FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-47245
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(Exact name of registrant as specified in its charter)
NEW YORK 36-2608394
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allstate Drive
P.O. Box 9095
Farmingville, New York 11738
(Address of principal executive offices)
(Zip Code)
516/451-5300
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes../X/.. No
Indicate the number of shares of each of the issuer's classes of common
stock, as of September 30, 1996; there were 80,000 shares of common capital
stock outstanding, par value $25 per share all of which shares are held by
Allstate Life Insurance Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Position As Of
September 30, 1996(Unaudited)and December 31, 1995 3
Statements of Operations
Three Months Ended September 30, 1996
and September 30, 1995 (Unaudited)
Nine Months Ended September 30, 1996
and September 30, 1995 (Unaudited) 4
Statements of Cash Flows
Nine Months Ended September 30, 1996
and September 30, 1995(Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30, December 31,
($ in thousands) 1996 1995
(Unaudited)
<S> <C> <C>
Assets
Investments
Fixed income securities available for sale, at
fair value (amortized cost $1,286,435 and
$1,219,418) $ 1,363,625 $1,424,893
Mortgage loans 81,116 86,394
Policy loans 24,557 22,785
Short-term 39,289 7,257
Total investments 1,508,587 1,541,329
Deferred acquisition costs 59,908 53,944
Accrued investment income 17,248 18,828
Reinsurance recoverables 2,911 3,331
Deferred income taxes 5,305
Cash 2,262 1,472
Other assets 3,552 3,924
Separate Accounts 243,863 220,141
Total assets $1,843,636 $ 1,842,969
Liabilities
Reserve for life insurance policy benefits $ 855,141 $ 838,739
Contractholder funds 516,144 499,548
Deferred income taxes 23,659
Other liabilities and accrued expenses 10,211 8,950
Net payable to affiliates 959 1,865
Separate Accounts 243,863 220,141
Total liabilities 1,626,318 1,592,902
Shareholder's equity
Common stock, $25 par value, 80,000 shares
authorized, issued and outstanding 2,000 2,000
Additional capital paid-in 45,787 45,787
Unrealized net capital gains 26,585 74,413
Retained income 142,946 127,867
Total shareholder's equity 217,318 250,067
Total liabilities and shareholder's equity $1,843,636 $1,842,969
</TABLE>
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) 1996 1995 1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Premium income (net of reinsurance
ceded of $626 and $692; $1,820 and
$1,758) $ 20,990 $ 23,519 $ 65,906 $100,126
Contract charges 6,567 5,676 18,872 15,514
Net investment income 28,528 26,622 83,952 77,304
Realized capital gains and (losses) (2,575) 324 (2,224) (1,809)
53,510 56,141 166,506 191,135
Costs and expenses
Provision for policy benefits (net of
reinsurance recoveries of $523 and
$503; $2,693 and $681) 40,298 43,061 125,687 152,832
Amortization of deferred acquisition costs 1,498 1,740 4,463 3,500
Operating costs and expenses 4,265 4,060 12,679 13,981
46,061 48,861 142,829 170,313
Income from operations before
income tax expense 7,449 7,280 23,677 20,822
Income tax expense 2,609 2,696 8,599 7,543
Net income $ 4,840 $ 4,584 $15,078 $13,279
-------- --------- -------- -------
</TABLE>
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
($ in thousands) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 15,078 $ 13,279
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation, amortization and other
non-cash items (19,375) (16,430)
Realized capital gains and losses 2,224 1,809
Interest credited to contractholder funds 18,178 19,798
Increase in reserve for policy benefits and
contractholder funds 53,962 88,166
Increase in deferred policy acquisition costs (4,957) (4,429)
Change in accrued investment income 1,580 (456)
Change in deferred income taxes (3,212) (5,078)
Change in other operating assets and
liabilities 1,879 2,799
Net cash provided by operating activities 65,357 99,458
Cash flows from investing activities
Proceeds from sales
Fixed income securities available for sale 20,810 13,526
Investment collections
Fixed income securities available for sale 50,223 21,582
Fixed income securities held to maturity 2,404
Mortgage loans 7,702 2,890
Investment purchases
Fixed income securities available for sale (122,232) (84,910)
Fixed income securities held to maturity (32,046)
Mortgage loans (1,825) (3,074)
Change in short-term investments, net (32,032) (20,614)
Change in other investments, net (1,772) (215)
Net cash used in investing activities (79,126) (100,457)
Cash flows from financing activities
Contractholder fund deposits 49,254 56,807
Contractholder fund withdrawals (34,695) (57,052)
Net cash provided by (used in)
financing activities 14,559 (245)
Net increase (decrease) in cash 790 (1,244)
Cash at beginning of period 1,472 1,763
------------ -----------
Cash at end of period $ 2,262 $ 519
------------ -----------
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Allstate Life Insurance Company of New York (the "Company") is
wholly owned by a wholly-owned subsidiary ("Parent") of Allstate Insurance
Company ("Allstate"), a wholly-owned subsidiary of The Allstate Corporation (the
"Corporation").
The financial statements and notes as of September 30, 1996 and
for the three-month and nine-month periods ended September 30, 1996 and 1995 are
unaudited. These interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for the fair presentation of the financial position,
results of operations and cash flows for the interim periods. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Allstate Life Insurance Company of New York Annual
Report on Form 10K for 1995. The results of operations for the interim periods
should not be considered indicative of results to be expected for the full year.
To conform with the 1996 presentation, certain items in the prior
year's financial statements have been reclassified.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion highlights significant factors influencing results
of operations and changes in financial position of Allstate Life Insurance
Company of New York (the "Company"). It should be read in conjunction with the
discussion and analysis and financial statements and notes thereto found under
Items 7 and 8 of Part II of the Allstate Life Insurance Company of New York
Annual Report on Form 10-K for the year ended December 31, 1995.
The Company, which is wholly owned by a wholly-owned subsidiary ("Parent")
of Allstate Insurance Company ("Allstate"), markets life insurance and group and
individual annuities in the state of New York, with products consisting
predominately of structured settlement annuities sold through independent
brokers. The Company also utilizes Allstate agencies and direct marketing to
distribute its traditional and universal life and accident and disability
insurance products. Certain single and flexible premium annuities are marketed
to individuals through the account executives of Dean Witter Reynolds Inc. The
Company issues flexible premium deferred variable annuity contracts, also sold
through the account executives of Dean Witter Reynolds Inc., the assets and
liabilities of which are legally segregated and reflected in the accompanying
statements of financial position as the assets and liabilities of the Separate
Accounts. Dean Witter InterCapital Inc. manages the funds in which the assets of
the Separate Accounts are invested.
Separate Account assets and liabilities are carried at fair value in the
statements of financial position. Investment income and realized gains and
losses of the Separate Account investments accrue directly to the
contractholders (net of fees) and, therefore are not included in the Company's
statements of operations.
7
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
($ in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Statutory premiums and
deposits $ 44,523 $ 45,982 $ 133,882 $ 164,732
Invested assets (1) $ 1,431,397 $ 1,299,304 $ 1,431,397 $ 1,299,304
Separate Account assets (1) 243,863 208,430 243,863 208,430
Invested assets including
Separate Account assets $ 1,675,260 $ 1,507,734 $ 1,675,260 $ 1,507,734
Premium income and contract
charges $ 27,557 $ 29,195 $ 84,778 $ 115,640
Net investment income 28,528 26,622 83,952 77,304
Policy benefits 40,298 43,061 125,687 152,832
Operating expenses 5,763 5,800 17,142 17,481
Income from operations 10,024 6,956 25,901 22,631
Income tax on operations 3,510 2,583 9,377 8,176
Net operating income 6,514 4,373 16,524 14,455
Realized capital gains and
losses, after tax (1,674) 211 (1,446) (1,176)
Net income $ 4,840 $ 4,584 $ 15,078 $ 13,279
------------- ------------- ------------- -------------
</TABLE>
(1) Fixed income securities are included in invested assets in the table
above at amortized cost and are carried at fair value in the statements
of financial position. Separate Account assets are included at fair value
in both the table above and the statements of financial position.
STATUTORY PREMIUMS AND DEPOSITS
Statutory premiums, which include premiums and deposits for all
products, decreased 3.2% and 18.7% for the third quarter and first nine months
of 1996 compared with the same periods of 1995. The decreases for both periods
are primarily due to lower sales of structured settlement annuities, partially
offset by increased sales of variable annuity and life products.
8
<PAGE>
PREMIUM INCOME, CONTRACT CHARGES AND PROVISION FOR POLICY BENEFITS
Premium income and contract charges under generally accepted accounting
principles ("GAAP") decreased 5.6% and 26.7% for the three-month and nine-month
periods ended September 30, 1996 from the same periods in 1995. Under GAAP,
revenues vary with the mix of products sold during the period because they
exclude deposits on most annuities and premiums on universal life insurance
policies. The decrease is due to decreased sales of life contingent annuities as
a result of maintaining margins on new business throughout the year. Policy
benefits decreased $2.76 million, or 6.4% during the third quarter of 1996, and
decreased $27.15 million, or 17.8% for the nine months ended September 30, 1996,
also reflecting the decrease in sales of structured settlement annuities with
life contingencies, partially offset by higher mortality costs resulting from
growth in the life insurance block of business.
NET INVESTMENT INCOME
Pre-tax net investment income increased 7.2% in the third quarter of
1996 and 8.6% for the nine months ended September 30, 1996, compared to the same
periods in 1995. The increases were primarily related to the 10.2% or $132.09
million increase in invested assets. The overall portfolio yield declined
slightly, as proceeds from calls and maturities as well as new premiums and
deposits were invested in securities yielding less than the average portfolio
rate.
OPERATING EXPENSES
Operating expenses decreased slightly in the third quarter of 1996 and
decreased $339 thousand, or 1.9%, for the nine months ended September 30, 1996,
compared to the same periods in 1995. The decreases were primarily attributable
to reduced acquisition costs due to lower sales of structured settlement
annuities.
NET OPERATING INCOME
Net operating income increased 49.0% during the third quarter of 1996
and increased 14.3% for the first nine months of 1996 compared to the same
periods in 1995. The increases were due to growth in assets as well as
favorable mortality margins on existing business.
REALIZED CAPITAL GAINS AND LOSSES
Net realized capital losses after-tax were $1.67 million during the
third quarter of 1996 compared to after-tax gains of $211 thousand during the
same period in 1995. Fixed income securities were sold at losses in the third
quarter of 1996 to reposition a portion of the investment portfolio to improve
overall investment yield. Net realized capital losses after-tax increased to
$1.45 million for the first nine months of 1996 compared to after-tax losses of
$1.18 million for the same period in 1995. The increased losses were due to
higher losses on fixed income securities partially offset by reduced mortgage
losses.
9
<PAGE>
INVESTMENTS
FIXED INCOME SECURITIES
The Company monitors the quality of its fixed income securities
portfolio, in part, by categorizing certain investments as problem, restructured
or potential problem investments. Problem fixed income securities are securities
in default with respect to principal or interest or securities issued by
companies that went into bankruptcy subsequent to acquisition of the security.
Restructured fixed income securities have modified terms and conditions that
were not at current market rates or terms at the time of the restructuring.
Potential problem fixed income securities are current with respect to
contractual principal or interest, but because of other facts and circumstances,
management has serious doubts regarding the borrower's ability to pay future
interest and principal, which causes management to believe these securities may
be classified as problem or restructured in the future. At September 30, 1996,
problem, restructured and potential problem fixed income securities totaled
$3.74 million. There were no problem, restructured, or potential problem fixed
income securities at December 31, 1995.
COMMERCIAL MORTGAGE LOANS
The Company monitors the quality of its mortgage loans by categorizing
certain loans as problem, restructured or potential problem. Problem commercial
mortgage loans are loans that are in foreclosure, loans for which a principal or
interest payment is over 60 days past due, or are current with respect to
interest payments, but considered in-substance foreclosed. Restructured
commercial mortgage loans have modified terms and conditions that were not at
current market rates or terms at the time of the restructuring. Potential
problem commercial mortgage loans include loans which are current with respect
to interest payments, or less than 60 days delinquent as to contractual
principal or interest payments, but because of other facts and circumstances,
management has serious doubts regarding the borrower's ability to pay future
interest and principal which causes management to believe these loans may be
classified as problem or restructured in the future. Total problem, restructured
and potential problem loans, net of valuation allowances of $1.52 million and
$1.95 million, were $6.41 million and $9.65 million at September 30, 1996 and
December 31, 1995, respectively.
The carrying value of impaired loans was $4.35 million and $9.65 million
as of September 30, 1996 and December 31, 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of funds consists primarily of premiums
and annuity deposits and collections of principal and income from the investment
portfolio. The Company generates substantial positive cash flows from operating
activities. The major uses of these funds are policyholder claims and benefits,
acquisition of investments, contract maturities, surrenders and other operating
costs.
10
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would materially
affect the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
(2) None
(3)(i) Articles of Incorporation*
(ii) By-laws*
(4) Allstate Life Insurance Company of New York
Single Premium Deferred Annuity Contract**
Allstate Life Insurance Company of New York Flexible
Premium Deferred Annuity Contract*
(10) None
(11) None
(15) None
(18) None
(19) None
(22) None
(23)(a)Consent of Independent Public Accountants***
(b)Consent of Attorneys****
(24) None
(27) Financial Data Schedule
(99) None
(b) Reports on 8-K
No reports on Form 8-K were filed during the third quarter of
1996.
* Previously filed in Form N-4 Registration Statement No.33-65381 dated
September 20, 1996 and incorporated by reference.
11
<PAGE>
** Previously filed in Form S-1 Registration Statement No.33-47245 dated
November 13, 1992 and incorporated by reference.
*** Previously filed in Form S-1 Registration Statement No.33-47245 dated April
16, 1996 and incorporated by reference.
**** Previously filed in Form S-1 Registration Statement No.33-47245 dated
November 13, 1992 and incorporated by reference.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Allstate Life Insurance Company of New York
(Registrant)
November 13, 1996 /s/ LOUIS G. LOWER, II
- ------------------ -----------------------
DATE LOUIS G. LOWER, II
CHAIRMAN OF THE BOARD OF DIRECTORS
and PRESIDENT
(Principal Executive Officer)
November 13, 1996 /s/ KEVIN R. SLAWIN
- ----------------- --------------------
DATE KEVIN R. SLAWIN
Director and Vice President
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
STATEMENTS OF FINANCIAL POSITION AS OF SEP 30, 1996 (UNAUDITED) AND
DEC 31, 1995, STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEP 30, 1996
AND SEP 30, 1995 (UNAUDITED) AND NINE MONTHS ENDED SEP 30, 1996 AND
SEP 30, 1995 (UNAUDITED), AND STATEMENTS OF CASH FLOWS NINE MONTHS ENDED
SEP 30, 1996 AND SEP 30, 1995 (UNAUDITED), AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS)
</LEGEND>
<CIK>0000839759
<NAME>ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 1,363,625
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 81,116
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,508,587
<CASH> 2,262
<RECOVER-REINSURE> 2,911
<DEFERRED-ACQUISITION> 59,908
<TOTAL-ASSETS> 1,843,636
<POLICY-LOSSES> 855,141
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 516,144
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,000
<OTHER-SE> 215,318
<TOTAL-LIABILITY-AND-EQUITY> 1,843,636
84,778
<INVESTMENT-INCOME> 83,952
<INVESTMENT-GAINS> (2,224)
<OTHER-INCOME> 0
<BENEFITS> 125,687
<UNDERWRITING-AMORTIZATION> 4,463
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 23,677
<INCOME-TAX> 8,599
<INCOME-CONTINUING> 15,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,078
<EPS-PRIMARY> 188.48
<EPS-DILUTED> 188.48
<RESERVE-OPEN> 5,009
<PROVISION-CURRENT> 7,738
<PROVISION-PRIOR> 62
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</TABLE>
