<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
The registrant meets the conditions set forth in General Instruction I(1)(a) and
(b) of Form 10-K and is therefore filing this Form with the reduced disclosure
format.
For fiscal year ended December 31, 1996 Commission file numbers: 33-50884
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33-84480
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33-90272
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Northbrook Life Insurance Company
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(Exact name of registrant as specified in its charter)
Illinois 36-300152
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sanders Road
Northbrook, Illinois 60062
(Address of Principal executive offices)(Zip Code)
847/402-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of December 31, 1996, there were 25,000 shares of common capital stock
outstanding, par value $100 per share all of which shares are held by Allstate
Life Insurance Company.
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NORTHBROOK LIFE INSURANCE COMPANY
(A wholly owned subsidiary of Allstate Life Insurance Company)
Annual Report for 1996 On Form 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I
Item 1. Business**............................................ 3
Item 2. Properties**.......................................... 4
Item 3. Legal Proceedings..................................... 4
Item 4. Submission of Matters to a Vote of Security Holders*..N/A
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters........................... 5
Item 6. Selected Financial Data...............................N/A
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 5
Item 8. Financial Statements and Supplementary Data........... 9
Item 9. Disagreements on Accounting and Financial Disclosure..N/A
PART III
Item 10. Directors and Executive Officers of the Registrant*...N/A
Item 11. Executive Compensation................................N/A
Item 12. Security Ownership of Certain Beneficial Owners and
Management*...........................................N/A
Item 13. Certain Relationships and Related Transactions*.......N/A
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K................................... 10
Index to Financial Statement Schedules.............................. 9
Signatures.......................................................... 11
</TABLE>
* Omitted pursuant to General Instruction I(2) of Form 10-K.
** Item prepared in accordance with General Instruction I(2) of Form 10-K.
2
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PART I
ITEM 1. BUSINESS
Northbrook Life Insurance Company (hereinafter "Northbrook Life" or
the "Company"), incorporated in 1978 as a stock life insurance company under the
laws of the State of Illinois, has done business continuously since that time as
"Northbrook Life Insurance Company."
Northbrook Life is a wholly owned subsidiary of Allstate Life Insurance
Company ("Allstate Life" or "ALIC"), a stock life insurance company incorporated
under the laws of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company ("Allstate" or "AIC"), a stock property-liability
insurance company incorporated 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 9, 1993 the
Corporation completed its initial public offering of 89,500,000 common shares.
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.
Northbrook Life's operations consist of one business segment which is
the sale of life insurance and annuity products.
Northbrook Life and Allstate Life entered into reinsurance agreements,
effective December 31, 1987, under which Northbrook Life reinsures substantially
all of its business with Allstate Life. Under the agreements, purchase payments
under all general account contracts are transferred to Allstate Life and become
invested with the assets of Allstate Life, and Allstate Life accepts 100% of the
liability under such contracts. However, the obligations of Allstate Life under
the reinsurance agreement are to the Company. In addition, assets of the Company
that relate to insurance in-force excluding separate account assets and,
beginning in 1995, assets related to certain market value adjusted annuity
contracts under employee benefit plans, are transferred to Allstate Life.
Therefore, the funds necessary to support the operations of the Company are
provided by Allstate Life and the Company is not required to obtain additional
capital to support in-force or future business.
Under the Company's reinsurance agreements with Allstate Life, the
Company reinsures all reserve liabilities with Allstate Life. The Company's
variable contract assets and liabilities are held in legally-segregated,
unitized separate accounts and are retained by the Company. The assets and
liabilities related to certain market value adjusted annuity contracts under
employee benefit plans will be held in the general account of the Company,
however, the transactions related to such variable and market value adjusted
contracts such as premiums, expenses and benefits are transferred to Allstate
Life.
3
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Northbrook Life's and Allstate Life's general account assets must be
invested in accordance 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. Of Allstate Life's consolidated invested assets of $28,037 million
on December 31, 1996, 82.3% was invested in fixed income securities, 3.0% in
equities, 10.9% in mortgage loans, and 3.8% in real estate, short-term
investments and other assets.
Northbrook Life is engaged in a business that is highly competitive
because of the large number of stock and mutual life insurance companies and
other entities 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 Northbrook Life. A.M. Best Company also assigns
Northbrook Life the rating of A+(r) because Northbrook Life 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 Investors Service assigns an Aa3 (excellent) financial strength rating
to the Company. Northbrook Life shares the same ratings of its parent, Allstate
Life.
Although the federal government generally does not directly regulate
the business of insurance, federal initiatives often have an impact on the
business in a variety of ways. Current and proposed measures which may
significantly affect the Company's insurance business relate to the taxation of
insurance companies, the tax treatment of insurance products and the removal of
barriers preventing banks from engaging in the insurance business.
Northbrook Life is regulated by the Securities and Exchange Commission
("SEC") as an issuer of registered products. The SEC also regulates certain
Northbrook Life Separate Accounts which together with the Company issue variable
annuity contracts.
ITEM 2. PROPERTIES
Northbrook Life occupies office space provided by Allstate in
Northbrook, Illinois. Expenses associated with these offices are allocated on a
direct and indirect basis to Northbrook Life.
ITEM 3. LEGAL PROCEEDINGS
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would materially
affect the Company. The Company is involved in pending and threatened
litigation in the normal course of its business in which claims for monetary
damages are asserted. Management, after consultation with legal counsel, does
not anticipate the ultimate liability arising from such pending or threatened
litigation to have a material effect on the financial condition of the Company.
4
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the Company's outstanding shares are owned by its parent.
Allstate Life's outstanding shares are owned by Allstate. With the exception of
director's qualifying shares, all of the outstanding capital stock of Allstate
is owned by The Allstate Corporation. On June 30, 1995, Sears distributed its
80.3% ownership in the Corporation to Sears common shareholders through a tax-
free dividend.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
5
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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
operations 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.
<TABLE>
<CAPTION>
Results of Operations
($ in thousands)
1996 1995 1994
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<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
investment 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
operations 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 resulted from a $25.0 million capital contribution from ALIC
during December 1994.
Realized capital losses of $13 thousand after tax in 1996 are primarily
related 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 $125 thousand in
1994. Overall, the market values of the Company's fixed income securities
were higher in 1995 than in 1994 due to declines in interest rates, which
resulted in gains in 1995 and losses in 1994 when certain fixed income
securities were sold in response to changes in market conditions.
6
<PAGE>
Northbrook Life Insurance Company
Management's Discussion and Analysis
of Financial Condition and Results of Operations
<TABLE>
<CAPTION>
Financial Position
($ in thousands)
1996 1995
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<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>
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
mortgages. The Company attempts to limit interest rate risk by purchasing MBS
whose cost does not significantly exceed par value, and with repayment
protection 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 status
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
million at December 31, 1996 and 1995, respectively. Beginning in 1996, the
Company 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 policyholder transfers from fixed annuity contracts to variable annuity
contracts, partially offset by interest credited to contractholders. Reinsurance
recoverable from ALIC relates to contract benefit obligations ceded to ALIC.
7
<PAGE>
Northbrook Life Insurance Company
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Separate Accounts increased by $1.00 billion attributable to sales of
variable annuity contracts, the favorable investment performance of the Separate
Account investment portfolios and transfers from fixed annuity contracts,
partially offset by variable annuity contract surrenders and withdrawals.
Liquidity and Capital Resources
Under the terms of intercompany reinsurance agreements, premiums and
deposits, 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
December 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 Accounting 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
relinquishment of control and addresses the accounting for securitizations,
securities lending, repurchase agreements and insubstance defeasance
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.
8
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Item 8. Financial Statements and Supplementary Data
Financial Statements
Index
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Page
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Independent Auditors' Report............................................... F-1
Financial Statements:
Statements of Financial Position
December 31, 1996 and 1995........................................... F-2
Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994..................................... F-3
Statements of Shareholder's Equity for the Years Ended
December 31, 1996, 1995 and 1994..................................... F-4
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994..................................... F-5
Notes to Financial Statements......................................... F-6
Schedule IV - Reinsurance for the Years Ended
December 31, 1996, 1995 and 1994..................................... F-16
9
<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 schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
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($ 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
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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
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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
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Total liabilities.................................. 6,837,324 5,994,728
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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
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Total shareholder's equity......................... 78,706 76,875
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Total liabilities and shareholder's equity......... $6,916,030 $6,071,603
========== ==========
</TABLE>
See notes to financial statements.
F-2
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NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1996 1995 1994
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($ 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 $1,733
====== ====== ======
</TABLE>
See notes to financial statements.
F-3
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NORTHBROOK LIFE INSURANCE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
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($ 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>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report. The page
number, if any, listed opposite a document indicates the page number in the
sequential numbering system in the manually signed original of this Report where
such document can be found.
(1) The financial statements filed as part of this Report are
listed in Item 8.
(2) Financial Statement Schedules
Schedule IV - Reinsurance page F-16
(3) Exhibits
Financial Data Schedule
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NORTHBROOK LIFE INSURANCE COMPANY
By LOUIS G. LOWER, II
------------------
Louis G. Lower, II
Chief Executive Officer and Chairman
(Principal Executive Officer)
Date March 27, 1997
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By LOUIS G. LOWER, II
------------------
Louis G. Lower, II
Chief Executive Officer and Chairman
(Principal Executive Officer)
Date March 27, 1997
--------------
By KEITH A. HAUSCHILDT
-------------------
Keith A. Hauschildt
Assistant Vice President and Controller
(Chief Accounting Officer)
Date March 27, 1997
--------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
STATEMENTS OF FINANCIAL POSITION AT DECEMBER 31, 1996; STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996; STATEMENTS OF SHAREHOLDER'S EQUITY FOR THE
YEAR ENDED DECEMBER 31, 1996; AND STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 67,479
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 74,069
<CASH> 0
<RECOVER-REINSURE> 2,480,034
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 6,916,030
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 143,346
<POLICY-HOLDER-FUNDS> 2,336,296
<NOTES-PAYABLE> 0
<COMMON> 2,500
0
0
<OTHER-SE> 76,206
<TOTAL-LIABILITY-AND-EQUITY> 6,916,030
0
<INVESTMENT-INCOME> 4,888
<INVESTMENT-GAINS> (20)
<OTHER-INCOME> 0
<BENEFITS> 0
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 4,868
<INCOME-TAX> 1,666
<INCOME-CONTINUING> 3,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,202
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
