
SEPARATE ACCOUNTS
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 assets and liabilities of the
Separate Accounts. Assets and liabilities of the Separate Accounts represent
funds of Northbrook Variable Annuity Account and Northbrook Variable Annuity
Account II ("Separate Accounts"), unit investment trusts registered with the
Securities and Exchange Commission.
The assets of the Separate Accounts are carried at fair value. Investment
income and realized capital gains and losses of the Separate Accounts accrue
directly to the contractholders and, therefore, are not included in the
Company's statements of operations. Revenues to the Company from the Separate
Accounts consist of contract maintenance fees, administration fees and
mortality and expense risk charges, which are ceded to ALIC.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to
structured settlement annuities and supplemental contracts with life
contingencies, is computed on the basis of assumptions as to future investment
yields, mortality, morbidity, terminations and expenses. These assumptions,
which for traditional life 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. Reserve
interest rates ranged from 3.96% to 11.00% during 1996.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group contracts
that include an investment component, including most annuities and interest-
sensitive life insurance contracts. Payments received are recorded as interest-
bearing liabilities. Contractholder funds are equal to deposits received and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. During 1996, credited interest
rates on contractholder funds ranged from 3.10% to 9.51% for those contracts
with fixed interest rates and from 3.25% to 7.86% for those with flexible
rates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
F-8
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
3. RELATED PARTY TRANSACTIONS
REINSURANCE
Premiums and contract charges ceded to ALIC were $3,024 and $60,744 in 1996,
$2,284 and $52,348 in 1995, and $1,886 and $38,306 in 1994. Credited interest,
policy benefits and expenses ceded to ALIC amounted to $207,752, $229,525 and
$243,326 in 1996, 1995 and 1994, respectively. Investment income earned on the
assets which support contractholder funds is not included in the Company's
financial statements as those assets are owned and managed by ALIC under the
terms of reinsurance agreements.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on behalf of the Company. The
cost to the Company is determined by various allocation methods and is
primarily related to the level of services provided. Operating expenses,
including compensation and retirement and other benefit programs allocated to
the Company were $8,074, $5,341 and $5,483 in 1996, 1995 and 1994,
respectively. Of these costs, the Company retains investment related expenses.
All other costs are ceded to ALIC under reinsurance agreements.
4. EXCLUSIVE DISTRIBUTION AGREEMENT
The Company and ALIC have formed a strategic alliance with Dean Witter to
develop, market and distribute proprietary annuity and life insurance products
through Dean Witter account executives. Dean Witter provides a portion of the
funding for these products through loans to an affiliate of the Company.
Under the terms of the strategic alliance, which is cancelable by either
party, the Company has agreed to use Dean Witter as an exclusive distribution
channel for the Company's products. Dean Witter Discover's wholly owned
subsidiary, Dean Witter Intercapital Inc., is the investment manager for the
Dean Witter Variable Investment Series, the fund in which the assets of the
Separate Accounts are invested.
On February 5, 1997, Dean Witter Discover and Morgan Stanley Group Inc.
announced that they had entered into an agreement and plan of merger, with the
combined company to be named Morgan Stanley, Dean Witter, Discover & Co. The
parties to the merger anticipate that the transaction will close in mid-1997.
The Company does not expect the merger to have a significant impact on its
business.
F-9
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
5. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses and fair value for
fixed income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ------------------ FAIR
AT DECEMBER 31, 1996 COST GAINS (LOSSES) VALUE
- -------------------- --------- ----- --------- -------
<S> <C> <C> <C> <C>
U.S. government and agencies............. $ 8,629 $ 193 $ (54) $ 8,768
Municipal................................ 873 48 -- 921
Corporate................................ 16,902 260 (69) 17,093
Mortgage-backed securities............... 39,096 1,883 (282) 40,697
------- -------- ------- -------
Total fixed income securities........ $65,500 $ 2,384 $ (405) $67,479
======= ======== ======= =======
<CAPTION>
AT DECEMBER 31, 1995
- --------------------
<S> <C> <C> <C> <C>
U.S. government and agencies............. $ 8,619 $ 880 $ -- $ 9,499
Municipal................................ 1,583 83 -- 1,666
Corporate................................ 4,967 349 -- 5,316
Mortgage-backed securities............... 43,973 3,003 (228) 46,748
------- -------- ------- -------
Total fixed income securities........ $59,142 $ 4,315 $ (228) $63,229
======= ======== ======= =======
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at
December 31, 1996:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- -------
<S> <C> <C>
Due in one year or less................................ $ 60 $ 60
Due after one year through five years.................. 3,416 3,525
Due after five years through ten years................. 15,706 15,958
Due after ten years.................................... 7,222 7,239
------- -------
26,404 26,782
Mortgage-backed securities............................. 39,096 40,697
------- -------
Total.............................................. $65,500 $67,479
======= =======
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments
by the issuers.
F-10
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Fixed income securities............................. $4,675 $4,633 $2,735
Short-term.......................................... 390 215 192
------ ------ ------
Investment income, before expense................. 5,065 4,848 2,927
Investment expense................................ 177 66 46
------ ------ ------
Net investment income............................. $4,888 $4,782 $2,881
====== ====== ======
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Fixed income securities........................ $ (20) $67 $ (193)
Income tax benefit (expense)................... 7 (23) 68
------- ------ --------
Realized capital losses and gains, after tax... $ (13) $ 44 $ (125)
======= ====== ========
</TABLE>
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES
Proceeds from sales of investments in fixed income securities were $3,522,
$5,423 and $1,256 in 1996, 1995 and 1994, respectively. Gross losses of $32
and $179 were realized on sales of fixed income securities during 1996 and
1994, respectively, and gross gains of $67 were recognized during 1995.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
COST/ FAIR UNREALIZED
AMORTIZED COST VALUE NET GAINS
-------------- ------- ----------
<S> <C> <C> <C>
Fixed income securities................. $65,500 $67,479 $1,979
======= =======
Deferred income taxes................... (693)
------
Unrealized net capital gains............ $1,286
======
</TABLE>
F-11
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
CHANGE IN UNREALIZED NET CAPITAL GAINS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
------------------------
1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Fixed income securities........................ $(2,108) $6,477 $(3,539)
Deferred income taxes.......................... 737 (2,267) 1,239
------- ------ -------
Change in unrealized net capital gains......... $(1,371) $4,210 $(2,300)
======= ====== =======
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1996, fixed income securities with a carrying value of $7,376
were on deposit with regulatory authorities as required by law.
6. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments 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 assets (including reinsurance recoverable) and
liabilities (including deferred income taxes and reserve for life-contingent
contract benefits) are not considered financial instruments and are not carried
at fair value. Other assets and liabilities considered financial instruments,
including accrued investment income and cash, are generally of a short-term
nature. It is assumed that their carrying value approximates fair value.
FINANCIAL ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------
1996 1995
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fixed income securities...... $ 67,479 $ 67,479 $ 63,229 $ 63,229
Short-term investments....... 6,590 6,590 8,049 8,049
Separate Accounts............ 4,354,783 4,354,783 3,354,910 3,354,910
</TABLE>
Fair values for fixed income securities are based on quoted market prices.
Short-term investments are highly liquid investments with maturities of less
than one year whose carrying value approximates fair value. Assets of the
Separate Accounts are carried in the statements of financial position at fair
value.
F-12
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
FINANCIAL LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------
1996 1995
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts....... $2,143,482 $2,118,583 $2,294,536 $2,274,053
Separate Accounts........... 4,354,783 4,354,783 3,354,910 3,354,910
</TABLE>
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. 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
Account liabilities are carried at the fair value of the underlying assets.
7. INCOME TAXES
Consolidated federal income tax returns are filed by the Corporation and its
eligible subsidiaries, including the Company. Tax liabilities and benefits
realized by the consolidated group are allocated as generated by the respective
entities.
Prior to the Distribution, the Corporation and all of its domestic
subsidiaries, including the Company (the "Allstate Group") joined with Sears
and its domestic business units (the "Sears Group") in the filing of a
consolidated federal income tax return (the "Sears Tax Group") and were parties
to a federal income tax allocation agreement (the "Tax Sharing Agreement").
Under the Tax Sharing Agreement, the Company, through the Corporation, paid to
or received from the Sears Group the amount, if any, by which the Sears Tax
Group's federal income tax liability was affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this
resulted in the Company's annual income tax provision being computed as if the
Company filed a separate return, except that items such as net operating
losses, capital losses or similar items, which might not be recognized in a
separate return, were allocated according to the Tax Sharing Agreement.
The Allstate Group and Sears Group have entered into an agreement which
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Distribution ("Consolidated Tax Years"). The
agreement provides that all Consolidated Tax Years will continue to be governed
by the Tax Sharing Agreement with respect to the Company's federal income tax
liability.
F-13
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
The components of the net deferred income tax liability at December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Difference in tax bases of investments................. $(1,392) $(1,368)
Unrealized net capital gains on fixed income securi-
ties.................................................. (693) (1,430)
------- -------
Total deferred liability........................... $(2,085) $(2,798)
======= =======
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Current............................................. $1,642 $1,078 $1,069
Deferred............................................ 24 608 (114)
------ ------ ------
Total income tax expense........................ $1,666 $1,686 $ 955
====== ====== ======
</TABLE>
The Company paid income taxes of $2,308, $1,555 and $1,393 in 1996, 1995 and
1994, respectively, to ALIC. The Company had income taxes payable to ALIC of
$814 and $233 at December 31, 1996 and 1995, respectively.
8. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income and shareholder's equity as
reported herein in conformity with generally accepted accounting principles
with statutory net income and capital and surplus, determined in accordance
with statutory accounting practices prescribed or permitted by insurance
regulatory authorities:
<TABLE>
<CAPTION>
NET INCOME
-----------------------
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1995 1994
------ ------- ------
<S> <C> <C> <C>
Balance per generally accepted accounting
principles.................................... $3,202 $ 3,163 $1,733
Deferred income taxes........................ 24 608 (114)
Non-admitted assets and statutory reserves... (661) (1,471) (27)
------ ------- ------
Balance per statutory accounting practices..... $2,565 $ 2,300 $1,592
====== ======= ======
</TABLE>
F-14
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SHAREHOLDER'S
EQUITY AT
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Balance per generally accepted accounting principles... $78,706 $76,875
Deferred income taxes................................ 2,085 2,798
Unrealized gain/loss on fixed income securities...... (1,979) (4,087)
Non-admitted assets and statutory reserves........... (2,503) (2,001)
Other................................................ (1,211) (520)
------- -------
Balance per statutory accounting practices............. $75,098 $73,065
======= =======
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the Illinois
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance
Commissioners, as well as state laws, regulations and general administrative
rules. Permitted statutory accounting practices encompass all accounting
practices not so prescribed. The Company does not follow any permitted
statutory accounting practices that have a material effect on statutory
surplus or risk-based capital.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business
conditions, income, cash requirements of the Company and other relevant
factors. The payment of shareholder dividends by insurance companies without
the prior approval of the state insurance regulator is limited to formula
amounts based on net income and capital and surplus, determined in accordance
with statutory accounting practices, as well as the timing and amount of
dividends paid in the preceding twelve months. The maximum amount of dividends
that the Company can distribute during 1997 without prior approval of both the
Illinois and California Departments of Insurance is $7,260.
F-15
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- ------
<S> <C> <C> <C>
Life insurance in force................................ $556,242 $556,242 $--
======== ======== ====
Premiums and contract charges:
Life and annuities................................... $ 64,519 $ 64,519 $--
======== ======== ====
YEAR ENDED DECEMBER 31, 1995
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- ------
<S> <C> <C> <C>
Life insurance in force................................ $610,478 $610,478 $--
======== ======== ====
Premiums and contract charges:
Life and annuities................................... $ 54,632 $ 54,632 $--
======== ======== ====
YEAR ENDED DECEMBER 31, 1994
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
-------- -------- ------
<S> <C> <C> <C>
Life insurance in force................................ $661,356 $661,356 $--
======== ======== ====
Premiums and contract charges:
Life and annuities................................... $ 40,192 $ 40,192 $--
======== ======== ====
</TABLE>
F-16
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I= the effective annual Interest Crediting Rate for that Sub-Account
N= the number of complete days from the withdrawal to the end of the Sub-
Account's Guarantee Period; and
J= the current interest rate credited for contracts, on the date the
withdrawal request is received, for a Guarantee Period of duration N.
If a Guarantee Period of duration N is not currently being offered, J
will be determined by a linear interpolation (weighted average). If N
is less than or equal to 365 days, J will be the rate for a Guarantee
Period of duration 365.
The Market Value Adjustment factor is determined from the following formula:
[.9 X (I-J) X (N/365)].
The amount withdrawn less any applicable Free Withdrawal Amount will be
multiplied by the Market Value Adjustment factor to determine the Market Value
Adjustment.
ILLUSTRATION
EXAMPLE OF MARKET VALUE ADJUSTMENT
<TABLE>
<S> <C>
Purchase Payment:................................................. $10,000
Guarantee Period:................................................. 5 years
Interest Rate:.................................................... 4.50%
Full Surrender:.................................... End of Contract Year 3
</TABLE>
NOTE: This illustration assumes that premium taxes were not applicable.
EXAMPLE 1: (Assumes declining interest rates)
Step 1: Calculate Account Value at End of Contract Year 3:
= 10,000.00 X (1.045)/3/ = $11,411.66
Step 2: Calculate The Amount Withdrawn in Excess of the Free Withdrawal
Amount:
Amount Withdrawn: 11,411.66
Free Withdrawal Amount: .10 X 10,000.00 = 1,000.00
Amount Withdrawn in Excess of the Free Withdrawal Amount:
= 11,411.66 - 1,000.00 = $10,411.66
Step 3: Calculate the Withdrawal Charge:
= .06 X 10,411.66 = $624.70
A-1
<PAGE>
Step 4: Calculate the Market Value Adjustment:
I= 4.50%
J= 4.20%
N = 730 days
Market Value Adjustment Factor: .9 X (I-J) X (N/365)
= .9 X (.045 - .042) X (730/365) = .0054
Market Value Adjustment = Factor X Amount in Excess of Free Withdrawal Amount:
= .0054 X 10,411.66 = $56.22
Step 5: Calculate The Net Surrender Value at End of Contract Year 3:
= 11,411.66 - 624.70 + 56.22 = $10,843.18
EXAMPLE 2: (Assumes rising interest rates)
Step 1: Calculate Account Value at End of Contract Year 3:
= 10,000.00 X (1.045)/3/ = $11,411.66
Step 2: Calculate The Amount Withdrawn in Excess of the Free Withdrawal Amount:
Amount Withdrawn: 11,411.66
Free Withdrawal Amount: .10 X 10,000.00 = 1,000.00
Amount Withdrawn in Excess of the Free Withdrawal Amount:
= 11,411.66 - 1,000.00 = $10,411.66
Step 3: Calculate the Withdrawal Charge:
= .06 X 10,411.66 = $624.70
Step 4: Calculate the Market Value Adjustment:
I= 4.50%
J= 4.80%
N = 730 days
Market Value Adjustment Factor: .9 X (I-J) X (N/365)
= .9 X (.045 - .048) X (730/365) = -.0054
Market Value Adjustment = Factor X Amount in Excess of Free Withdrawal Amount:
= -.0054 X 10,411.66 = -$56.22
Step 5: Calculate The Net Surrender Value at End of Contract Year 3:
= 11,411.66 - 624.70 - 56.22 = $10,730.74
A-2
<PAGE>
PART II
-------
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
Pursuant to Item 511 of Regulation S-K, the Registrant hereby
represents that the following expenses totaling approximately $30,500
will be incurred or are anticipated to be incurred in connection with
the issuance and distribution of the securities to be registered:
registration fees - 0, cost of printing and engraving -
$25,000, legal fees - $5,000; and accounting fees - $500. All amounts
are estimated.
ITEM 14. Indemnification of Directors and Officers.
The By-Laws of Northbrook Life Insurance Company ("Registrant") which
are incorporated herein by reference as Exhibit (3), provide that
Registrant will indemnify its officers and directors for certain
damages and expenses that may be incurred in the performance of their
duty to Registrant. No indemnification is provided, however, when such
person is adjudged to be liable for negligence or misconduct in the
performance of his or her duty, unless indemnification is deemed
appropriate by the court upon application.
ITEM 15. Recent Sales of Unregistered Securities.
Not applicable.
ITEM 16. Exhibits and Financial Statement Schedules.
Exhibit No. Description
----------- -----------
(1) Underwriting Agreement*
(2) NONE
(3) (i) Articles of Incorporation*
(ii) By-Laws*
(4) Northbrook Life Insurance Company Flexible Premium
Deferred Annuity Certificate and Application
(5) Opinion of General Counsel re: Legality
(6) NONE
(7) NONE
(8) NONE
(9) NONE
(10) Reinsurance Agreement between Northbrook Life Insurance Company
and Allstate Life Insurance Company
(11) NONE
(12) NONE
(14) NONE
(15) NONE
(16) NONE
(21) NONE
(23)(a) Consent of Independent Public Accountants
(23)(b) Consent of Attorneys
(24) Powers of Attorney
(25) NONE
(26) NONE
(27) Financial Data Schedule**
(28) NONE
(99) Resolution of Board of Directors
* Previously filed in Form N-4 Registration Statement No. 33-35412 dated
December 31, 1996 and incorporated by reference.
** Previously filed in Registrant's 10-K filed on March 31, 1997.
<PAGE>
ITEM 17. Undertakings.
-------------
The undersigned registrant, Northbrook Life Insurance Company, hereby
undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant, Northbrook Life Insurance Company pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized and attested, in the Township of
Northfield, State of Illinois on March 26, 1997.
NORTHBROOK LIFE INSURANCE COMPANY
(Registrant)
By: /s/MICHAEL J. VELOTTA
----------------------------
Michael J. Velotta
Vice President, Secretary,
General Counsel and Director
(SEAL)
Attest: /s/ BRENDA D. SNEED
----------------------------
Brenda D. Sneed
Assistant Secretary and
Assistant General Counsel
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
26th day of March, 1997.
SIGNATURE TITLE
- --------- -----
*/ LOUIS G. LOWER, II Chairman of the Board
- --- ------------------ And Chief Executive Officer
Louis G. Lower, II (Principal Executive Officer)
/s/ MICHAEL J. VELOTTA Vice President, Secretary,
- --- ------------------ General Counsel and Director
Michael J. Velotta
**/ PETER H. HECKMAN President, Chief
- --- ---------------- Operating Officer and
Peter H. Heckman Director
* / JOHN R. HUNTER Director
- --- --------------
John R. Hunter
*/ KEVIN R. SLAWIN Vice President and
- --- --------------- Director (Principal
Kevin R. Slawin Financial Officer)
*/ CASEY J. SYLLA Director and Chief
- --- -------------- Investment Officer
Casey J. Sylla
**/ MARLA G. FRIEDMAN Vice President
- --- -----------------
Marla G. Friedman
**/ KAREN C. GARDNER Vice President
- --- ----------------
Karen C. Gardner
*/ JAMES P. ZILS Treasurer
- --- -------------
James P. Zils
**/ Keith A. Hauschildt Assistant Vice President
- --- ------------------- and Controller
Keith A. Hauschildt (Principal Accounting Officer)
*/ By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
**/ By Michael J. Velotta, pursuant to Power of Attorney, filed herewith.
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed herewith:
(1) Underwriting Agreement*
(2) None
(3) (i) Articles of Incorporation*
(ii) By-Laws*
(4) Form of Northbrook Life Insurance Company Flexible Premium Deferred
Annuity Contract and Application
(5) Opinion of General Counsel re: Legality
(6) None
(7) None
(8) None
(9) None
(10) Reinsurance Agreement between Northbrook Life Insurance Company and
Allstate Life Insurance Company
(11) None
(12) None
(14) None
(15) None
(16) None
(21) None
(23)(a) Consent of Independent Public Accountants
(23)(b) Consent of Attorneys
(24) Powers of Attorney
(25) None
(26) None
(27) Financial Data Schedule**
(28) None
(99) Resolution of Board of Directors
* Previously filed in Form N-4 Registration Statement No. 33-35412 dated
December 31, 1996 and incorporated by reference.
** Previously filed in Registrant's Form 10-K filed on March 31, 1997
<PAGE>
EXHIBIT 4
CONTRACT AND APPLICATION
<PAGE>
FLEXIBLE PREMIUM DEFERRED
ANNUITY CERTIFICATE
This Certificate is issued according to the terms of Master Policy Number
64890008 issued by Northbrook Life Insurance Company to Dean Witter Reynolds
Inc. Dean Witter Reynolds Inc. is called the Master Policyholder. This
Certificate is issued in the state of Delaware and is governed by Delaware law.
Throughout this Certificate, "you" and "your" refer to the Certificate's
owner(s). "We", "us" and "our" refer to Northbrook Life Insurance Company.
CERTIFICATE SUMMARY . The first phase of this Certificate is the accumulation
phase which begins on the issue date of the
Certificate. The primary feature of this phase is the
accumulation of interest, at guaranteed rates for
guaranteed periods of time, on all purchase amounts.
Additional features of this phase include a partial
withdrawal option, a full surrender option, and death
benefit options. The partial withdrawal and surrender
benefits may be subject to an upward or downward Market
Value Adjustment.
. The second phase of this Certificate is the payout
phase which begins on the Payout Start Date. The
primary feature of this phase is the exchange of the
Adjusted Account Value for a series of periodic income
payments to be made under an Income Plan. Various types
of Income Plans are offered in this Certificate.
This page of the Certificate is only a summary of the
Certificate terms. The detailed provisions of this
Certificate, that follow, will control. This Certificate
and the Master Policy do not pay dividends. PLEASE READ
YOUR CERTIFICATE CAREFULLY.
RETURN PRIVILEGE If you are not satisfied with this Certificate for any
reason, you may return it to us within 20 days after you
receive it. We will refund any purchase payments to you.
We appreciate that, through the services of your Dean Witter Reynolds Account
Executive, you chose Northbrook Life Insurance Company to help you achieve your
long-term financial goals. We value our relationship with you.
Michael J. Velotta Louis G. Lower, II
Secretary President
FLEXIBLE PREMIUM DEFERRED ANNUITY
NLU566 Page 1
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
General Definitions .................................... 2
People Involved ........................................ 4
Accumulation Phase ..................................... 5
Death Benefit Options During Accumulation Phase ........ 7
Payout Phase ........................................... 9
General Provisions ..................................... 10
</TABLE>
- --------------------------------------------------------------------------------
GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT VALUE The sum of the Sub-Account values.
- -------------
ADJUSTED ACCOUNT VALUE The Account Value adjusted by the Market Value
- ---------------------- Adjustment, less any applicable taxes.
CASH SURRENDER VALUE The Account Value adjusted by the Market Value
- -------------------- Adjustment, less any applicable withdrawal charges
and taxes.
DEATH BENEFIT The greater of the Account Value and the Cash
- ------------- Surrender Value. We will calculate the Death Benefit
as of the date we receive a complete request for
payment of the Death Benefit. Death Benefit provisions
are described in detail on page 7.
GUARANTEE PERIOD A period of years for which a specified interest rate
- ---------------- is guaranteed. Guarantee Periods will be offered at
our discretion and may range from one to ten years.
INCOME PLAN An Income Plan distributes payments on a scheduled
- ----------- basis during the payout phase.
MARKET VALUE ADJUSTMENT An increase or decrease in a partial withdrawal, full
- ----------------------- surrender, Death Benefit or Income Plan payment to
you, reflecting changes in the level of interest rates
since the Sub-Account was established. The method of
calculation is explained on page 7.
PAYOUT START DATE The date the Adjusted Account Value is applied to an
- ----------------- Income Plan. The anticipated date is shown on page 3.
You may change the Payout Start Date by writing to us
at least 30 days prior to this date. The Payout Start
Date must be on or before the later of:
. the annuitant's 90th birthday; or
. the 10th anniversary of the Certificate's issue
date.
SUB-ACCOUNT A portion of this Certificate which is identified by
- ----------- the Guarantee Period and the date the guarantee
begins. A Sub-Account(s) is created when:
. a purchase payment is made; or
. a new Guarantee Period is selected after the prior
Guarantee Period expires.
A Sub-Account continues until the end of the Guarantee
Period.
SUB-ACCOUNT VALUE The funds allocated to a Sub-Account plus the interest
- ----------------- credited, less any withdrawals.
Page 2
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY DATA
- --------------------------------------------------------------------------------
CERTIFICATE NUMBER:........................................ 44444444
ISSUE DATE:................................................ JUNE 1, 1995
INITIAL PURCHASE PAYMENT:.................................. $10,000.00
OWNERS:.................................................... JOHN DOE
........................................................... JANE DOE
ANNUITANT:................................................. JOHN DOE
AGE AT ISSUE:............................................ 35
SEX:..................................................... MALE
PAYOUT START DATE:......................................... MAY 19, 2030
ADDITIONAL PURCHASE PAYMENTS:
NUMBER OF ADDITIONS ALLOWED:............................. UNLIMITED
MINIMUM ADDITION AMOUNT:................................. $1000.00
<TABLE>
<CAPTION>
GUARANTEE ALLOCATION INTEREST CREDITING RATE
PERIOD ENDING DATE AMOUNT FOR GUARANTEE PERIOD
- ----------- ----------- ---------- ------------------------
<S> <C> <C> <C>
5 YEARS 06/01/00 $5,000.00 X.XX%
10 YEARS 06/01/05 $5,000.00 X.XX%
</TABLE>
OWNER'S
BENEFICIARY PERCENTAGE
- ----------- ----------
JEFF DOE 50%
MICHAEL DOE 50%
DPN566 Page 3
<PAGE>
- --------------------------------------------------------------------------------
PEOPLE INVOLVED
- --------------------------------------------------------------------------------
OWNER The person named at the time of enrollment is the owner of
- ----- this Certificate unless subsequently changed. As owner, you
will receive any periodic income payments, unless you have
directed us to pay them to someone else.
You may exercise all rights stated in this Certificate,
subject to the rights of any irrevocable beneficiary.
You may change the owner or beneficiary at any time. If you
are a natural person or a grantor trust, you may change the
annuitant prior to the Payout Start Date. Once we have
received a satisfactory written request for an owner,
beneficiary or annuitant change, 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 from you. We are not responsible for the tax
consequences of an owner, beneficiary or annuitant change.
You may assign an interest in this Certificate. No
beneficiary may assign benefits under the Certificate until
they are due to them. We are not bound by an assignment
unless it is signed by you and filed with us. We are not
responsible for the validity or tax consequences of an
assignment.
If the owner is more than one person, then:
. owner as used in this Certificate is defined as all
people named as owners, unless otherwise indicated; and
. any request to exercise ownership rights must be signed
by all owners.
On the death of the owner (or if multiple owners, on the
death of the first owner to die), a Death Benefit option
must be elected. A Death Benefit option must also be elected
if the owner is a grantor trust and one of the grantors dies
prior to the Payout Start Date. See page 7 for more details.
ANNUITANT The annuitant must be a natural person. The owner ( or if
- --------- multiple owners, the youngest owner) is the annuitant unless
a different annuitant has been named. If the annuitant dies
prior to the Payout Start Date, a Death Benefit option must
be elected. See page 7 for details.
BENEFICIARY If the owner is a natural person:
- -----------
. we will determine the beneficiary from the most recent
written request we have received from you;
. if you do not name a beneficiary or if the beneficiaries
named are no longer living, the beneficiary will be:
. your spouse if living;
. otherwise, your children equally if living;
. otherwise, your estate.
If the owner is a grantor trust, then the beneficiary will
be that same grantor trust.
If the owner is a non-natural person other than a grantor
trust, the owner is also the beneficiary, unless a different
beneficiary has been named.
Page 4
<PAGE>
The beneficiary becomes the new owner if the sole surviving
owner dies prior to the Payout Start Date. If the sole
surviving owner dies after the Payout Start Date, the
beneficiary will receive any guaranteed income payments
scheduled to continue.
- --------------------------------------------------------------------------------
ACCUMULATION PHASE
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS Purchase payments may be made at any time during the
- ----------------- accumulation phase. Purchase payments after the initial
purchase payment are not required. We may limit the number
of additional purchase payments. Any such limit is on page
3. We may also set a maximum acceptable size for each
purchase payment.
You will be required to designate a Guarantee Period(s) for
each purchase payment made.
INTEREST CREDITED Interest will be credited daily during the accumulation
- ----------------- phase using the effective annual interest rate declared by
us for that particular Guarantee Period at the time the Sub-
Account is established. Interest will be credited to the
initial purchase payment from the issue date. Interest will
be credited to subsequent purchase payments from the date of
receipt. "Effective annual rate" is defined as the yield
resulting when interest credited at the underlying daily
rate has compounded for a full year. Interest rates will be
declared periodically for each Guarantee Period then being
offered.
RENEWAL OF A A notice will be mailed prior to the expiry of each Sub-
- ------------ Account allowing you to select a renewal Guarantee
GUARANTEE PERIOD Period(s). If we do not receive a selection by the expiry
- ---------------- of the Sub-Account, a renewal Guarantee Period of the same
duration as the previous Guarantee Period will automatically
be established. If a renewal Guarantee Period selection is
made within the 30 calendar days following the Sub-Account
expiry, a Sub-Account will be established according to that
selection as of the Sub-Account expiry date.
If a full surrender is made within 30 days following the
expiry of any Sub-Account or if a partial withdrawal of an
entire Sub-Account is made within 30 days following that
Sub-Account's expiry, then the affected Sub-Account will be
deemed to have been renewed at the shortest Guarantee Period
then being offered.
No less than $1,000 may be allocated to any one Guarantee
Period at the time a purchase payment is made or a renewal
Guarantee Period is selected.
PARTIAL WITHDRAWALS You have the right to make a partial withdrawal at any
- ------------------- time during the accumulation phase. You must specify the
Sub-Account(s) from which you wish to make a withdrawal. If
a partial withdrawal would leave a Sub-Account Value of less
than $1,000, we will treat the request as a withdrawal of
that Sub-Account's entire value. If any partial withdrawal
reduces the Account Value of your Certificate to less than
$1,000, we will treat the request as full surrender of the
entire Account Value and the Certificate will terminate.
The amount of any partial withdrawal you request, plus any
applicable withdrawal charge and taxes, will reduce your
Sub-Account Value. During the first 30 calendar days of a
Sub-Account's renewal Guarantee Period, amounts withdrawn
from that Sub-Account will not incur withdrawal charges or
Market Value Adjustments. After the first 30 calendar days
of a Sub-Account's renewal Guarantee Period, amounts
withdrawn from that Sub-Account in excess of the remaining
preferred withdrawal amount will incur withdrawal charges
and Market Value Adjustments.
In addition, the amount you receive will reflect the
deduction of any applicable taxes.
Page 5
<PAGE>
Withdrawal charges and Market Value Adjustments will be
waived on partial withdrawals taken to satisfy qualified
plan required minimum distribution rules as described in
the Internal Revenue Code. This waiver is permitted only
for withdrawals which satisfy distributions resulting from
this Certificate.
We reserve the right to defer payment of any partial
withdrawal for up to six months after the date you request
it.
FULL SURRENDER Upon a full surrender, the Certificate will terminate. You
have the right to make a full surrender at any time during
the accumulation phase. If you surrender your Certificate,
a withdrawal charge and Market Value Adjustment will be
applied to:
. The Account Value less:
. The total Sub-Account Value for all Sub-Accounts
which are within the first 30 calendar days of their
Guarantee Periods, and
. The remaining preferred withdrawal amount for any
Sub-Accounts which are not within the first 30 days
of their Guarantee Periods.
In addition, the amount you receive will reflect the
deduction of any applicable taxes.
We reserve the right to defer payment of any full
surrender for up to six months after the date you request
it.
RETURN OF PURCHASE If you surrender this Certificate, your Cash Surrender
PAYMENT (GUARANTEE Value is guaranteed to never be less than:
UPON FULL SURRENDER)
. The sum of all purchase payments;
. less the sum of all amounts previously received (prior
to the deduction of any premium taxes or other
applicable taxes imposed on us.)
PREFERRED WITHDRAWAL A withdrawal amount free of withdrawal charges and Market
AMOUNT Value Adjustments will be available in each Sub-Account
year for each Sub-Account. The preferred withdrawal amount
is 10% of the amount of the Sub-Account's purchase payment
or funds allocated to the Sub-Account.
Any preferred withdrawal amount not withdrawn in a Sub-
Account Year may not be carried over to increase the
preferred withdrawal amount in a subsequent Sub-Account
Year. Similarly, the preferred withdrawal amount not
withdrawn from one Sub-Account may not be transferred to
increase the preferred withdrawal amount in another Sub-
Account.
WITHDRAWAL CHARGE Unless otherwise waived by provisions of this Certificate,
a withdrawal charge will be applied to any partial
withdrawals or a full surrender of the certificate.
The withdrawal charge will be 6% multiplied by the amount
defined in the Partial Withdrawal and Full Surrender
sections above.
TAXES Any premium taxes or other applicable taxes imposed on us
for amounts relating to this Certificate may be deducted
from the purchase payments or the Account Value when the
tax is incurred or at a later time. In addition, personal
federal and state income tax withholding may be deducted
from partial withdrawal and full surrender payments.
Amounts withheld for personal taxes do not necessarily
represent your entire tax liability.
Page 6
<PAGE>
MARKET VALUE ADJUSTMENT Unless otherwise waived by provisions of this
Certificate, the Market Value Adjustment will be
applied to any partial withdrawals or full surrender of
the Certificate. The Market Value Adjustment may be
either positive or negative and will be based on the
following:
I = the interest crediting rate for that Sub-
Account;
N = the number of complete days from the date
the withdrawal request is received to the
end of the Sub-Account's Guarantee Period;
and
J = the current interest rate credited for new
certificates, on the date the withdrawal
request is received, for a Guarantee Period
of duration N. If a Guarantee Period of
duration N is not currently being offered, J
will be determined by weighted average. If N
is less than or equal to 365 days, J will be
the rate for a Guarantee Period of duration
365.
The Market Value Adjustment will be the result of [.9 X
(I - J) X (N / 365)] multiplied by the amount defined
in the Partial Withdrawal and Full Surrender sections
above.
- -------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS DURING ACCUMULATION PHASE
- -------------------------------------------------------------------------------
OWNER'S DEATH If any owner dies prior to the Payout Start Date, the
new owner (any surviving joint owner(s) or if none, the
beneficiary) must elect an applicable option listed
below. If the owner is a grantor trust and one of the
grantors dies prior to the Payout Start Date, the
trustee must elect an applicable option listed below.
If the option selected is 1(a), 1(b)(ii), 2(a) or
2(b)(ii) below, and the deceased owner was also the
annuitant, the new annuitant will be the youngest new
owner, unless the new owner names a different
annuitant.
1. IF THE NEW OWNER IS A NATURAL PERSON AND IS NOT THE
SPOUSE OF THE DECEASED OWNER. IF IN A GRANTOR TRUST
SITUATION, THE SURVIVING GRANTOR, OR IF NONE, THE
BENEFICIARY OF THE TRUST, IS A NATURAL PERSON AND
IS NOT THE SPOUSE OF THE DECEASED GRANTOR:
a. The new owner or trustee may choose to receive
the Cash Surrender Value in a lump sum not later
than five years from the date of the owner's
death; or
b. If we receive due proof of death within 180 days
of the date of the owner's death, then the new
owner or trustee may alternatively choose to:
i. Receive the Death Benefit in a lump sum; or
ii. Apply the Death Benefit to an Income Plan
which must begin within one year of the date
of death and must be for a period equal to
or less than the life expectancy of the new
owner. In a grantor trust situation, the
period must be equal to or less than the
life expectancy of a surviving grantor (or
if none, the beneficiary) selected by the
trustee.
2. IF THE NEW OWNER IS THE SURVIVING SPOUSE OF THE
DECEASED OWNER. IF IN A GRANTOR TRUST SITUATION, THE
SPOUSE IS THE SOLE SURVIVING GRANTOR (OR, IF THERE
IS NO SURVIVING GRANTOR, THE SOLE BENEFICIARY OF THE
TRUST):
a. The surviving spouse may choose to continue the
Certificate as if the death had not occurred. If
the Certificate is continued as if the death had
not occurred, the surviving spouse may make a
single
Page 7
<PAGE>
withdrawal of any amount within one year of the date of
death without incurring a withdrawal charge. However, a
Market Value Adjustment, determined at the date of the
withdrawal, will apply. The single withdrawal amount is
in addition to the annual preferred withdrawal amount;
or
b. If we receive due proof of death within 180 days of the
date of the owner's death, then the surviving spouse
may alternatively choose to:
i. Receive the Death Benefit in a lump sum; or
ii. Apply the Death Benefit to an Income Plan which
must begin within one year of the date of death
and must be for a period equal to or less than the
life expectancy of the new owner or, in a grantor
trust situation, the life expectancy of the
surviving spouse.
3. IF THE NEW OWNER IS A NON-NATURAL PERSON (OTHER THAN A
GRANTOR TRUST):
The new owner must receive the Death Benefit in a lump sum.
ANNUITANT'S DEATH If the annuitant dies and the annuitant is not also an
owner, the owner must elect an applicable option listed
below. If the option selected is 1(a) or 1(b)(ii) below,
the new annuitant will be the youngest owner, unless the
owner names a different annuitant.
1. IF THE OWNER IS A NATURAL PERSON OR A GRANTOR TRUST:
a. The owner may choose to continue the Certificate as if
the death had not occurred; or
b. If we receive due proof of death within 180 days of the
date of the annuitant's death, then the owner may
alternatively choose to:
i. Receive the Death Benefit in a lump sum; or
ii. Apply the Death Benefit to an Income Plan which
must begin within one year of the date of death
and must be for a period equal to or less than the
life expectancy of the owner, or in a grantor
trust situation, the life expectancy of a grantor.
2. IF THE OWNER IS A NON-NATURAL PERSON (OTHER THAN A GRANTOR
TRUST):
The owner must receive the Death Benefit in a lump sum.
PROOF OF DEATH We may require that this Certificate be returned to us prior to
any settlement. We must receive due proof of death of the owner
prior to settlement of a death claim. Due proof of death is one
of the following:
. a certified copy of a death certificate; or
. a certified copy of a decree of a court of competent
jurisdiction as to a finding of death; or
. any other proof acceptable to us.
Page 8
<PAGE>
- -------------------------------------------------------------------------------
PAYOUT PHASE
- -------------------------------------------------------------------------------
PAYMENT AMOUNT The Adjusted Account Value on the Payout Start Date, will be
exchanged for a series of periodic income payments under an
Income Plan. The periodic income payment amount will be
calculated by multiplying the Adjusted Account Value on the
Payout Start Date, by the greater of:
. Payment plan rates declared by us. These rates will provide
at least as much income as would our then current Single
Premium Immediate Annuity certificate rates; or
. Guaranteed payment plan rates. These rates are calculated
using the following assumptions for the Income Plan and
payment frequency selected:
. Interest rate of 3% per year; and
. No loading.
For Income Plans which include life income, the following
additional assumptions will be used:
. Mortality rates from the 1983 Table a Annuity Mortality
Tables;
. Age(s) of the annuitant and joint annuitant (if applicable)
on the Payout Start Date set back one year for each six
full years between January 1, 1983 and the Payout Start
Date; and
. Sex(es) of the annuitant and joint annuitant (if
applicable) on the Payout Start Date, unless the
Certificate was issued under an employer-sponsored program
or in a jurisdiction requiring unisex rates (in which case,
a 80% female, 20% male blend of the mortality rates will be
used).
INCOME PLANS Available Income Plans are listed below:
1. LIFE INCOME WITH OR WITHOUT GUARANTEED PAYMENTS. For plans
without guaranteed payments, we will make payments only for
as long as the annuitant is living. For plans with
guaranteed payments, we will make payments for the
guaranteed period and thereafter as long as the annuitant
is living. The number of months guaranteed range from 60 to
360.
2. JOINT AND SURVIVOR LIFE INCOME WITH OR WITHOUT GUARANTEED
PAYMENTS. For plans without guaranteed payments, we will
make payments only for as long as either the annuitant or
joint annuitant is living. For plans with guaranteed
payments, we will make payments for the guaranteed period
and thereafter as long as either the annuitant or joint
annuitant is living. The number of months guaranteed range
from 60 to 360.
3. GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD. We will make
payments beginning on the Payout Start Date for a specified
period. These payments do not depend on the annuitant's
life. The number of months guaranteed may range from 60 to
360.
We reserve the right to accept other Income Plans.
Page 9
<PAGE>
PAYOUT TERMS The income payments are subject to the following terms and
AND CONDITIONS conditions:
. If the Adjusted Account Value is not enough to provide an
initial payment of at least $20, we reserve the right to:
. change the payment frequency to make the payment at least
$20; or
. terminate the Certificate and pay you the Adjusted
Account Value in a lump sum.
. If we do not receive a written choice of an Income Plan
from you at least 30 days before the Payout Start Date, the
Income Plan will be life income with 120 months guaranteed.
. If you choose an Income Plan which depends on any person's
life, we may require proof of age and sex before income
payments begin and we may require proof that the annuitant
or joint annuitant is still alive before we make each
payment.
. After the Adjusted Account Value has been applied to an
Income Plan on the Payout Start Date, the Income Plan
cannot be changed, the exchange of the Adjusted Account
Value for an Income Plan can not be reversed and no
withdrawals can be made.
. If any owner dies during the payout phase, income payments
will continue as scheduled.
- -------------------------------------------------------------------------------
GENERAL PROVISIONS
- -------------------------------------------------------------------------------
THE ENTIRE The entire contract consists of the Master Policy, the Master
CONTRACT Policy application, any written enrollments, and any
endorsements.
All statements made in written enrollments are representations
and not warranties. No statement will be used by us in defense
of a claim or to void a Certificate unless it is included in a
written enrollment.
Only our officers may change the Master Policy or Certificate
or waive a right or requirement. No other individual may do
this.
The Master Policy may be amended by us, terminated by us, or
terminated by the Master Policyholder without the consent of
any other person. No termination completed after the issue date
of this Certificate will adversely affect your rights under
this Certificate.
We may not modify this Certificate without your consent, except
to make it comply with any changes in the Internal Revenue
Code, or as required by any other applicable law.
INCONTESTABILITY We will not contest the validity of this Certificate after the
issue date.
MISSTATEMENT OF If any age or sex has been misstated, we will pay the amounts
AGE OR SEX which would have been paid at the correct age or sex. If we
find the misstatement of age or sex after the income payments
begin, we will:
. pay all amounts underpaid including due interest; or
. stop payments until the total payments are equal to the
corrected amount plus due interest.
Page 10
<PAGE>
For purposes of the Misstatement of Age or Sex provision,
due interest will be calculated at an effective annual rate
of 3% or as required by state law.
The misstatement of sex provision described above does not
apply to Certificates issued under employer-sponsored
programs or Certificates issued in jurisdictions which
require unisex rates.
ANNUAL STATEMENT At least once a year, prior to the Payout Start Date, we
- ---------------- will send you a statement containing Account Value
information. The information presented will comply with any
applicable law.
Page 11
<PAGE>
Northbrook Life Insurance Company
(herein called "we" or "us")
Certificate Endorsement for IRA Plans
The following provisions are added to your Certificate and will take precedence
over any other provision to the contrary in your Certificate:
1. The owner of this Certificate must be the annuitant.
2. You may not:
a. transfer;
b. sell;
c. assign;
d. discount; or
e. pledge
this Certificate for any purpose.
3. Your rights in this Certificate are nonforfeitable. This Certificate is for
the exclusive benefit of you and your beneficiaries.
4. Except as described below, the annual purchase payment under the Certificate
shall not exceed the lesser of $2,000 or 100% of compensation. In the case of
a spousal IRA, the maximum contribution shall not exceed the lesser of $2,250
or 100% of compensation, but no more than $2,000 can be paid to either
spouse's IRA. The exceptions are:
a. The above limits shall not apply to "rollover contributions" as that term
is described in Sections 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8) and 408(d)(3) of the Internal Revenue Code.
b. In addition to any amounts you contribute, your employer can contribute
annually up to the lesser of 15% of your compensation or $30,000 under
408(k) of the Internal Revenue Code.
c. Any or all of the above contribution limits shall change in step with
changes to such limits in the Internal Revenue Code.
5. Your entire interest must be or begin to be distributed by April 1 following
the calendar year in which you reach age 70 1/2. You must take distributions
in accordance with the requirements of Section 401(a)(9) of the Internal
Revenue Code, including the incidental death benefit requirements of Section
401(a)(9)(G) of the Code, and the regulations thereunder, including the
minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2
of the Proposed Income Tax Regulations. The distribution may be made in a
single sum or in periodic payments over:
a. your life; or
b. the lives of you and your "designated beneficiary"; or
c. a period certain not extending beyond your life expectancy; or
d. a period certain not extending beyond the life expectancy of you and your
"designated beneficiary".
For purposes of this endorsement "designated beneficiary" is the natural
person that you name prior to the payout start date.
For the purpose of the distribution rules described in this section, payments
must be made in periodic payments at intervals of no longer than one year. In
addition, payments must be either nonincreasing or they may increase only as
provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax
Regulations.
6. The minimum amount you are required to receive for any tax year is at least
equal to:
a. the value of the Certificate at the end of the prior year; divided by
b. your life expectancy (or the joint life and last survivor expectancy of
you and your "designated beneficiary") using the age(s) as of your
birthday(s) in that year.
7. If your spouse is not the "designated beneficiary":
a. the minimum amount you are required to receive beginning with the first
calendar year for which distributions are required is:
1) the value of the Certificate at the end of the prior year; divided by
2) the lesser of:
a) the applicable life expectancy; or
b) the applicable divisor contained in Q & A -4 in 1.401(a)(9)-2 of
the Proposed Income Tax Regulations.
<PAGE>
b. if payments are made in the form of a period certain
annuity, the maximum period certain at the required
beginning date is defined in 1.401(a)(9)-2.
c. if the payments are made in the form of a joint and
survivor annuity, the payment to the survivor must not
exceed the applicable percentage as defined in
1.401(a)(9)-2.
8. For purposes of calculating the minimum annual distribution
from this Certificate, life expectancies are determined by
the return multiples contained in Tables V and VI of
Section 1.72-9 of the Income Tax Regulations. Life
expectancies of you and your spouse (if your spouse is the
"designated beneficiary") may be recalculated annually. The
life expectancy of a non-spousal "designated beneficiary"
may not be redetermined.
Your life expectancy and any spousal "designated
beneficiary's" life expectancy will be redetermined
annually using 1.72-9 unless you elect otherwise prior to
the start of the required distributions.
If you elect not to have life expectancies redetermined
annually, then life expectancies will be calculated only
once, at the time of the first payment, and will thereafter
decrease at the rate of 1 year per year elapsed. If made,
this election is irrevocable and will apply to all
subsequent years.
9. If you die before distribution has begun and your
beneficiary is your surviving spouse, your spouse must
elect one of the following forms of distribution:
a. a life annuity; or
b. one or more certain payments over a period no longer
than his/her own life expectancy; or
c. treat the account as his/her own IRA.
If the form of distribution elected is a. or b. above,
equal or substantially equal payments will be made over
your spouse's life or life expectancy. The form of
distribution must be elected within five years after your
death or the calendar year in which you would have attained
age 70 1/2, whichever is earlier. If the form of
distribution is a. or b. above, payments must commence
within one year of your death or the year in which you
would have attained age 70 1/2, whichever is later. If your
surviving spouse makes a regular IRA contribution to the
account, makes a rollover to or from the account, or fails
to elect any of the three forms of distribution listed
above, c. is automatically assumed. Any amount paid to a
child of the owner will be treated as if it were paid to
the surviving spouse if the remainder of the interest
becomes payable to the surviving spouse when the child
reaches age of majority.
10. If you die before distribution has begun and your
beneficiary is not your surviving spouse, the beneficiary
must either:
a. start receiving, within one year of your death, equal
or substantially equal payments over the life or life
expectancy of your beneficiary; or
b. have the proceeds totally distributed within five years
of your death.
11. For the purpose of the distribution rules described in the
two preceding sections, the payments to be received by your
beneficiary will be computed using the return multiples
specified in section 1.72-9 of the Income Tax Regulations.
Life expectancies of a surviving spousal beneficiary may be
recalculated annually. The life expectancy of a non-spousal
beneficiary may not be redetermined.
If the beneficiary is your spouse, his/her life expectancy
will be redetermined annually using Table V and VI of
Section 1.72-9 unless he/she elects otherwise prior to the
start of the required distributions.
If your spouse is the beneficiary and does not elect to
have life expectancies redetermined annually, or if your
beneficiary is not your spouse, then life expectancies will
be calculated only once, at the time of the first payment,
and will thereafter decrease at the rate of 1 year per year
elapsed. If made, this election is irrevocable and will
apply to all subsequent years.
Distributions made in accordance with this section are
considered to have begun if distributions are made on
account of your beneficiary reaching his or her required
beginning date or if prior to the required beginning date
distributions irrevocably begin for your beneficiary over a
period permitted and in an annuity form acceptable under
Section 1.401(a)(9) of the Proposed Income Tax Regulations.
12. If you die after distribution has begun, any remaining
payments shall continue to be paid to your beneficiaries at
least as rapidly as under the method of distribution in
effect.
13. We will issue annual reports containing account value
information.
Michael J. Velotta Louis G. Lower, II
------------------ ------------------
Secretary President
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
(HEREIN CALLED "WE" OR "US")
CERTIFICATE AMENDMENT FOR 403(B) ANNUITIES
The following provisions are added to your Certificate:
1. The owner of this Certificate must be the annuitant.
2. You may not:
a. transfer;
b. sell;
c. assign;
d. discount; or
e. pledge
this Certificate for any purpose, to any person but us.
3. Account balances accruing after December 31, 1986 must begin to be paid out
by the April 1 after the calendar year in which you reach age 70 1/2. The
distribution may be made in a single sum or in periodic payments.
a. The payments must be over:
1) your life; or
2) the lives of you and your "designated beneficiary"; or
3) a period certain not extending beyond your life expectancy; or
4) a period certain not extending beyond the life expectancy of you and
your "designated beneficiary".
For the purpose of this amendment, the "designated beneficiary" is the
natural person that you name prior to the payout start date.
b. The minimum amount you are required to receive for any tax year is:
1) the account balance of the Certificate at the end of the prior year,
divided by;
2) your life expectancy (or the joint and last survivor expectancy of you
and your "designated beneficiary") using the age(s) as of your
birthday(s) in that year.
4. For account balances accruing after December 31, 1988 distributions of
contributions made under a salary reduction agreement may only occur upon:
a. or after attainment of age 59 1/2; or
b. separation from service; or
c. death; or
d. disability (as defined in Internal Revenue Code Section 72(m)(7)); or
e. hardship.
In the case of hardship distributions, earnings due to these purchase
payments cannot be withdrawn. The plan administrator will be responsible for
determining whether an individual's circumstances meet the definition of
hardship as set forth in the Internal Revenue Code and Regulations.
<PAGE>
5. For the purpose of this amendment, "account balances" includes:
a. any contributions made after the specified date:
1) December 31, 1986; or
2) December 31, 1988
whichever is applicable; and
b. all earnings credited after the specified date.
You are permitted to directly rollover all or a portion of any eligible
rollover distribution which you receive, to an eligible retirement plan (i.e.,
IRA, 401(a), or 403(b) ). In the case of an eligible rollover distribution to
your surviving spouse, an eligible retirement plan is limited to an IRA.
An eligible rollover distribution is any distribution from your account except:
1. one of a series of payments pursuant to a life or a joint life income option,
or
2. one of a series of payments pursuant to a period certain income option based
on your life expectancy (or joint life expectancy of you and your designated
beneficiary), or
3. one of a series of substantially equal periodic payments for a specified
period of ten years or more, or
4. one that qualifies as a required minimum distribution as defined by section
401(a)(9) of the Internal Revenue Code.
Michael J. Vellota Louis G. Lower, II
Secretary President
<PAGE>
Custom Annuity Plus and Custom Plus G&I
Enrollment for Coverage under Group Annuity Contract(s) issued to
Dean Witter Reynolds, Inc.
Issued by Northbrook Life Insurance Company, Northbrook, Illinois
Send Enrollment to: Northbrook Life Insurance Company
P.O. Box 94040, Palatine, IL 60094-4040
- --------------------------------------------------------------------------------
1. Total Purchase Payment
$____________________
- --------------------------------------------------------------------------------
2. Annuity Plan (check only one plan)
[_] Custom Annuity Plus (Fill in sub-account allocation(s))
$________ for ____ year(s) $________ for ____ years
$________ for ____ year $________ for ____ years
$________ for ____ year $________ for ____ years
$________ for ____ year $________ for ____ years
$________ for ____ year $________ for ____ years
[_] Custom Plus Growth & Income Annuity for _____ (5 - 10) years.
(2 certificates will be issued)
- --------------------------------------------------------------------------------
3. Federal Withholding Election
Do you wish to have Federal Income Tax withheld from your annuity payments?
[_] Yes [_] No
- --------------------------------------------------------------------------------
4. Owner(s) [_] Male [_] Female
(mm / dd / yy)
Name_____________________ Soc. Sec. No. ____________ Birthdate______________
Address__________________ City______________________ State_____ Zip_________
Name_____________________ Soc. Sec. No. ____________ Birthdate______________
Address__________________ City______________________ State_____ Zip_________
- --------------------------------------------------------------------------------
5. Annuitant (Leave blank if Annuitant same as sole Owner or if this annuity
will be part of an IRA, 403(b), or SEP.)
(Defining life only, not entitled to benefits.)
[_] Male [_] Female Relationship to Owner___________
Name______________________ Soc. Sec. No. ____________ Birthdate______________
Address___________________ City______________________ State_____ Zip_________
- --------------------------------------------------------------------------------
6. Beneficiary(ies)(Entitled to benefits upon last Owner's death. If Owner is a
trust, the beneficiary will be the same trust.)
Name___________________________ Relationship to Owner ____________
Name___________________________ Relationship to Owner ____________
- --------------------------------------------------------------------------------
7. Replacement Will this annuity replace or change any existing annuity or life
insurance? [_] Yes [_] No
(If yes, complete the following.)
Company__________________________________ Policy No. ___________________
Cost basis amount________________________ Policy Date___________________
Intended to qualify as a 1035 exchange? [_] Yes [_] No (If yes, attach copy
of signed Absolute Assignment form.)
- --------------------------------------------------------------------------------
8. Tax Qualified Plan [_] Yes [_] No (If yes, complete the following)
[_] IRA Rollover [_] IRA Transfer [_] IRA/Year of Contribution_____
[_] 401(a)(pension) [_] 403(b)(TSA) [_] SEP/Year of Contribution_____
(Attach Form 5305) [_] Other_______
- --------------------------------------------------------------------------------
9. Special Instructions
- --------------------------------------------------------------------------------
A copy of this Enrollment signed by the Account Executive will be the receipt
for the first purchase payment. If this Enrollment is declined, Northbrook Life
Insurance Company ("Northbrook") will have no liability except to return the
first purchase payment.
I have read the above statements and represent that they are complete and
true to the best of my knowledge and belief. I agree that this Enrollment shall
be a part of the Certificate issued by Northbook. Northbrook may add to or
correct the Enrollment in the space labeled 'Home Office Endorsement.' By
accepting the Certificate issued, I agree to any additions or corrections to
this Enrollment. Northbrook will obtain written agreement from me for any change
in the benefits, type of plan, or birth date.
I UNDERSTAND THAT WITHDRAWALS AND SURRENDERS MAY BE SUBJECT TO A MARKET VALUE
ADJUSTMENT IF EXERCISED PRIOR TO THE END OF A RATE GUARANTEE PERIOD. I ALSO
ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUS FOR THIS PRODUCT.
Signed at_________________________________________ Date___/___/___
City State
Signature(s) of Owner(s)_____________________________________________________
- --------------------------------------------------------------------------------
Home Office Endorsement
- --------------------------------------------------------------------------------
AE Use Only Do you have any reason to believe that the Certificate(s) applied
for is (are) to replace or change any existing annuity or life insurance?
[_] YES [_] NO
AE's Signature___________________________________ Quote #____________________
AE's Name______________________________ AE's License ID # (FL only)__________
Branch/AE No.__________ Phone Number (___)__________ Transaction #___________
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 5
Opinion of General Counsel
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
LAW AND REGULATION DEPARTMENT
3100 Sanders Road, J5B
Northbrook, Illinois 60062
Direct Dial Number 847-402-2400
Facsimile 847-402-4371
Michael J. Velotta Please direct reply to:
Vice President, Secretary Post Office Box 3005
and General Counsel Northbrook, Illinois 60065-3005
September 26, 1994
TO: Northbrook Life Insurance Company
Northbrook, Illinois 60062
FROM: Michael J. Velotta
Vice President, Secretary and General Counsel
RE: Form S-1 Registration Statement
Under the Securities Act of 1933
File No. 33-________________
With reference to the Registration Statement on Form S-1 filed by
Northbrook Life Insurance Company with the Securities and Exchange Commission
covering Individual and Group Market Value Adjusted Deferred Annuity Contracts
("Contracts"), I have examined such documents and such law as I have considered
necessary and appropriate, and on the basis of such examination, it is my
opinion that:
1. Northbrook Life Insurance Company is duly organized and existing under
the laws of the State of Illinois and has been duly authorized to do
business and to issue the Contracts by the Director of Insurance of the
State of Illinois.
2. The Contracts covered by the above Registration Statement are approved
and authorized by the Director of Insurance of the State of Illinois
and when issued will be valid, legal and binding obligations of
Northbrook Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to the above
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus constituting a part of the Registration statement.
Sincerely,
/s/ MICHAEL J. VELOTTA
Michael J. Velotta
Vice President, Secretary
and General Counsel
<PAGE>
EXHIBIT 10.1
REINSURANCE AGREEMENT
<PAGE>
REINSURANCE AGREEMENT
between the
NORTHBROOK LIFE INSURANCE COMPANY, Northbrook, Illinois
(hereinafter "NORTHBROOK")
and
ALLSTATE LIFE INSURANCE COMPANY, Northbrook, Illinois
(hereinafter "ALLSTATE")
Article I
BASIS OF REINSURANCE
--------------------
1. One-hundred percent (100%) of the net benefits (defined in Article II,
Paragraph 1), under all eligible policies (defined in Schedule A) of
NORTHBROOK, will be reinsured with ALLSTATE.
2. This reinsurance will be ceded to ALLSTATE on an automatic coinsurance
basis.
3. In no event will reinsurance under this Agreement be in force unless the
corresponding policy issued by NORTHBROOK or the reinsurance accepted by
NORTHBROOK is in force.
Article II
REINSURANCE BENEFITS
--------------------
1. Net benefits are defined as follows:
(a) For a policy issued directly by NORTHBROOK and reinsured under this
Agreement, net benefits are the actual amounts payable by NORTHBROOK to
the policyholder, less any amounts payable to NORTHBROOK by another
reinsurer with respect to the policy. These payments include death
benefits, endowment benefits, annuity benefits, disability benefits,
benefits under A & H policies, surrender benefits and payments on
supplementary contracts with and without life contingencies.
(b) For policies reinsured by NORTHBROOK and retroceded under this
Agreement, net benefits are the actual amounts payable by
<PAGE>
NORTHBROOK to the ceding company with respect to the policy reinsured
by NORTHBROOK. These payments will include commissions and expense
allowances on reinsurance accepted.
2. With respect to policies issued directly or reinsured by NORTHBROOK on or
prior to the Effective Date of this Agreement, ALLSTATE's liability for net
benefits will begin on the first day following the Agreement's Effective
Date. This liability will include net benefits incurred on or prior to the
Effective Date of this Agreement, but not paid until after the Agreement's
Effective Date.
3. With respect to policies issued directly or reinsured by NORTHBROOK after
the Effective Date of this Agreement, ALLSTATE's liability for net benefits
will begin simultaneously with that of NORTHBROOK and will include any
liability NORTHBROOK may incur as a result of a Temporary Insurance
Agreement or Conditional Receipt issued in conjunction with a policy
subject to this Agreement.
4. ALLSTATE's liability under this Agreement will continue as long as
NORTHBROOK remains liable on the underlying coverage, and will terminate
simultaneously with NORTHBROOK's termination of liability.
Article III
RESERVE TRANSFERS
-----------------
1. On or before the Effective Date of this Agreement, NORTHBROOK shall pay to
ALLSTATE one million dollars ($1,000,000) in cash.
2. Within one-hundred and eighty (180) days following the Effective Date of
this Agreement, NORTHBROOK shall pay to ALLSTATE assets with statutory book
value equal to (a) less (b), where (a) and (b) are as defined below.
NORTHBROOK shall also pay to ALLSTATE interest on this amount; such amount
being equal to the sum of (c) and (d), as defined below.
(a) Net statutory reserves determined as the portion of the following
items (i) through (viii), minus items (ix) through (xi) attributable
to the policies (or portion of such policies) ceded to ALLSTATE under
this Agreement. The applicable portion of these items will be
calculated as of the Effective Date of this Agreement and will be
based on the corresponding items from NORTHBROOK's General Account
statutory financial statement as filed with the Illinois Insurance
Department.
2
<PAGE>
<TABLE>
<CAPTION>
ITEM NAIC STATEMENT REFERENCE* DESCRIPTION
- ---- ------------------------- -----------
<S> <C> <C>
(i) Page 3, Line 1 Aggregate reserve for life
policies and contracts
(ii) Page 3, Line 2 Aggregate reserve for A & H
policies and contracts
(iii) Page 3, Line 3 Supplementary contracts
without life contingencies
(iv) Page 3, Lines 4.1 & 4.2 Policy and contract claims
(v) Page 3, Line 9 Premium and annuity
considerations received in
advance
(vi) Page 3, Lines 10.1, 10.2 & 10.3 Liability for premiums and other
deposit funds
(vii) Page 3, Lines 11.1, 11.2 & 11.3 Policy and contract liabilities
not included elsewhere
(viii) Page 3, Line 15 Cost of collection on premiums
and annuity considerations
deferred and uncollected in
excess of total loading
(ix) Page 2, Lines 11.1, 11.2 & 11.3 Reinsurance ceded (amounts
due)
(x) Page 2, Line 14 Life insurance premiums and
annuity considerations deferred
and uncollected
(xi) Page 2, Line 15 Accident and health premiums
due and unpaid
</TABLE>
- -----------------------
/*/ References herein are to the 1986 NAIC Statutory Statement.
Appropriate adjustment will be made for changes, if any, in the NAIC Statutory
Statement on or after the Effective Date.
3
<PAGE>
(b) The amount transferred under Article III, Paragraph 1.
(c) All interest payments, dividend payments and mortgage payments
received by NORTHBROOK, between the Effective Date of this Agreement
and the date of asset transfer, on the assets transferred.
(d) Interest on cash transferred at an effective rate of six percent (6%)
per annum, compounded daily, from the Effective Date of this Agreement
to the date of asset transfer.
3. Within sixty (60) days following the filing of ALLSTATE's 1987 Federal
Income Tax return, NORTHBROOK shall pay to ALLSTATE assets with statutory
book value equal to 0.4 x [(a)-(b)], where (a) and (b) are as defined
below.
(a) Net statutory reserves on the Effective Date of this Agreement as
calculated under Article III, Paragraph 2, Item (a).
(b) Net tax reserves on the Effective Date of this Agreement for the items
listed in Article III, Paragraph 2, Item (a), as revalued for purposes
of calculating the 1987 Federal Income Tax liability.
4. Within ninety (90) days following the recapture by NORTHBROOK of any
business ceded to another reinsurer, NORTHBROOK shall pay to ALLSTATE
assets with statutory book value equal to (a)x[1+(b)(c)/365], where (a)
through (c) are as defined below.
(a) Net Statutory reserves, as defined in Article III, Paragraph 2, Item
(a), attributable to the policies so recaptured. The applicable
portion of these items will be calculated as of the end of the month
following the date of recapture.
(b) The annual rate of interest appearing on NORTHBROOK's General Account
statutory financial statement (NAIC Statement Reference/**/: Exhibit
2, Line 8) as filed with the Illinois Insurance Department as of the
end of the calendar year immediately preceding the date of recapture.
- -----------------------
/**/ References herein are to the 1986 NAIC Statutory Statement.
Appropriate adjustments will be made for changes, if any, in the NAIC Statutory
Statement on or after the Effective Date.
4
<PAGE>
(c) The number of days between the end of the month following the date of
recapture and the date when payment is made.
5. Within sixty (60) days following the filing of an Allstate Federal Income
Tax return for a year in which there was a recapture by NORTHBROOK of any
business ceded to another reinsurer, NORTHBROOK shall pay to ALLSTATE
assets with statutory book value equal to the product of the then current
Federal Income Tax rate applicable to ALLSTATE and the amount (a)-(b),
where (a) and (b) are as defined below.
(a) Net Statutory reserves, as defined in Article III, Paragraph 2, Item
(a), attributable to the policies so recaptured. The applicable
portion of these items will be calculated as of the end of the
calendar year following the date of recapture.
(b) Net tax reserves for the items listed in Article III, Paragraph 2,
Item (a), attributable to the policies so recaptured and as revalued
for purposes of calculating ALLSTATE's Federal Income Tax liability.
The applicable portion of these items will be calculated as of the end
of the calendar year following the date of recapture.
Article IV
MONTHLY SETTLEMENTS
-------------------
1. Within thirty (30) days following the end of each calendar month in which
this Agreement is in effect, NORTHBROOK shall pay to ALLSTATE, with respect
to eligible policies under this Agreement, a reinsurance premium equal to
(or the accounting equivalent of) the sum Items (a) and (b) below less the
sum of Items (c), (d) and (e) below.
(a) Gross premiums (direct and reinsurance assumed) collected by
NORTHBROOK during the month.
(b) Reserves transferred from a NORTHBROOK Separate Account to the
NORTHBROOK General Account during the month.
(c) Gross premiums refunded by NORTHBROOK during the month to
policyholders.
(d) Reserves transferred from the NORTHBROOK General Account to a
NORTHBROOK Separate Account during the month.
5
<PAGE>
(e) Reinsurance premiums paid by NORTHBROOK during the month to reinsurers
other than ALLSTATE.
2. Within thirty (30) days following the end of each calendar month in which
this Agreement is in effect, ALLSTATE shall pay to NORTHBROOK a benefit and
expense allowance equal to (or the accounting equivalent of) the sum of
Items (a), (b), (c) and (d) below.
(a) Net benefits (as defined in Article II, Paragraph 1) paid by
NORTHBROOK during the month with respect to the policies ceded under
this Agreement.
(b) Commissions and other sales compensation incurred by NORTHBROOK during
the month with respect to the policies ceded under this Agreement.
(c) General insurance expenses incurred by NORTHBROOK during the month
with respect to the policies ceded under this Agreement.
(d) Insurance taxes, licenses and fees (excluding Federal Income Tax)
incurred by NORTHBROOK during the month with respect to the policies
ceded under this Agreement.
Article V
OVERSIGHTS
----------
ALLSTATE shall be bound as NORTHBROOK is bound, and it is expressly understood
and agreed that if failure to reinsure or failure to comply with any terms of
this Agreement is shown to be unintentional and the results of misunderstanding
or oversight on the part of either NORTHBROOK or ALLSTATE, both NORTHBROOK and
ALLSTATE shall be restored to the positions they would have occupied had no such
error or oversight occurred.
Article VI
POLICY CHANGES
--------------
If any change is made in coverage reinsured under this Agreement, NORTHBROOK
shall notify ALLSTATE.
6
<PAGE>
Article VII
RECAPTURE
---------
1. If a policy reinsured under this Agreement becomes ineligible for
reinsurance (as specified in Schedule A), the policy will be immediately
recaptured by NORTHBROOK.
2. NORTHBROOK shall notify ALLSTATE of any such recapture.
3. Upon receiving notice of recapture, ALLSTATE shall pay to NORTHBROOK an
amount equal to the net statutory reserves associated with the recaptured
policy. This amount will be determined in accordance with the formula
defined in Article III, Paragraph 2, Item (a), as of the end of the month
following the date of recapture.
Article VIII
INSPECTION OF RECORDS
---------------------
NORTHBROOK and ALLSTATE shall have the right, at any reasonable time, to examine
at the office of the other, any books, documents, reports or records which
pertain in any way to the policies reinsured under this Agreement.
Article IX
INSOLVENCY
----------
1. In the event of the insolvency of NORTHBROOK, reinsurance hereunder is
payable by ALLSTATE on the basis of its liability hereunder without
diminution because of the insolvency of NORTHBROOK.
2. Further, in the event of the insolvency of NORTHBROOK, the liquidator,
receiver or statutory successor of the insolvent NORTHBROOK shall give
written notice to ALLSTATE of the pendency of an obligation of the
insolvent NORTHBROOK on any policy reinsured, whereupon ALLSTATE may
investigate such claim and interpose at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses which it may
deem available to NORTHBROOK or its liquidator or statutory successor. The
expense thus incurred by ALLSTATE shall be chargeable, subject to court
approval, against the insolvent NORTHBROOK as part of the expenses of
liquidation to the extent of a proportionate share of the benefit
7
<PAGE>
which may accrue to NORTHBROOK solely as a result of the defense undertaken
by ALLSTATE.
3. All monies due NORTHBROOK or ALLSTATE under this Agreement shall be offset
against each other, dollar for dollar, regardless of any insolvency of
either party.
Article X
ARBITRATION
-----------
Any dispute arising with respect to this Agreement which is not settled by
mutual agreement of the parties shall be referred to arbitration. Within twenty
(20) days from receipt of written notice from one party that an arbitrator has
been appointed, the other party will also name an arbitrator. The two
arbitrators will choose a third arbitrator and will forthwith notify the
contracting parties of such choice. Each arbitrator should be a present or
former officer of a life insurance company and should have not present or past
affiliation with this Agreement or with either party. The arbitrators will
consider this Agreement as an honorable engagement rather than merely as a legal
obligation, and will be relieved of all judicial formalities. The decision of
the arbitrators will be final and binding upon the parties hereto. Each party
shall bear the expenses of its own arbitrator and shall jointly and equally bear
the expenses of the third arbitrator and of the arbitration. Any such
arbitration will take place at the Home Office of NORTHBROOK, unless some other
location is mutually agreed upon.
Article XI
PARTIES TO AGREEMENT
--------------------
This Agreement is solely between NORTHBROOK and ALLSTATE. The acceptance of
reinsurance hereunder does not create any right or legal relation whatever
between ALLSTATE and any party in interest under any policy reinsured hereunder.
NORTHBROOK shall be and remain solely liable to any insured, contract owner, or
beneficiary under any policy reinsured hereunder.
8
<PAGE>
Article XII
DURATION OF AGREEMENT
---------------------
This Agreement will be effective as of December 31, 1987, and will be unlimited
as to its duration; provided, however, it may be terminated with respect to the
reinsurance of new business by either party giving sixty (60) days prior written
notice of termination to the other party.
IN WITNESS HEREOF, the parties to this Agreement have caused it to be duly
executed in duplicate by their respective officers on the date shown below.
NORTHBROOK LIFE INSURANCE COMPANY of Northbrook, Illinois
By /s/ James D. Clements
-------------------------------
Title Assistant Vice President, Assistant Secretary and
Assistant General Counsel
Date October 20, 1987
ALLSTATE LIFE INSURANCE COMPANY of Northbrook, Illinois
By /s/ Joseph A. Haas
-------------------------------
Title Vice President and Controller
Date October 20, 1987
9
<PAGE>
EXHIBIT 23 (a)
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 3 to Registration
Statement No. 033-84480 of Northbrook Life Insurance Company on Form S-1 of our
report dated February 21, 1997 relating to the financial statements and
financial statement schedule of Northbrook Life Insurance Company, appearing in
the Prospectus, which is part of such Registration Statement, and to the
reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 28, 1997
<PAGE>
EXHIBIT 23 (b)
CONSENT OF ATTORNEYS
<PAGE>
ROUTIER, MACKEY AND JOHNSON, P.C.
Attorneys at Law
1700 K. Street, N.W.
Suite 1003
Washington, D.C. 20006 (202) 296-4852
September 26, 1994
CONSENT OF COUNSEL
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the prospectus forming part of the Registration statement on Form
S-1 to be filed with the Securities and Exchange Commission on or about
September 27, 1994, for certain group and individual deferred annuity contracts
to be issued by Northbrook Life Insurance Company.
Routier, Mackey and Johnson, P.C.
By: /s/ GREGOR B. MCCURDY
--------------------------
Gregor B. McCurdy
<PAGE>
EXHIBIT NO. (24)
POWERS OF ATTORNEY
<PAGE>
POWERS OF ATTORNEY
WITH RESPECT TO THE NORTHBROOK LIFE INSURANCE COMPANY
"CUSTOM ANNUITY PLUS" CONTRACT
Know all men by these presents that Michael J. Velotta, whose signature
appears below, constitutes and appoints Louis G. Lower, II, his attorney-in-
fact, with power of substitution, and his in any and all capacities, to sign any
registration statements and amendments thereto for the Northbrook Life Insurance
Company Custom Annuity Plus Contract and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
March 12, 1997
- ----------------------------
Date
/s/ MICHAEL J. VELOTTA
- ----------------------------
Michael J. Velotta
Vice President, Secretary, General Counsel
and Director
<PAGE>
POWERS OF ATTORNEY
WITH RESPECT TO THE NORTHBROOK LIFE INSURANCE COMPANY
"CUSTOM ANNUITY PLUS" CONTRACT
Know all men by these presents that Marla G. Friedman whose signature
appears below, constitutes and appoints Michael J. Velotta and Louis G. Lower,
II, her attorneys-in-fact, with power of substitution, and her in any and all
capacities, to sign any registration statements and amendments thereto for the
Northbrook Life Insurance Company Custom Annuity Plus Contract and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
March 12, 1997
- ---------------------------
Date
/s/ MARLA G. FRIEDMAN
- ---------------------------
Marla G. Friedman
Vice President
<PAGE>
POWERS OF ATTORNEY
WITH RESPECT TO THE NORTHBROOK LIFE INSURANCE COMPANY
"CUSTOM ANNUITY PLUS" CONTRACT
Know all men by these presents that Kevin R. Slawin, whose signature
appears below, constitutes and appoints Michael J. Velotta and Louis G. Lower,
II, his attorneys-in-fact, with power of substitution, and his in any and all
capacities, to sign any registration statements and amendments thereto for the
Northbrook Life Insurance Company Custom Annuity Plus Contract and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
March 12, 1997
- -----------------------------
Date
/s/ KEVIN R. SLAWIN
- -----------------------------
Kevin R. Slawin
Vice President and Director
<PAGE>
POWERS OF ATTORNEY
WITH RESPECT TO THE NORTHBROOK LIFE INSURANCE COMPANY
"CUSTOM ANNUITY PLUS" CONTRACT
Know all men by these presents that Karen C. Gardner, whose signature
appears below, constitutes and appoints Michael J. Velotta and Louis G. Lower,
II, her attorneys-in-fact, with power of substitution, and her in any and all
capacities, to sign any registration statements and amendments thereto for the
Northbrook Life Insurance Company Custom Annuity Plus Contract and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
March 12, 1997
- -------------------------
Date
/s/ KAREN C. GARDNER
- -------------------------
Karen C. Gardner
Vice President
<PAGE>
POWERS OF ATTORNEY
WITH RESPECT TO THE NORTHBROOK LIFE INSURANCE COMPANY
"CUSTOM ANNUITY PLUS" CONTRACT
Know all men by these presents that Peter H. Heckman, whose signature
appears below, constitutes and appoints Michael J. Velotta and Louis G. Lower,
II, his attorneys-in-fact, with power of substitution, and his in any and all
capacities, to sign any registration statements and amendments thereto for the
Northbrook Life Insurance Company Custom Annuity Plus Contract and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
March 12, 1997
- ----------------------------
Date
/s/ PETER H. HECKMAN
- ----------------------------
Peter H. Heckman
President and Chief Operating Officer
<PAGE>
POWERS OF ATTORNEY
WITH RESPECT TO THE NORTHBROOK LIFE INSURANCE COMPANY
"CUSTOM ANNUITY PLUS" CONTRACT
Know all men by these presents that Keith A. Hauschildt, whose signature
appears below, constitutes and appoints Michael J. Velotta and Louis G. Lower,
II, his attorneys-in-fact, with power of substitution, and his in any and all
capacities, to sign any registration statements and amendments thereto for the
Northbrook Life Insurance Company Custom Annuity Plus Contract and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
March 12, 1997
- ------------------------------
Date
/s/ KEITH A. HAUSCHILDT
- ------------------------------
Keith A. Hauschildt
Assistant Vice President and Controller
<PAGE>
POWERS OF ATTORNEY
WITH RESPECT TO THE NORTHBROOK LIFE INSURANCE COMPANY
"CUSTOM ANNUITY PLUS" CONTRACT
Know all men by these presents that John R. Hunter, whose signature
appears below, constitutes and appoints Michael J. Velotta and Louis G. Lower,
II, his attorneys-in-fact, with power of substitution, and his in any and all
capacities, to sign any registration statements and amendments thereto for the
Northbrook Life Insurance Company Custom Annuity Plus Contract and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
March 12, 1997
- --------------------------
Date
/s/ JOHN R. HUNTER
- --------------------------
John R. Hunter
Director
<PAGE>
EXHIBIT 99
RESOLUTION OF BOARD OF DIRECTORS
<PAGE>
I, Robert S. Seiler, hereby certify that the attached is a true, complete
and correct copy of a resolution of the Board of Directors of Northbrook Life
Insurance Company, with respect to the Northbrook Life Market Value Adjusted
Contract, as adopted on March 1, 1991.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of said
corporation to be affixed this 5th day of March, 1991.
/s/ Robert S. Seiler
----------------------------
Robert S. Seiler
Senior Vice President, Secretary
and General Counsel
(Corporate Seal)
<PAGE>
WRITTEN CONSENT OF ALL DIRECTORS
OF
NORTHBROOK LIFE INSURANCE COMPANY
MARCH 1, 1991
Pursuant to the provisions of Section 10 of the Illinois Insurance Code of
1937, we the undersigned being all of the Directors of Northbrook Life Insurance
Company, an Illinois Corporation, do hereby consent to the following actions
being taken by and on behalf of Northbrook Life Insurance Company.
BE IT RESOLVED, That, pursuant to the Company's plan to issue market value
adjusted annuity contracts ("Contracts), the appropriate officers, with such
assistance from the Company's auditors, legal counsel and independent
consultants or others as they may require, be, and hereby are, authorized and
directed to take all action necessary to: (a) register the Contracts on a
continuous basis and in such amounts as the officers of the Company shall from
time to time deem appropriate under the Securities Act of 1933; and (b) take all
other actions which are necessary in connection with the offering of said
Contracts for sale in order to comply with the Securities exchange Act of 1934,
the Securities Act of 1933, and other applicable federal laws, including the
filing of any amendments to registration statements, any undertakings or other
requirements of applicable federal laws, as the officers of the Company shall
deem necessary or appropriate; and
BE IT FURTHER RESOLVED, That the Senior Vice President, Secretary and
General Counsel, and the Vice President of the Company's Dean Witter Profit
Center, and either of them with full power to act without the other, hereby are
severally authorized and empowered to prepare, execute and cause to be filed
with the Securities and Exchange Commission on behalf of the Company as issuer
of the Contracts, a Registration Statement under the Securities Act of 1933
registering the Contracts, and any and all amendments to the foregoing on behalf
of the Company and on behalf of and as attorneys for the principal executive
officer and/or the principal financial officer and/or the principal accounting
officer and/or any other officer of the Company; and
BE IT FURTHER RESOLVED, That the Senior Vice President, Secretary, and
General Counsel is hereby appointed as agent for service under any such
registration statement and any and all amendments thereof, and is duly
authorized to receive communications and notices from the Securities and
Exchange Commission under the Securities Act of 1933; and
BE IT FURTHER RESOLVED, That the appropriate officers of the Company be,
and they hereby are, authorized on behalf of the Company to take any and all
action that they may deem necessary or advisable in order to sell the Contracts,
including any registrations, filings and qualifications of the Company, its
officers, agents and employees, and the Contracts under the insurance and
securities laws of any states of the United States of America or other
jurisdictions, and in connection therewith, to prepare execute, deliver and file
all such applications, reports, covenants,
<PAGE>
resolutions, applications for exemptions, consents to service of process and
other papers and instruments as may be required under such laws, and to take any
and all further action which said officers or counsel of the Company may deem
necessary or desirable (including entering into whatever agreements and
contracts may be necessary) in order to maintain such registrations or
qualifications for as long as said officers or counsel deem them to be in the
best interest of the Company; and
BE IF FURTHER RESOLVED, That the appropriate officers of the Company, and
each of them, are hereby authorized to execute and deliver all such documents
and papers and to do or cause to be done all such acts and things as they may
deem necessary or desirable to carry out the foregoing resolutions and the
intent and purposes thereof.
UNDERSTANDING OF DIRECTORS
- --------------------------
IT IS EXPRESSLY UNDERSTOOD by all of the undersigned Directors of the
Corporation that this WRITTEN CONSENT shall and does have the same legal effect
as an unanimous vote of the same at a duly called, convened and held Director's
meeting.
IN WITNESS WHEREOF, all of the Directors of Northbrook Life Insurance
Company have signed this WRITTEN CONSENT as of the day and year first above
written.
/s/ Marla G. Friedman
- ----------------------------------
MARLA G. FRIEDMAN
/s/ Peter H. Heckman
- ----------------------------------
PETER H. HECKMAN
/s/ Louis G. Lower, II
- ----------------------------------
LOUIS G. LOWER, II
/s/ David E. McPherson
- ----------------------------------
DAVID E. McPHERSON
/s/ Myron J. Resnick
- ----------------------------------
MYRON J. RESNICK
/s/ Robert S. Seiler
- ----------------------------------
ROBERT S. SEILER
