<PAGE> 1
As filed with the Securities and Exchange Commission on April 1, 1997
Registration No. 33-65355
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
POST-EFFECTIVE AMENDMENT NO. 1 [X]
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------------------
NEW YORK 6311
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
36-2608394
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
------------------------------
P.O. BOX 9075
FARMINGVILLE, NEW YORK 11738-9075
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
-----------------------------
MICHAEL J. VELOTTA, ESQUIRE
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-2400
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
STEPHEN E. ROTH, ESQUIRE JOHN R. HEDRICK, ESQUIRE
SUTHERLAND, ASBILL AND BRENNAN ALLSTATE LIFE FINANCIAL SERVICES, INC.
1275 PENNSYLVANIA AVENUE 3100 SANDERS ROAD
WASHINGTON, D.C. 20004-2404 NORTHBROOK, ILLINOIS 60062
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: [x]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM AMOUNT
CLASS OF AMOUNT OFFERING AGGREGATE OF
SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
Deferred Annuity Contracts
and Participating Interests
therein * * * *
</TABLE>
The Registrant has previously registered securities in the amount of
$5,000,000. No additional amount of securities is being registered by this
post-effective amendment to the Registration Statement.
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ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
OFFERED BY
ALLSTATE LIFE INSURANCE COMPANY
OF NEW YORK
POST OFFICE BOX 9075
FARMINGVILLE, NEW YORK 11738-9075
1-(800) 692-4682
FLEXIBLE PREMIUM DEFERRED VARIABLE
ANNUITY CONTRACTS
PROSPECTUS ------------------------
May 1, 1997
This prospectus describes the AIM Lifetime Plus(SM) Variable Annuity, a
group Flexible Premium Deferred Variable Annuity Certificate (hereinafter
referred to as "Contract") designed to aid you in long-term financial planning
and which can be used for retirement planning. The Contracts are issued by
Allstate Life Insurance Company of New York ("Company"), a wholly owned indirect
subsidiary of Allstate Insurance Company. The Contracts are issued as group
Contracts. A certificate is issued that summarizes the provisions of the group
Contract. For convenience, this prospectus refers to both Contracts and
certificates as "Contracts." Purchase payments for the Contracts will be
allocated to a series of Variable Sub-accounts of the Allstate Life of New York
Separate Account A ("Variable Account") and/or to a Fixed Account option(s)
funded through the Company's general account.
The Variable Sub-accounts invest in shares of AIM Variable Insurance Funds,
Inc. (the "Fund Series"). Nine Funds are currently available for investment
within the Variable Account: (1) AIM V.I. Capital Appreciation Fund; (2) AIM
V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I.
Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and
Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market
Fund; and (9) AIM V.I. Value Fund.
This prospectus presents information you should know before making a
decision to invest in the Contract and the available Investment Alternatives.
The Contract Value will vary daily as a function of the investment
performance of the Sub-accounts of our Variable Account and any interest
credited to the Fixed Account. The Company does not guarantee any minimum
Contract Value for amounts allocated to the Variable Account. Benefits provided
by this Contract, when based on the Fixed Account, are subject to a Market Value
Adjustment, the operation of which may result in upward or downward adjustments
in withdrawal benefits, death benefits, settlement values, transfers to other
Sub-accounts, or periodic income payments.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS WHICH HAVE
RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH
BANKS; HOWEVER, THE CONTRACTS AND THE INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS,
OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, AND THE FUNDS' SHARES
ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL. THESE CONTRACTS ARE NOT FDIC INSURED.
The Company has prepared and filed a Statement of Additional Information
dated May 1, 1997 with the U.S. Securities and Exchange Commission. If you wish
to receive the Statement of Additional Information, you may obtain a free copy
by calling or writing the Company at the address above. For your convenience, an
order form for the Statement of Additional Information may be found on page B-2
of this prospectus. Before ordering, you may wish to review the Table of
Contents of the Statement of Additional Information on page B-1 of this
prospectus. The Statement of Additional Information has been incorporated by
reference into this prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED OR PRECEDED BY A CURRENT
PROSPECTUS FOR AIM VARIABLE INSURANCE FUNDS, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE
The Contract is only available in the State of New York.
At least once each Contract year, the Company will send the Owner an annual
statement that contains certain information pertinent to the individual Owner's
Contract. The annual statement details values and specific Contract data that
applies to each particular Contract. The annual statement does not contain
financial statements of the Company, although the Company's financial statements
are on page F-1 of this prospectus. Our Company files annual and quarterly
reports and other information with the SEC. You may read and copy any reports,
statements or other information we file at the SEC's public reference room in
Washington, D.C. You can request copies of these documents upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public on the SEC internet site
(http://www.sec.gov.).
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
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TABLE OF CONTENTS
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PAGE
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GLOSSARY................................. 3
HIGHLIGHTS............................... 4
SUMMARY OF VARIABLE ACCOUNT EXPENSES..... 5
CONDENSED FINANCIAL INFORMATION.......... 7
YIELD AND TOTAL RETURN DISCLOSURE........ 7
FINANCIAL STATEMENTS..................... 8
ALLSTATE LIFE INSURANCE COMPANY OF NEW
YORK AND THE VARIABLE ACCOUNT.......... 8
Allstate Life Insurance Company of New
York................................ 8
The Variable Account................... 8
THE FUND SERIES.......................... 9
AIM Variable Insurance Funds, Inc...... 9
Investment Advisor for the Funds....... 9
FIXED ACCOUNT............................ 10
Example of Interest Crediting During
the Guarantee Period................ 10
Withdrawals or Transfers............... 11
Market Value Adjustment................ 11
PURCHASE OF THE CONTRACTS................ 11
Purchase Payment Limits................ 11
Free-Look Period....................... 12
Crediting of Initial Purchase
Payment............................. 12
Allocation of Purchase Payments........ 12
Accumulation Units..................... 12
Accumulation Unit Value................ 12
Transfers Among Investment
Alternatives........................ 12
Dollar Cost Averaging.................. 13
Automatic Fund Rebalancing............. 13
BENEFITS UNDER THE CONTRACT.............. 13
Withdrawals............................ 13
Income Payments........................ 14
Payout Start Date for Income
Payments.......................... 14
Variable Account Income Payments.... 14
Fixed Amount Income Payments........ 14
Income Plans........................ 14
DEATH BENEFITS........................... 15
Distribution Upon Death Payment
Provisions.......................... 15
Death Benefit Amount................... 15
CHARGES AND OTHER DEDUCTIONS............. 16
Deductions from Purchase Payments...... 16
Withdrawal Charge (Contingent Deferred
Sales Charge)....................... 16
Contract Maintenance Charge............ 16
Administrative Expense Charge.......... 17
Mortality and Expense Risk Charge...... 17
Taxes.................................. 17
Transfer Charges....................... 17
Fund Expenses.......................... 17
</TABLE>
<TABLE>
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PAGE
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<S> <C>
GENERAL MATTERS.......................... 17
Owner.................................. 17
Beneficiary............................ 17
Assignments............................ 17
Delay of Payments...................... 18
Modification........................... 18
Customer Inquiries..................... 18
FEDERAL TAX MATTERS...................... 18
Introduction........................... 18
Taxation of Annuities in General....... 18
Tax Deferral........................ 18
Non-natural Owners.................. 18
Diversification Requirements........ 18
Ownership Treatment................. 18
Delayed Maturity Dates.............. 19
Taxation of Partial and Full
Withdrawals....................... 19
Taxation of Annuity Payments........ 19
Taxation of Annuity Death
Benefits.......................... 20
Penalty Tax on Premature
Distributions..................... 20
Aggregation of Annuity Contracts.... 20
Possible Changes in Taxation........ 20
Tax Qualified Contracts............. 20
Restrictions Under Section 403(b)
Plans............................. 20
Income Tax Withholding.............. 20
DISTRIBUTION OF THE CONTRACTS............ 20
VOTING RIGHTS............................ 21
SELECTED FINANCIAL DATA.................. 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................. 22
COMPETITION.............................. 25
EMPLOYEES................................ 26
PROPERTIES............................... 26
STATE AND FEDERAL REGULATION............. 26
EXECUTIVE OFFICERS AND DIRECTORS OF THE
COMPANY................................ 26
EXECUTIVE COMPENSATION................... 28
LEGAL PROCEEDINGS........................ 29
EXPERTS.................................. 29
LEGAL MATTERS............................ 29
FINANCIAL STATEMENTS.....................
APPENDIX A--Market Value Adjustment...... A-1
STATEMENT OF ADDITIONAL INFORMATION:
TABLE OF CONTENTS...................... B-1
ORDER FORM............................... B-2
</TABLE>
2
<PAGE> 4
GLOSSARY
ACCUMULATION UNIT: A measure of your ownership interest in a Sub-account of the
Variable Account prior to the Payout Start Date. Analogous, though not
identical, to a share owned in a mutual fund.
ACCUMULATION UNIT VALUE: The value of each Accumulation Unit which is calculated
each Valuation Date. Each Sub-account of the Variable Account has its own
distinct Accumulation Unit Value. Analogous, though not identical, to the share
price (net asset value) of a mutual fund.
ANNUITANT(S): The person or persons whose life determines the latest Payout
Start Date and the amount and duration of any income payments for Income Plan
options other than Guaranteed Payments for a Specified Period. Joint annuitants
are only permitted in the payout phase.
BENEFICIARY(IES): The person(s) to whom any benefits are due when a death
benefit is payable and there is no surviving Owner.
COMPANY ("WE," "US"): Allstate Life Insurance Company of New York.
CONTRACT: The Allstate Life Insurance Company of New York Flexible Premium
Deferred Variable Annuity Contract, known as the "AIM Lifetime Plus(SM) Variable
Annuity," that is described in this prospectus.
CONTRACT ANNIVERSARY: An anniversary of the date that the Contract was issued.
CONTRACT VALUE: The value of all amounts accumulated under the Contract prior to
the Payout Start Date, equivalent to the Accumulation Units in each Sub-account
of the Variable Account multiplied by the respective Accumulation Unit Value,
plus the value in the Fixed Account.
CONTRACT YEAR: A period of 12 months starting with the issue date or any
Contract Anniversary.
DEATH BENEFIT ANNIVERSARY: Every seventh Contract Anniversary beginning on the
date that the Contract was issued. For example, the issue date, 7th and 14th
Contract Anniversaries are the first three Death Benefit Anniversaries.
FIXED ACCOUNT: All of the assets of the Company that are not in separate
accounts.
FIXED SUB-ACCOUNTS: These Sub-accounts are distinguished by Guarantee Period(s)
and the dates the period(s) begin. The Fixed Sub-accounts are established when
purchase payments are allocated to the Fixed Account; when previous Sub-accounts
expire and a new Guarantee Period is selected; and when You transfer an amount
to the Fixed Account.
GUARANTEE PERIOD: A period of years for which a specified effective annual
interest rate is guaranteed by the Company.
INCOME PLAN: One of several ways in which a series of payments are made after
the Payout Start Date. Income payments are based on the Contract Value adjusted
by any applicable Market Value Adjustment and applicable taxes on the Payout
Start Date. Income payment amounts may vary based on any Sub-account of the
Variable Account and/or may be fixed for the duration of the Income Plan.
INVESTMENT ALTERNATIVES: The Sub-accounts of the Variable Account and the Fixed
Account.
MARKET VALUE ADJUSTMENT: The Market Value Adjustment is the adjustment made to
the money distributed from a Sub-account of the Fixed Account, prior to the end
of the Guarantee Period, to reflect the impact of changes in interest rates
between the time the Sub-account of the Fixed Account was established and the
time of distribution.
NON-QUALIFIED CONTRACTS: Contracts other than Qualified Contracts.
OWNER(S) ("YOU"): The person or persons designated as the Owner in the Contract.
PAYOUT START DATE: The date on which income payments begin.
QUALIFIED CONTRACTS: Contracts issued under plans that qualify for special
federal income tax treatment under Sections 401(a), 403(a), 403(b) and 408 of
the Internal Revenue Code.
VALUATION DATE: Each day that the New York Stock Exchange is open for business.
The Valuation Date does not include such Federal and non-Federal holidays as are
observed by the New York Stock Exchange.
VALUATION PERIOD: The period between successive Valuation Dates, commencing at
the close of regular trading on the New York Stock Exchange (which is normally
4:00 pm Eastern Time) and ending as of the close of regular trading on the New
York Stock Exchange on the next succeeding Valuation Date.
VARIABLE ACCOUNT: Allstate Life of New York Separate Account A, a separate
investment account established by the Company to receive and invest purchase
payments paid under the Contracts.
VARIABLE SUB-ACCOUNT: A portion of the Variable Account invested in shares of a
corresponding Fund. The investment performance of each Variable Sub-account is
linked directly to the investment performance of its corresponding Fund.
3
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HIGHLIGHTS
THE CONTRACT
This Contract is designed for long-term financial planning and retirement
planning. Money can be allocated to any combination of Funds or the Fixed
Account. You have access to your funds either through withdrawals of Contract
Value or through periodic income payments. You bear the entire investment risk
for Contract Values and income payments based upon the Variable Account, because
values will vary depending on the investment performance of the Fund(s) you
select. See "Accumulation Unit Value," page 12 and "Income Plans," page 14. You
will also bear the investment risk of adverse changes in interest rates in the
event amounts are prematurely withdrawn or transferred from Sub-accounts of the
Fixed Account. See "Fixed Account," page 10.
FREE-LOOK
You may cancel the Contract any time within 10 days after receipt of the
Contract and receive a full refund of purchase payments allocated to the Fixed
Account. Purchase payments allocated to the Variable Account will be returned
after an adjustment to reflect investment gain or loss that occurred from the
date of allocation through the date of cancellation, unless a refund of purchase
payments is required by state or federal law. See "Free-Look Period," page 12.
HOW TO INVEST
Your first purchase payment must be at least $5,000 (for Qualified
Contracts, $2,000). Subsequent purchase payments must be at least $500. Purchase
payments may also be made pursuant to an Automatic Addition Program. See
"Purchase Payment Limits," page 11. At the time of your application, you will
allocate your purchase payment among the Investment Alternatives. See
"Allocation of Purchase Payments," page 12. All allocations must be in whole
percents from 0% to 100% (total allocation equals 100%) or in whole dollars.
Allocations may be changed by notifying the Company in writing. See "Allocation
of Purchase Payments," page 12.
INVESTMENT ALTERNATIVES
The Variable Account invests in shares of AIM Variable Insurance Funds,
Inc. (the "Fund Series"). The Fund Series has a total of nine Funds available
under the Contract. The Funds include: (1) AIM V.I. Capital Appreciation Fund;
(2) AIM V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4)
AIM V.I. Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I.
Growth and Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I.
Money Market Fund; and (9) AIM V.I. Value Fund. The assets of each Fund are held
separately from the other Funds and each has distinct investment objectives and
policies which are described in the accompanying prospectus for the Fund Series.
In addition to the Variable Account, Owners can also allocate all or part of
their purchase payments to the Fixed Account. See "Fixed Account," on page 10.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Prior to the Payout Start Date, you may transfer amounts among the
Investment Alternatives. The Company reserves the right to assess a $10 charge
on each transfer in excess of twelve per Contract Year. The Company is presently
waiving this charge. Transfers to the Fixed Account must be at least $500.
Certain Fixed Account transfers may be restricted. See "Transfers Among
Investment Alternatives," page 12. You may want to enroll in a Dollar Cost
Averaging Program or an Automatic Fund Rebalancing Program. See "Dollar Cost
Averaging," page 13, and "Automatic Fund Rebalancing," page 13.
CHARGES AND DEDUCTIONS
The costs of the Contract include: a contract maintenance charge ($35
annually), a mortality and expense risk charge (deducted daily, equal on an
annual basis to 1.35% of the Contract's daily net assets of the Variable
Account), and an administrative expense charge (deducted daily, equal on an
annual basis to .10% of the Contract's daily net assets of the Variable
Account). The Company reserves the right to assess a transfer charge ($10 on
each transfer in excess of twelve per Contract Year). Additional deductions may
be made for certain taxes. See "Contract Maintenance Charge," page 16,
"Mortality and Expense Risk Charge," page 17, "Administrative Expense Charge,"
page 17, "Transfer Charges," page 17, and "Taxes," page 17.
WITHDRAWALS
You may withdraw all or part of the Contract Value before the earliest of
the Payout Start Date, the death of any Owner or, if the Owner is not a natural
person, the death of the Annuitant. No withdrawal charges or Market Value
Adjustments will be applied to amounts withdrawn up to 10% of the amount of
purchase payments. Amounts withdrawn in excess of the 10% may be subject to a
withdrawal charge of 0% to 7% depending on how long purchase payments have been
invested in the Contract. Amounts withdrawn from a Sub-account of the Fixed
Account, in excess of the 10%, except during the 30 day period after the
Guarantee Period expires, will be subject to
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a Market Value Adjustment. See "Withdrawals," page 13, "Withdrawals or
Transfers," page 11, and "Taxation of Annuities in General," page 18.
DEATH BENEFIT
The Company will pay a death benefit prior to the Payout Start Date on the
death of any Owner or, if the Owner is not a natural person, the death of the
Annuitant. See "Death Benefit Amount," page 15.
INCOME PAYMENTS
You will receive periodic income payments beginning on the Payout Start
Date. You may choose among several Income Plans to fit your needs. Income
payments may be received for a specified period or for life (either single or
joint life), with or without a guaranteed number of payments. You can select
income payments that are fixed, variable or a combination of fixed and variable.
See "Income Payments," page 14.
SUMMARY OF VARIABLE ACCOUNT EXPENSES
The following table illustrates all expenses and fees that you will incur.
The expenses and fees set forth in the table are based on charges under the
Contracts and on the expenses of the Variable Account and the underlying Fund
Series.
OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
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Sales Load Imposed on Purchases (as a percentage of purchase
payments)................................................. None
Contingent Deferred Sales Charge (as a percentage of
purchase payments)........................................ *
</TABLE>
<TABLE>
<CAPTION>
APPLICABLE
YEAR APPLICABLE SINCE WITHDRAWAL
PREMIUM PAYMENT ACCEPTED CHARGE PERCENTAGE
------------------------ -----------------
<S> <C>
1st Year............................................... 7%
2nd Year............................................... 6%
3rd Year............................................... 5%
4th Year............................................... 4%
5th Year............................................... 3%
6th Year............................................... 2%
7th Year............................................... 1%
Thereafter............................................. 0%
Transfer Fee................................................ **
Annual Contract Fee......................................... $35***
Variable Account Annual Expenses (as a percentage of the
Contract's average net assets in the Variable Account):
Mortality and Expense Risk Charge........................... 1.35%
Administrative Expense Charge............................... .10%
Total Variable Account Annual Expenses...................... 1.45%
</TABLE>
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* Each Contract Year up to 10% of the amount of purchase payments may be
withdrawn without a contingent deferred sales charge or a Market Value
Adjustment.
** No charges will be imposed on the first twelve transfers in any Contract
Year. The Company reserves the right to assess a $10 charge for each
transfer in excess of twelve in any Contract Year, excluding transfers due
to dollar cost averaging and automatic fund rebalancing.
*** The annual Contract Fee will be waived if total purchase payments as of a
Contract Anniversary, or upon a full withdrawal, are $50,000 or if the
entire Contract Value is allocated to the Fixed Account.
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FUND EXPENSES
(AS A PERCENTAGE OF FUND ASSETS)
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TOTAL FUND
MANAGEMENT OTHER ANNUAL
FUND FEES EXPENSES EXPENSES
---- ---------- -------- ----------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.......................... 0.64% 0.09% 0.73%
AIM V.I. Growth and Income Fund............................. 0.65% 0.13% 0.78%
AIM V.I. Global Utilities Fund*............................. 0.65% 0.90% 1.55%
AIM V.I. Diversified Income Fund............................ 0.60% 0.26% 0.86%
AIM V.I. Government Securities Fund......................... 0.50% 0.41% 0.91%
AIM V.I. Growth Fund........................................ 0.65% 0.13% 0.78%
AIM V.I. International Equity Fund.......................... 0.75% 0.21% 0.96%
AIM V.I. Value Fund......................................... 0.64% 0.09% 0.73%
AIM V.I. Money Market Fund.................................. 0.40% 0.15% 0.55%
</TABLE>
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* Management fees have been restated to reflect current expense agreements.
EXAMPLE
You (the Owner) would pay the following cumulative expenses on a $1,000
investment, assuming a 5% annual return under the following circumstances:
If you terminate your Contract or annuitize for a specified period of less
than 120 months at the end of the applicable time period:
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FUND 1 YEAR 3 YEARS 5 YEAR 10 YEAR
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.......................... $77 $107 $139 $259
AIM V.I. Growth and Income Fund............................. $77 $108 $142 $264
AIM V.I. Global Utilities Fund.............................. $85 $132 $181 $341
AIM V.I. Diversified Income Fund............................ $78 $111 $146 $272
AIM V.I. Government Securities Fund......................... $79 $112 $148 $277
AIM V.I. Growth Fund........................................ $77 $108 $142 $264
AIM V.I. International Equity Fund.......................... $79 $114 $151 $282
AIM V.I. Value Fund......................................... $77 $107 $139 $259
AIM V.I. Money Market Fund.................................. $75 $101 $130 $240
</TABLE>
If you do not terminate your Contract or if you annuitize for a specified
period of 120 months or more at the end of the applicable time period:
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEAR 10 YEAR
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund.......................... $23 $ 71 $121 $259
AIM V.I. Growth and Income Fund............................. $23 $ 72 $124 $264
AIM V.I. Global Utilities Fund.............................. $31 $ 96 $163 $341
AIM V.I. Diversified Income Fund............................ $24 $ 75 $128 $272
AIM V.I. Government Securities Fund......................... $25 $ 76 $130 $277
AIM V.I. Growth Fund........................................ $23 $ 72 $124 $264
AIM V.I. International Equity Fund.......................... $25 $ 78 $133 $282
AIM V.I. Value Fund......................................... $23 $ 71 $121 $259
AIM V.I. Money Market Fund.................................. $21 $ 65 $112 $240
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
purpose of the example is to assist you in understanding the various costs and
expenses that you will bear directly or indirectly. No deductions were made for
premium taxes because New York does not charge premium taxes on annuities.
6
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CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values and Number
of Accumulation Units Outstanding for
Each Sub-Account since Inception
<TABLE>
<CAPTION>
1996
------
<S> <C> <C>
AIM V.I. MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 10.023
Accumulation Unit Value, End of Period.................... 10.369
Number of Units Outstanding, End of Period................ 4,373
AIM V.I. GOVERNMENT SECURITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 10.080
Accumulation Unit Value, End of Period.................... 10.164
Number of Units Outstanding, End of Period................ 0
AIM V.I. DIVERSIFIED INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 10.086
Accumulation Unit Value, End of Period.................... 10.934
Number of Units Outstanding, End of Period................ 4,618
AIM V.I. GLOBAL UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 10.252
Accumulation Unit Value, End of Period.................... 11.276
Number of Units Outstanding, End of Period................ 0
AIM V.I. GROWTH AND INCOME SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 9.926
Accumulation Unit Value, End of Period.................... 11.699
Number of Units Outstanding, End of Period................ 5,371
AIM V.I. VALUE SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 9.800
Accumulation Unit Value, End of Period.................... 11.090
Number of Units Outstanding, End of Period................ 5,921
AIM V.I. INTERNATIONAL EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 10.168
Accumulation Unit Value, End of Period.................... 11.953
Number of Units Outstanding, End of Period................ 5,404
AIM V.I. GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 9.892
Accumulation Unit Value, End of Period.................... 11.466
Number of Units Outstanding, End of Period................ 2,384
AIM V.I. CAPITAL APPRECIATION SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period.............. 9.855
Accumulation Unit Value, End of Period.................... 11.387
Number of Units Outstanding, End of Period................ 7,681
</TABLE>
All Sub-Accounts commenced operations on October 1, 1996. The Accumulation
Unit Values in this table reflect a Mortality and Expense Risk Charge of 1.35%
and an Administrative Expense Charge of 0.10%.
YIELD AND TOTAL RETURN DISCLOSURE
From time to time the Variable Account may advertise the yield and total
return investment performance of one or more Sub-accounts. Standardized yield
and total return advertisements include charges and expenses attributable to the
Contracts. Including these fees has the effect of decreasing the advertised
performance of a Sub-account, so that a Sub-account's investment performance
will not be directly comparable to that of an ordinary mutual fund.
When a Sub-account advertises its standardized total return it will usually
be calculated for one year, five years, and ten years or since inception if the
Sub-account has not been in existence for such periods. Total return is measured
by comparing the value of an investment in the Sub-account at the end of the
relevant period to the value of the investment at the beginning of the period.
In addition to the standardized total return, the Sub-account may advertise
a non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as
7
<PAGE> 9
the standardized total return described above, except that the withdrawal
charges under the Contract are not deducted. Therefore, a non-standardized total
return for a Sub-account can be higher than a standardized total return for a
Sub-account.
Certain Sub-accounts may advertise yield in addition to total return.
Except in the case of the AIM V.I. Money Market Sub-account, the yield will be
computed in the following manner: the net investment income per unit earned
during a recent one month period is divided by the unit value on the last day of
the period, and then annualized. This figure reflects the recurring charges at
the separate account level.
The AIM V.I. Money Market Sub-account may advertise, in addition to the
total return, either yield or the effective yield. The yield in this case refers
to the income generated by an investment in that Sub-account over a seven-day
period net of recurring charges at the separate account level. The income is
then annualized (i.e., the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment). The effective yield is calculated
similarly but when annualized, the income earned by an investment in the AIM
V.I. Money Market Sub-account is assumed to be reinvested at the end of each
seven-day period. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment during a 52-week
period.
The Variable Account may also disclose yield, standard total return, and
non-standard total return for periods prior to the date that the Variable
Account commenced operations. For periods prior to the date the Variable Account
commenced operations, performance information for the Sub-accounts will be
calculated based on the performance of the underlying Funds and the assumption
that the Sub-accounts were in existence for the same periods as those of the
underlying Funds, with a level of charges equal to those currently assessed
against the Sub-accounts.
Please refer to the Statement of Additional Information for a further
description of the method used to calculate a Sub-account's yield and total
return.
FINANCIAL STATEMENTS
The financial statements of Allstate Life Insurance Company of New York
begin on page F-1 of the prospectus. The financial statements of Allstate Life
of New York Separate Account A are not included because, as of the date of this
Prospectus, the Variable Account had not yet commenced operations and had no
assets, liabilities, or income.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK AND THE VARIABLE ACCOUNT
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
The Company was incorporated in 1967 as a stock life insurance company
under the laws of New York and was known as "Financial Life Insurance Company"
from 1967 to 1978. From 1978 to 1984, the Company was known as "PM Life
Insurance Company." Since 1984 the Company has been known as "Allstate Life
Insurance Company of New York." The Company's operations consist of one business
segment which is the sale of annuities and life insurance. The Company is
currently licensed to operate in New York. The Company's home office is located
in Farmingville, New York.
The Company is an indirect, wholly-owned subsidiary of Allstate Insurance
Company ("Allstate") which is a stock property-liability insurance company
incorporated under the laws of Illinois. With the exception of directors'
qualifying shares, all of the outstanding capital stock of Allstate is owned by
The Allstate Corporation ("Corporation"). On June 30, 1995, Sears, Roebuck and
Co. ("Sears") distributed its 80.3% ownership in the Corporation to Sears common
shareholders through a tax-free dividend.
THE VARIABLE ACCOUNT
Established on December 22, 1995, the Allstate Life of New York Separate
Account A is a unit investment trust registered with the Securities and Exchange
Commission under the Investment Company Act of 1940. However, such registration
does not signify that the Commission supervises the management or investment
practices or policies of the Variable Account. The investment performance of the
Variable Account is entirely independent of both the investment performance of
the Company's general account and the performance of any other separate account.
The Variable Account has been divided into nine Sub-accounts, each of which
invests solely in its corresponding Fund of AIM Variable Insurance Funds, Inc.
Additional Variable Sub-accounts may be added at the discretion of the Company.
The assets of the Variable Account are held separately from the other
assets of the Company. They are not chargeable with liabilities incurred in the
Company's other business operations. Accordingly, the income, capital gains and
capital losses, realized or unrealized, incurred on the assets of the Variable
Account are credited to or charged against the assets of the Variable Account,
without regard to the income, capital gains or capital losses arising out of any
other business the Company may conduct. The Company's obligations arising under
the Contracts are general corporate obligations of the Company.
8
<PAGE> 10
THE FUND SERIES
The Variable Account will invest in shares of the AIM Variable Insurance
Funds, Inc. (the "Fund Series"). The Fund Series is registered with the
Securities and Exchange Commission as an open-end, series, management investment
company. Registration of the Fund Series does not involve supervision of its
management, investment practices or policies by the Securities and Exchange
Commission. The Funds are designed to provide investment vehicles for variable
insurance contracts of various insurance companies, in addition to the Variable
Account.
Shares of the Funds are not deposits, or obligations of, or guaranteed or
endorsed by any bank and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. offers nine Funds for use with this
Contract: (1) AIM V.I. Capital Appreciation Fund; (2) AIM V.I. Diversified
Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I. Government
Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and Income Fund;
(7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market Fund; and (9)
AIM V.I. Value Fund. Each Fund has different investment objectives and policies
and operates as a separate investment fund. The following is a brief description
of the investment objectives and programs of the Funds:
AIM V.I. CAPITAL APPRECIATION FUND ("CAPITAL APPRECIATION FUND") is a
diversified Fund which seeks to provide capital appreciation through investments
in common stocks, with emphasis on medium-sized and smaller emerging growth
companies.
AIM V.I. DIVERSIFIED INCOME FUND ("DIVERSIFIED INCOME FUND") is a
diversified Fund which seeks to achieve a high level of current income primarily
by investing in a diversified portfolio of foreign and U.S. government and
corporate debt securities, including lower rated high yield debt securities
(commonly known as "junk bonds"). The risks of investing in junk bonds are
described in the accompanying prospectus for the Fund Series, which should be
read carefully before investing.
AIM V.I. GLOBAL UTILITIES FUND ("GLOBAL UTILITIES FUND") is a
non-diversified Fund which seeks to achieve a high level of current income and,
as a secondary objective, to achieve capital appreciation, by investing
primarily in common and preferred stocks of public utility companies (either
domestic or foreign).
AIM V.I. GOVERNMENT SECURITIES FUND ("GOVERNMENT FUND")is a diversified
Fund which seeks to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the U.S. Government.
AIM V.I. GROWTH FUND ("GROWTH FUND") is a diversified Fund which seeks to
provide growth of capital through investments primarily in common stocks of
leading U.S. companies considered by AIM to have strong earnings momentum.
AIM V.I. GROWTH AND INCOME FUND ("GROWTH & INCOME FUND") is a diversified
Fund which seeks to provide growth of capital, with current income as a
secondary objective by investing primarily in dividend paying common stocks
which have prospects for both growth of capital and dividend income.
AIM V.I. INTERNATIONAL EQUITY FUND ("INTERNATIONAL FUND") is a diversified
Fund which seeks to provide long-term growth of capital by investing in
international equity securities, the issuers of which are considered by AIM to
have strong earnings momentum.
AIM V.I. MONEY MARKET FUND ("MONEY MARKET FUND") is a diversified Fund
which seeks to provide as high a level of current income as is consistent with
the preservation of capital and liquidity by investing in a diversified
portfolio of money market instruments.
AIM V.I. VALUE FUND ("VALUE FUND") is a diversified Fund which seeks to
achieve long-term growth of capital by investing primarily in equity securities
judged by AIM to be undervalued relative to the current or projected earnings of
the companies issuing the securities, or relative to current market values of
assets owned by the companies issuing the securities or relative to the equity
markets generally. Income is a secondary objective.
INVESTMENT ADVISOR FOR THE FUNDS
A I M Advisors, Inc., ("AIM") serves as the investment advisor to each
Fund. AIM was organized in 1976 and, together with its domestic subsidiaries,
manages or advises 48 investment company portfolios (including the Funds). AIM
is a wholly-owned subsidiary of A I M Management Group Inc., an indirect
subsidiary of AMVESCO plc, (formerly INVESCO plc). AIM manages each Fund's
assets pursuant to a master investment advisory agreement dated February 28,
1997. As of March 18, 1997, total assets advised or managed by AIM and its
domestic subsidiaries were approximately $68 billion.
There is no assurance that the Funds will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Funds can be found in the current prospectus for the Fund Series
accompanying this prospectus.
You will find more complete information about the Funds, including the
risks associated with each Fund, in the accompanying prospectus. You should read
the prospectus for the Fund Series in conjunction with this prospectus.
9
<PAGE> 11
THE FUND SERIES PROSPECTUS SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE
SUB-ACCOUNT.
FIXED ACCOUNT
Purchase payments and transfers allocated to one or more of the
Sub-accounts of the Fixed Account become part of the general account of the
Company. Each Sub-account offers a separate interest rate Guarantee Period.
Guarantee Periods will be offered at the Company's discretion and may range from
one to ten years. Presently, the Company offers Guarantee Periods of one, three,
five, seven and ten years. The Owner must select the Sub-account(s) in which to
allocate each purchase payment and transfer. No less than $500 may be allocated
to any one Sub-account. The Company reserves the right to limit the number of
additional purchase payments. Please consult with your sales representative for
current information.
Interest is credited daily to each Sub-account at a rate which compounds to
the effective annual interest rate declared for each Sub-account's Guarantee
Period that has been selected.
The following example illustrates how the Sub-account value for a
Sub-account of the Fixed Account would grow given an assumed purchase payment,
Guarantee Period, and effective annual interest rate:
EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD:
<TABLE>
<S> <C>
Purchase Payment............................................ $10,000.00
Guarantee Period............................................ 5 years
Effective Annual Rate:...................................... 4.50%
</TABLE>
END OF CONTRACT YEAR:
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Beginning Sub-Account Value $10,000.00
X (1 + Effective Annual Rate) 1.045
----------
$10,450.00
Sub-Account Value at end of Contract $10,450.00
year 1 X (1 + Effective Annual Rate) 1.045
----------
$10,920.25
Sub-Account Value at end of Contract $10,920.25
year 2 X (1 + Effective Annual Rate) 1.045
----------
$11,411.66
Sub-Account Value at end of Contract $11,411.66
year 3 X (1 + Effective Annual Rate) 1.045
----------
$11,925.19
Sub-Account Value at end of Contract $11,915.19
year 4 X (1 + Effective Annual Rate) 1.045
----------
Sub-Account Value at end of Guarantee Period: $12,461.82
==========
TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $2,461.82 ($12,461.82 -$10,000.00)
</TABLE>
NOTE: The above illustration assumes no withdrawals of any amount during the
entire five year period. A withdrawal charge and a Market Value Adjustment
may apply to any amount withdrawn in excess of 10% of the amount of
purchase payments. The hypothetical interest rate is for illustrative
purposes only and is not intended to predict future interest rates to be
declared under the Contract.
The Company has no specific formula for determining the rate of interest
that it will declare initially or in the future. Such interest rates will be
reflective of investment returns available at the time of the determination. In
addition, the management of the Company may also consider various other factors
in determining interest rates, including regulatory and tax requirements, sales
commissions and administrative expenses borne by the Company, general economic
trends, and competitive factors. The Company guarantees that the interest rates
will never be less than the minimum guaranteed rate shown in the Contract. For
current interest rate information, please contact your sales representative or
the Company's customer support unit at 1(800) 692-4682.
THE MANAGEMENT OF THE COMPANY WILL MAKE THE FINAL DETERMINATION AS TO THE
INTEREST RATES TO BE DECLARED. THE COMPANY CAN NEITHER PREDICT NOR GUARANTEE
FUTURE INTEREST RATES TO BE DECLARED.
10
<PAGE> 12
Prior to the end of a Guarantee Period, a notice will be mailed to the
Owner outlining the options available at the end of a Guarantee Period. During
the 30 day period after a Guarantee Period expires the Owner may:
-- take no action and the Company will automatically renew the Sub-account
value to a Guarantee Period of the shortest duration available to be
established on the day the previous Guaranteed Period expired; or
-- notify the Company to apply the Sub-account value to a new Guarantee
Period or periods to be established on the day the previous Guarantee
Period expired; or
-- notify the Company to apply the Sub-account value to any Sub-account of
the Variable Account on the day we receive the notification; or
-- receive a portion of the Sub-account value or the entire Sub-account
value through a partial or full withdrawal that is not subject to a
Market Value Adjustment. In this case, the amount withdrawn will be
deemed to have been withdrawn on the day the guarantee period expired.
The Automatic Laddering Program allows the Owner to choose, in advance, one
renewal Guarantee Period for all renewing Sub-accounts. The Owner can select the
Automatic Laddering Program at any time during the accumulation phase, including
on the issue date. The Automatic Laddering Program will continue until the Owner
gives written notice to the Company. The Company reserves the right to
discontinue this Program. For additional information on the Automatic Laddering
Program, please call the Company's Customer Support Unit at 1(800)692-4682.
WITHDRAWALS OR TRANSFERS
With the exception of transfers made automatically through dollar cost
averaging, all withdrawals and transfers, paid from a Sub-account of the Fixed
Account other than during the 30 day period after a Guarantee Period expires are
subject to a Market Value Adjustment.
The amount received by the Owner under a withdrawal request equals the
amount requested, adjusted by any Market Value Adjustment, less any applicable
withdrawal charge, less premium taxes and withholding (if applicable).
MARKET VALUE ADJUSTMENT
The Market Value Adjustment reflects the relationship between (1) the
Treasury Rate for the time remaining in the Guarantee Period at the time of the
request for withdrawal or transfer, and (2) the Treasury Rate at the time the
Sub-account was established. As such, the Owner bears some investment risk under
the Contract. Treasury Rate means the U.S. Treasury Note Constant Maturity yield
for the preceding week as reported in Federal Reserve Bulletin Release H.15.
Generally, if the Treasury Rate for the Guarantee Period is higher than the
applicable current Treasury Rate, then the Market Value Adjustment will result
in a higher amount payable to the Owner or transferred. Similarly, if the
Treasury Rate at the time the Sub-account was established is lower than the
applicable Treasury Rate (interest rate for a period equal to the time remaining
in the Sub-account), then the Market Value Adjustment will result in a lower
amount payable to the Owner or transferred.
For example, assume the Owner purchases a Contract and selects an initial
Guarantee Period of five years and the five year Treasury Rate for that duration
is 4.50%. Assume that at the end of 3 years, the Owner makes a partial
withdrawal. If, at that later time, the current two year Treasury Rate is 4.20%,
then the Market Value Adjustment will be positive, which will result in an
increase in the amount payable to the Owner. Similarly, if the current two year
Treasury Rate is 4.80%, then the Market Value Adjustment will be negative, which
will result in a decrease in the amount payable to the Owner.
The formula for calculating the Market Value Adjustment is set forth in
Appendix A to this prospectus which also contains additional illustrations of
the application of the Market Value Adjustment.
The Market Value Adjustment will be waived on withdrawals taken to satisfy
IRS required minimum distribution rules for this Contract.
PURCHASE OF THE CONTRACTS
PURCHASE PAYMENT LIMITS
Your first purchase payment must be at least $5,000 unless the Contract is
a Qualified Contract, in which case the first purchase payment must be at least
$2,000. All subsequent purchase payments must be $500 or more and may be made at
any time prior to the Payout Start Date. Subsequent purchase payments may also
be made from your bank account through Automatic Additions. Under an Automatic
Additions Program, the minimum purchase payment for allocation to the Variable
Account is $100 and for allocation to the Fixed Account the minimum purchase
payment is $500. Please consult with your sales representative for detailed
information about Automatic Additions.
11
<PAGE> 13
We reserve the right to limit the amount of purchase payments we will
accept.
FREE-LOOK PERIOD
You may cancel the Contract any time within 10 days after receipt of the
Contract and receive a full refund of purchase payments allocated to the Fixed
Account. Purchase payments allocated to the Variable Account will be returned
after an adjustment to reflect investment gain or loss that occurred from the
date of allocation through the date of cancellation unless a refund of purchase
payments is required by state or federal law.
CREDITING OF INITIAL PURCHASE PAYMENT
The initial purchase payment accompanied by a duly completed application
will be credited to the Contract within two business days of receipt by us at
our home office. If an application is not duly completed, we will credit the
purchase payments to the Contract within five business days or return it at that
time unless you specifically consent to us holding the purchase payment until
the application is complete. We reserve the right to reject any application.
Subsequent purchase payments will be credited to the Contract at the close of
the Valuation Period in which the purchase payment is received by the Company at
its home office.
ALLOCATION OF PURCHASE PAYMENTS
On the application, you instruct us how to allocate the purchase payment
among the Investment Alternatives. Purchase payments may be allocated in whole
percents, from 0% to 100% (total allocation equals 100%) to any Investment
Alternative. Unless you notify us in writing otherwise, subsequent purchase
payments are allocated according to the allocation for the previous purchase
payment.
ACCUMULATION UNITS
Each purchase payment allocated to the Variable Account will be credited to
the Contract as Accumulation Units. For example, if a $10,000 purchase payment
is credited to the Contract when the Accumulation Unit value equals $10, then
1,000 Accumulation Units would be credited to the Contract. The Variable
Account, in turn, purchases shares of the corresponding Fund.
ACCUMULATION UNIT VALUE
The Accumulation Units in each Sub-account of the Variable Account are
valued separately. The value of Accumulation Units will change each Valuation
Period according to the investment performance of the shares purchased by each
Variable Sub-account and the deduction of certain expenses and charges.
The value of an Accumulation Unit in a Variable Sub-account for any
Valuation Period equals the value of the Accumulation Unit as of the immediately
preceding Valuation Period, multiplied by the Net Investment Factor for that
Sub-account for the current Valuation Period. The Net Investment Factor for a
Valuation Period is a number representing the change, since the last Valuation
Date in the value of Sub-account assets per Accumulation Unit due to investment
income, realized or unrealized capital gain or loss, deductions for taxes, if
any, and deductions for the mortality and expense risk charge and administrative
expense charge.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Prior to the Payout Start Date, you may transfer amounts among Investment
Alternatives. The Company reserves the right to assess a $10 charge on each
transfer in excess of twelve per Contract Year. The Company is presently waiving
this charge. Transfers to or from more than one Investment Alternative on the
same day are treated as one transfer. Transfers among Investment Alternatives
before the Payout Start Date may be made at any time. See "Withdrawals or
Transfers," page 10, for the requirements on transfers from the Fixed Account.
After the Payout Start Date, transfers among Sub-accounts of the Variable
Account or from a variable amount income payment to a fixed amount income
payment may be made only once every six months and may not be made during the
first six months following the Payout Start Date. After the Payout Start Date,
transfers from a fixed amount income payment are not allowed.
Telephone transfer requests will be accepted by the Company if received at
1(800) 692-4682 by 4:00 p.m., Eastern Time. Telephone transfer requests received
at any other telephone number or after 4:00 p.m., Eastern Time will not be
accepted by the Company. Telephone transfer requests received before 4:00 p.m.,
Eastern Time are effected at the next computed value. The Company utilizes
procedures which the Company believes will provide reasonable assurance that
telephone authorized transfers are genuine. Such procedures include taping of
telephone conversations with persons purporting to authorize such transfers and
requesting identifying information from such persons. Accordingly, the Company
disclaims any liability for losses resulting from such transfers by reason of
their allegedly not having been properly authorized. However, if the Company
does not take reasonable steps to help ensure that such authorizations are
valid, the Company may be liable for such losses.
The minimum amount that may be transferred into a Sub-account of the Fixed
Account is $500. Any transfer from a Sub-account of the Fixed Account at a time
other than during the 30 day period after a Guarantee Period expires will be
subject to a Market Value Adjustment. If any transfer reduces the value of a
Sub-account of the Fixed Account to less than $500, the Company will treat the
request as a transfer of the entire Sub-account value.
12
<PAGE> 14
The Company reserves the right to waive transfer restrictions.
DOLLAR COST AVERAGING
Transfers may be made automatically through Dollar Cost Averaging prior to
the Payout Start Date. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month from the one year Guarantee Period Sub-account of
the Fixed Account or any Sub-account of the Variable Account, to any Sub-account
of the Variable Account. Transfers made through Dollar Cost Averaging must be
$50 or more. Dollar Cost Averaging cannot be used to transfer amounts to the
Fixed Account. Transfers made through Dollar Cost Averaging are not subject to a
Market Value Adjustment. In addition, such transfers are not assessed a $10
charge and are not included in the twelve free transfers per Contract Year.
The theory of Dollar Cost Averaging is that, if purchases of equal dollar
amounts are made at fluctuating prices, the aggregate average cost per unit will
be less than the average of the unit prices on the same purchase dates. However,
participation in the Dollar Cost Averaging program does not assure you of a
greater profit from your purchases under the program; nor will it prevent or
alleviate losses in a declining market.
AUTOMATIC FUND REBALANCING
Transfers may be made automatically through Automatic Fund Rebalancing
prior to the Payout Start Date. By electing Automatic Fund Rebalancing, all of
the money allocated to Sub-accounts of the Variable Account will be rebalanced
to the desired allocation on a quarterly basis, determined from the first date
that you decide to rebalance. Each quarter, money will be transferred among
Sub-accounts of the Variable Account to achieve the desired allocation.
The desired allocation will be the allocation initially selected, unless
subsequently changed. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive the written request.
Transfers made through Automatic Fund Rebalancing are not assessed a $10
charge and are not included in the twelve free transfers per Contract Year.
Any money allocated to the Fixed Account will not be included in the
rebalancing.
BENEFITS UNDER THE CONTRACT
WITHDRAWALS
You may withdraw all or part of the Contract Value at any time prior to the
earlier of the death of the Owner (or the Annuitant if the Owner is not a
natural person) or the Payout Start Date. The amount available for withdrawal is
the Contract Value next computed after the Company receives the request for a
withdrawal at its home office, adjusted by any applicable Market Value
Adjustment, less any withdrawal charges, contract maintenance charges and any
premium taxes. See "Charges and Other Deductions," page 16. Withdrawals from the
Variable Account will be paid within seven days of receipt of the request,
subject to postponement in certain circumstances. See "Delay of Payments," page
18.
Money can be withdrawn from the Variable Account or the Fixed Account. To
complete the partial withdrawal from the Variable Account, the Company will
redeem Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. The Owner must name the
Investment Alternative from which the withdrawal is to be made. If none is
named, then the withdrawal request is incomplete and cannot be honored.
The minimum partial withdrawal is $50. If any withdrawal reduces the value
of any Sub-account of the Fixed Account to less than $500, we will treat the
request as a withdrawal of the entire Sub-account value. If the Contract Value
after a partial withdrawal would be less than $1,000, then the Company will
treat the request as one for termination of the Contract and the entire Contract
Value, adjusted by any Market Value Adjustment, less any charges and premium
taxes, will be paid out.
Partial withdrawals may also be taken automatically through Systematic
Withdrawals on a monthly, quarterly, semi-annual or annual basis. Systematic
Withdrawals of $50 or more may be requested at any time prior to the Payout
Start Date. At the Company's discretion, Systematic Withdrawals may not be
offered in conjunction with Dollar Cost Averaging or Automatic Fund Rebalancing.
Partial and full withdrawals may be subject to income tax and a 10% tax
penalty. This tax and penalty are explained in "Federal Tax Matters," on page
18.
After the Payout Start Date, withdrawals are only permitted when payments
from the Variable Account are being made that do not involve life contingencies.
In that case, you may terminate the Variable Account portion of the income
payments at any time and receive a lump sum equal to the commuted balance of the
remaining variable payments due, less any applicable withdrawal charge.
13
<PAGE> 15
INCOME PAYMENTS
PAYOUT START DATE FOR INCOME PAYMENTS
The Payout Start Date is the day that income payments will start under the
Contract. You may change the Payout Start Date at any time by notifying the
Company in writing of the change at least 30 days before the scheduled Payout
Start Date. The Payout Start Date must be (a) at least one month after the issue
date; and (b) no later than the day the Annuitant reaches age 90.
VARIABLE ACCOUNT INCOME PAYMENTS
The amount of Variable Account income payments depends upon the investment
experience of the Sub-accounts selected by the Owner and any premium taxes, the
age and sex of the Annuitant, and the Income Plan chosen. The Company guarantees
that the amount of the income payment will not be affected by (1) actual
mortality experience and (2) the amount of the Company's administration
expenses.
The Contracts offered by this prospectus contain income payment tables that
provide for different benefit payments to men and women of the same age.
Nevertheless, in accordance with the U.S. Supreme Court's decision in ARIZONA
GOVERNING COMMITTEE V. NORRIS, in certain employment-related situations, annuity
tables that do not vary on the basis of sex will be used.
The total income payments received may be more or less than the total
purchase payments made because (a) Variable Account income payments vary with
the investment results of the underlying Funds, and (b) Annuitants may not live
as long as, or may live longer than, expected.
The Income Plan option selected will affect the dollar amount of each
income payment. For example, if an Income Plan for a Life Income is chosen, the
income payments will be greater than income payments under an Income Plan for a
Life Income with Guaranteed Payments.
If the actual net investment experience of the Variable Account is less
than the assumed investment rate, then the dollar amount of the income payments
will decrease. The dollar amount of the income payments will stay level if the
net investment experience equals the assumed investment rate and the dollar
amount of the income payments will increase if the net investment experience
exceeds the assumed investment rate. For purposes of the Variable Account income
payments, the assumed investment rate is 3 percent. For more detailed
information as to how Variable Account income payments are determined see the
Statement of Additional Information.
FIXED AMOUNT INCOME PAYMENTS
Income payment amounts derived from any monies allocated to Sub-accounts of
the Fixed Account during the accumulation phase are fixed for the duration of
the Income Plan. The fixed amount income payment amount is calculated by
applying the portion of the Contract Value in the Fixed Account on the Payout
Start Date, adjusted by any Market Value Adjustment and less any applicable
premium tax, to the greater of the appropriate value from the income payment
table selected or such other value as we are offering at that time.
INCOME PLANS
The Income Plans include:
INCOME PLAN 1--LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as the Annuitant lives. If the
Annuitant dies before the selected number of guaranteed payments have been made,
the Company will continue to pay the remainder of the guaranteed payments.
INCOME PLAN 2--JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as either the Annuitant or Joint
Annuitant, named at the time of Income Plan selection, is living. If both the
Annuitant and the Joint Annuitant die before the selected number of guaranteed
payments have been made, the Company will continue to pay the remainder of the
guaranteed payments.
INCOME PLAN 3--GUARANTEED NUMBER OF PAYMENTS
The Company will make payments for a specified number of months beginning
on the Payout Start Date. These payments do not depend on the Annuitant's life.
The number of months guaranteed may be from 60 to 360. The mortality and expense
risk charge will be deducted from Variable Account assets supporting these
payments even though the Company does not bear any mortality risk.
The Owner may change the Income Plan until 30 days before the Payout Start
Date. If an Income Plan is chosen which depends on the Annuitant or Joint
Annuitant's life, proof of age will be required before income payments begin.
Applicable premium taxes will be assessed.
In the event that an Income Plan is not selected, the Company will make
income payments in accordance with Income Plan 1 with Guaranteed Payments for
120 Months. At the Company's discretion, other Income Plans may be available
upon request. The Company
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<PAGE> 16
currently uses sex-distinct annuity tables. However, if legislation is passed by
Congress or the State of New York, the Company reserves the right to use income
payment tables which do not distinguish on the basis of sex. Special rules and
limitations may apply to certain qualified contracts.
If the Contract Value to be applied to an Income Plan is less than $2,000,
or if the monthly payments determined under the Income Plan are less than $20,
the Company may pay the Contract Value adjusted by any Market Value Adjustment
and less any applicable taxes, in a lump sum or change the payment frequency to
an interval which results in income payments of at least $20.
DEATH BENEFITS
DISTRIBUTION UPON DEATH PAYMENT PROVISIONS
A distribution upon death may be paid to the Owner determined immediately
after the death if, prior to the Payout Start Date:
-- any Owner dies; or
-- the Annuitant dies and the Owner is not a natural person.
If the Owner eligible to receive a distribution upon death is not a natural
person, then the Owner may elect to receive the distribution upon death in one
or more distributions. Otherwise, if the Owner is a natural person, the Owner
may elect to receive a distribution upon death in one or more distributions or
periodic payments through an Income Plan.
A death benefit will be paid: 1) if the Owner elects to receive the death
benefit in a single payment distributed within 180 days of the date of death;
and 2) if the death benefit is paid as of the day the value of the death benefit
is determined. Otherwise, the settlement value will be paid. The settlement
value is the same amount that would be paid in the event of withdrawal of the
Contract Value. The Company will calculate the settlement value at the end of
the Valuation Period coinciding with the requested distribution date for payment
or on the mandatory distribution date of 5 years after the date of death. In any
event, the entire distribution upon death must be distributed within five years
after the date of death unless an Income Plan is selected or a surviving spouse
continues the Contract in accordance with the following sections:
Payments from the Income Plan must begin within one year of the date of
death and must be payable throughout:
-- the life of the Owner; or
-- a period not to exceed the life expectancy of the Owner; or
-- the life of the Owner with payments guaranteed for a period not to
exceed the life expectancy of the Owner.
If the surviving spouse of the deceased Owner is the new Owner, then the
spouse may elect one of the options listed above or may continue the Contract in
the accumulation phase as if the death had not occurred. The Company will only
permit the Contract to be continued once. If the Contract is continued in the
accumulation phase, 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, any applicable Market Value Adjustment, determined as of the
date of the withdrawal, will apply.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest
of:
(a) the Contract Value on the date the Company determines the death
benefit; or
(b) the amount that would have been payable in the event of a full
withdrawal of the Contract Value on the date the Company determines the
death benefit; or
(c) the Contract Value on the Death Benefit Anniversary immediately
preceding the date we determine the death benefit adjusted by any
purchase payments, withdrawals and charges made between such Death
Benefit Anniversary and the date we determine the death benefit; or
(d) the greatest of the anniversary values as of the date we determine the
death benefit. The anniversary value is equal to the Contract Value on
a Contract Anniversary, increased by purchase payments made since that
anniversary and reduced by the amount of any partial withdrawals since
that anniversary. Anniversary values will be calculated for each
Contract Anniversary prior to the earlier of: (i) the date we determine
the death benefit, or (ii) the deceased's attained age 75 or 5 years
after the date the Contract was established, if later.
The value of the death benefit will be determined at the end of the
Valuation Period during which the Company receives a complete request for
payment of the death benefit, which includes due proof of death.
The Company will not settle any death claim until it receives due proof of
death.
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<PAGE> 17
CHARGES AND OTHER DEDUCTIONS
DEDUCTIONS FROM PURCHASE PAYMENTS
No deductions are made from purchase payments. Therefore, the full amount
of every purchase payment is invested in the Investment Alternative(s).
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)
You may withdraw the Contract Value at any time before the earliest of the
Payout Start Date, the death of any Owner or, if the Owner is not a natural
person, the death of the Annuitant.
There are no withdrawal charges on amounts withdrawn up to 10% of the
amount of purchase payments. Amounts withdrawn in excess of this may be subject
to a withdrawal charge. Amounts not subject to a withdrawal charge and not
withdrawn in a Contract Year are not carried over to later Contract Years.
Withdrawal charges, if applicable, will be deducted from the amount paid.
For purposes of calculating the amount of the withdrawal charge,
withdrawals are assumed to come from purchase payments first, beginning with the
oldest payment. Withdrawals made after all purchase payments have been
withdrawn, will not be subject to a withdrawal charge. For partial withdrawals,
the Contract Value will be adjusted to reflect the amount of payment received by
the Owner, any withdrawal charge, any applicable taxes and any Market Value
Adjustment.
Withdrawals in excess of the preferred withdrawal amount will be subject to
a withdrawal charge as set forth below:
<TABLE>
<CAPTION>
APPLICABLE
YEAR APPLICABLE SINCE WITHDRAWAL
PREMIUM PAYMENT ACCEPTED CHARGE PERCENTAGE
------------------------ -----------------
<S> <C>
1st Year............................................. 7%
2nd Year............................................. 6%
3rd Year............................................. 5%
4th Year............................................. 4%
5th Year............................................. 3%
6th Year............................................. 2%
7th Year............................................. 1%
Thereafter........................................... 0%
</TABLE>
Withdrawal charges will be used to pay sales commissions and other
promotional or distribution expenses associated with the marketing of the
Contracts.
In addition, federal and state income tax may be withheld from withdrawal
amounts. Certain terminations may also be subject to a federal tax penalty. See
"Federal Tax Matters," page 18.
The Company reserves the right to waive the withdrawal charge with respect
to Contracts issued to employees and registered representatives of any
broker-dealer that has entered into a sales agreement with Allstate Life
Financial Services, Inc. ("ALFS") to sell the Contracts and all wholesalers and
their employees that are under agreement with ALFS to wholesale the Contract.
The withdrawal charge will also be waived on withdrawals taken to satisfy IRS
required minimum distribution rules for this Contract.
CONTRACT MAINTENANCE CHARGE
A contract maintenance charge is deducted annually from the Contract Value
to reimburse the Company for its costs in maintaining each Contract and the
Variable Account. The Company guarantees that the amount of this charge will not
exceed $35 per Contract Year over the life of the Contract. This charge will be
waived if the total purchase payments are $50,000 or more on a Contract
Anniversary or if all money is allocated to the Fixed Account on the Contract
Anniversary.
Maintenance costs include but are not limited to expenses incurred in
billing and collecting purchase payments; keeping records; processing death
claims, cash withdrawals, and policy changes; proxy statements; calculating
Accumulation Unit and Annuity Unit values; and issuing reports to Owners and
regulatory agencies.
On each Contract Anniversary prior to the payout start date, the contract
maintenance charge will be deducted from Sub-accounts of the Variable Account in
the same proportion that the Owner's value in each bears to the total value in
all Sub-accounts of the Variable Account. After the Payout Start Date, a pro
rata share of the annual contract maintenance charge will be deducted from each
income payment. For example, 1/12 of the $35, or $2.92, will be deducted if
there are twelve income payments during the Contract Year. A full contract
maintenance charge will be deducted if the Contract is terminated on any date
other than a Contract Anniversary.
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<PAGE> 18
ADMINISTRATIVE EXPENSE CHARGE
The Company will deduct an administrative expense charge which is equal, on
an annual basis, to .10% of the daily net assets you have allocated to the
Sub-accounts of the Variable Account. This charge is designed to cover actual
administrative expenses which exceed the revenues from the contract maintenance
charge. There is no necessary relationship between the amount of administrative
charge imposed on a given Contract and the amount of expenses that may be
attributable to that Contract.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct a mortality and expense risk charge which is equal,
on an annual basis, to 1.35% of the daily net assets you have allocated to the
Sub-accounts of the Variable Account. The Company estimates that .95% is
attributable to the assumption of mortality risks and .40% is attributable to
the assumption of expense risks. The Company guarantees that the amount of this
charge will not increase over the life of the Contract.
The mortality risk arises from the Company's guarantee to cover all death
benefits and to make income payments in accordance with the Income Plan selected
and the Income Payment Tables.
The expense risk arises from the possibility that the contract maintenance
and administrative expense charges, both of which are guaranteed not to
increase, will be insufficient to cover actual administrative expenses.
TAXES
The Company will deduct applicable state premium taxes or other similar
policyholder taxes relative to the Contract (collectively referred to as
"premium taxes") either at the Payout Start Date, or when a total withdrawal
occurs. The Company reserves the right to deduct premium taxes from the purchase
payments. Currently, no deductions are made because New York does not charge
premium taxes on annuities.
At the Payout Start Date, the charge for applicable premium taxes will be
deducted from each Investment Alternative in the proportion that the Owner's
value in the Investment Alternative bears to the total Contract Value.
TRANSFER CHARGES
The Company reserves the right to assess a $10 charge on each transfer in
excess of twelve per Contract Year, excluding transfers through Dollar Cost
Averaging and Automatic Fund Rebalancing. The Company is presently waiving this
charge.
FUND EXPENSES
A complete description of the expenses and deductions from the Funds is
found in the prospectus for the Fund Series. This prospectus is accompanied by
the prospectus for the Fund Series.
GENERAL MATTERS
OWNER
The Owner has the sole right to exercise all rights and privileges under
the Contract, except as otherwise provided in the Contract. The Contract cannot
be jointly owned by both a non-natural person and a natural person.
BENEFICIARY
Subject to the terms of any irrevocable Beneficiary designation, the Owner
may change the Beneficiary at any time by notifying the Company in writing. Any
change will be effective at the time it is signed by the Owner, whether or not
the Annuitant is living when the change is received by the Company. The Company
will not, however, be liable as to any payment or settlement made prior to
receiving the written notice.
Unless otherwise provided in the Beneficiary designation, if a Beneficiary
predeceases the Owner and there are no other surviving beneficiaries, the new
Beneficiary will be: the Owner's spouse if living; otherwise, the Owner's
children, equally, if living; otherwise, the Owner's estate. Multiple
Beneficiaries may be named. Unless otherwise provided in the Beneficiary
designation, if more than one Beneficiary survives the Owner, the surviving
Beneficiaries will share equally in any amounts due.
ASSIGNMENTS
The Company will not honor an assignment of an interest in a Contract as
collateral or security for a loan. Otherwise, the Owner may assign benefits
under the Contract prior to the Payout Start Date. No Beneficiary may assign
benefits under the Contract until they are due.
No assignment will bind the Company unless it is signed by the Owner and
filed with the Company. The Company is not responsible for the validity of an
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.
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<PAGE> 19
DELAY OF PAYMENTS
Payment of any amounts due from the Variable Account under the Contract
will occur within seven days, unless:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission; or
3. The Securities and Exchange Commission permits delay for the protection
of the Owners.
Payments or transfers from the Fixed Account may be delayed for up to 6
months.
MODIFICATION
The Company may not modify the Contract without the consent of the Owner
except to make the Contract meet the requirements of the Investment Company Act
of 1940, or to make the Contract comply with any changes in the Internal Revenue
Code or to make any changes required by the Code or by any other applicable law.
CUSTOMER INQUIRIES
The Owner or any persons interested in the Contract may make inquiries
regarding the Contract by calling or writing your representative or the Company
at:
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
POST OFFICE BOX 9075
FARMINGVILLE, NEW YORK 11738-9075
1-(800)692-4682
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL
Generally, an annuity contract owner is not taxed on increases in the
Contract Value until a distribution occurs. This rule applies only where (1) the
owner is a "natural person," (see "Non-Natural Owners" below for exception) (2)
the investments of the Variable Account are "adequately diversified" in
accordance with Treasury Department Regulations, and (3) the issuing insurance
company, instead of the annuity owner, is considered the owner for federal
income tax purposes of any separate account assets funding the contract.
NON-NATURAL OWNERS
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 and the income on such contracts is taxed as
ordinary income received or accrued by the owner during the taxable year. There
are several exceptions to the general rule for contracts owned by non-natural
persons which are discussed in the Statement of Additional Information.
DIVERSIFICATION REQUIREMENTS
For a Contract to be treated as an annuity for federal income tax purposes,
the investments in the Variable Account must be "adequately diversified" in
accordance with the standards provided in the Treasury regulations. If the
investments in the Variable Account are not adequately diversified, then the
Contract will not be treated as an annuity contract for federal income tax
purposes and the Owner will be taxed on the excess of the Contract Value over
the investment in the Contract. Although the Company does not have control over
the Funds or their investments, the Company expects the Funds to meet the
diversification requirements.
OWNERSHIP TREATMENT
In connection with the issuance of the regulations on the adequate
diversification standards, the Department of the Treasury announced that the
regulations do not provide guidance concerning the extent to which contract
owners may direct their investments
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<PAGE> 20
among Sub-accounts of a variable account. The Internal Revenue Service has
previously stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the owner possesses incidents
of ownership in those assets such as the ability to exercise investment control
over the assets. At the time the diversification regulations were issued,
Treasury announced that guidance would be issued in the future regarding the
extent that owners could direct their investments among Sub-accounts without
being treated as owners of the underlying assets of the Variable Account.
The ownership rights under this contract are similar to, but different in
certain respects from, those described by the Service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of this contract has the choice of more investment options to
which to allocate premiums and contract values, and may be able to transfer
among investment options more frequently than in such rulings. These differences
could result in the contract owner being treated as the owner of the assets of
the Variable Account. In those circumstances, income and gains from the Variable
Account assets would be includible in the Contract Owners' gross income. In
addition, the Company does not know what standards will be set forth in the
regulations or rulings which the Treasury Department has stated it expects to
issue. It is possible that the Treasury's position, when announced, may
adversely affect the tax treatment of existing contracts. The Company,
therefore, reserves the right to modify the Contract as necessary to attempt to
prevent the Owner from being considered the federal tax owner of a pro rata
share of the assets of the Variable Account. However, the Company makes no
guarantee that such modification to the contract will be successful.
DELAYED MATURITY DATES
If the contract's scheduled maturity date is at a time when the annuitant
has reached an advanced age, e.g., past age 85, it is possible that the contract
would not be treated as an annuity. In that event, the income and gains under
the contract could be currently includible in the owner's income. There is no
definitive guidance on the proper tax treatment of Market Value Adjustments, and
you should contact a competent tax advisor with respect to the potential tax
consequences of a Market Value Adjustment.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal under a non-qualified contract, amounts
received are taxable to the extent the contract value, without regard to any
surrender charges, exceeds the investment in the contract. The contract value is
the sum of all account values. No matter which account a withdrawal is made
from, all account values are combined and the total contract value is used to
determine the amount of taxable income. The investment in the contract is the
gross premium or other consideration paid for the contract reduced by any
amounts previously received from the contract to the extent such amounts were
properly excluded from the owner's gross income. In the case of a partial
withdrawal under a qualified contract, the portion of the payment that bears the
same ratio to the total payment that the investment in the contract (i.e.,
nondeductible IRA contributions, after tax contributions to qualified plans)
bears to the contract value, can be excluded from income. In the case of a full
withdrawal under a non-qualified contract or a qualified contract, the amount
received will be taxable only to the extent it exceeds the investment in the
contract. If an individual transfers an annuity contract without full and
adequate consideration to a person other than the individual's spouse (or to a
former spouse incident to a divorce), the owner will be taxed on the difference
between the contract value and the investment in the contract at the time of
transfer. Other than in the case of certain qualified contracts, any amount
received as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) of the contract value is treated as a withdrawal of such
amount or portion. The contract provides a death benefit that in certain
circumstances may exceed the greater of the payments and the contract value. As
described elsewhere in the prospectus, the Company imposes certain charges with
respect to the death benefit. It is possible that some portion of those charges
could be treated for federal tax purposes as a partial withdrawal from the
contract.
TAXATION OF ANNUITY PAYMENTS
Generally, the rule for income taxation of payments received from an
annuity contract provides for the return of the owner's investment in the
contract in equal tax-free amounts over the payment period. The balance of each
payment received is taxable. In the case of variable annuity payments, the
amount excluded from taxable income is determined by dividing the investment in
the contract by the total number of expected payments. In the case of fixed
annuity payments, 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. Once the total amount of the investment
in the contract is excluded using these ratios, the annuity payments will be
fully taxable. If annuity payments cease because of the death of the annuitant
before the total amount of the investment in the contract is recovered, the
unrecovered amount generally will be allowed as a deduction to the Owner for the
last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS
Amounts may be distributed from an annuity contract because of the death of
an owner or annuitant. Generally, such amounts are includible in income as
follows: (1) if distributed in a lump sum, the amounts are taxed in the same
manner as a full withdrawal or (2) if distributed under an annuity option, the
amounts are taxed in the same manner as an annuity payment.
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<PAGE> 21
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any premature
distribution from a non-qualified annuity contract. The penalty tax generally
applies to any distribution made prior to the owner attaining age 59 1/2.
However, there should be no penalty tax on distributions to owners (1) made on
or after the owner attains age 59 1/2; (2) made as a result of an owner's death
or disability; (3) made in substantially equal periodic payments over life or
life expectancy; (4) made under an immediate annuity; or (5) attributable to an
investment in the contract before August 14, 1982. Similar rules apply for
distributions from qualified contracts. A competent tax advisor should be
consulted to determine if any other exceptions to the penalty apply to your
specific circumstances.
AGGREGATION OF ANNUITY CONTRACTS
All non-qualified deferred annuity contracts issued by the Company (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.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is credited
to the annuity. Although as of the date of this prospectus Congress is not
actively considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change).
TAX QUALIFIED CONTRACTS
Annuity contracts may be used as investments with certain tax qualified
plans such as: (1) Individual Retirement Annuities under Section 408(b) of the
Code; (2) Simplified Employee Pension Plans under Section 408(k) of the Code;
(3) Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the code; (4) Tax Sheltered Annuities under Section 403(b) of the
Code; (5) Corporate and Self Employed Pension and Profit Sharing Plans; and (6)
State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans. In the case of certain tax qualified plans, the terms of the plans may
govern the right to benefits, regardless of the terms of the contract.
RESTRICTIONS UNDER SECTION 403(B) PLANS
Section 403(b) of the Code provides for tax-deferred retirement savings
plans for employees of certain non-profit and educational organizations. In
accordance with the requirements of Section 403(b), any annuity contract used
for a 403(b) plan must provide that distributions attributable to salary
reduction contributions made after 12/31/88, and all earnings on salary
reduction contributions, may be made only after the employee attains age 59 1/2,
separates from service, dies, becomes disabled or on account of hardship
(earnings on salary reduction contributions may not be distributed on the
account of hardship). These limitations do not apply to withdrawals where the
Company is directed to transfer some or all of the contract value to another
Section 403(b) plans.
INCOME TAX WITHHOLDING
The Company is required to withhold federal income tax at a rate of 20% on
all "eligible rollover distributions" unless an individual elects to make a
"direct rollover" of such amounts to another qualified plan or Individual
Retirement Account or Annuity (IRA). Eligible rollover distributions generally
include all distributions from qualified contracts, excluding IRAs, with the
exception of (1) required minimum distributions, or (2) a series of
substantially equal periodic payments made over a period of at least 10 years,
or the life (joint lives) of the participant (and beneficiary). For any
distributions from non-qualified annuity contracts, or distributions from
qualified contracts which are not considered eligible rollover distributions,
the Company may be required to withhold federal and state income taxes unless
the recipient elects not to have taxes withheld and properly notifies the
Company of such election.
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road,
Northbrook Illinois, an indirect, wholly owned subsidiary of Allstate Insurance
Company, acts as the principal underwriter of the Contracts. ALFS is registered
as a broker-dealer under the Securities Exchange Act of 1934 and became a member
of the National Association of Securities Dealers, Inc. on June 30, 1993.
Contracts are sold by registered representatives of broker-dealers or bank
employees who are licensed insurance agents appointed by the Company, either
individually or through an incorporated insurance agency. Contracts may be sold
by representatives or employees of banks which may be acting as broker-dealers
without separate registration under the Securities Exchange Act of 1934,
pursuant to legal and regulatory exceptions.
Commissions paid may vary, but in aggregate are not anticipated to exceed
6.75% of any purchase payment. In addition, under certain circumstances, certain
sellers of the Contracts may be paid persistency bonuses which will take into
account, among other things, the length of time purchase payments have been held
under a Contract, and the amount of purchase payments. A persistency bonus is
not
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<PAGE> 22
expected to exceed .56%, on an annual basis, of the purchase payments considered
in connection with the bonus. These commissions are intended to cover
distribution expenses.
The underwriting agreement with ALFS provides for indemnification of ALFS
by the Company for liability to Owners arising out of services rendered or
Contracts issued.
VOTING RIGHTS
The Owner or anyone with a voting interest in the Sub-account of the
Variable Account may instruct the Company on how to vote at shareholder meetings
of the Fund Series. The Company will solicit and cast each vote according to the
procedures set up by the Fund Series and to the extent required by law. The
Company reserves the right to vote the eligible shares in its own right, if
subsequently permitted by the Investment Company Act of 1940, its regulations or
interpretations thereof.
Fund shares as to which no timely instructions are received will be voted
in proportion to the voting instructions which are received with respect to all
Contracts participating in that Sub-account. Voting instructions to abstain on
any item to be voted upon will be applied on a pro-rata basis to reduce the
votes eligible to be cast.
Before the Payout Start Date, the Owner holds the voting interest in the
Sub-account of the Variable Account (The number of votes for the Owner will be
determined by dividing the Contract Value attributable to a Sub-account by the
net asset value per share of the applicable eligible Fund.)
After the Payout Start Date, the person receiving income payments has the
voting interest. After the Payout Start Date, the votes decrease as income
payments are made and as the reserves for the Contract decrease. That person's
number of votes will be determined by dividing the reserve for such Contract
allocated to the applicable Sub-account by the net asset value per share of the
corresponding eligible Fund.
SELECTED FINANCIAL DATA
The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
prospectus beginning on page F-1.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SELECTED FINANCIAL DATA
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR-END FINANCIAL DATA 1996 1995 1994 1993 1992
----------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For The Years Ended December 31:
Revenues....................................... $ 228,387 $ 250,854 $ 186,249 $ 227,445 $ 203,890
Net Income..................................... 20,561 19,522 18,221 13,163 12,225
As of December 31:
Total Assets................................... 1,990,284 1,842,969 1,449,993 1,410,895 1,162,763
</TABLE>
In 1992, the Company adopted the provisions of Statement of Financial
Accounting Standard ("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," which resulted in a charge against 1992 earnings
of $623 on an after tax basis. Effective December 31, 1993, the Company adopted
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires that investments classified as available for sale be
carried at fair value. The net effect of adoption of this SFAS increased
shareholder's equity at December 31, 1993 by $25,391 thousand and did not have a
material impact on net income.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights significant factors influencing results
of operations and financial position of Allstate Life Insurance Company of New
York (the "Company"). It should be read in conjunction with the financial
statements and related notes.
The Company, which is wholly owned by a wholly owned subsidiary of Allstate
Insurance Company ("AIC"), markets a broad line of life insurance and annuity
products in the State of New York. Life insurance includes traditional products
such as whole life and term life insurance, as well as universal life and other
interest-sensitive life products. Annuities include deferred annuities, such as
variable annuities and fixed rate single and flexible premium annuities, and
immediate annuities such as structured settlement annuities. The Company
distributes its products using a combination of Allstate agents including life
specialists, banks and other financial institutions, brokers and direct response
marketing.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
Statutory premiums and deposits............................. $ 235,634 $ 216,361 $ 153,000
========== ========== ==========
Investments................................................. 1,636,654 1,541,329 1,172,524
Separate Account assets..................................... 260,668 220,141 175,918
---------- ---------- ----------
Investments and Separate Account assets..................... 1,897,322 1,761,470 1,348,442
========== ========== ==========
Premiums and contract charges (net of reinsurance).......... 117,106 148,316 88,560
Net investment income....................................... 112,862 104,384 96,911
Contract benefits (net of reinsurance)...................... 172,772 198,055 137,434
Operating costs and expenses................................ 23,386 23,366 20,205
Early retirement program.................................... -- -- 1,210
---------- ---------- ----------
Income from operations...................................... 33,810 31,279 26,622
Income tax expense on operations............................ 12,221 10,557 8,907
---------- ---------- ----------
Net operating income........................................ 21,589 20,722 17,715
Realized capital losses and gains, after tax................ (1,028) (1,200) 506
---------- ---------- ----------
Net income.................................................. $ 20,561 $ 19,522 $ 18,221
========== ========== ==========
</TABLE>
PREMIUMS, DEPOSITS AND CONTRACT CHARGES
Statutory premiums, which include premiums and deposits for all products,
increased $19.3 million or 8.9% in 1996 from 1995. The increase is largely the
result of a sale of a funding agreement, a type of investment contract first
sold by the Company in 1996, as well as higher sales of variable annuity and
life insurance products, partially offset by lower sales of structured
settlement annuities. Sales of funding agreements may not continue, as they are
entered into based on the Company's assessment of market opportunities. In 1995,
statutory premiums increased $63.4 million or 41.4% compared to 1994 levels
primarily due to growth in sales of individual annuities. Increased sales of
structured settlement annuities in 1995 were partially offset by a decrease in
the sales of variable annuities. Individual annuities comprised 55.4% and 77.3%
of statutory premiums and deposits in 1996 and 1995, respectively.
Premiums and contract charges under generally accepted accounting
principles ("GAAP") decreased 21.0% in 1996 and increased 67.5% in 1995. Under
GAAP, revenues exclude deposits on most annuities and premiums on universal life
insurance policies. The changes in premiums and contract charges in 1996 and
1995 primarily reflect fluctuations in the level of sales of structured
settlement annuities sold with life contingencies. Provision for policy benefits
decreased $25.3 million or 12.8%, during 1996 and increased $60.6 million or
44.1%, during 1995. These changes also result primarily from the fluctuations in
the level of sales of structured settlement annuities with life contingencies.
GAAP premium and contract charges will vary with the mix of products sold during
the period.
NET INVESTMENT INCOME
Pretax net investment income increased 8.1% in 1996 primarily due to growth
of 13.3% or $178.2 million in investments excluding unrealized gains on fixed
income securities. The additional investment income earned on the higher base of
assets is partially offset by lower yields on fixed income securities. Pretax
net investment income increased 7.7% in 1995 primarily due to the 12.8% or
$151.8 million increase in investments excluding unrealized gains on fixed
income securities. The increase in investments resulted primarily from growth in
new business, partially offset by surrenders, withdrawals and benefits paid.
In low interest rate environments, funds from maturing investments may be
reinvested at substantially lower interest rates than those which prevailed when
the funds were previously invested.
22
<PAGE> 24
REALIZED CAPITAL GAINS AND LOSSES
Realized capital losses of $1.0 million after tax in 1996 were 14.3% lower
than those reported in 1995. Reduced mortgage losses were partially offset by
losses incurred on the sale of fixed income securities to reposition a portion
of the investment portfolio to improve overall yield in 1996. Net capital losses
were realized in 1995 as compared to net capital gains in 1994. Capital losses
in 1995 were realized primarily from writedowns of mortgage loans, partially
offset by gains on sales of fixed income securities. In 1994, the Company
experienced lower asset writedowns and, as a result, realized net capital gains
from sales of securities and bond calls.
OPERATING EXPENSES
Operating expenses were essentially unchanged in 1996. The 15.6% increase
in 1995 operating expense resulted from an increase in amortization of deferred
acquisition costs. In 1994, the Company recognized an after tax charge of $787
thousand related to the cost of an early retirement program offered to certain
home office employees. The program provided one year of salary continuation and
related benefits and an enhanced retirement benefit.
NET OPERATING INCOME
Net operating income increased 4.2% in 1996 and 17.0% in 1995. The increase
in 1996 is the result of growth in investments partially offset by less
favorable mortality experience on structured settlement annuities with life
contingencies. The increase in net operating income in 1995 was primarily due to
higher margins and growth in revenues.
MARKET RISK
Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. The Company's primary market risk exposure
is to changes in interest rates. The Company does not currently have material
exposures to equity price, commodity price, or foreign currency exchange risk.
The active management of market risk is integral to the Company's
operations. The Company may use the following tools to manage its exposure to
market risk within defined tolerance ranges: 1) rebalance its existing asset or
liability portfolios, 2) change the character of future investments purchased or
3) use derivatives to modify the interest rate characteristics of existing
assets and liabilities or assets expected to be purchased. (See the financial
futures contracts section in "Investments" and Note 5 to the financial
statements for a more detailed discussion of these products.)
The Company offers a variety of annuities including fixed rate single and
flexible premium deferred annuities and single premium immediate annuities,
including structured settlement annuities. For such products, the Company
invests premiums and deposits to create cash flows that will fund future claims,
benefits and expenses, and earn stable margins.
The Company calculates effective durations of assets and liabilities and
monitors quarterly whether the asset-liability duration gap is within desired
tolerances. The primary tools for managing investment portfolios in relation to
liabilities are simulation models (including cash flow and duration analysis),
asset allocation models and periodic analysis of portfolio composition compared
to specifications. In addition, the Company uses financial futures to hedge the
interest rate risk related to asset liability management.
INVESTMENTS
The composition of the investment portfolio at December 31, 1996 is
presented at carrying value in the table below (see Notes 2 and 4 to the
financial statements for investment accounting policies and additional
information).
<TABLE>
<CAPTION>
PERCENT
TO TOTAL
($ IN THOUSANDS) ----------------
<S> <C> <C>
Fixed income securities..................................... 1,500,783 91.7%
Mortgage loans.............................................. 84,657 5.2
Short-term.................................................. 25,855 1.6
Policy loans................................................ 25,359 1.5
---------- -----
Total................................................ $1,636,654 100.0%
========== =====
</TABLE>
FIXED INCOME SECURITIES
The Company's fixed income securities portfolio consists of tax-exempt
municipal bonds, publicly traded corporate bonds, privately-placed securities,
mortgage-backed securities, asset-backed securities, and U.S. government bonds.
The Company generally holds its fixed income securities for the long term, but
has classified all of these securities as available for sale to allow maximum
flexibility in portfolio management. At December 31, 1996, net unrealized
capital gains on the fixed income securities portfolio totaled
23
<PAGE> 25
$122.6 million compared to $205.5 million as of December 31, 1995. The decrease
in the unrealized gain position is primarily attributable to rising interest
rates.
Substantially all of the Company's fixed income securities portfolio is
rated investment grade, which is defined by the Company as a security having a
National Association of Insurance Commissioners ("NAIC") rating of 1 or 2, a
Moody's rating of Aaa, Aa, A or Baa, or a comparable Company internal rating.
As of December 31, 1996, the fixed income securities portfolio included
$492.8 million of privately-placed corporate obligations, compared with $466.2
million at December 31, 1995. The benefits of privately-placed securities as
compared to public securities are generally higher yields, improved cash flow
predictability through pro-rata sinking funds on many bonds and a combination of
covenant and call protection features designed to better protect the holder
against losses resulting from credit deterioration, reinvestment risk and
fluctuations in interest rates. The relative disadvantages of privately-placed
securities as compared to public securities include reduced liquidity and in
some cases limited access to information. All of the privately-placed securities
are rated as investment grade by either the NAIC or the Company's internal
ratings. The Company determines the fair value of privately-placed fixed income
securities based on discounted cash flows using current interest rates for
similar securities.
At December 31, 1996 and 1995, $194.2 million and $200.9 million,
respectively, of the fixed income portfolio were invested in mortgage-backed
securities ("MBS"). At December 31, 1996, all of the MBS were investment grade
and approximately 81.6% have underlying collateral that is guaranteed by U.S.
government entities, thus credit risk was minimal.
MBS, however, are subject to interest rate risk as the duration and
ultimate realized yield are affected by the rate of repayment of the underlying
mortgages. The Company attempts to limit interest rate risk by purchasing MBS
whose cost does not significantly exceed par value, and with repayment
protection to provide a more certain cash flow to the Company. At December 31,
1996, the amortized cost of the MBS portfolio was below par value by $6.9
million and over 34% of the MBS portfolio was invested in planned amortization
class bonds. This type of MBS is repaid over a predetermined time period, which
is guaranteed to be met under most circumstances.
The fixed income securities portfolio contained $31.5 million and $24.7
million of asset-backed securities ("ABS") at December 31, 1996 and 1995,
respectively. ABS are subject to many of the same risks as MBS, but to a lesser
degree because of the nature of the underlying assets. The Company attempts to
mitigate these risks by primarily investing in highly-rated, publicly-traded,
intermediate term ABS at par value. At December 31, 1996, the amortized cost of
the ABS portfolio was below par value by $327 thousand.
The Company closely monitors its fixed income portfolio for declines in
value that are other than temporary. Securities are placed on non-accrual status
when they are in default or when the receipt of interest payments is in doubt.
MORTGAGE LOANS
The Company's $84.6 million investment in mortgage loans at December 31,
1996 is comprised primarily of loans secured by first mortgages on developed
commercial real estate. Property type diversification is a key consideration
used to manage the Company's mortgage loan risk.
The Company closely monitors its commercial mortgage loan portfolio on a
loan-by-loan basis. Loans with an estimated collateral value less than the loan
balance, as well as loans with other characteristics indicative of a higher than
normal credit risk, are reviewed by financial and investment management at least
quarterly for purposes of establishing valuation allowances and placing loans on
non-accrual status. The underlying collateral values are based upon discounted
property cash flow projections, which are updated as conditions change or at
least annually.
In 1996, $8.6 million of commercial mortgage loans were contractually due.
Of these, 20.3% were paid as due, and 79.7% were refinanced at prevailing market
terms. For contractual maturities of the commercial mortgage loan portfolio as
of December 31, 1996, and for loans that were not in foreclosure see Note 4 of
the financial statements. The Company expects to continue to extend the maturity
of certain maturing loans at prevailing interest rates where the borrower is
unable to obtain financing elsewhere. Depending on the interest rate
environment, some loans may not be able to be extended at prevailing market
rates.
SHORT-TERM INVESTMENTS
The Company's short-term investment portfolio was $25.9 million and $7.3
million at December 31, 1996 and 1995, respectively. The Company invests all
available cash balances in taxable and tax-exempt short-term securities having a
final maturity date or redemption date of one year or less.
FINANCIAL FUTURES CONTRACTS
The Company uses financial futures contracts to reduce its exposure to
interest rate risk on its investments as well as to improve asset/liability
management. The Company does not hold or issue these instruments for trading
purposes. At December 31, 1996, the Company had $6.7 million in notional amount
of futures contracts outstanding, all of which mature within one year. The
Company is exposed to credit-related losses in the event of nonperformance by
counterparties to financial futures contracts. However, such
24
<PAGE> 26
nonperformance is not expected because the Company utilizes highly rated
counterparties, establishes risk control limits and maintains ongoing monitoring
procedures. In addition, futures contracts have limited off-balance-sheet credit
risk as they are executed on organized exchanges and require security deposits,
as well as the daily cash settlement of margins.
SEPARATE ACCOUNTS
Separate Account balances increased 18.4% from $220.1 million at December
31, 1995 to $260.7 million at December 31, 1996 due to favorable investment
performance of the Separate Account investment portfolios and sales of flexible
premium deferred variable annuity contracts, partially offset by variable
annuity contract surrenders and withdrawals.
RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits increased 8.7% to $911.5
million at December 31, 1996, resulting primarily from the sales of structured
settlement annuities with life contingencies.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL RESOURCES
The NAIC has a standard for assessing the solvency of insurance companies,
which is referred to as risk-based capital ("RBC"). The requirement consists of
a formula for determining each insurer's RBC and a model law specifying
regulatory actions if an insurer's RBC falls below specified levels. The RBC
formula for life insurance companies establishes capital requirements relating
to insurance risk, business risk, asset risk and interest rate risk. At December
31, 1996, RBC for the Company was significantly above levels which would require
regulatory action.
FINANCIAL RATINGS AND STRENGTH
Claims-paying ability ratings at December 31, 1996 assigned to the Company
include AA+, A+(g) and Aa3 from Standard & Poor's, A.M. Best and Moody's,
respectively.
LIQUIDITY
The Company's principal sources of funds are premiums, deposits, and
collections of principal and income from the investment portfolio. The primary
uses of these funds are to purchase investments and pay policyholder claims,
benefits, contract maturities and surrenders, and operating costs.
Fixed income securities represent 91.7% of the Company's total investments.
The maturity structure of these securities is managed to meet the anticipated
cash flow requirements of the underlying liabilities. A portion of the Company's
product portfolio, primarily fixed deferred annuities and universal life
insurance policies, is subject to discretionary surrender and withdrawal by
customers. Management believes its assets are sufficiently liquid to meet future
obligations to its life and annuity policyholders, under various interest rate
scenarios.
OTHER DEVELOPMENTS
The initial draft of the NAIC's codification of statutory accounting
practices will be distributed in March 1997 for a six-month public exposure
period. Finalization of the codification is expected to occur in late 1997 or
early 1998, with implementation tentatively planned for January 1, 1999. Due to
the possible changes resulting from the public exposure of the codification, the
potential impact to statutory surplus is not determinable at this time.
PENDING ACCOUNTING STANDARD
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers of Financial
Assets and Extinguishments of Liabilities." This standard distinguishes between
transfers of financial assets as sales versus financing transactions based upon
relinquishment of control and addresses the accounting for securitizations,
securities lending, repurchase agreements and insubstance defeasance
transactions. The requirements of this statement that were effective on January
1, 1997 were adopted and are not expected to have a material impact on the
results of operations or financial position of the Company.
COMPETITION
The Company is engaged in a business that is highly competitive because of
the large number of stock and mutual life insurance companies and other entities
competing in the sale of insurance and annuities. There are approximately 1,700
stock, mutual and other types of insurers in business in the United States.
Several independent rating agencies regularly evaluate life insurer's
claims-paying ability, quality of investments and overall stability. A.M. Best
Company assigns A+(g) to the Company. Under Best's rating policy and procedure,
the Company is assigned the Best's rating of its parent Company, and the rating
is based on the consolidated performance of the parent and its subsidiary.
Standard & Poor's Insurance Rating Services assigns AA+ (Excellent) to the
Company and Moody's assigns
25
<PAGE> 27
an Aa3 (Excellent) financial stability rating to the Company. These ratings do
not relate to the investment performance of the Variable Account.
EMPLOYEES
As of December 31, 1996, the Company had approximately 82 employees at its
home office in Farmingville, New York who work primarily on the Company's
matters.
PROPERTIES
The Company occupies office space in Farmingville, New York which is owned
by its parent company.
STATE AND FEDERAL REGULATION
The insurance business of the Company is subject to comprehensive and
detailed regulation and supervision in the State of New York. The laws of New
York establish a supervisory agency with broad administrative powers with
respect to licensing to transact business, overseeing trade practices, licensing
agents, approving policy forms, establishing reserve requirements, fixing
maximum interest rates on life insurance policy loans and minimum rates for
accumulation of surrender values, prescribing the form and content of required
financial statements and regulating the type and amounts of investments
permitted. Each insurance company is required to file detailed annual reports
with the supervisory agency and its operations and accounts are subject to
examination by such agency at regular intervals.
Under insurance guaranty fund law, for the State of New York, insurers
doing business therein can be assessed up to prescribed limits for contract
owner losses incurred as a result of company insolvencies. The amount of any
future assessments on the Company under these laws cannot be reasonably
estimated. These laws do provide, however, that an assessment may be excused or
deferred if it would threaten an insurer's own financial strength.
In addition, the State of New York regulates affiliated groups of insurers,
such as the Company and its affiliates, under insurance holding company
legislation. Under such laws, intercompany transfers of assets and dividend
payments from insurance subsidiaries may be subject to prior notice or approval,
depending on the size of such transfers and payments in relation to the
financial positions of the companies.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regulation,
controls on medical care costs, removal of barriers preventing banks from
engaging in the securities and insurance business, tax law changes affecting the
taxation of insurance companies, the tax treatment of insurance products and its
impact on the relative desirability of various personal investment vehicles, and
proposed legislation to prohibit the use of gender in determining insurance and
pension rates and benefits.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with
information as to their ages, dates of election and principal business
occupations during the last five years (if other than their present business
occupations).
LOUIS G. LOWER, II, 51, Chairman of the Board and President (1992)*
Also Director (1986-Present) and Senior Vice President (1995-Present) of
Allstate Insurance Company; Director (1991-Present) of Allstate Life Financial
Services, Inc.; Director (1986-Present) and President (1990-Present) Allstate
Life Insurance Company; Director (1983-Present) and Chairman of the Board
(1990-Present) of Allstate Life Insurance Company of New York; Chairman of the
Board of Directors and Chief Executive Officer (1995-Present), Chairman of the
Board of Directors and President (1990-1995) of Glenbrook Life Insurance
Company; Director (1992-Present), Chairman of the Board of Directors and Chief
Executive Officer (1995-Present) of Glenbrook Life and Annuity Company; Director
and Chairman of the Board (1995-Present) of Laughlin Group Holdings, Inc.;
Director and Chairman of the Board of Directors and Chief Executive Officer
(1989-Present) Lincoln Benefit Life Company; Chairman of the Board of Directors
and Chief Executive Officer (1995-Present) of Northbrook Life Insurance Company;
and Chairman of the Board of Directors and Chief Executive Officer
(1995-Present) Surety Life Insurance Company.
MICHAEL J. VELOTTA, 50, Vice president, Secretary, General Counsel, and Director
(1993)*
Also Director and Secretary (1993-Present) of Allstate Life Financial
Services, Inc.; Director (1992-Present) Vice President, Secretary and General
Counsel (1993-Present) Allstate Life Insurance Company; Director (1992-Present)
Vice President, Secretary and General Counsel (1993-Present) Allstate Life
Insurance Company of New York; Director (1992-Present) Vice President, Secretary
and General Counsel (1993-Present) Glenbrook Life Insurance Company; Director
(1992-Present) Vice President, Secretary and General Counsel (1993-Present)
Glenbrook Life and Annuity Company; Director and Secretary (1995-Present)
Laughlin Group Holdings, Inc.; Director (1992- Present) and Assistant Secretary
(1995-Present) Lincoln Benefit Life Company; Director (1992-Present) Vice
President,
26
<PAGE> 28
Secretary and General Counsel (1993-Present) Northbrook Life Insurance Company;
and Director and Assistant Secretary (1995-Present) Surety Life Insurance
Company.
SHARMAINE M. MILLER, 42, Director and Chief Administrative Officer (1996)*
Prior to 1996, she was a Department manager for Allstate Insurance Company.
PETER H. HECKMAN, 51, Vice President (1992)*
Also Director and Vice President (1988-Present) of Allstate Life Insurance
Company; Director (1990-1996), Vice President (1989-Present), Allstate Life
Insurance Company of New York; Director (1991-1993) of Allstate Life Financial
Services, Inc.; Director (1990-Present), President and Chief Operating Officer
(1996-Present), and Vice President (1990-1996), Glenbrook Life Insurance
Company; Director (1992-Present) President and Chief Operating Officer
(1996-Present), and was Vice President (1995-1996), Glenbrook Life and Annuity
Company; Director (1995-Present) and Vice Chairman of the Board (1996-Present)
Laughlin Group Holdings, Inc.; Director (1990-Present) and Vice Chairman of the
Board (1996-Present) Lincoln Benefit Life Company; Director (1988-Present)
President and Chief Operating Officer (1996-Present), and was Vice President
(1989-1996), Northbrook Life Insurance Company; and Director (1995-Present) and
Vice Chairman of the Board (1996-Present) Surety Life Insurance Company
TIMOTHY H. PLOHG, 50, Vice President and Director (1995)*
Also Assistant Vice President (1991-Present), Allstate Life Insurance
Company, and Vice President and Director (1995-Present) Allstate Life Insurance
Company of New York. Prior to 1995, he was Vice President of the Allstate Life
Service Center; Assistant Vice President Sales, Regional Vice President.
KAREN C. GARDNER, 43, Vice President (1996)*
Vice President (1996-Present) Allstate Insurance Company; Vice President
(1996-Present) Allstate Life Insurance Company; Vice President (1996-Present)
Allstate Life Insurance Company of New York; Vice President (1996-Present)
Glenbrook Life Insurance Company; Vice President (1996-Present) Laughlin Group
Holdings, Inc.; Assistant Vice President (1996-Present) Lincoln Benefit Life
Company; Vice President (1996-Present) Northbrook Life Insurance Company;
Assistant Vice President (1996-Present) Surety Life Insurance Company. Prior to
1996 she was a Partner (1975-1996) Ernst & Young LLP.
KEVIN R. SLAWIN, 39, Director and Vice President (1996)*
Also Assistant Vice President and Assistant Treasurer (1995-1996) Allstate
Insurance Company; Director (1996-Present) and Assistant Treasurer (1995-1996)
Allstate Life Financial Services, Inc.; Director and Vice President
(1996-Present) and Assistant Treasurer (1995-1996) Allstate Life Insurance
Company; Director and Vice President (1996-Present) and Assistant Treasurer
(1995-1996) Allstate Life Insurance Company of New York; Director and Vice
President (1996-Present) and Assistant Treasurer (1995-1996) Glenbrook Life
Insurance Company; Vice President (1996-Present) and Assistant Treasurer
(1995-1996) Glenbrook Life and Annuity Company; Director (1996-Present) and
Assistant Treasurer (1995-1996) Laughlin Group Holdings, Inc.; Director
(1996-Present) Lincoln Benefit Life Company; Director and Vice President
(1996-Present) and Assistant Treasurer (1995-1996) Northbrook Life Insurance
Company; Director (1996-Present) Surety Life Insurance Company; Assistant
Treasurer and Director (1994-1995) Sears Roebuck and Co.; and Treasurer and
First Vice President (1986-1994) Sears Mortgage Corporation.
CASEY J. SYLLA, 53, Chief Investment Officer and Director (1995)*
Also Director (1995-Present ) Senior Vice President and Chief Investment
Officer (1995-Present) Allstate Insurance Company; Director (1995-Present) Chief
Investment Officer (1995-Present) Allstate Life Insurance Company; Chief
Investment Officer (1995-Present) Allstate Life Insurance Company of New York;
Chief Investment Officer (1995-Present) Glenbrook Life Insurance Company; Chief
Investment Officer (1995-Present) Glenbrook Life and Annuity Company; and
Director and Chief Investment Officer (1995-Present) Northbrook Life Insurance
Company. Prior to 1995 he was Senior Vice President and Executive
Officer-Investments (1992-1995) of Northwestern Mutual Life Insurance Company.
JAMES P. ZILS, 46, Treasurer (1995)*
Also Vice President and Treasurer (1995-Present) Allstate Insurance
Company; Treasurer (1995-Present) Allstate Life Financial Services, Inc.;
Treasurer (1995-Present) Allstate Life Insurance Company; Treasurer
(1995-Present) Allstate Life Insurance Company of New York; Treasurer
(1995-Present) Glenbrook Life Insurance Company; Treasurer (1995-Present)
Glenbrook Life and Annuity Company; Treasurer (1995-Present) Laughlin Group
Holdings, Inc. and Treasurer (1995-Present) Northbrook Life Insurance Company.
Prior to 1995, he was Vice President of Allstate Life Insurance Company. Prior
to 1993, he held various management positions.
MARCIA D. ALAZRAKI, 55, Director (1993)*
Marcia D. Alazraki is an attorney practicing with the firm of Simpson,
Thacher & Bartlett, New York, New York. Prior to 1991, she practiced with the
firm of Shea & Gould, New York, New York.
27
<PAGE> 29
JOSEPH F. CARLINO, 79, Director (1983)*
Joseph F. Carlino is a self-employed practicing attorney in Mineola, New
York.
CLEVELAND JOHNSON, JR., 61, Director (1983)*
Cleveland Johnson, Jr. is currently a Business Development Advocate for the
Town of Islip, Division of Economic Development. Previously he was a Vice
president with State University of New York in Farmingdale, New York.
PHILLIP E. LAWSON, 43, Director (1994)*
Phillip E. Lawson is also a Regional Vice President of Allstate Insurance
Company. Prior to 1990, he was a Director of Allstate Insurance Company.
GERARD F. MCDERMOTT, 50, Director (1995)*
Gerard F. McDermott is also a Regional Vice President of Allstate Insurance
Company. Prior to 1992, he held various management positions.
JOSEPH P. MCFADDEN, 57, Director (1992)*
Joseph P. McFadden is also a Territorial Vice President of Allstate
Insurance Company. Prior to 1992, he was a Claim Vice President of Allstate
Insurance Company.
JOHN R. RABEN, JR., 51, Director (1988)*
John R. Raben, Jr. is also Vice President & Municipal Bond/Public Finance
Liaison with J.P. Morgan Securities, Inc.
THEODORE A. SCHNELL, 48, ASSISTANT VICE PRESIDENT AND DIRECTOR (1995)*
Theodore A. Schnell is also Assistant Vice President, Assistant Secretary
and Assistant Treasurer (1989-Present) Allstate Life Insurance Company;
Assistant Treasurer (1990-Present), Glenbrook Life Insurance Company; Assistant
Treasurer (1992-Present) Glenbrook Life and Annuity Company; Director
(1987-Present) Lincoln Benefit Life Company; Assistant Vice President, Assistant
Secretary and Assistant Treasurer (1989-Present) Northbrook Life Insurance
Company and Director (1995-Present) Surety Life Insurance Company.
SALLY A. SLACKE, 63, (Director) (1983)*
Sally A. Slacke is also President of Slacke Test Boring, Inc.
- ------------
*Date elected/appointed to current office.
EXECUTIVE COMPENSATION
Executive officers of the Company also serve as officers of its parent
company and receive no compensation directly from the Company. Some of the
officers also serve as officers of other companies affiliated with the Company.
Allocations have been made as to each individual's time devoted to his or her
duties as an executive officer of the Company. However, no officer's
compensation allocated to the Company exceeded $100,000 in 1996. The allocated
cash compensation of all officers of the Company as a group for services
rendered in all capacities to the Company during 1996 totaled $61,330.32.
Directors of the Company receive no compensation in addition to their
compensation as employees of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------- ------------ ----------
(A) (B) (C) (D) (F)
(E) SECURITIES (G) (H) (I)
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) AWARD(S) (#) ($) ($)
--------------------------- ---- -------- -------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis G. Lower, II............. 1996 $436,800 $246,781 $10,246 0 $18,258 0 $5,250(1)
President and Chairman 1995 $416,000 $266,175 $17,044 $199,890 N/A $411,122 $5,250(1)
of the Board of Directors 1994 $389,050 $ 43,973 $26,990 $170,660 N/A 0 $1,890(1)
James J. Brazda(2)............. 1995 $115,870 $ 27,808 $ 175 0 N/A 0 $5,761(3)
Chief Administrative Officer
and Director 1994 $108,195 $ 21,707 0 $ 16,935 N/A 0 $1,608(3)
</TABLE>
- ------------
(1) Amount received by Mr. Lower which represents the value allocated to his
account from employer contributions under The Savings and Profit Sharing
Fund of Allstate Employees and prior to 1996, to The Profit Sharing Fund and
to its predecessor, The Savings and Profit Sharing Fund of Sears employees.
(2) Mr. Brazda no longer serves in this capacity for Allstate Life Insurance
Company of New York.
(3) Amount received by Mr. Brazda which represents the value allocated to his
account from employer contributions under The Profit Sharing Fund and to its
predecessor, The Savings and Profit Sharing Fund of Sears employees.
28
<PAGE> 30
Shares of the Company are not directly owned by any director or officer of
the Company. The percentage of shares of The Allstate Corporation beneficially
owned by any director, and by all directors and officers of the Company as a
group, does not exceed one percent of the class outstanding.
LEGAL PROCEEDINGS
From time to time the Company is involved in pending and threatened
litigation in the normal course of its business in which claims for monetary
damages are asserted. Management, after consultation with legal counsel, does
not anticipate the ultimate liability arising from such pending or threatened
litigation to have a material effect on the financial condition of the Company.
EXPERTS
The financial statements of the Variable Account incorporated by reference
in this prospectus, and the financial statements and financial statement
schedules of the Company included in this prospectus have been audited by
Deloitte & Touche LLP, Two Prudential Plaza, 180 North Stetson Avenue, Chicago,
Illinois, 60601-6779, independent auditors, as stated in their reports appearing
herein and incorporated by reference in this prospectus, and are included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
Sutherland, Asbill & Brennan, L.L.P., of Washington, D.C., has provided
advice on certain legal matters relating to the federal securities laws
applicable to the issue and sale of the Contracts. All matters of New York law
pertaining to the Contracts, including the validity of the Contracts and the
Company's right to issue such Contracts under New York insurance law, have been
passed upon by Michael J. Velotta, General Counsel of the Company.
29
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK:
We have audited the accompanying Statements of Financial Position of
Allstate Life Insurance Company of New York (the "Company") as of December 31,
1996 and 1995, and the related Statements of Operations, Shareholder's Equity
and Cash Flows for each of the three years in the period ended December 31,
1996. Our audits also included Schedule IV -- Reinsurance and Schedule V --
Valuation and Qualifying Accounts. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Allstate Life Insurance Company of New York
as of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. Also, in our opinion,
Schedule IV -- Reinsurance and Schedule V -- Valuation and Qualifying Accounts,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 21, 1997
F-1
<PAGE> 32
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
Assets
Investments
Fixed income securities, at fair value (amortized cost
$1,378,155 and $1,219,418)............................ $1,500,783 $1,424,893
Mortgage loans......................................... 84,657 86,394
Policy loans........................................... 25,359 22,785
Short-term............................................. 25,855 7,257
---------- ----------
Total investments................................. 1,636,654 1,541,329
Deferred acquisition costs................................ 61,559 53,944
Accrued investment income................................. 20,321 18,828
Reinsurance recoverables.................................. 2,566 3,331
Cash...................................................... 1,027 1,472
Other assets.............................................. 7,489 3,924
Separate Accounts......................................... 260,668 220,141
---------- ----------
Total assets...................................... $1,990,284 $1,842,969
========== ==========
Liabilities
Reserve for life-contingent contract benefits............. $ 911,457 $ 838,739
Contractholder funds...................................... 572,480 499,548
Deferred income taxes..................................... 3,692 23,659
Other liabilities and accrued expenses.................... 6,405 8,950
Net payable to affiliates................................. 2,515 1,865
Separate Accounts......................................... 260,668 220,141
---------- ----------
Total liabilities................................. 1,757,217 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.............................. 36,852 74,413
Retained income........................................... 148,428 127,867
---------- ----------
Total shareholder's equity........................ 233,067 250,067
---------- ----------
Total liabilities and shareholder's equity........ $1,990,284 $1,842,969
========== ==========
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Life and annuity premiums (net of reinsurance ceded of
$2,273, $2,147 and $2,198)............................. $ 91,825 $126,713 $ 70,070
Contract charges.......................................... 25,281 21,603 18,490
Net investment income..................................... 112,862 104,384 96,911
Realized capital gains and losses......................... (1,581) (1,846) 778
-------- -------- --------
228,387 250,854 186,249
-------- -------- --------
Costs and expenses
Life and annuity contract benefits (net of reinsurance
recoveries of $2,827, $1,581 and $1,860)............... 172,772 198,055 137,434
Amortization of deferred acquisition costs................ 6,512 5,502 3,875
Operating costs and expenses.............................. 16,874 17,864 16,330
Early retirement program.................................. -- -- 1,210
-------- -------- --------
196,158 221,421 158,849
-------- -------- --------
Income from operations before income tax expense............ 32,229 29,433 27,400
Income tax expense.......................................... 11,668 9,911 9,179
-------- -------- --------
Net income.................................................. $ 20,561 $ 19,522 $ 18,221
======== ======== ========
</TABLE>
See notes to financial statements.
F-2
<PAGE> 33
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Common Stock................................................ $ 2,000 $ 2,000 $ 2,000
-------- -------- --------
Additional capital paid-in.................................. 45,787 45,787 45,787
-------- -------- --------
Unrealized net capital gains and losses
Balance, beginning of year................................ 74,413 (6,891) 25,391
Net (decrease) increase................................... (37,561) 81,304 (32,282)
-------- -------- --------
Balance, end of year........................................ 36,852 74,413 (6,891)
-------- -------- --------
Retained income
Balance, beginning of year................................ 127,867 108,345 90,124
Net income................................................ 20,561 19,522 18,221
-------- -------- --------
Balance, end of year........................................ 148,428 127,867 108,345
-------- -------- --------
Total shareholder's equity............................. $233,067 $250,067 $149,241
======== ======== ========
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................ $ 20,561 $ 19,522 $ 18,221
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation, amortization and other non-cash items.... (26,172) (22,348) (18,969)
Realized capital gains and losses...................... 1,581 1,846 (778)
Interest credited to contractholder funds.............. 25,817 26,924 27,233
Increase in life-contingent contract benefits and
contractholder funds.................................. 75,217 103,513 55,233
Increase in deferred acquisition costs................. (6,859) (5,537) (6,850)
Increase in accrued investment income.................. (1,493) (2,497) (102)
Change in deferred income taxes........................ 257 (2,677) (5,993)
Changes in other operating assets and liabilities...... (4,234) 3,897 (18,082)
--------- --------- ---------
Net cash provided by operating activities............ 84,675 122,643 49,913
--------- --------- ---------
Cash flows from investing activities
Proceeds from sales of fixed income securities............ 28,454 13,526 49,903
Investment collections
Fixed income securities available for sale............. 72,751 30,871 54,796
Fixed income securities held to maturity............... -- 3,067 17,186
Mortgage loans......................................... 12,508 6,499 9,744
Investment purchases
Fixed income securities available for sale............. (236,252) (142,205) (137,684)
Fixed income securities held to maturity............... -- (32,046) (38,709)
Mortgage loans......................................... (10,325) (9,864) (10,132)
Change in short-term investments, net..................... (18,598) (45) 41,528
Change in policy loans, net............................... (2,574) (859) (2,133)
--------- --------- ---------
Net cash used in investing activities................ (154,036) (131,056) (15,501)
--------- --------- ---------
Cash flows from financing activities
Contractholder fund deposits.............................. 115,420 76,534 57,468
Contractholder fund withdrawals........................... (46,504) (68,412) (92,574)
--------- --------- ---------
Net cash provided by (used in) financing
activities.......................................... 68,916 8,122 (35,106)
--------- --------- ---------
Net decrease in cash........................................ (445) (291) (694)
Cash at beginning of year................................... 1,472 1,763 2,457
--------- --------- ---------
Cash at end of year......................................... $ 1,027 $ 1,472 $ 1,763
========= ========= =========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 34
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Allstate Life
Insurance Company of New York (the "Company"). The Company is wholly owned by a
wholly owned subsidiary ("Parent") of Allstate Insurance Company ("AIC"), a
wholly owned subsidiary of The Allstate Corporation (the "Corporation"). On June
30, 1995, Sears, Roebuck and Co. ("Sears") distributed its 80.3% ownership in
the Corporation to Sears common shareholders through a tax-free dividend (the
"Distribution"). These financial statements have been prepared in conformity
with generally accepted accounting principles.
To conform with the 1996 presentation, certain items in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets a broad line of life insurance and annuity products in
the State of New York. Life insurance includes traditional products such as
whole life and term life insurance, as well as universal life and other
interest-sensitive life products. Annuities include deferred annuities, such as
variable annuities and fixed rate single and flexible premium annuities, and
immediate annuities such as structured settlement annuities. The Company
distributes its products using a combination of Allstate agents, banks and other
financial institutions, brokers and direct response marketing.
Structured settlement annuity contracts issued by the Company are long-term
in nature and involve fixed guarantees relating to the amount and timing of
benefit payments. In addition, single and flexible premium deferred annuity
contracts issued by the Company are subject to discretionary withdrawal or
surrender by the contractholder, subject to applicable surrender charges. In a
low interest rate environment, funds from maturing investments, particularly
those supporting long-term structured settlement annuity obligations, may be
reinvested at substantially lower interest rates than those which prevailed when
the funds were previously invested.
The Company utilizes various modeling techniques in managing the
relationship between assets and liabilities. The fixed income securities
supporting the Company's obligations have been selected to meet, to the extent
possible, the anticipated cash flow requirements of the related liabilities. The
Company employs strategies to minimize its exposure to interest rate risk and to
maintain investments which are sufficiently liquid to meet obligations to
contractholders in various interest rate scenarios.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal
legislation and regulation that would allow banks greater participation in
securities and insurance businesses, which could present an increased level of
competition for sales of the Company's annuity contracts. Furthermore, the
market for deferred annuities and interest-sensitive life insurance is enhanced
by the tax incentives available under current law. Any legislative changes which
lessen these incentives are likely to negatively impact the market for these
products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed and asset-backed
securities. All fixed income securities are carried at fair value and may be
sold prior to their contractual maturity ("available for sale"). The difference
between amortized cost and fair value, net of deferred income taxes, certain
deferred acquisition costs and reserves for life-contingent contract benefits,
is reflected as a component of shareholder's equity. Provisions are recognized
for declines in the value of fixed income securities that are other than
temporary. Such writedowns are included in realized capital gains and losses.
Mortgage loans are carried at outstanding principal balance, net of
unamortized premium or discount and valuation allowances. Valuation allowances
are established for impaired loans when it is probable that contractual
principal and interest will not be collected. Valuation allowances for impaired
loans reduce the carrying value to the fair value of the collateral or the
present value of the loan's expected future repayment cash flows discounted at
the loan's original effective interest rate. Valuation allowances on loans not
considered to be impaired are established based on consideration of the
underlying collateral, borrower financial strength, current and expected future
market conditions and other factors.
Short-term investments are carried at cost which approximates fair value.
Policy loans are carried at the unpaid principal balances.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed and asset-backed securities is
determined on the effective yield method, based on estimated principal
repayments. Accrual of income is suspended for fixed income securities and
mortgage loans that are in default or when the receipt of interest payments is
in doubt. Realized capital gains and losses are determined on a specific
identification basis.
F-4
<PAGE> 35
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes futures contracts which are derivative financial
instruments. When futures meet specific criteria they may be designated as
accounting hedges and accounted for on a deferral basis, depending upon the
nature of the hedge strategy, and the method used to account for the hedged
item.
If, subsequent to entering into a hedge transaction, the future becomes
ineffective (including if the hedged item is sold or otherwise extinguished or
the occurrence of a hedged anticipatory transaction is no longer probable), the
Company terminates the derivative position. Gains and losses on these
terminations are reported in realized capital gains and losses in the period
they occur. The Company may also terminate the derivatives as a result of other
events or circumstances. Gains and losses on these terminations are either
deferred and amortized over the remaining life of the hedged item or are
reported in shareholder's equity, consistent with the accounting for the hedged
item.
When the Company uses futures as hedging instruments, the derivative must
reduce the primary market risk exposure on an enterprise basis in conjunction
with the hedge strategy; be designated as a hedge at the inception of the
transaction; and be highly correlated with the fair value of, or interest income
or expense associated with, the hedged item at inception and throughout the
hedge period.
Under deferral accounting, gains and losses on derivatives are deferred on
the statement of financial position and recognized in earnings in conjunction
with earnings on the hedged item. The Company accounts for interest rate futures
as hedges using deferral accounting for anticipatory investment purchases and
sales when the criteria discussed above are met. In addition, anticipated
transactions must be probable of occurrence and their significant terms and
characteristics identified.
Changes in fair values of these derivatives are initially deferred as other
liabilities and accrued expenses. Once the anticipated transaction occurs, the
deferred gains or losses are considered part of the cost basis of the asset and
reported net of tax in shareholder's equity or recognized as a gain or loss from
disposition of the asset, as appropriate. The Company reports initial margin
deposits on futures in short-term investments. Fees and commissions paid on
these derivatives are also deferred as an adjustment to the carrying value of
the hedged item.
RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES
Premiums for traditional life insurance are recognized as revenue when due.
Accident and disability premiums are earned on a pro rata basis over the policy
period. Revenues on interest-sensitive life insurance contracts are comprised of
contract charges and fees, and are recognized when assessed against the
policyholder account balance. Revenues on investment contracts include contract
charges and fees for contract administration and surrenders. These revenues are
recognized when levied against the contract balances. Gross premium in excess of
the net premium on limited payment contracts, primarily structured settlement
annuities when sold with life contingencies, are deferred and recognized over
the contract period.
REINSURANCE
Certain premiums and contract benefits are ceded and reflected net of such
cessions in the statements of operations. Reinsurance recoverable and the
related reserves for life-contingent contract benefits are reported separately
in the statements of financial position. The Company continues to have primary
liability as the direct insurer for risks reinsured.
DEFERRED ACQUISITION COSTS
Certain costs of acquiring life and annuity business, principally agents'
remuneration, premium taxes, certain underwriting costs and direct mail
solicitation expenses are deferred and amortized to income. For traditional
life, limited payment contracts and accident and disability, these costs are
amortized in proportion to the estimated revenues on such business. For
interest-sensitive life insurance and investment contracts, the costs are
amortized in relation to the present value of estimated gross profits on such
business. Changes in the amount or timing of estimated gross profits will result
in adjustments in the cumulative amortization of these costs. To the extent that
unrealized gains or losses on fixed income securities carried at fair value
would result in an adjustment of deferred acquisition costs had those gains or
losses actually been realized, the related unamortized deferred acquisition
costs are recorded as a reduction of the unrealized gains or losses included in
shareholder's equity.
F-5
<PAGE> 36
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred
tax assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities and the enacted tax
regulations. The principal assets and liabilities giving rise to such
differences are insurance reserves and deferred acquisition costs. Deferred
income taxes also arise from unrealized capital gains or losses on fixed income
securities carried at fair value.
SEPARATE ACCOUNTS
The Company issues flexible premium deferred variable annuity contracts,
the assets and liabilities of which are legally segregated and reflected in the
accompanying statements of financial position as assets and liabilities of the
Separate Accounts. Assets and liabilities of the Separate Accounts represent
funds of Allstate Life of New York Variable Annuity Account, Allstate Life of
New York Variable Annuity Account II and Allstate Life of New York Separate
Account A ("Separate Accounts"), unit investment trusts registered with the
Securities and Exchange Commission.
Assets of the Separate Accounts are invested in funds of management
investment companies, and are carried at fair value. Investment income and
realized capital gains and losses of the Separate Accounts accrue directly to
the contractholders and, therefore, are not included in the Company's statements
of operations. Revenues to the Company from the Separate Accounts consist of
contract maintenance fees, administration fees and mortality and expense risk
charges.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to
traditional life insurance, group annuities and structured settlement annuities
with life contingencies, disability insurance and accident insurance, is
computed on the basis of assumptions as to future investment yields, mortality,
morbidity, terminations and expenses. These assumptions, which for traditional
life insurance are applied using the net level premium method, include
provisions for adverse deviation and generally vary by such characteristics as
type of coverage, year of issue and policy duration. Reserve interest rates
ranged from 4.0% to 9.51% during 1996. To the extent that unrealized gains on
available for sale securities would result in a premium deficiency had those
gains actually been realized, the related increase in reserves is recorded as a
reduction of the unrealized gains included in shareholder's equity.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group
contracts that include an investment component, including most annuities and
interest-sensitive life insurance contracts. Payments received are recorded as
interest-bearing liabilities. Contractholder funds are equal to deposits
received and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Credited interest
rates on contractholder funds ranged from 3.1% to 9.75% for those contracts with
fixed interest rates and from 3.55% to 8.42% for those with flexible rates
during 1996.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans have only off-balance-sheet risk
because their contractual amounts are not recorded in the Company's statements
of financial position.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company cedes business to the Parent under reinsurance treaties to
limit aggregate and single exposures on large risks. Premiums and policy
benefits ceded totaled $1,383 and $1,662 in 1996, $1,259 and $278 in 1995, and
$1,181 and $1,877 in 1994, respectively. Included in the reinsurance recoverable
at December 31, 1996 and 1995 are amounts due from the Parent of $965 and
$1,212.
F-6
<PAGE> 37
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
STRUCTURED SETTLEMENT ANNUITIES
AIC, through an affiliate, purchased $15,610, $11,243, and $7,568 of
structured settlement annuities from the Company in 1996, 1995 and 1994,
respectively. Of these amounts, $8,517, $4,164 and $1,221 relate to structured
settlement annuities with life contingencies and are included in premium income
in 1996, 1995 and 1994, respectively. Additionally, the reserve for
life-contingent contract benefits was increased by approximately 94% of such
premium received in each of these years.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on its behalf. The cost to the
Company is determined by various allocation methods and is primarily related to
the level of the services provided. Expenses allocated to the Company were
$23,134, $21,288 and $17,320 in 1996, 1995 and 1994, respectively. A portion of
these expenses related to the acquisition of life and annuity business is
deferred and amortized over the contract period.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses and fair value for
fixed income securities are as follows:
<TABLE>
<CAPTION>
GROSS
UNREALIZED
AMORTIZED ------------------ FAIR
COST GAINS LOSSES VALUE
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996
U.S. government and agencies............................... $ 387,806 $ 54,349 $(2,642) $ 439,513
Municipal.................................................. 36,158 1,883 (406) 37,635
Corporate.................................................. 734,500 68,022 (4,592) 797,930
Mortgage-backed securities................................. 188,480 6,793 (1,106) 194,167
Asset-backed securities.................................... 31,211 394 (67) 31,538
---------- -------- ------- ----------
Total fixed income securities............................ $1,378,155 $131,441 $(8,813) $1,500,783
========== ======== ======= ==========
AT DECEMBER 31, 1995
U.S. government and agencies............................... $ 336,331 $ 99,750 $ (526) $ 435,555
Municipal.................................................. 36,002 2,831 (92) 38,741
Corporate.................................................. 633,731 92,073 (767) 725,037
Mortgage-backed securities................................. 189,436 11,600 (164) 200,872
Asset-backed securities.................................... 23,918 770 -- 24,688
---------- -------- ------- ----------
Total fixed income securities............................ $1,219,418 $207,024 $(1,549) $1,424,893
========== ======== ======= ==========
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at
December 31, 1996:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 16,350 $ 16,842
Due after one year through five years....................... 85,776 89,809
Due after five years through ten years...................... 228,717 240,079
Due after ten years......................................... 827,621 928,348
---------- ----------
1,158,464 1,275,078
Mortgage-backed and asset-backed securities................. 219,691 225,705
---------- ----------
Total..................................................... $1,378,155 $1,500,783
========== ==========
</TABLE>
Actual maturities may differ from those scheduled as a result of
prepayments by the issuers.
F-7
<PAGE> 38
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
4. INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Fixed income securities..................................... $104,583 $ 95,212 $88,149
Mortgage loans.............................................. 7,113 7,999 8,092
Other....................................................... 2,942 2,744 2,246
-------- -------- -------
Investment income, before expense......................... 114,638 105,955 98,487
Investment expense........................................ 1,776 1,571 1,576
-------- -------- -------
Net investment income..................................... $112,862 $104,384 $96,911
======== ======== =======
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Fixed income securities..................................... $(1,522) $ 422 $1,570
Mortgage loans.............................................. (59) (2,268) (792)
------- ------- ------
Realized capital losses and gains......................... (1,581) (1,846) 778
Income taxes.............................................. (553) (646) 272
------- ------- ------
Realized capital losses and gains, after tax.............. $(1,028) $(1,200) $ 506
======= ======= ======
</TABLE>
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES
Proceeds from sales of investments in fixed income securities were $28,454,
$13,526 and $49,903 in 1996, 1995 and 1994, respectively. Gross gains of $480,
$172 and $1,743 and gross losses of $2,308, $105 and $973 were realized on sales
of fixed income securities during 1996, 1995 and 1994, respectively.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
COST/ UNREALIZED
AMORTIZED FAIR NET
COST VALUE GAINS
---------- ---------- ----------
<S> <C> <C> <C>
Fixed income securities..................................... $1,378,155 $1,500,783 $122,628
========== ==========
Reserves for life insurance policy benefits................. (65,300)
Deferred income taxes....................................... (19,844)
Deferred acquisition costs and other........................ (632)
--------
Unrealized net capital gains.............................. $ 36,852
========
</TABLE>
CHANGE IN UNREALIZED NET CAPITAL GAINS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Fixed income securities..................................... $(82,847) $216,975 $(52,740)
Reserves for life insurance policy benefits................. 24,300 (89,600) --
Deferred income taxes....................................... 20,224 (43,779) 17,382
Deferred acquisition costs and other........................ 762 (2,292) 3,076
-------- -------- --------
Change in unrealized net capital gains.................... $(37,561) $ 81,304 $(32,282)
======== ======== ========
</TABLE>
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to other than
temporary declines in value on fixed income securities and valuation allowances
on mortgage loans were $208, $2,448 and $627 in 1996, 1995 and 1994,
respectively.
F-8
<PAGE> 39
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
4. INVESTMENTS (CONTINUED)
MORTGAGE LOAN IMPAIRMENT
A mortgage loan is impaired when it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan
agreement.
The Company had no impaired loans at December 31, 1996. The net carrying
value of impaired loans at December 31, 1995 was $9,647, measured at the fair
value of the collateral. The total investment in impaired mortgage loans before
valuation allowance at December 31, 1995 was $11,581 and the related allowance
on these impaired loans was $1,934.
Activity in the valuation allowance for all mortgage loans for the years
ended December 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Balance at January 1........................................ $ 1,952 $ 1,179
Additions................................................. 207 1,930
Direct write-downs........................................ (1,934) (1,157)
------- -------
Balance at December 31...................................... $ 225 $ 1,952
======= =======
</TABLE>
Interest income is recognized on a cash basis for impaired loans carried at
the fair value of the collateral, beginning at the time of impairment. For other
impaired loans, interest is accrued based on the net carrying value. The Company
recognized interest income of $281 and $1,398 on impaired loans during 1996 and
1995, respectively, of which $281 and $1,194 was received in cash during 1996
and 1995, respectively. The average recorded investment in impaired loans was
$5,154 and $8,900 during 1996 and 1995, respectively.
INVESTMENT CONCENTRATION FOR MUNICIPAL BOND AND COMMERCIAL MORTGAGE PORTFOLIOS
AND OTHER INVESTMENT INFORMATION
The Company maintains a diversified portfolio of municipal bonds. The
largest concentrations in the portfolio are presented below. Except for the
following, holdings in no other state exceeded 2.7% of the carrying value of the
portfolio at December 31, 1996:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1996 1995
----- -----
(% OF MUNICIPAL BOND
PORTFOLIO CARRYING
VALUE)
<S> <C> <C>
Ohio........................................................ 25.9% 26.8%
California.................................................. 24.3 23.1
Illinois.................................................... 19.0 19.7
Maryland.................................................... 7.8 7.6
Maine....................................................... 5.7 5.7
New York.................................................... 5.3 5.3
Minnesota................................................... 5.3 5.2
</TABLE>
The Company's mortgage loans are collateralized by a variety of commercial
real estate property types located throughout the United States. Substantially
all of the commercial mortgage loans are non-recourse to the borrower. The
states with the largest portion of the commercial mortgage loan portfolio are as
listed below. Except for the following, holdings in no other state exceed 2.3%
of the portfolio at December 31, 1996:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1996 1995
---- ----
(% OF COMMERCIAL
MORTGAGE PORTFOLIO
CARRYING VALUE)
<S> <C> <C>
California.................................................. 49.1% 56.7%
Illinois.................................................... 21.3 22.9
New York.................................................... 21.1 11.1
</TABLE>
F-9
<PAGE> 40
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
4. INVESTMENTS (CONTINUED)
The types of properties collateralizing the commercial mortgage loans are
as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1996 1995
----- -----
(% OF COMMERCIAL
MORTGAGE PORTFOLIO
CARRYING VALUE)
<S> <C> <C>
Retail...................................................... 39.1% 39.5%
Warehouse................................................... 24.2 32.1
Apartment complex........................................... 14.6 4.5
Office buildings............................................ 14.3 16.0
Industrial.................................................. 6.8 6.9
Other....................................................... 1.0 1.0
----- -----
100.0% 100.0%
===== =====
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1996, fixed income securities with a carrying value of
$1,829 were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets, incurs various financial liabilities and enters into agreements
involving derivative financial instruments and other off-balance-sheet financial
instruments. The fair value estimates of financial instruments presented below
are not necessarily indicative of the amounts the Company might pay or receive
in actual market transactions. Potential taxes and other transaction costs have
not been considered in estimating fair value. The disclosures that follow do not
reflect the fair value of the Company as a whole since a number of the Company's
significant assets (including deferred acquisition costs and reinsurance
recoverables) and liabilities (including reserve for life-contingent contract
benefits and deferred income taxes) are not considered financial instruments and
are not carried at fair value. Other assets and liabilities considered financial
instruments, including accrued investment income and cash, are generally of a
short-term nature. It is assumed that their carrying value approximates fair
value.
FINANCIAL ASSETS
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
---------- ----------
<S> <C> <C>
AT DECEMBER 31, 1996
Fixed income securities..................................... $1,500,783 $1,500,783
Mortgage loans.............................................. 84,657 83,789
Short-term investments...................................... 25,855 25,855
Policy loans................................................ 25,359 25,359
Separate Accounts........................................... 260,668 260,668
AT DECEMBER 31, 1995
Fixed income securities..................................... $1,424,893 $1,424,893
Mortgage loans.............................................. 86,394 89,517
Short-term investments...................................... 7,257 7,257
Policy loans................................................ 22,785 22,785
Separate Accounts........................................... 220,141 220,141
</TABLE>
Carrying value and fair value include the effects of derivative financial
instruments where applicable.
Fair values for fixed income securities are based on quoted market prices
where available. Non-quoted securities are valued based on discounted cash flows
using current interest rates for similar securities. Mortgage loans are valued
based on discounted contractual cash flows. Discount rates are selected using
current rates at which similar loans would be made to borrowers with similar
characteristics, using similar properties as collateral. Loans that exceed 100%
loan-to-value are valued at the estimated fair value of the
F-10
<PAGE> 41
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
5. FINANCIAL INSTRUMENTS (CONTINUED)
underlying collateral. Short-term investments are highly liquid investments with
maturities of less than one year whose carrying value approximates fair value.
The carrying value of policy loans approximates its fair value. Assets of the
Separate Accounts are carried in the statements of financial position at fair
value.
FINANCIAL LIABILITIES
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------- --------
<S> <C> <C>
AT DECEMBER 31, 1996
Contractholder funds on investment contracts................ $421,642 $430,696
Separate Accounts........................................... 260,668 260,668
AT DECEMBER 31, 1995
Contractholder funds on investment contracts................ $366,481 $392,111
Separate Accounts........................................... 220,141 220,141
</TABLE>
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company primarily uses derivative financial instruments to reduce its
exposure to interest rate risk in conjunction with asset/liability management.
The Company does not hold or issue these instruments for trading purposes. The
following table summarizes the contract or notional amount, credit exposure,
fair value and carrying value of the Company's derivative financial instruments:
<TABLE>
<CAPTION>
CONTRACT/
NOTIONAL CREDIT CARRYING FAIR
AMOUNT EXPOSURE VALUE VALUE
--------- -------- -------- -----
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996
Financial futures contracts................................. $ 6,700 $-- $266 $56
AT DECEMBER 31, 1995
Financial futures contracts................................. $22,900 $-- $576 $--
</TABLE>
The contract or notional amounts are used to calculate the exchange of
contractual payments under the agreements and are not representative of the
potential for gain or loss on these agreements.
Credit exposure represents the Company's potential loss if all of the
counterparties failed to perform under the contractual terms of the contracts
and all collateral, if any, became worthless. This exposure is represented by
the fair value of contracts with a positive fair value at the reporting date
reduced by the effect, if any, of master netting agreements.
The Company manages its exposure to credit risk by utilizing highly rated
counterparties, establishing risk control limits, executing legally enforceable
master netting agreements and obtaining collateral where appropriate. To date,
the Company has not incurred any losses on derivative financial instruments due
to counterparty nonperformance.
Fair value is the estimated amount that the Company would receive (pay) to
terminate or assign the contracts at the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Deal and
exchange quotes are available for the Company's derivatives.
Financial futures are commitments to either purchase or sell designated
financial instruments at a future date for a specified price or yield. They may
be settled in cash or through delivery. As part of its asset/liability
management, the Company generally utilizes futures contracts to manage its
market risk related to fixed income securities and anticipatory investment
purchases and sales. Futures used as hedges of anticipatory transactions pertain
to identified transactions which are probable to occur and are generally
completed within ninety days. Futures contracts have limited off-balance-sheet
credit risk as they are executed on organized exchanges and require security
deposits, as well as the daily cash settlement of margins.
F-11
<PAGE> 42
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
5. FINANCIAL INSTRUMENTS (CONTINUED)
Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. Market risk exists for all of the derivative
financial instruments that the Company currently holds, as these instruments may
become less valuable due to adverse changes in market conditions. The Company
mitigates this risk through established risk limits set by senior management. In
addition, the change in the value of the Company's derivative financial
instruments designated as hedges are generally offset by the change in the value
of the related assets.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans are agreements to lend to a customer
provided there is no violation of any condition established in the contract. The
Company enters these agreements to commit to future loan fundings at a
predetermined interest rate. Commitments generally have fixed expiration dates
or other termination clauses. Commitments to extend mortgage loans, which are
secured by the underlying properties, are valued based on estimates of fees
charged by other institutions to make similar commitments to similar borrowers.
At December 31, 1996, the Company had $6,190 in mortgage loan commitments which
had a fair value of $62. No such commitments existed at December 31, 1995.
6. INCOME TAXES
Consolidated federal income tax returns are filed by the Corporation and
its eligible subsidiaries, including the Company. Tax liabilities and benefits
realized by the consolidated group are allocated as generated by the respective
entities.
Prior to the Distribution, the Corporation and all of its domestic
subsidiaries, including the Company, (the "Allstate Group") joined with Sears
and its domestic business units (the "Sears Group") in the filing of a
consolidated federal income tax return (the "Sears Tax Group") and were parties
to a federal income tax allocation agreement (the "Tax Sharing Agreement").
Under the Tax Sharing Agreement, the Company, through the Corporation, paid to
or received from the Sears Group the amount, if any, by which the Sears Tax
Group's federal income tax liability was affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this
resulted in the Company's annual income tax provision being computed as if the
Company filed a separate return, except that items such as net operating losses,
capital losses or similar items, which might not be recognized in a separate
return, were allocated according to the Tax Sharing Agreement.
The Allstate Group and Sears Group have entered into an agreement which
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Distribution ("Consolidated Tax Years"). The
agreement provides that all Consolidated Tax Years will continue to be governed
by the Tax Sharing Agreement with respect to the Company's federal income tax
liability.
The components of the deferred income tax assets and liabilities at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
DEFERRED ASSETS
Life-contingent contract reserves........................... $ 27,951 $ 25,562
Difference in tax bases of investments...................... 270 1,536
Loss on disposal of discontinued operations................. 375 376
Other postretirement benefits............................... 524 496
Other assets................................................ 1,789 1,701
-------- --------
Total deferred assets..................................... 30,909 29,671
-------- --------
DEFERRED LIABILITIES
Unrealized net capital gains................................ (19,844) (40,069)
Deferred acquisition costs.................................. (14,020) (12,655)
Prepaid commission expense.................................. (717) (578)
Other liabilities........................................... (20) (28)
-------- --------
Total deferred liabilities................................ (34,601) (53,330)
-------- --------
Net deferred liability.................................... $ (3,692) $(23,659)
======== ========
</TABLE>
F-12
<PAGE> 43
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
6. INCOME TAXES (CONTINUED)
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current..................................................... $11,411 $12,588 $15,172
Deferred.................................................... 257 (2,677) (5,993)
------- ------- -------
Total income tax expense.................................. $11,668 $ 9,911 $ 9,179
======= ======= =======
</TABLE>
The Company paid income taxes of $11,968, $11,000 and $27,682 in 1996, 1995
and 1994, respectively, to the Parent. The Company had an income tax recoverable
from the Parent of $105 at December 31, 1996, and an income tax payable of
$1,729 at December 31, 1995.
Prior to January 1, 1984, the Company was entitled to exclude certain
amounts from taxable income and accumulate such amounts in a "policyholder
surplus" account. The balance in this account at December 31, 1996,
approximately $389, will result in taxes payable of $136 if distributed by the
Company to the Parent. No provision for taxes has been made as the Company has
no plan to distribute amounts from this account. No further additions to the
account are allowed under the Tax Reform Act of 1984.
7. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income and shareholder's equity as
reported herein in conformity with generally accepted accounting principles with
statutory net income and capital and surplus, determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities:
<TABLE>
<CAPTION>
NET INCOME
---------------------------
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Balance per generally accepted accounting principles........ $20,561 $19,522 $18,221
Deferred acquisition costs................................ (6,859) (5,537) (6,850)
Deferred income taxes..................................... 257 (2,677) (5,993)
Non-admitted assets and statutory reserves................ 6,224 12,786 6,900
Other postretirement and postemployment benefits.......... (34) 71 105
Other..................................................... (2,004) (965) (1,442)
------- ------- -------
Balance per statutory accounting practices.................. $18,145 $23,200 $10,941
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER'S EQUITY
------------------------
AT DECEMBER 31,
------------------------
1996 1995
-------- ---------
<S> <C> <C>
Balance per generally accepted accounting principles........ $233,067 $ 250,067
Deferred acquisition costs................................ (61,559) (53,944)
Deferred income taxes..................................... 3,692 23,659
Unrealized net capital gains.............................. (57,102) (114,500)
Non-admitted assets and statutory reserves................ 48,426 43,624
Other postretirement and postemployment benefits.......... 968 1,058
Other..................................................... (2,473) (1,667)
-------- ---------
Balance per statutory accounting practices.................. $165,019 $ 148,297
======== =========
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the New York
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners,
as well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a material effect on statutory surplus or risk-based
capital.
F-13
<PAGE> 44
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
7. STATUTORY FINANCIAL INFORMATION (CONTINUED)
DIVIDENDS
The ability of the Company to pay dividends is dependent on business
conditions, income, cash requirements of the Company and other relevant factors.
Under New York Insurance Law, a notice of intention to distribute any dividend
must be filed with the New York Superintendent of Insurance not less than 30
days prior to the distribution. Such proposed declaration is subject to the
Superintendent's disapproval.
8. BENEFIT PLANS
PENSION PLANS
Defined benefit pension plans, sponsored by the Corporation, cover domestic
full-time employees and certain part-time employees. Benefits under the pension
plans are based upon the employee's length of service, average annual
compensation and estimated social security retirement benefits. The
Corporation's funding policy for the pension plans is to make annual
contributions in accordance with accepted actuarial cost methods. The costs to
the Company included in net income were $490, $446, and $344 for the pension
plans in 1996, 1995 and 1994, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Corporation provides certain health care and life insurance benefits
for retired employees. Qualified employees may become eligible for these
benefits if they retire in accordance with the Corporation's established
retirement policy and are continuously insured under the Corporation's group
plans or other approved plans for 10 or more years prior to retirement. The
Corporation shares the cost of the retiree medical benefits with retirees based
on years of service with the Corporation's share being subject to a 5% limit on
annual medical cost inflation after retirement. The Corporation's postretirement
benefit plans currently are not funded. The Corporation has the right to modify
or terminate these plans.
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries are also
eligible to become members of The Savings and Profit Sharing Fund of Allstate
Employees ("Allstate Plan"). The Corporation contributions are based on the
Corporation's matching obligation and performance. The Allstate Plan includes an
Employee Stock Ownership Plan ("Allstate ESOP") to pre-fund a portion of the
Corporation's anticipated contribution. The Allstate Plan and the Allstate ESOP
split from The Savings and Profit Sharing Fund of Sears Employees ("Sears Plan")
on the date of the Distribution. In connection with this, the Corporation paid
Sears $327 million, and in return received a note from the Allstate ESOP for a
like principal amount and 50% of the unallocated shares. The Corporation will
make contributions to the Allstate ESOP annually in the amount necessary to
allow the Allstate ESOP to fund interest and principal payments on the note
after considering the dividends paid on ESOP shares, which are available for
debt service. The Company's defined contribution to the Allstate Plan was $111
and $141 in 1996 and 1995, respectively. The cost to the Company prior to the
Distribution and the split from the Sears Plan was $123 in 1994.
F-14
<PAGE> 45
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV -- REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
---------- -------- ----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Life insurance in force..................................... $9,962,300 $553,628 $9,408,672
========== ======== ==========
Premiums and contract charges:
Life and annuities........................................ $ 114,296 $ 1,398 $ 112,898
Accident and health....................................... 5,044 834 4,210
---------- -------- ----------
$ 119,340 $ 2,232 $ 117,108
========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
---------- -------- ----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Life insurance in force..................................... $8,513,295 $398,025 $8,115,270
========== ======== ==========
Premiums and contract charges:
Life and annuities........................................ $ 146,732 $ 1,246 $ 145,486
Accident and health....................................... 3,731 901 2,830
---------- -------- ----------
$ 150,463 $ 2,147 $ 148,316
========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
---------- -------- ----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Life insurance in force..................................... $7,598,374 $321,623 $7,276,751
========== ======== ==========
Premiums and contract charges:
Life and annuities........................................ $ 87,562 $ 1,193 $ 86,369
Accident and health....................................... 3,276 1,005 2,271
---------- -------- ----------
$ 90,838 $ 2,198 $ 88,640
========== ======== ==========
</TABLE>
F-15
<PAGE> 46
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V -- VALUATION AND QUALIFYING ACCOUNTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Allowance for estimated losses on mortgage loans............ $1,952 $ 207 $1,934 $ 225
====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1995
Allowance for estimated losses on mortgage loans............ $1,179 $2,170 $1,397 $1,952
====== ====== ====== ======
YEAR ENDED DECEMBER 31, 1994
Allowance for estimated losses on mortgage loans............ $2,297 $ 667 $1,785 $1,179
====== ====== ====== ======
</TABLE>
F-16
<PAGE> 47
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Sub-account's Guarantee
Period for the week preceding the establishment of the Sub-account.
N = the number of whole and partial years from the date we receive the
withdrawal, or death benefit request, or from the Payout Start Date to
the end of the Sub-account's Guarantee Period.
J = the Treasury Rate for a maturity of length N for the week preceding the
receipt of the withdrawal request, death benefit request, or income
payment request. If a Note with a maturity of length N is not
available, a weighted average will be used. If N is one year or less, J
will be the 1-year Treasury Rate.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as
reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following
formula:
.9 X (I-J) X N
Any transfer, withdrawal in excess of the preferred withdrawal amount, or
death benefit paid from a Sub-account of the Fixed Account will be multiplied by
the Market Value Adjustment factor to determine the Market Value Adjustment.
ILLUSTRATION
EXAMPLE OF MARKET VALUE ADJUSTMENT
<TABLE>
<S> <C>
Purchase Payment: $10,000
Guarantee Period: 5 Years
Guaranteed Interest Rate: 4.50%
5 Year Treasury Rate at the time the
Sub-account is established: 4.50%
Full Withdrawal: End of Contract Year 3
</TABLE>
NOTE: THIS ILLUSTRATION ASSUMES THAT PREMIUM TAXES WERE NOT APPLICABLE.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Account Value at End of Contract Year 3:
= 10,000 X (1.045)(3) = 11,411.66
Step 2: Calculate the Preferred Withdrawal Amount:
= 10% X (10,000.00) = $1,000.00
Step 3: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.20%
N = 730 days = 2
---------
365 days
Market Value Adjustment Factor .9 X (I-J) X N
= .9 X (.045 - .042) X 2 = .0054
Market Value Adjustment = Factor X Amount Subject to Market Value Adjustment:
= .0054 X (11,411.66 - 1,000) = $56.22
Step 4: Calculate the Withdrawal Charge:
= .05 X (10,000 - 1,000 + $56.22) = $452.81
Step 5: Calculate The Amount Received by Customers as a Result of a Full
Withdrawal at the end of Contract Year 3:
$11,411.66 - 452.81 + 56.22 = $11,015.07
A-1
<PAGE> 48
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Account Value at End of Contract Year 3:
= 10,000 X (1.045)(3) = 11,411.66
Step 2: Calculate the Preferred Withdrawal Amount
= 10% X (10,000.00) = $1,000.00
Step 3: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.80%
N = 730 days = 2
---------
365 days
Market Value Adjustment Factor .9 X (I-J) X N
= .9 X (.045 - .048) X 2 = -.0054
Market Value Adjustment = Factor X Amount Subject to Market Value Adjustment:
= -.0054 ($11,411.66 - 1,000) = -$56.22
Step 4: Calculate the Withdrawal Charge:
- .05 X (10,000 - 1,000 - 56.22) = $447.19
Step 5: Calculate The Net Withdrawal Value at End of Contract Year 3:
$11,411.66 - 447.19 - 56.22 = $10,908.25
A-2
<PAGE> 49
STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS........ 3
REINVESTMENT................................................ 3
THE CONTRACT................................................ 4
Purchase of Contracts..................................... 4
Performance Data.......................................... 4
Tax-free Exchanges (1035 Exchanges, Rollovers and
Transfers)............................................. 5
Premium Taxes............................................. 6
Tax Reserves.............................................. 6
INCOME PAYMENTS............................................. 6
Calculation of Variable Annuity Unit Values............... 6
GENERAL MATTERS............................................. 7
Incontestability.......................................... 7
Settlements............................................... 7
Safekeeping of the Variable Account's Assets.............. 7
FEDERAL TAX MATTERS......................................... 7
Introduction.............................................. 7
Taxation of Allstate Life Insurance Company of New York... 8
Exceptions to the Non-Natural Owner Rule.................. 8
IRS Required Distribution at Death Rules.................. 8
Qualified Plans........................................... 9
Types of Qualified Plans.................................. 9
VARIABLE ACCOUNT FINANCIAL STATEMENTS....................... 11
</TABLE>
B-1
<PAGE> 50
ORDER FORM
Please send me a copy of the most recent Statement of Additional
Information for the Allstate Life of New York Separate Account A.
- ------------------------- ----------------------------------------------------
(Date) (Name)
----------------------------------------------------
(Street Address)
----------------------------------------------------
(City) (State) (Zip Code)
Send to:
Allstate Life Insurance Company of New York
Post Office Box 9075
Farmingville, New York 11738-9075
Attention: VA Customer Service Unit
B-2
<PAGE> 51
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
--------------------------------------------
Pursuant to Item 511 of Regulation S-K, the Registrant hereby
represents that the following expenses totaling $29,600 will be
incurred or are anticipated to be incurred in connection with the
issuance and distribution of the securities to be registered:
registration fees - $0; cost of printing and engraving - $9,000.00
(approximate); legal fees - $4,000.00 (approximate); accounting fees -
6,500.00 (approximate) and collating and mailing fees - $10,000.00
(approximate).
ITEM 14. Indemnification of Directors and Officers.
------------------------------------------
The By-Laws of Allstate Life Insurance Company of New York
("Registrant") which are incorporated herein by reference as Exhibit
(3), provide that Registrant will indemnify its officers and directors
for certain damages and expenses that may be incurred in the
performance of their duty to Registrant. No indemnification is
provided, however, when such person is adjudged to be liable for
negligence or misconduct in the performance of his or her duty, unless
indemnification is deemed appropriate by the court upon application.
ITEM 15. Recent Sales of Unregistered Securities.
----------------------------------------
Not applicable.
ITEM 16. Exhibits and Financial Statement Schedules.
-------------------------------------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(1) Form of Underwriting Agreement*
(2) None
(3)(i) Certificate of Incorporation*
(ii) By-Laws*
(4) Allstate Life Insurance Company of New York
Flexible Premium Deferred Variable Annuity Contract*
(5) Opinion of General Counsel re: Legality**
(6) None
(7) None
(8) None
(9) None
(10) None
(11) None
(12) None
(13) None
(14) None
(15) None
(16) None
(21) None
(23)(i) Consent of Independent Public Accountants
(ii) Consent of Attorneys**
(24) Powers of Attorney
(25) None
(26) None
(27) Financial Data Schedule ***
(28) None
</TABLE>
<PAGE> 52
* Previously filed and incorporated by reference in N-4 Registration Statement
No.33-65381 dated September 20, 1996.
** Previously filed and incorporated by reference to S-1, Registration
Statement No. 33-65355 filed September 20, 1996.
*** Previously filed in Registrant's Form 10-K filed on March 31, 1997.
<PAGE> 53
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 this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant 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 the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit ore 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> 54
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant, Allstate Life Insurance Company of New York, has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the Township of Northfield, State of Illinois, on the 26th day of March,
1997.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(SEAL)
Attest /s/ BRENDA D. SNEED By: /s/ MICHAEL J. VELOTTA
------------------------ -----------------------------
Brenda D. Sneed Michael J. Velotta
Assistant Vice President Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Act of 1933 this
Registration Statement has been signed below by the following Directors and
Officers of Allstate Life Insurance Company of New York on this 26th day of
March, 1997.
*/LOUIS G. LOWER, II Chairman of the Board and President
- -------------------- (Principal Executive Officer)
Louis G. Lower, II
/s/ MICHAEL J. VELOTTA Director, Vice President, Secretary and
- ---------------------- General Counsel
Michael J. Velotta
*/SHARMAINE M. MILLER Director and Chief Administrative Officer
- ---------------------
Sharmaine M. Miller
**/PETER H. HECKMAN Vice President
- ------------------
Peter H. Heckman
*/KAREN C. GARDNER Vice President
- ------------------
Karen C. Gardner
*/THOMAS A. MCAVITY, JR. Vice President
- -----------------------
Thomas A. McAvity, Jr.
*/TIMOTHY H. PLOHG
- ------------------ Director and Vice President
Timothy H. Plohg
*/KEVIN R. SLAWIN Director and Vice President
- ----------------- (Principal Financial Officer)
Kevin R. Slawin
*/MARCIA D. ALAZRAKI Director
- --------------------
Marcia D. Alazraki
<PAGE> 55
*/JOSEPH F. CARLINO Director
- -------------------
Joseph F. Carlino
*/CLEVELAND JOHNSON, JR. Director
- ------------------------
Cleveland Johnson, Jr.
*/PHILLIP E. LAWSON Director
- -------------------
Phillip E. Lawson
*/GERARD F. McDERMOTT Director
- ---------------------
Gerard F. McDermott
*/JOSEPH P. McFADDEN Director
- --------------------
Joseph P. McFadden
*/JOHN R. RABEN, JR. Director
- --------------------
John R. Raben, Jr.
*/SALLY A. SLACKE Director
- -----------------
Sally A. Slacke
*/THEODORE A. SCHNELL Director, and Assistant Vice President
- ----------------------
Theodore A. Schnell
*/JAMES P. ZILS Treasurer
- ---------------
James P. Zils
*/CASEY J. SYLLA Chief Investment Officer
- ----------------
Casey J. Sylla
**/KEITH A. HAUSCHILDT Assistant Vice President and Controller
- ---------------------- (Principal Accounting Officer)
Keith A. Hauschildt
*/ By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
**/ By Michael J. Velotta, pursuant to Power of Attorney filed herewith.
<PAGE> 56
INDEX TO EXHIBITS
The following exhibits are filed herewith:
(1) Underwriting Agreement*
(2) None
(3)(i) Certificate of Incorporation*
(ii) By-Laws*
(4) Allstate Life Insurance Company of New York
Flexible Premium Deferred Variable Annuity Contract*
(5) Opinion of General Counsel re: Legality
(6) None
(7) None
(8) None
(9) None
(10) None
(11) None
(12) None
(13) None
(14) None
(15) None
(16) None
(21) None
(22) None
(23)(i) Consent of Independent Certified Public Accountants
(ii) Consent of Attorneys**
(24) Powers of Attorney
(25) None
(26) None
(27) Financial Date Schedule ***
(28) None
* Previously filed and incorporated by reference to N-4, Registration
Statement NO. 33-65381, filed September 20, 1996.
** Previously filed and incorporated by reference to S-1, Registration
Statement No. 33-65355, filed September 20, 1996.
*** Previously filed in Registrant's Form 10-K filed on March 31, 1997.
<PAGE> 1
EXHIBIT 23(i)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 033-65355 of Allstate Life Insurance Company of New York on Form
S-1 of our report dated February 21, 1997 relating to the financial statements
and financial statement schedules of Allstate Life Insurance Company of New
York, appearing in the Prospectus, and our report dated February 21, 1997
relating to the financial statements of Allstate Life of New York Separate
Account A contained in the Statement of Additional Information (which is
incorporated by reference in the Prospectus of Allstate Life Insurance Company
of New York) which is part of such Registration Statement,
and to the reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 28, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
WITH RESPECT TO THE ALLSTATE LIFE OF NEW YORK
MARKET VALUE ADJUSTED ANNUITY CONTRACT
Know all men by these presents that Keith A. Hauschildt whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution,
and his in any and all capacities, to sign any Form S-1 registration statements
and amendments thereto for the Allstate Life of New York Market Value Adjusted
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.
March 14, 1997
----------------------------------
Date
/s/ KEITH A. HAUSCHILDT
----------------------------------
Keith A. Hauschildt
Assistant Vice President and Controller
Allstate Life Insurance Company
of New York
<PAGE> 2
POWER OF ATTORNEY
WITH RESPECT TO THE ALLSTATE LIFE OF NEW YORK
MARKET VALUE ADJUSTED ANNUITY CONTRACT
Know all men by these presents that Peter H. Heckman whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution,
and his in any and all capacities, to sign any Form S-1 registration statements
and amendments thereto for the Allstate Life of New York Market Value Adjusted
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.
March 14, 1997
----------------------------------
Date
/s/ PETER H. HECKMAN
----------------------------------
Peter H. Heckman
Vice President and Controller
Allstate Life Insurance Company
of New York
