<PAGE>
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: March 31, 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 March 31, 1996; there were 80,000 shares of common capital stock
outstanding, par value $25 per share all of which shares are held by Allstate
Life Insurance Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Position
March 31, 1996 (Unaudited) and December 31, 1995 3
Statements of Operations
Three Months Ended March 31, 1996
and March 31, 1995 (Unaudited) 4
Statements of Cash Flows
Three Months Ended March 31, 1996
and March 31, 1995 (Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page 12
2
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
($ in thousands) 1996 1995
<S> <C> <C>
(Unaudited)
Assets
Investments
Fixed income securities
Available for sale, at fair value
(amortized cost $1,248,287 and $1,219,418) $1,334,675 $1,424,893
Mortgage loans 85,454 86,394
Policy loans 23,415 22,785
Short-term 7,607 7,257
Total investments 1,451,151 1,541,329
Deferred acquisition costs 55,550 53,944
Accrued investment income 17,485 18,828
Reinsurance recoverable 3,548 3,331
Deferred income taxes 3,098
Cash 1,541 1,472
Other assets 3,452 3,924
Separate Accounts 230,800 220,141
Total assets $1,766,625 $1,842,969
Liabilities
Reserve for life insurance policy benefits $ 811,450 $ 838,739
Contractholder funds 506,817 499,548
Deferred income taxes 23,659
Other liabilities and accrued expenses 6,486 8,950
Net payable to affiliates 746 1,865
Separate Accounts 230,800 220,141
Total liabilities 1,556,299 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 29,747 74,413
Retained income 132,792 127,867
Total shareholder's equity 210,326 250,067
Total liabilities and shareholder's equity $1,766,625 $1,842,969
</TABLE>
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
($ in thousands) 1996 1995
(Unaudited)
<S> <C> <C>
Revenues
Premium income (net of reinsurance ceded of
$584 and $505) $23,103 $47,322
Contract charges 5,701 4,294
Net investment income 27,594 25,227
Realized capital losses (69) (1,615)
56,329 75,228
Costs and expenses
Provision for policy benefits (net of reinsurance
recoveries of $865 and $313) 43,017 62,907
Amortization of deferred acquisition costs 1,147 947
Operating costs and expenses 4,473 4,954
48,637 68,808
Income before income taxes 7,692 6,420
Income tax expense 2,767 2,159
Net income $ 4,925 $ 4,261
</TABLE>
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
<S> <C> <C>
Three Months Ended
March 31,
($ in thousands) 1996 1995
(Unaudited)
Cash flows from operating activities
Net income $ 4,925 $ 4,261
Adjustments to reconcile net income to net
cash from operating activities
Realized capital losses 69 1,615
Depreciation, amortization and other
noncash items (6,230) (5,201)
Interest credited to contractholder funds 7,548 5,827
Increase in reserve for policy benefits
and contractholder funds 17,356 43,169
Increase in deferred acquisition costs (836) (2,216)
Decrease in accrued investment income 1,343 1,524
Change in deferred income taxes (2,706) (2,235)
Changes in other operating assets and
liabilities (1,967) 3,764
Net cash from operating activities 19,502 50,508
Cash flows from investing activities
Proceeds from sales
Fixed income securities available for sale 3,463
Investment collections
Fixed income securities available for sale 10,107 9,069
Fixed income securities held to maturity 2,305
Mortgage loans 888 1,833
Investment purchases
Fixed income securities available for sale (34,124) (39,489)
Fixed income securities held to maturity (6,849)
Mortgage loans (2,895)
Change in short-term investments, net (350) (10,546)
Change in other investments (630) (441)
Net cash from investing activities (24,109) (43,550)
Cash flows from financing activities
Contractholder fund deposits 15,487 23,404
Contractholder fund withdrawals (10,811) (29,655)
Net cash from financing activities 4,676 (6,251)
Net increase in cash 69 707
Cash at beginning of period 1,472 1,763
Cash at end of period $ 1,541 $ 2,470
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
($ in thousands)
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 statements of financial position as of March 31, 1996, the
statements of operations for the three-month periods ended March 31, 1996
and 1995, and the statements of cash flows for the three-month periods then
ended are unaudited. The 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. The 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.
2. Accounting Change
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition and Disclosures." SFAS No. 114
defines impaired loans as loans in which it is probable that a creditor
will be unable to collect all amounts contractually due under the terms of
a loan agreement and requires that impaired loans be measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate, at the loan's observable market price, or at the
fair value of the collateral. SFAS No. 118 amends SFAS No. 114 to allow a
creditor to use existing methods for recognizing interest income on
impaired loans. The adoption of these statements did not have a material
impact on net income or financial position.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following 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 financial
statements and notes thereto found under Part II. Item 8 along with the
discussion and analysis found under Part II. Item 7 of the Allstate Life
Insurance Company of New York Annual Report on Form 10-K.
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. Additionally, flexible premium deferred variable annuity
contracts and certain single and flexible premium annuities are marketed to
individuals through the account executives of Dean Witter Reynolds, Inc.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
Three Months
Ended March 31,
1996 1995
---------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Statutory premiums and deposits.............. $ 44,818 $ 71,286
========== ==========
Invested assets (1).......................... 1,364,763 1,231,089
Separate Account assets (2).................. 230,800 182,734
---------- ----------
Invested assets, including Separate Account
assets...................................... 1,595,563 1,413,823
========== ==========
Premium income and contract charges.......... 28,804 51,616
Net investment income........................ 27,594 25,227
Policy benefits.............................. 43,017 62,907
Operating expenses........................... 5,620 5,901
---------- ----------
Income from operations....................... 7,761 8,035
Income tax on operations..................... 2,791 2,724
---------- ----------
Net operating income......................... 4,970 5,311
Realized capital gains and losses, after
tax........................................ (45) (1,050)
---------- ----------
Net income................................... $ 4,925 $ 4,261
========== ==========
</TABLE>
7
<PAGE>
(1) Fixed income securities are included in invested assets at amortized cost
in the table above and at fair value in the statements of financial
position.
(2) Separate Accounts are included at fair value.
STATUTORY PREMIUMS AND DEPOSITS
Statutory premiums, which include premiums and deposits for all products,
decreased $26.5 million or 37.1% for the three-month period ended March 31, 1996
from $71.3 million for the same period in 1995. The decrease is primarily due
to lower sales of structured settlement annuities, partially offset by an
increase in sales of variable annuities.
PREMIUM INCOME, CONTRACT CHARGES AND PROVISION FOR POLICY BENEFITS
Premium income and contract charges under generally accepted accounting
principles ("GAAP") decreased 44.2% for the three-month period ended March 31,
1996 as compared to the same period in 1995. Under GAAP, revenues exclude
deposits on most annuities and premiums on universal life insurance policies.
The decrease in premium and contract charges in 1996 is primarily the result of
lower sales of structured settlement annuities with life contingencies. Policy
benefits decreased $19.9 million, or 31.6% during the first quarter of 1996,
also reflecting the decrease in the level of sales of structured settlement
annuities with life contingencies, partially offset by higher mortality costs.
NET INVESTMENT INCOME
Pre-tax net investment income increased 9.4% in the first quarter of 1996 as
compared to the same period in 1995. The increase was related to the 10.9% or
$133.7 million increase in invested assets resulting primarily from growth in
new business, partially offset by surrenders and other benefits paid.
OPERATING EXPENSES
Operating expenses decreased by $281 thousand, or 4.8%, in the first quarter
of 1996 as compared to the same period in 1995. The decrease is primarily
attributable to reduced acquisition costs due to lower sales of structured
settlements. First quarter 1995 operating expenses reflected a one-time $303
thousand benefit related to a reduced rate of amortization of deferred policy
acquisition costs, due to favorable universal life insurance persistency.
NET OPERATING INCOME
Net operating income decreased by 6.4% in the first quarter of 1996 as
compared to the same period in 1995. The decrease was primarily due to higher
mortality losses, partially offset by the decrease in operating expenses, in the
first quarter of 1996 and the nonrecurring benefit attributable to the
amortization of deferred acquisition costs in the first quarter of 1995.
8
<PAGE>
REALIZED CAPITAL GAINS AND LOSSES
Realized capital losses after tax of $45 thousand during the first quarter
of 1996 were lower than realized capital losses after tax of $1.05 million
during the first quarter of 1995. The lower losses were attributable to
commercial mortgage loans.
INVESTMENTS
FIXED INCOME SECURITIES
The Company closely monitors its fixed income security portfolio for
declines in value that are other than temporary. Securities are placed on non-
accrual status when they are in default or when the receipt of interest payments
is in doubt.
The Company monitors the quality of its fixed income portfolio, in part, by
categorizing certain investments as problem, restructured or potential problem
investments. Problem fixed income securities are those in default with respect
to principal and/or interest and/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 and/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 March 31, 1996, problem, restructed, and
potential problem fixed income investments were $3.9 million. There were no
problem, restructured, and potential problem fixed income securities at December
31, 1995.
MORTGAGE LOANS
The Company defines problem commercial mortgage loans as loans that are in
foreclosure, have a principal or interest payment over 60 days past due, or are
current but considered in-substance foreclosed. Restructured commercial mortgage
loans have modified terms and conditions that were not at prevailing market
rates or terms at the time of the restructuring. Potential problem commercial
mortgage loans are current or less than 60 days delinquent as to contractual
principal and 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. At both March 31, 1996 and
December 31, 1995 total problem, restructured and potential problem loans, net
of valuation allowances, were $9.6 million.
The total pre-tax provision for loan losses was $52 thousand and $1.2
million for the three months ended March 31, 1996 and 1995, respectively. The
carrying value of impaired loans as of March 31, 1996 and December 31, 1995, was
$9.6 million in each period.
9
<PAGE>
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 use 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**
(10) Reinsurance Agreement between Allstate Life
Insurance Company of New York and
Allstate Life Insurance Company**
(11) None
(15) None
(18) None
(19) None
(22) None
(23)(a) Consent of Independent Public Accountants***
(b) Consent of Attorneys**
(24) None
(27) Financial Data Schedule
(99) None
(b) Reports on 8-K
No reports on Form 8-K were filed during the first
quarter of 1996.
* Previously filed in Form S-1 Registration Statement No.33-47245
dated April 15, 1992 and incorporated by reference.
** 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.
11
<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)
DATE May 14, 1996 /s/MICHAEL J. VELOTTA *
------------ -----------------------
LOUIS G. LOWER, II
CHAIRMAN OF THE BOARD OF DIRECTORS
and PRESIDENT
(Principal Executive Officer)
DATE May 14, 1996 /s/BARRY S. PAUL
------------ ------------------
BARRY S. PAUL
ASSISTANT VICE PRESIDENT
and CONTROLLER
(Chief Accounting Officer)
*by Michael J. Velotta, Vice President, Secretary and General Counsel pursuant
to Power of Attorney dated January 5, 1993, previously filed with Form S-1
Registration Statement, File No. 33-47245, filed October 12, 1993, copy attached
hereto.
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
CUSTOM ANNUITY CONTRACT
Know all men by these presents that Louis G. Lower, II, whose signature
appears below, constitutes and appoints Michael J. Velotta, his attorney-in-
fact, with power of substitution, and is in any and all capacities, to sign any
registration statements and amendments thereto for the Allstate Life Insurance
Company of New York Custom Annuity Contract and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
January 5, 1993
---------------
Date
/s/ LOUIS G. LOWER, II
----------------------
Louis G. Lower, II
Chairman of the Board of Directors
& President
Allstate Life Insurance Company
of New York
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information extracted from
Statements of Financial Position; Statements of Operations; and Statements of
Cash Flows and is qualified in its entirety by reference to such financial
statements.</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<DEBT-HELD-FOR-SALE> 1,334,675 1,424,893
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 0 0
<MORTGAGE> 85,454 86,394
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 1,451,151 1,541,329
<CASH> 1,541 1,472
<RECOVER-REINSURE> 3,548 3,331
<DEFERRED-ACQUISITION> 55,550 53,944
<TOTAL-ASSETS> 1,766,625 1,842,969
<POLICY-LOSSES> 811,450 838,739
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 506,817 499,548
<NOTES-PAYABLE> 0 0
<COMMON> 2,000 2,000
0 0
0 0
<OTHER-SE> 208,326 248,067
<TOTAL-LIABILITY-AND-EQUITY> 1,766,625 1,842,969
28,804 148,316
<INVESTMENT-INCOME> 27,594 104,384
<INVESTMENT-GAINS> (69) 1,846
<OTHER-INCOME> 0 0
<BENEFITS> 43,017 198,055
<UNDERWRITING-AMORTIZATION> 1,147 5,502
<UNDERWRITING-OTHER> 0 0
<INCOME-PRETAX> 7,692 29,433
<INCOME-TAX> 2,767 9,911
<INCOME-CONTINUING> 4,925 19,522
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,925 19,522
<EPS-PRIMARY> 61.56 244.03
<EPS-DILUTED> 61.56 244.03
<RESERVE-OPEN> 5,009 3,527
<PROVISION-CURRENT> 3,527 10,806
<PROVISION-PRIOR> 53 134
<PAYMENTS-CURRENT> 4,166 9,397
<PAYMENTS-PRIOR> 93 60
<RESERVE-CLOSE> 4,330 5,009
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
