AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1999
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FILE NO. 033-90272
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4 TO FORM S-1
ON
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NORTHBROOK LIFE INSURANCE COMPANY
(Exact Name of Registrant)
ARIZONA 36-3001527
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
3100 SANDERS ROAD, NORTHBROOK, ILLINOIS 60062
847-402-2400
(Address and Phone Number of Principal Executive Office)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
NORTHBROOK LIFE INSURANCE COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847-402-2400
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
RICHARD T. CHOI, ESQUIRE CHRISTINE A. EDWARDS, ESQ.
FREEDMAN, LEVY, KROLL & SIMONDS DEAN WITTER REYNOLDS INC.
1050 CONNECTICUT AVENUE, N.W. TWO WORLD TRADE CENTER, 74TH FLOOR
SUITE 825 NEW YORK, NY 10048
WASHINGTON, D.C. 20036-5366
Approximate date of commencement of proposed sale to the public: The annuity
contract covered by this registration statement is to be issued promptly and
from time to time after the effective date of this registration statement.
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
<PAGE>
THE SCHEDULED ANNUITY MANAGER
Northbrook Life Insurance Company Prospectus dated May 1, 1999
3100 Sanders Road, Northbrook, IL 60062
Telephone Number: 1-800-654-2397
Northbrook Life Insurance Company ("Northbrook") is offering The Scheduled
Annuity Manager, a group and individual flexible premium deferred annuity
contract ("Contract"). This prospectus contains information about the Contract
that you should know before investing. Please keep it for future reference.
The Contracts are available exclusively through Dean Witter Reynolds Inc., the
principal underwriter for the Contracts.
The Securities and Exchange Commission has not approved
or disapproved the securities described in this
prospectus, nor has it passed on the accuracy or the
adequacy of this prospectus. Anyone who tells you
IMPORTANT otherwise is committing a federal crime.
NOTICES
The Contracts are not FDIC insured.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
<S> <C> <C>
Overview Important Terms..........................................
The Contract At A Glance.................................
How the Contract Works...................................
The Contract.............................................
Purchases and Contract
Value....................................................
Contract Features Guarantee Periods........................................
Expenses.................................................
Access To Your Money.....................................
Income Payments..........................................
Death Benefits...........................................
More Information:
Northbrook.............................................
Other Information The Contract...........................................
Qualified Plans........................................
Legal Matters..........................................
Year 2000..............................................
Taxes....................................................
Experts..................................................
Annual Reports and Other Documents.......................
Appendix A - Market Value Adjustment ....................
</TABLE>
<PAGE>
IMPORTANT TERMS
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This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears highlighted.
Page
Accumulation Phase.....................................
Annuitant..............................................
Automatic Payment Plan.................................
Automatic Laddering Program............................
Beneficiary............................................
Cancellation Period....................................
Cash Surrender Value...................................
*Contract .............................................
Contract Value.........................................
Contract Owner ("You") ................................
Death Benefit..........................................
Due Proof of Death.....................................
Guarantee Periods.....................................
Income Plan ...........................................
Issue Date ............................................
Market Value Adjustment ...............................
Northbrook ("We")......................................
Payout Phase...........................................
Payout Start Date ....................................
Preferred Withdrawal Amount............................
Qualified Contracts....................................
Systematic Withdrawal Program..........................
*In certain states, the Contract is only available as a group Contract.
In these states, we will issue you a certificate that represents your
ownership and that summarizes the provisions of the group Contract.
References to "Contract" in this prospectus include certificates,
unless the context requires otherwise.
<PAGE>
THE CONTRACT AT A GLANCE
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The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
---------------------------------- -----------------------------------------
Flexible Payments You can purchase a Contract with as little
as $1,000 ($2,000 for a Qualified Contract)
(we may increase the minimum to $4,000 in
the future, other than for "Qualified
Contracts," which are Contracts issued
with qualified plans). You can add to
your Contract as often and as much as you
like, but each payment must be at least
$1,000. You must maintain a minimum
account size of $1,000.
---------------------------------- -----------------------------------------
Right to Cancel You may cancel your Contract within 20 days
of receipt or any longer period your state
may require ("Cancellation Period") and
receive a full refund of your purchase
payments.
---------------------------------- -----------------------------------------
Expenses You will bear the following expenses:
o Withdrawal charge of 6% on amounts
withdrawn (with exceptions)
o State premium tax (if your state imposes
one)
---------------------------------- -----------------------------------------
Guaranteed Interest The Contract offers fixed interest
rates that we guarantee for specified
periods we call "Guarantee Periods." To
find out what the current rates are on the
Guarantee Periods, call us at
1-800-654-2397.
---------------------------------- -----------------------------------------
Special Services For your convenience, we offer these
special services:
o Automatic Additions Program
o Systematic Withdrawal Program
---------------------------------- -----------------------------------------
Income Payments The Contract offers three income payment
plans:
o life income with or without guaranteed
payments (5 to 30 years)
o a joint and survivor life income
with or without guaranteed payments
(5 to 30 years)
o guaranteed payments for a specified
period (5 to 30 years)
---------------------------------- -----------------------------------------
Death Benefits If you or the Annuitant dies
before the Payout Start Date, we will pay
the death benefit described in the
Contract.
---------------------------------- -----------------------------------------
Withdrawals You may withdraw some or all of your
Contract value ("Contract Value") at
anytime prior to the Payout Start Date. If
you withdraw Contract Value from a
Guarantee Period before its maturity, a
withdrawal charge, Market Value Adjustment,
and taxes (including a 10% penalty tax for
withdrawals before age 59 1/2) may apply.
---------------------------------- -----------------------------------------
<PAGE>
HOW THE CONTRACT WORKS
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The Contract basically works in two ways.
First, the Contract can help you (we assume you are the Contract owner)
save for retirement because you can invest in the Contract and pay no federal
income taxes on any earnings until you withdraw them. You do this during what we
call the "Accumulation Phase" of the Contract. The Accumulation Phase begins on
the date we issue your Contract (we call that date the "Issue Date") and
continues until the Payout State Date, which is the date we apply your money to
provide income payments. During the Accumulation Phase, you may allocate your
purchase payments to our Fixed Account for one or more Guarantee Periods. During
each Guarantee Period, your money will earn a fixed rate of interest that we
declare periodically.
Second, the Contract can help you plan for retirement because you can use
it to receive retirement income for life and/or for a pre-set number of years,
by selecting one of the income payment options (we call these "Income Plans")
described on page __. You receive income payments during what we call the
"Payout Phase" of the Contract, which begins on the Payout Start Date and
continues until we make the last income payment provided by the Income Plan you
select. During the Payout Phase, we guarantee the amount of your payments, which
will remain fixed. The amount of money you accumulate under your Contract during
the Accumulation Phase and apply to an Income Plan will determine the amount of
your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Issue Payout Start
Date Accumulation Phase Date Payout Phase
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You save for retirement
| | | ?
You buy You elect to receive income You can receive Or you can
a Contract payments or receive a lump sum income payments receive income
payment for a set period payments for
life
</TABLE>
As the Contract owner, you exercise all of the rights and privileges
provided by the Contract. If you die, any surviving Contract owner or if there
is none, the Beneficiary will exercise the rights and privileges provided by the
Contract. See "The Contract." In addition, if you die before the Payout Start
Date, we will pay a death benefit to any surviving Contract owner or, if there
is none, to your Beneficiary. See "Death Benefits."
Please call us at 1-800-654-2397 if you have any question about how the
Contract works.
<PAGE>
THE CONTRACT
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CONTRACT OWNER
The Scheduled Annuity Manager is a contract between you, the Contract owner, and
Northbrook, a life insurance company. As the Contract owner, you may exercise
all of the rights and privileges provided to you by the Contract. That means it
is up to you to select or change (to the extent permitted):
o the amount and timing of your purchase payments and withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement income,
o the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when you die, and
o any other rights that the Contract provides.
If you die, any surviving Contract owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued with a qualified plan. See
"Qualified Plans" on page __.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). The Contract requires that there be an Annuitant at all times
during the Accumulation Phase and on the Payout Start Date. The Annuitant must
be a natural person.
You initially designate an Annuitant in your application. If the Contract owner
is a natural person, you may change the Annuitant at any time prior to the
Payout Start Date. Once we receive your change request, any change will be
effective at the time you sign the written notice. We are not liable for any
payment we make or other action we take before receiving any written request
from you. You may designate a joint Annuitant, who is a second person on whose
life income payments depend. If the Annuitant dies prior to the Payout Start
Date, the new Annuitant will be the youngest Contract owner, unless the Contract
owner names a different annuitant.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed and filed with us. Any change will be effective at the time you sign the
written notice. Until we receive your written notice to change a Beneficiary, we
are entitled to rely on the most recent Beneficiary information in our files. We
will not be liable as to any payment or settlement made prior to receiving the
written notice. Accordingly, if you wish to change your Beneficiary, you should
deliver your written notice to us promptly. If the Contract owner is a natural
person, we will determine the Beneficiary from the most recent request of the
Contract owner.
If the Contract owner is a grantor trust, then the Beneficiary will be that same
trust. If the Contract owner is a non-natural person other than a grantor trust,
the Contract owner is also the Beneficiary, unless a different Beneficiary is
named.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living, the Beneficiary will be:
o your spouse or, if he or she is no longer alive,
o your surviving children equally, or if you have no surviving children,
o your estate.
If more than one Beneficiary survives you, we will divide the death benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only a Northbrook officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract, without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
You may assign an interest in your Contract. No Beneficiary may assign benefits
under the Contract until they are due. We will not be bound by any assignment
until you sign it and file it with us. We are not responsible for the validity
of any assignment. Federal law prohibits or restricts the assignment of benefits
under many types of retirement plans and the terms of such plans may themselves
contain restrictions on assignments. An assignment may also result in taxes or
tax penalties. You should consult with an attorney before assigning your
Contract.
<PAGE>
PURCHASES AND CONTRACT VALUE
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MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $1,000 (2,000 for a Qualified
Contract). We may increase the minimum to $4,000 in our sole discretion. (The
higher minimum would not apply to Qualified Contracts that are issued under
plans that qualify for special federal income tax treatment.) Each subsequent
purchase payment must be at least $1,000. You may make purchase payments at any
time prior to the Payout Start Date. We reserve the right to limit the maximum
amount and number of purchase payments we will accept.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchases payments by automatically transferring money
from your bank account. Please call or write us for an enrollment form.
ALLOCATION OF PURCHASE PAYMENTS
For each purchase payment, you must select a Guarantee Period. A Guarantee
Period is a period of years during which you will earn a guaranteed interest
rate on your money. You must allocate at least $1,000 to any one Guarantee
Period at the time you make your purchase payment or select a renewal Guarantee
Period.
We will apply your purchase payment to the Guarantee Period you select within 7
days of the receipt of the payment. If you do not select a Guarantee Period for
a purchase payment, we will allocate the purchase payment to the same period
used for the most recent purchase payment.
RIGHT TO CANCEL
You may cancel your Contract within the Cancellation Period, which is 20 days of
receipt or any longer period your state may require. You may return it by
delivery it or mailing it to us. If you exercise this right to cancel, the
Contract terminates and we will pay you the full amount of your purchase
payments or any greater amount that your state may require.
CONTRACT VALUE
Your Contract Value at any time during the Accumulation Phase is equal to the
purchase payments you have invested in the Guarantee Periods, plus earnings
thereon, and less any amounts previously withdrawn.
<PAGE>
GUARANTEE PERIODS
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Each payment allocated to a Guarantee Period earns interest at a specified rate
that we guarantee. We are currently offering Guarantee Periods of 5 years in
length. In the future we may offer Guarantee Periods of different lengths
ranging from 1 to 10 years or stop offering some Guarantee Periods.
Amounts allocated to Guarantee Periods become part of our general account, which
supports our insurance and annuity obligations. The general account consists of
our general assets other than those in segregated asset accounts. We have sole
discretion to invest the assets of the general account, subject to applicable
law. Any money you allocate to a Guarantee Period does not entitle you to share
in the investment experience of the general account.
You must allocate at least $1,000 to a Guarantee Period at the time you make a
purchase payment or select a renewal Guarantee Period.
INTEREST RATES
We will tell you what interest rates and Guarantee Periods we are offering at a
particular time. We will not change the interest rate that we credit to a
particular investment until the end of the relevant Guarantee Period. We may
declare different interest rates for Guarantee Periods of the same length that
begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, sales commissions and administrative expenses,
general economic trends, and competitive factors. We determine the interest
rates to be declared in our sole discretion. We can neither predict nor
guarantee what those rates will be in the future. For current interest rate
information, please contact your sales representative or Northbrook at
1-800-654-2397.
The interest rate will never be less than the minimum guaranteed rate stated in
the Contract.
HOW WE CREDIT INTEREST
We will credit interest to your initial purchase payment from the Issue Date. We
will credit interest to your additional purchase payments from the date we
receive them. We will credit interest daily to each amount allocated to a
Guarantee Period at a rate that compounds to the annual interest rate that we
declared at the beginning of the applicable Guarantee Period.
The following example illustrates how a purchase payment would grow, given an
assumed Guarantee Period and annual interest rate:
Purchase Payment..............................$10,000
Guarantee Period..............................5 years
Annual Interest Rate........................... 4.50%
<TABLE>
<CAPTION>
END OF CONTRACT YEAR
<S> <C> <C> <C> <C> <C>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
Beginning Contract Value $10,000.00
X (1 + Annual Interest Rate) X 1.045
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Annual Interest Rate) X 1.045
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Annual Interest Rate) X 1.045
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Annual Interest Rate) X 1.045
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Annual Interest Rate) X 1.045
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82 -$10,000)
</TABLE>
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a partial withdrawal, you may be required to pay a
withdrawal charge. In addition, the amount withdrawn may be increased or
decreased by a Market Value Adjustment that reflects changes in interest rates
since the time you invested the amount withdrawn. The hypothetical interest rate
is for illustrative purposes only and is 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 shown above but will never be
less than the guaranteed minimum rate stated in the Contract.
RENEWALS
Prior to the end of each Guarantee Period, we will mail you a notice asking you
what to do with your money. During the 30-day period after the end of the
Guarantee Period, you may:
1) take no action. We will automatically apply your money to a new
Guarantee Period of the same length as the expired Guarantee Period.
The new Guarantee Period will begin on the day the previous Guarantee
Period ends. The new interest rate will be our then current declared
rate for a Guarantee Period of that length; or
2) instruct us to apply your money to one or more new Guarantee Periods
that may be available. The new Guarantee Period(s) will begin on the
day the previous Guarantee Period ends. The new interest rate will be
our then current declared rate for those Guarantee Periods; or
3) withdraw all or a portion of your money without incurring a withdrawal
charge or a 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 Period expired. Amounts not withdrawn will be applied to a
new Guarantee Period of the same length as the previous Guarantee
Period. The new Guarantee Period will begin on the day the previous
Guarantee Period ends.
Under our Automatic Laddering Program, you may choose, in advance, to use
Guarantee Periods of the same length for all renewals. You can select this
Program at any time during the Accumulation Phase, including on the Issue Date.
We will apply renewals to Guarantee Periods of the selected length until you
direct us in writing to stop. We may stop offering this Program at any time. For
additional information on the Automatic Laddering Program, please call our
customer support unit at 1-800-654-2397.
MARKET VALUE ADJUSTMENT
All withdrawals from a Guarantee Period, other than those taken within the first
30 days of a renewal Guarantee Period, are subject to a Market Value Adjustment.
A Market Value Adjustment also applies upon payment of a death benefit under
Contracts and when you apply amounts currently invested in a Guarantee Period to
an Income Plan (other than during the 30-day period described above).
We will not apply the Market Value Adjustment to withdrawals you make:
o to satisfy IRS minimum distribution rules for the Contract, or
o within the "Preferred Withdrawal Amount," described under "Expenses" below.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time you remove
it from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "Treasury Rate" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin
Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. If interest rates increase significantly from the time you make
a purchase payment, the Market Value Adjustment, withdrawal charge, premium
taxes, and income tax withholding (if applicable) could reduce the amount you
receive upon full withdrawal of your Contract Value to an amount that is less
than the purchase payments plus interest at the minimum guaranteed interest rate
under the Contract.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is lower than the applicable current Treasury Rate for a period equal to
the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a lower amount payable to you. Conversely, if the Treasury Rate
at the time you allocate money to a Guarantee Period is higher than the
applicable current Treasury Rate, then the Market Value Adjustment will result
in a higher amount payable to you.
For example, assume that you purchase a Contract and select an initial Guarantee
Period of 5 years and the Treasury Rate for that duration is 4.50%. Assume that
at the end of 3 years, you make a partial withdrawal. If, at that later time,
the current Treasury Rate for a 2 year period is 4.00%, then the Market Value
Adjustment will be positive, which will result in an increase in the amount
payable to you. Conversely, if the current Treasury Rate for the 2 year period
is 5.00%, then the Market Value Adjustment will be negative, which will result
in a decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix A
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
<PAGE>
EXPENSES
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As a Contract owner, you will bear the charges and expenses described below.
WITHDRAWAL CHARGE
We may assess a withdrawal charge equal to 6% of the amounts you withdraw.
However, each year you may withdraw up to 10% of the funds initially allocated
to the Guarantee Period from which you are making the withdrawal without paying
a withdrawal charge. We measure each year from the commencement of the relevant
Guarantee Period. Unused portions of this 10% "Preferred Withdrawal Amount" are
not carried forward to future years or other Guarantee Periods. We will deduct
withdrawal charges, if applicable, from the amount paid unless you instruct
otherwise.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date;
o the death of the Contract owner or the Annuitant;
o withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; or
o withdrawals made within 30 days of their renewal Guarantee Periods.
Withdrawals may be subject to tax penalties, income tax, and a Market Value
Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
We may discontinue this practice some time in the future, and deduct premium
taxes from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, we deduct the charge for premium taxes from the total
Contract Value before applying the Contract Value to an Income Plan.
<PAGE>
ACCESS TO YOUR MONEY
- ------------------------------------------------------------------------------
You can withdraw some or all of your money at any time prior to the Payout Start
Date. You may not make any withdrawals or surrender your Contract once the
Payout Phase has begun.
You must specify the Guarantee Period from which you would like to withdraw your
money. If the amount you withdraw reduces the amount invested in any Guarantee
Period to less than $1,000, we will treat the withdrawal request as a request to
withdraw the entire amount in that Guarantee Period.
The amount you receive may be reduced by a withdrawal charge, income tax
withholding, 10% tax penalty, and any premium taxes. The amount you receive may
be increased or reduced by a Market Value Adjustment.
If you request a total withdrawal, you must return your Contract to us.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $100. We will deposit
systematic withdrawal payments into the Contract owner's bank account or Morgan
Stanley Dean Witter Active Assets(TM) Account. Please consult with your Morgan
Stanley Dean Witter Financial Advisor for details.
Income taxes may apply to systematic withdrawals. Please consult your tax
advisor before taking any withdrawal.
We may modify or suspend the Systematic Withdrawal Program and charge a
processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
POSTPONEMENT OF PAYMENTS
We may defer payment of withdrawals for up to six months from the date we
receive your withdrawal request.
MINIMUM CONTRACT VALUE
If a withdrawal would reduce your Contract Value to less than $1,000, we will
treat the request as a request to withdraw the entire Contract Value. Your
Contract will terminate if you withdraw all of your Contract Value. We will,
however, ask you to confirm your withdrawal request before terminating your
Contract. If you surrender your Contract, we will pay you its Contract Value
adjusted by any applicable Market Value Adjustment, less any applicable
withdrawal charges and taxes.
<PAGE>
INCOME PAYMENTS
- ------------------------------------------------------------------------------
PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your Contract Value, adjusted by the Market Value
Adjustment, less any applicable taxes, to an Income Plan. The Payout Start Date
must be:
o at least one month after the Issue Date; and
o no later than the Annuitant's 90th birthday, or the 10th Contract
anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date as stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose and change your choice of Income Plan until 30 days
before the Payout Start Date. If you do not select an Income Plan, we will make
income payments in accordance with Income Plan 1 with guaranteed payments for 10
years. After the Payout Start Date, you may not make withdrawals or change your
choice of Income Plan.
The three Income Plans available under the Contract are:
Income Plan 1 -- Life Income With or Without Guaranteed Payments. Under
this plan, we make periodic income payments for as long as the
Annuitant lives. In addition, for plans with guaranteed income
payments, if the Annuitant dies before we have made all of the
guaranteed income payments, we will continue to pay the remainder of
such payments as required by the Contract.
Income Plan 2 -- Joint and Survivor Life Income With or Without
Guaranteed Payments. Under this plan, we make periodic income payments
for at least as long as either the Annuitant or the joint Annuitant is
alive. In addition, for plans with guaranteed income payments, if both
the Annuitant and the joint Annuitant die before we have made all of
the guaranteed income payments, we will continue to pay the remainder
of such payments as required by the Contract.
Income Plan 3 -- Guaranteed Payments for a Specified Period. Under this
plan, we make periodic income payments for the period you have chosen.
These payments do not depend on the Annuitant's life.
You may elect to receive guaranteed payments under each of the above Income
Plans for periods ranging from 5 to 30 years.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
We may make other Income Plans available, including ones that you and we agree
upon. You may obtain information about them by writing or calling us.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is still alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
We will apply your Contract Value, adjusted by a Market Value Adjustment, less
applicable taxes, to your Income Plan on the Payout Start Date. If the amount
available to apply under an Income Plan is not enough to provide an initial
payment of at least $20, and state law permits, we may:
o pay you the Contract Value, adjusted by any Market Value Adjustment and
less any applicable taxes, in a lump sum instead of the periodic payments
you have chosen, or
o we may reduce the frequency of your payments so that each payment will be
at least $20.
INCOME PAYMENTS
We guarantee income payment amounts for the duration of the Income Plan. We
calculate income payments by:
1) adjusting the value of your Contract on the Payout Start Date by any
applicable Market Value Adjustment;
2) deducting any applicable premium tax; and
3) applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as
we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
<PAGE>
DEATH BENEFITS
- ------------------------------------------------------------------------------
We will pay a death benefit prior to the Payout Start Date on:
1) the death of any Contract owner, or
2) the death of the Annuitant, if the Contract owner is not the same person as
the Annuitant.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greater of:
(1) the Contract Value, and (2) the "Cash Surrender Value," which is the
Contract Value, adjusted by any Market Value Adjustment, less withdrawal charges
and premium taxes. We will calculate the death benefit as of the date we receive
a complete request for payment of the death benefit.
A claim for a distribution on death must include "Due Proof of Death." We will
accept the following documentation as Due Proof of Death:
o a certified original copy of the death certificate; or
o a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
o any other proof acceptable to us.
DEATH BENEFIT OPTIONS
Upon death of the Contract owner, the new Contract owner generally has the
following 3 options:
1) receive the Cash Surrender Value within 5 years of the date of death;
2) receive the Death Benefit in a lump sum. The "Death Benefit" is equal to
the greater of the Contract Value and the Cash Surrender Value computed as
of the date we receive a complete request for payment of Death Benefit; or
3) 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 Contract owner, or a period not to exceed the life
expectancy of the new Contract owner.
Options 2 and 3 above are not available if we do not receive notice of death
within 180 days of the date of death. We are currently waiving the 180 day
limitation but may enforce it in the future. Please refer to your Contract for
more details on the above options, including terms that apply to grantor trusts.
If the new Contract owner is a non-natural person (other than a grantor trust),
the new Contract owner must elect to receive the Death Benefit in a lump sum.
If the surviving spouse of the deceased Contract owner is the new Contract
owner, then the spouse may elect Options 2 or 3 listed above or may continue the
Contract in the Accumulation Phase as if the death had not occurred. If the
Contract is continued in the Accumulation Phase, the surviving spouse may make a
single withdrawal of any amount within 1 year of the date of death without
incurring a withdrawal charge. However, any applicable Market Value Adjustment,
determined as of the date of the withdrawal, will apply. The single withdrawal
amount is in addition to the annual Preferred Withdrawal Amount.
If the Contract owner is not the Annuitant and the Annuitant dies, then the
Contract owner has the following 3 options:
1) continue the Contract as if the death had not occurred;
2) receive the Death Benefit in a lump sum; or
3) apply the Death Benefit to an Income Plan, which must begin within 1 year
of the date of death and must be for a period equal to or less than the
life expectancy of the Contract owner.
For Options 1 and 3, the new Annuitant will be the youngest Contract owner
unless the Contract owner names a different Annuitant. Options 1 and 3 are not
available if the Contract owner is a non-natural person (other than a grantor
trust).
Options 2 and 3 above are not available if we do not receive notice of death
within 180 days of the date of death. We are currently waiving the 180 day
limitation but may enforce it in the future. Please refer to your Contract for
more details on the above options, including terms that apply to grantor trusts.
<PAGE>
MORE INFORMATION
- ------------------------------------------------------------------------------
NORTHBROOK
Northbrook is the issuer of the Contract. Northbrook is a stock life insurance
company organized under the laws of the State of Arizona in 1998. Previously,
Northbrook was organized under the laws of the State of Illinois in 1978.
Northbrook is currently licensed to operate in the District of Columbia and all
states except New York. We intend to offer the Contract in those jurisdictions
in which we are licensed. Our home office is located at 3100 Sanders Road,
Northbrook, Illinois, 60062.
Northbrook is a wholly owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the laws of
the State of Illinois. Allstate Life is a wholly owned subsidiary of Allstate
Insurance Company, a stock property-liability insurance company incorporated
under the laws of Illinois. All of the outstanding capital stock of Allstate
Insurance Company is owned by The Allstate Corporation.
Northbrook and Allstate Life entered into a reinsurance agreement effective
December 31, 1987. Under the reinsurance agreement, Allstate Life reinsures all
of Northbrook's liabilities under its various insurance Contracts. The
reinsurance agreement provides us with financial backing from Allstate Life.
However, it does not create a direct contractual relationship between Allstate
Life and you. In other words, the obligations of Allstate Life under the
reinsurance agreement are to Northbrook; Northbrook remains the sole obligor
under the Contract to you.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate Life which automatically reinsures all
net business of Northbrook. A.M. Best Company also assigns Northbrook the rating
of A+(r) because Northbrook automatically reinsures all net business with
Allstate Life. Standard & Poor's Insurance Rating Services assigns an AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Northbrook. Northbrook shares the same ratings of
its parent, Allstate Life. We may from time to time advertise these ratings in
our sales literature.
THE CONTRACT
Dean Witter Reynolds Inc. ("Dean Witter"), located at Two World Trade Center,
74th Floor, New York, NY 10048, serves as distributor of the Contracts. Dean
Witter is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. Dean
Witter is a registered broker-dealer under the Securities Exchange Act of 1934,
as amended ("Exchange Act") and is a member of the National Association of
Securities Dealers. Dean Witter is also registered with the Securities and
Exchange Commission ("SEC") as an investment adviser.
We may pay broker-dealers 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 broker-dealers.
The underwriting agreement with Dean Witter provides that we will reimburse Dean
Witter for any liability to Contract owners arising out of services rendered or
Contracts issued.
<PAGE>
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Northbrook on
certain federal securities law matters. All matters of state insurance law
pertaining to the Contracts, including the validity of the Contracts and
Northbrook's right to issue such Contracts under state insurance law, have been
passed upon by Michael J. Velotta, General Counsel of Northbrook.
YEAR 2000
Northbrook is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Northbrook's older computer software programs
recognize only the last two digits of the year in any date, some software may
fail to operate properly in or after the year 1999, if the software is not
reprogrammed or replaced ("Year 2000 Issue"). Northbrook believes that many of
its counterparties and suppliers also have Year 2000 Issues which could affect
Northbrook. In 1995, Allstate Insurance Company commenced a plan intended to
mitigate and/or prevent the adverse effects of Year 2000 Issues. These
strategies include normal development and enhancement of new and existing
systems, upgrades to operating systems already covered by maintenance agreements
and modifications to existing systems to make them Year 2000 compliant. The plan
also includes Northbrook actively working with its major external counterparties
and suppliers to assess their compliance efforts and Northbrook's exposure to
them. Northbrook presently believes that it will resolve the Year 2000 Issue in
a timely manner, and the financial impact will not materially affect its results
of operations, liquidity or financial position. Year 2000 costs are and will be
expensed as incurred.
<PAGE>
TAXES
- ------------------------------------------------------------------------------
The following discussion is general and is not intended as tax advice. We make
no guarantee regarding the tax treatment of any Contract or transaction
involving a Contract.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax advisor.
TAXATION OF NORTHBROOK
Northbrook is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code ("Tax Code").
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where the owner is a natural
person. As a general rule, annuity contracts owned by non-natural persons such
as corporations, trusts, or other entities are not treated as annuity contracts
for federal income tax purposes. The income on such contracts is taxed as
ordinary income received or accrued by the owner during the taxable year.
Contracts will generally be treated as held by a natural person if the nominal
owner is a trust that holds the Contract for the benefit of a natural person.
Please see a competent tax advisor to discuss other possible exceptions to the
nonnatural owner rule.
Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that is not taxable is
equal to the payment times the ratio of the investment in the contract (i.e.,
nondeductible IRA contributions, after tax contributions to qualified plans) to
the Contract Value.
You should contact a competent tax advisor about the potential tax consequences
of a Market Value Adjustment, as no definitive guidance exists on the proper tax
treatment of Market Value Adjustments. If you make a full withdrawal under a
non-Qualified Contract or a Qualified Contract, the amount received will be
taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are taxable only to the extent that distributions exceed
contributions. "Qualified distributions" from Roth IRAs are not taxable.
"Qualified distributions" are any distributions made more than 5 taxable years
after the taxable year of the first contribution to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the Contract owner's death,
o attributable to the Contract owner being disabled, or
o for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. The amount excluded from income
is determined by multiplying the payment by the ratio of the investment in the
Contract (adjusted for any refund feature or period certain) to the total
expected value of annuity payments for the term of the Contract. The annuity
payments will be fully taxable after the total amount of the investment in the
Contract is excluded using these ratios. If you die, and annuity payments cease
before the total amount of the investment in the Contract is recovered, the
unrecovered amount will be allowed as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1) if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2) if distributed under an Income Plan, the amounts are taxed in the same
manner as an annuity payment.
IRS Required Distribution at Death Rules. To qualify as an annuity contract for
federal income tax purposes, a non-Qualified Contract must provide:
1) if any Contract owner dies on or after the Payout Start Date, but before
the entire interest in the Contract has been distributed, the remaining
portion of such interest must be distributed at least as rapidly as under
the method of distribution being used as of the date of the owner's death;
2) if any Contract owner dies prior to the Payout Start Date, the entire
interest in the Contract must be distributed within 5 years after the date
of the owner's death.
The 5-year requirement is satisfied if:
o any portion of the Contract owner's interest which is payable to 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
o the distributions begin within 1 year of the Contract owner's death.
If the Contract owner's designated Beneficiary is a surviving spouse, the
Contract may be continued with the surviving spouse as the new Contract owner.
If the owner of the Contract is a non-natural person, the Annuitant is treated
as the Contract owner for purposes of applying the distribution at death rules.
In addition, a change in the Annuitant on a Contract owned by a non-natural
person is treated as the death of the Contract owner.
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
o made on or after the date the Contract owner attains age 59 1/2;
o made as a result of the Contract owner's death or disability;
o made in substantially equal periodic payments over the Contract owner's
life or life expectancy,
o made under an immediate annuity; or
o attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
Aggregation of Annuity Contracts. All non-qualified deferred annuity contracts
issued by Northbrook (or its affiliates) 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.
TAX QUALIFIED CONTRACTS
The Contract may be used with several types of qualified plans. The tax rules
applicable to participants in qualified plans vary according to the type of plan
and the terms and conditions of the plan. Qualified plan participants, and
Contract owners, Annuitants and Beneficiaries under the Contract may be subject
to the terms and conditions of the qualified plan regardless of the terms of the
Contract.
TYPES OF QUALIFIED PLANS
IRAs. Section 408 of the Code permits eligible individuals to contribute to an
individual retirement plan known as an IRA. IRAs are subject to limitations on
the amount that can be contributed and on the time when distributions may
commence. Certain distributions from other types of qualified plans may be
"rolled over" on a tax-deferred basis into an IRA. An IRA generally may not
provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid or the Contract value. The Contract provides a
death benefit that in certain situations, may exceed the greater of the payments
or the contract value. If the IRS treats the death benefit as violating the
prohibition on investment in life insurance contracts, the Contract would not
qualify as an IRA.
Roth IRAs. Section 408A of the Code permits eligible individuals to make
nondeductible contributions to an individual retirement plan known as a Roth
IRA. Roth IRAs are subject to limitations on the amount that can be contributed.
In certain instances, distributions from Roth IRAs are excluded from gross
income. Subject to certain limits, a traditional Individual Retirement Account
or Annuity may be converted or "rolled over" to a Roth IRA. The taxable portion
of a conversion or rollover distribution is included in gross income, but is
exempt from the 10% penalty tax on premature distributions.
Simplified Employee Pension Plans. Section 408(k) of the Code allows employers
to establish simplified employee pension plans for their employees using the
employees' IRAs if certain criteria are met. Under these plans the employer may,
within limits, make deductible contributions on behalf of the employees to their
individual retirement annuities. Employers intending to use the contract in
connection with such plans should seek competent advice.
Savings Incentive Match Plans for Employees (SIMPLE Plans). Sections 408(p) and
401(k) of the Tax Code allow employers with 100 or fewer employees to establish
SIMPLE retirement plans for their employees. SIMPLE plans may be structured as a
SIMPLE retirement account using an employee's IRA to hold the assets, or as a
Section 401(k) qualified cash or deferred arrangement. In general, a SIMPLE plan
consists of a salary deferral program for eligible employees and matching or
nonelective contributions made by employers. Employers intending to use the
Contract in conjunction with SIMPLE plans should seek competent tax and legal
advice.
Tax Sheltered Annuities. Section 403(b) of the Tax 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 Contracts for
them. Subject to certain limitations, a Section 403(b) plan allows an employer
to exclude the purchase payments from the employees' gross income. A 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:
1) on or after the date the employee:
o attains age 59 1/2,
o separates from service,
o dies, or
o becomes disabled; or
2) on account of hardship (earnings on salary reduction contributions may not
be distributed for hardship).
These limitations do not apply to withdrawals where Northbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
Corporate and Self-Employed Pension and Profit Sharing Plans. Sections 401(a)
and 403(a) of the Tax Code permit corporate employers to establish various types
of tax favored retirement plans for employees. The Tax Code permits
self-employed individuals to establish tax favored retirement plans for
themselves and their employees. Such retirement plans may permit the purchase of
Contracts to provide benefits under the plans.
State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current income taxes. The employees must be participants in an eligible
deferred compensation plan. Employees with Contracts under the plan are
considered general creditors of the employer. The employer, as owner of the
Contract, has the sole right to the proceeds of the Contract. Under these plans,
contributions made for the benefit of the employees will not be taxable to the
employees until distributed from the plan. However, all compensation deferred
under a 457 plan must remain the sole property of the employer. As property of
the employer, the assets of the plan are subject only to the claims of the
employer's general creditors, until such time as the assets become available to
the employee or a beneficiary.
INCOME TAX WITHHOLDING
Northbrook is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amounts to an IRA or eligible retirement plan. Eligible rollover
distributions generally include all distributions from Qualified Contracts,
excluding IRAs, with the exception of:
o required minimum distributions,
o a series of substantially equal periodic payments made over a period of at
least 10 years, or,
o over the life (joint lives) of the participant (and beneficiary).
Northbrook may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts, or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
<PAGE>
EXPERTS
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The financial statements and the related financial statement schedule of
Northbrook incorporated in this prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
ANNUAL REPORTS AND OTHER DOCUMENTS
- ------------------------------------------------------------------------------
Northbrook's annual report on Form 10-K for the year ended December 31, 1998
("Form 10-K Annual Report") is incorporated herein by reference, which means
that it is legally a part of this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000716791. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can review these materials
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of the SEC's Public Reference
Room, call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents) , please
write or call us at 3100 Sanders Road, Northbrook, Illinois 60062 (telephone :
1-800-654-2397).
ANNUAL STATEMENTS
At least once a year prior to the Payout Start Date, we will send you a
statement containing information about your Contract Value. For more
information, please contact your Morgan Stanley Dean Witter Financial Advisor or
call our customer support unit at 1-800-654-2397.
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Guarantee Period for
the week preceding the establishment of the Guarantee Period.
N = the number of complete days from the date we receive the withdrawal
request to the end of the Guarantee Period; and
J = the Treasury Rate for a maturity of N days for the week preceding
the receipt of the withdrawal request on the date we determine the
Market Value Adjustment.
If a Treasury Rate for a maturity of N days is not available, we will
use a weighted average. If N is less than or equal to 365 days, J will
be the 1-year Treasury Rate.
The Market Value Adjustment factor is determined from the following formula:
.9 X (I - J) X N/365
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount withdrawn (in excess of the Preferred Withdrawal
Amount) or applied to an Income Plan, from a Guarantee Period other than amounts
withdrawn or applied from a renewal Guarantee Period during the first 30 days
thereof.
A-1
<PAGE>
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
<TABLE>
<CAPTION>
EXAMPLE 1: (Assumes declining interest rates)
<S> <C>
Step 1. Calculate Contract Value at End of Contract Year 3: 10,000.00 X (1.0450)(3) = $11,411.66
Step 2. Calculate the Amount in excess of Preferred Withdrawal Amount (.10 X 10,000) = $1,000
the Preferred Withdrawal Amount: Amount in Excess: $11,411.66 - 1,000 = $10,411.66
Step 3. Calculate the Withdrawal Charge: .06 X $10,411.66 = $624.70
Step 4. Calculate the Market Value Adjustment: I = 4.5%
J = 4.2%
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 = Market Value Adjustment Factor X
Amount Subject to Market Value Adjustment:
= .0054 X $10,411.66 = $56.22
Step 5. Calculate the amount received by a Contract owner
as a result of full withdrawal at the end of Contract Year 3: $11,411.66 - $624.70 + $56.22 = $10,843.18
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE 2: (Assumes rising interest rates)
<S> <C>
Step 1. Calculate Contract Value at End of Contract Year 3: 10,000.00 X (1.045)(3) = $11,411.66
Step 2. Calculate the Amount in excess of Preferred Withdrawal Amount (.10 X 10,000) = $1,000
the Preferred Withdrawal Amount: Amount in Excess: $11,411.66 - 1,000 = $10,411.66
Step 3. Calculate the Withdrawal Charge: .06 X $10,411.66 = $624.70
Step 4. Calculate the Market Value Adjustment: I = 4.5%
J = 4.8%
N = 730
Market Value Adjustment Factor: .9 X (I-J) X N/365
= .9 X (.045 - .048) X (730/365) = -.0054
Market Value Adjustment = Market Value Adjustment Factor
X Amount Subject to Market Value Adjustment
= -.0054 X $10,411.66 = - $56.22
Step 5. Calculate the amount received by a Contract owner
as a result of full withdrawal at the end of Contract Year 3: $11,411.66 - $624.70 - $56.22 = $10,730.74
</TABLE>
A-3
<PAGE>
back cover
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made. We do not authorize anyone to provide
any information or representations regarding the offering described in this
prospectus other than as contained in this prospectus.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of Northbrook Life Insurance Company ("Registrant") 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 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No. Description
(1) Form of Underwriting Agreement (Incorporated herein by reference to
Post-Effective Amendment No. 13 to the Form N-4 Registration Statement of
Northbrook Variable Annuity Account II of Northbrook Life Insurance Company
(File No. 033-35412) dated December 31, 1996.)
(2) None
(4) Form of Northbrook Life Insurance Company Flexible Premium Deferred Annuity
Certificate and Application
(5)(a) Opinion of General Counsel re: Legality (Previously filed in initial
filing to this Registration Statement (File No. 033-90272) dated March 13,
1995.)
(5)(b) Opinion and Consent of General Counsel re: Legality
(8) None
(11) None
(12) None
(15) None
(23)(a) Independent Auditors' Consent
(23)(b) Consent of Attorneys
(24)(a) Powers of Attorney for Louis G. Lower, II and Casey J. Sylla (Previously
filed in Post-Effective Amendment No. 1 to this Registration Statement
(File No. 033-90272) dated April 2, 1996.)
(24)(b) Powers of Attorney for Michael J. Velotta, Peter H. Heckman, John R.
Hunter, Kevin R. Slawin and Keith A. Hauschildt (Previously filed in
Post-Effective Amendment No. 2 to this Registration Statement (File No.
033-90272) dated April 1, 1997.)
(24)(c) Power of Attorney for Thomas J. Wilson, II
(25) None
(26) None
(27) Not applicable
(99) Form of Resolution of Board of Directors (Incorporated herein by reference
to the Post-Effective Amendment No. 3 to Registrant's Registration
Statement (File No. 033-84480) dated April 1, 1997.)
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to the 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;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference 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
Securities Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant certifies
that it has reasonable grounds to believe that it will meet all of the
requirements for filing on Form S-3 and has duly caused this amended
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, and its seal to be hereunto affixed and attested, in the
Township of Northfield, State of Illinois on the 27th day of April, 1999.
NORTHBROOK LIFE INSURANCE COMPANY
(REGISTRANT)
(SEAL)
Attest: /s/BRENDA D. SNEED By: /s/MICHAEL J. VELOTTA
------------------ ----------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary Vice President, Secretary and
And Assistant General Counsel General Counsel
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated and on the 27th day of April, 1999.
*/LOUIS G. LOWER, II Chairman of the Board, Chief
Louis G. Lower, II Executive Officer and Director
(Principal Executive Officer)
*/THOMAS J. WILSON, II Vice Chairman and Director
Thomas J. Wilson, II (Principal Operating Officer)
/s/MICHAEL J. VELOTTA Vice President, Secretary, General
Michael J. Velotta Counsel and Director
*/PETER H. HECKMAN President, Chief Operating Officer
Peter H. Heckman and Director
*/JOHN R. HUNTER Director
John R. Hunter
*/KEVIN R. SLAWIN Vice President and Director
Kevin R. Slawin (Principal Financial Officer)
*/CASEY J. SYLLA Chief Investment Officer and Director
Casey J. Sylla
*/KEITH A. HAUSCHILDT Assistant Vice President and Controller
Keith A. Hauschildt (Principal Accounting Officer)
*/ By Michael J. Velotta, pursuant to Powers of Attorney previously filed or
filed herewith.
<PAGE>
EXHIBIT LIST
The following exhibits are filed herewith:
Exhibit No. Description
(4) Form of Northbrook Life Insurance Company Flexible Premium
Deferred Annuity Certificate and Application
(5)(b) Opinion of General Counsel re: Legality
(23)(a) Independent Auditors' Consent
(23)(b) Consent of Attorneys
(24)(b) Power of Attorney for Thomas J. Wilson, II
FLEXIBLE PREMIUM DEFERRED
ANNUITY CERTIFICATE
This Certificate is issued according to the terms of Master Policy Number
64890011 issued by Northbrook Life Insurance Company to Dean Witter Reynolds
Inc. Dean Witter Reynolds Inc. is called the Master Policyholder. This
Certificate is governed by the laws of the Commonwealth of Puerto Rico.
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
-------------------
o 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.
o 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
NLU634A Page 1
<PAGE>
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
General Definitions....................................................2
People Involved........................................................4
Accumulation Phase.....................................................5
Death Benefit Options During Accumulation Phase........................7
Payout Phase...........................................................8
General Provisions....................................................10
- ------------------------------------------------------------------------------
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
pages 6 and 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:
o the annuitant's 90th birthday; or
o 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:
o a purchase payment is made; or
o 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>
- ------------------------------------------------------------------------------
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:
o owner as used in this Certificate is
defined as all people named as owners,
unless otherwise indicated; and
o 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:
o we will determine the beneficiary from
the most recent written request we
have received from you;
o if you do not name a beneficiary or if
the beneficiaries named are no longer
living, the beneficiary will be:
o your spouse if living;
o otherwise, your children equally if
living;
o 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.
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.
Page 4
<PAGE>
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
Guarantee Period of each Sub-Account allowing youto select
a renewal Guarantee Period(s). If we do
not receive a selection by theexpiry 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:
o The Account Value less:
o The total Sub-Account Value for
all Sub-Accounts which are within
the first 30 calendar days of
their Guarantee Periods, and
o 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.
Preferred Withdrawal A withdrawal amount free of withdrawal
Amount charges and Market 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.
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 this
Certificate. As used in this provision,
"Treasury Rate" means the U.S. Treasury
Note Constant Maturity weekly yield as
reported in Federal Reserve Bulletin
Release H.15. The Market Value Adjustment
may be either positive or negative
and will be based on the following:
I = the X-year Treasury Rate
for the week preceding the
issue date of this
Certificate, where X is the
Sub-Account Guarantee Period
chosen. If a Note with a
maturity of X years is not
available, a weighted average
will be used.
N = the number of complete days
from the date we receive the
withdrawal request to the end
of the Xth year since the
Sub-Account was established
J = the Treasury Rate for a
maturity of N days for the
week preceding
Page 6
<PAGE>
the receipt of the withdrawal
request. If a Note with a
maturity of N days is not
available, a weighted average
will be used. If N is one
year or less, J will be the
1-year Treasury Rate.
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 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.
Page 7
<PAGE>
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 If the annuitant dies and the
Death 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:
o a certified copy of a death certificate; or
o a certified copy of a decree of a court of
competent jurisdiction as to a
finding of death; or
o any other proof acceptable to us.
- ------------------------------------------------------------------------------
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:
o 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
o Guaranteed payment plan rates. These rates
are calculated using the following
assumptions for the Income Plan and payment
frequency selected:
o Interest rate of 3% per year; and
o No loading.
For Income Plans which include life income,
the following additional assumptions will
be used:
o Mortality rates from the 1983 Table
a Annuity Mortality Tables;
o 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
Page 8
<PAGE>
o 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.
Payout Terms The income payments are
subject to the following terms and conditions:
and Conditions
o If the Adjusted Account Value is not enough
to provide an initial payment of at least
$20, we reserve the right to:
o change the payment frequency to
make the payment at least $20; or
o terminate the Certificate and pay you
the Adjusted Account Value in a lump
sum.
o 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.
o 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.
o 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.
o If any owner dies during the payout phase,
income payments will continue as scheduled.
- ------------------------------------------------------------------------------
GENERAL PROVISIONS
- ------------------------------------------------------------------------------
The Entire Contract The entire contract consists of
the Master Policy, the Master 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.
Page 9
<PAGE>
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
Age or Sex pay the amounts which would have been paid at
the correct age or sex. If we find the
misstatement of age or sexafter the income
payments begin, we will:
o pay all amounts underpaid including due
interest; or
o stop payments until the total payments are
equal to the corrected amount plus due
interest.
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 10
<PAGE>
Northbrook Life Insurance Company
(herein called "we" or "us")
Certificate Amendment for Minimum Surrender Value
The following is added to the Full Surrender provision of the Certificate.
If you surrender a Certificate prior to the anniversary of the Certificate
following the annuitant's 70th birthday or ten years after the issue date if
later, the amount we pay you will not be less than the Account Value at the time
of the surrender:
o accumulated at the guaranteed interest rate to the end of the current
guarantee period and thereafter at 3% until the later of the
anniversary of the Certificate following the annuitant's 70th birthday
or ten years after the issue date, and
o discounted back to the date of surrender at an interest rate(s) one
percent higher than the rate(s) used for the projected accumulation.
If you surrender a Certificate on or after the anniversary of the Certificate
following the annuitant's 70th birthday or ten years after the issue date if
later, the amount we pay you will not be less than the Account Value at the time
of the surrender.
Secretary Chief Executive Officer
NLU833-1
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
April 14, 1999
TO: NORTHBROOK LIFE INSURANCE COMPANY
NORTHBROOK, ILLINOIS 60062
FROM: MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
RE: FORM S-3 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 033-90272
With reference to the Registration Statement on Form S-3 filed by
Northbrook Life Insurance Company (the "Company") with the Securities and
Exchange Commission covering the Flexible Premium Deferred Annuity 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 as of
December 28, 1998:
1. The Company is duly organized and existing under the laws of the State
of Arizona and has been duly authorized to do business by the Director
of Insurance of the State of Arizona.
2. The securities registered by the above Registration Statement when
issued will be valid, legal and binding obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the
above referenced 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
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 4 to Registration Statement No. 033-90272 of Northbrook Life Insurance
Company to Form S-1 on Form S-3 of our report dated February 19, 1999, appearing
in the Annual Report on Form 10-K of Northbrook Life Insurance Company for the
year ended December 31, 1998, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
April 26, 1999
Freedman, Levy, Kroll & Simonds
CONSENT OF
FREEDMAN, LEVY, KROLL & SIMONDS
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus contained in Post-Effective Amendment No. 4 to Form
S-1 on the Form S-3 Registration Statement of Northbrook Life Insurance Company
(File No. 033-90272).
/s/FREEDMAN, LEVY, KROLL & SIMONDS
Washington, D.C.
April 26, 1999
POWER OF ATTORNEY
WITH RESPECT TO
NORTHBROOK LIFE INSURANCE COMPANY
Know all men by these presents that Thomas J. Wilson, II, whose
signature appears below, constitutes and appoints Louis G. Lower, II and Michael
J. Velotta, each acting individually, his attorney-in-fact, with power of
substitution and in any and all capacities, to sign any registration statements
and amendments thereto for the Northbrook Life Insurance Company and related
Contracts 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 said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
April 23, 1999
Date
/s/Thomas J. Wilson, II
Thomas J. Wilson, II
Vice Chairman and Director
