UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
The registrant meets the conditions set forth in General Instruction I(1)(a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
For fiscal year ended December 31, 1998 Commission file number 33-47245
33-65355
033-65381
033-35445
033-24228
Allstate Life Insurance Company of New York
(Exact name of registrant as specified in its charter)
New York 36-2608394
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allstate Drive
P.O. Box 9095
Farmingville, New York 11738
(Address of Principal executive offices)(Zip Code)
516/451-5300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------------ -----------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of December 31, 1998 there were 80,000 shares of common capital stock
outstanding, par value $25 per share all of which shares are held by ALIC.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Allstate Life Insurance Company)
Annual Report for 1998 On Form 10-K
TABLE OF CONTENTS
PAGE
----
PART I
ITEM 1. Business**........................................... 3
ITEM 2. Properties**......................................... 4
ITEM 3. Legal Proceedings.................................... 4
ITEM 4. Submission of Matters to a Vote of Security Holders*.N/A
PART II
ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters.......................... 5
ITEM 6. Selected Financial Data*.............................N/A
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 6
ITEM 7A. Quantitiative and Qualitative Disclosures About
Market Risk..........................................16
ITEM 8. Financial Statements and Supplementary Data..........16
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................16
PART III
ITEM 10. Directors and Executive Officers of the Registrant*..N/A
ITEM 11. Executive Compensation*..............................N/A
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management*..........................................N/A
ITEM 13. Certain Relationships and Related Transactions*......N/A
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K...................................17
Index to Financial Statement Schedules..........................18
Signatures......................................................19
Exhibit Index...................................................E-1
* Omitted pursuant to General Instruction I(2) of Form 10-K.
**Item prepared in accordance with General Instruction I(2) of Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
Allstate Life Insurance Company of New York (hereinafter "Allstate Life of
New York" or the "Company") was incorporated in 1967 as a stock life insurance
company under the laws of the State 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 done business as
"Allstate Life Insurance Company of New York." Allstate Life of New York's
products, individual annuities and life insurance, have been approved by the
State of New York.
Allstate Life of New York is a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), a stock life insurance company incorporated under
the laws of Illinois. ALIC is a wholly owned subsidiary of Allstate Insurance
Company ("AIC"), a stock property-liability insurance company incorporated under
the laws of Illinois. All of the outstanding capital stock of AIC is owned by
The Allstate Corporation ("Corporation").
Allstate Life of New York's operations consist of one business segment
which is the sale of life insurance and savings products.
Allstate Life of New York's and ALIC's general account assets must be
invested in accordance with applicable state laws. These laws govern the nature
and quality of investments that may be made by life insurance companies and the
percentage of their assets that may be committed to any particular type of
investment.
Allstate Life of New York 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. A.M. Best Company assigns Allstate Life of New
York the rating of A+(g). Under Best's rating policy and procedure, the Company
is assigned the Best's rating of its parent company, and is based on the
consolidated performance of the parent and its subsidiary. Standard & Poor's
Insurance Rating Services assigns an AA+ (Excellent) to the Company's claim
paying ability. Moody's Investors Service assigns an Aa2 (Excellent) financial
strength rating to the Company. The Company shares the same ratings of its
parent, ALIC.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed measures which may significantly
affect the Company's insurance business relate to the taxation of insurance
companies and the tax treatment of insurance products and the removal of
barriers preventing banks from engaging in the securities and insurance
business.
3
<PAGE>
Allstate Life of New York is registered with the Securities and Exchange
Commission ("SEC") as an issuer of registered products. The SEC also regulates
certain Allstate Life of New York Separate Accounts which, together with the
Company, issue variable annuity contracts.
ITEM 2. PROPERTIES
Allstate Life of New York occupies office space in Farmingville, New York
and Northbrook, Illinois.
ITEM 3. LEGAL PROCEEDINGS
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would materially
affect the Company. The Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. Management, after consultation with legal counsel, does not anticipate
the ultimate liability arising from such pending or threatened litigation to
have a material effect on the position or results of operations of the Company.
4
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the Company's outstanding shares are owned by its parent, ALIC. All
of ALIC's outstanding shares are owned by AIC. All of the outstanding shares of
AIC are owned by the Corporation.
5
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion highlights significant factors influencing
results of operations and changes in financial position of Allstate Life
Insurance Company of New York (the "Company"). It should be read in conjunction
with the financial statements and related notes.
The Company, a wholly owned subsidiary of Allstate Life Insurance Company
("ALIC"), which is a wholly owned subsidiary of Allstate Insurance Company
("AIC"), a wholly owned subsidiary of The Allstate Corporation ("Corporation"),
markets a broad line of life insurance and savings 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. Savings products 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 (which include life
specialists), banks, independent insurance agents, brokers and direct marketing.
The Company has identified itself as a single segment entity.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
($ in thousands)
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Statutory premiums and deposits $ 266,950 $ 208,090 $ 235,634
=========== =========== ===========
Investments $ 2,216,909 $ 1,907,997 $ 1,636,654
Separate Account assets 366,247 308,595 260,668
----------- ----------- -----------
Investments, including Separate Account assets $ 2,583,156 $ 2,216,592 $ 1,897,322
=========== =========== ===========
Premiums and contract charges $ 119,052 $ 118,963 $ 117,106
Net investment income 134,413 124,887 112,862
Life and annuity contract benefits 183,839 179,872 172,772
Operating costs and expenses 31,100 28,667 23,386
----------- ----------- -----------
Income from operations 38,526 35,311 33,810
Income tax expense on operations 13,511 13,051 12,221
----------- ----------- -----------
Operating income 25,015 22,260 21,589
Realized capital gains and losses, after-tax (1) 2,642 456 (1,028)
----------- ----------- -----------
Net income $ 27,657 $ 22,716 $ 20,561
=========== =========== ===========
<FN>
(1) Net of the effect of related amortization of deferred acquisition costs in
1998.
</FN>
</TABLE>
6
<PAGE>
PREMIUMS, DEPOSITS, CONTRACT CHARGES AND CONTRACT BENEFITS
Statutory premiums and deposits include premiums and deposits for all
products. In 1998, total statutory premiums and deposits increased $58.9 million
or 28.3%. The increase was due primarily to increased sales of fixed annuities
in the banking distribution channel. Total statutory premiums and deposits
decreased $27.5 million, or 11.7%, in 1997 from 1996 as increased sales of
variable annuities and life insurance policies were more than offset by a
reduction in deposits relating to funding agreements, a type of fixed annuity
product. Funding agreements, first sold by the Company in 1996, are entered into
based on the Company's assessment of market opportunities.
Under generally accepted accounting principles ("GAAP"), revenues exclude
deposits on most annuity contracts and premiums on universal life insurance
policies, and will vary with the mix of business sold during the period.
Premiums and contract charges were $119.1 million in 1998 compared to $119.0
million in 1997. In both years higher universal life and variable annuity
contract charges were partially offset by lower sales of structured settlement
annuities with life contingencies. In 1998, higher traditional life, health and
credit premiums also contributed to the increase. The increase in universal life
contract charges was due primarily to growth in universal life policies in
force. Variable annuity contract charges increased due to growth in variable
annuity deposits as well as strong performance in the underlying funds of the
Separate Accounts.
OPERATING INCOME
Pretax net investment income increased 7.6% and 10.7% in 1998 and 1997,
respectively. Higher investment balances in each period more than offset lower
portfolio yields. Investments, excluding Separate Account assets and unrealized
gains on fixed income securities, grew 14.3% and 9.8% in 1998 and 1997,
respectively. In the declining interest rate environments of 1998, 1997 and
1996, funds from maturing investments were generally reinvested at lower yields
resulting in reduced investment income.
Operating costs and expenses increased $2.4 million, or 8.5% and $5.3
million, or 22.6%, for the years ended December 31, 1998 and 1997, respectively.
For the year ended December 31, 1998, the increase in expenses is primarily due
to growth in business. For the year ended December 31, 1997 the increase is
related to growth in business and the recognition of costs related to the
relocation of the policy administration function, offset by a reduction in
amortization of deferred acquisition costs due to revised estimates of future
gross profits on interest-sensitive life products.
Operating income increased 12.4% in 1998 and 3.1% in 1997. The increase
in 1998 resulted from favorable mortality margins and increased contract
charges, primarily from variable annuities, partially offset by higher expenses.
The increase in 1997 is primarily due to favorable mortality experience and
higher investment margins on the structured settlement annuity business.
REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains and losses increased in 1998 due primarily to
higher levels of sales and pre-payments of fixed income securities. In 1997,
increased realized capital gains on fixed income securities and reduced losses
on other investments were partially offset by increased writedowns on mortgage
loans. Year to year fluctuations in realized capital gains are largely the
result of the timing of sales decisions reflecting management's view of
individual securities and overall market conditions.
7
<PAGE>
INVESTMENTS
The composition of the investment portfolio at December 31, 1998 is
presented in the table below (see Notes 2 and 4 to the financial statements for
investment accounting policies and additional information).
PERCENT
($ in thousands) TO TOTAL
--------
Fixed income securities (1) $1,966,067 88.7%
Mortgage loans 145,095 6.6
Short-term 76,127 3.4
Policy loans 29,620 1.3
---------- -------
Total $2,216,909 100.0%
========== =======
(1)Fixed income securities are carried at fair value. Amortized cost for these
securities was $1,648,972 at December 31, 1998.
Total investments increased to $2.22 billion at December 31, 1998, from
$1.91 billion at December 31, 1997. The increase was primarily due to amounts
invested from positive cash flows generated from operations and increases in the
market values of fixed income securities.
Short-term investments increased, in part, at December 31, 1998 by $10.0
million due to a change in accounting treatment for collateral received by the
securities lending program and by approximately $34 million in anticipation of
an inter-company settlement.
FIXED INCOME SECURITIES
The Company's fixed income securities portfolio consists of U.S.
government bonds, privately-placed securities, publicly traded corporate bonds,
mortgage-backed securities, asset-backed securities and tax-exempt municipal
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, 1998, unrealized
net capital gains on the fixed income securities portfolio were $317.1 million
compared to $246.1 million as of December 31, 1997. The increase in the
unrealized gain position is primarily attributable to lower interest rates.
8
<PAGE>
At December 31, 1998, substantially all of the Company's fixed income
securities portfolio was 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. The quality mix of the Company's fixed income securities
portfolio at December 31, 1998 is presented below:
NAIC
RATINGS MOODY'S EQUIVALENT DESCRIPTION FAIR VALUE PERCENT TO TOTAL
------- ------------------------------ ---------- ----------------
1 Aaa/Aa/A $1,565,538 79.6%
2 Baa 387,948 19.7
3 Ba 10,617 .6
4 B 1,964 .1
---------- --------
$1,966,067 100.0%
========== ========
As of December 31, 1998, the fixed income securities portfolio contained
$555.9 million of privately-placed corporate obligations, compared with $540.9
million at December 31, 1997. 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. A relative disadvantage of privately-placed
securities as compared to public securities is reduced liquidity. At December
31, 1998, substantially all of the privately-placed securities were 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, 1998 and 1997, $305.1 million and $228.7 million,
respectively, of the fixed income securities portfolio were invested in
mortgage-backed securities ("MBS"). At December 31, 1998, all of the MBS were
investment grade and substantially all have underlying collateral that is
guaranteed by U.S. government entities, thus credit risk is 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
where cost does not significantly exceed par value, and with repayment
protection to provide a more certain cash flow to the Company. At December 31,
1998, the amortized cost of the MBS portfolio was below par value by $6.9
million and over 42% of the MBS portfolio was invested in planned amortization
class bonds. This type of MBS is purchased to provide additional protection
against declining interest rates.
The fixed income securities portfolio contained $34.5 million and $39.7
million of asset-backed securities ("ABS") at December 31, 1998 and 1997,
respectively. ABS are subject to credit and interest rate risk. Credit risk is
mitigated by monitoring the performance of the collateral. Approximately 50% of
all securities are rated in the highest rating category by one or more credit
rating agencies. Interest rate risk is similar to the risk posed by MBS, however
to a lesser degree because of the nature of the underlying assets. At December
31, 1998, the amortized cost of the ABS portfolio was below par value by $230
million. Over 65% of the Company's ABS are invested in securitized credit card
receivables. The remainder of the portfolio is backed primarily by securitized
home equity, manufactured housing, and auto loans.
The Company closely monitors its fixed income securities 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.
9
<PAGE>
MORTGAGE LOANS
The Company's $145.1 million investment in mortgage loans at December 31,
1998 is comprised primarily of loans secured by first mortgages on developed
commercial real estate. Geographical and property type diversification are key
considerations 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 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.
SHORT-TERM INVESTMENTS
The Company's short-term investment portfolio was $76.1 million and $9.5
million at December 31, 1998 and 1997, respectively. The Company invests
available cash balances primarily in taxable short-term securities having a
final maturity date or redemption date of one year or less. The short-term
investment portfolio increased, in part, at December 31, 1998 by $10.0 million
due to a change in the accounting treatment for collateral received by the
securities lending program and by approximately $34 million in anticipation of
an inter-company settlement.
SEPARATE ACCOUNTS
Separate Account assets and liabilities increased 18.7% to $366.2 million
at December 31, 1998. The increases were primarily attributable to sales of
flexible premium deferred variable annuity contracts and favorable investment
performance of the Separate Accounts investment portfolios, partially offset by
variable annuity surrenders and withdrawals.
MARKET RISK
Market risk is the risk that the Company will incur losses due to
adverse changes in equity prices or interest rates. The Company's primary market
risk exposure is to changes in interest rates, although the Company also has
certain exposures to changes in equity prices.
The active management of market risk is integral to the Company's
operations. The Company may use the following approaches 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 derivative instruments to modify the market risk characteristics of
existing assets and liabilities or assets expected to be purchased. Note 5 to
the financial statements provides a more detailed discussion of these
instruments.
10
<PAGE>
CORPORATE OVERSIGHT
The Company administers and oversees its investment risk management
processes primarily through two oversight bodies: the Board of Directors and the
Credit and Risk Management Committee ("CRMC") of the Corporation. The Board of
Directors provide executive oversight of investment activities. The
Corporation's CRMC is a senior management committee consisting of the Chief
Investment Officer, the Investment Risk Manager, and other investment officers
who are responsible for the day-to-day management of market risk. The CRMC meets
at least monthly to provide detailed oversight of investment risk, including
market risk.
The Company has investment guidelines that define the overall framework
for managing market and other investment risks, including the accountabilities
and controls over these activities. In addition, the Company has specific
investment policies that delineate the investment limits and strategies that are
appropriate given the Company`s liquidity, surplus, product and regulatory
requirements.
The Company manages its exposure to market risk through asset allocation
limits, duration limits and, as appropriate, stress tests. Asset allocation
limits place restrictions on the aggregate fair value which may be invested
within an asset class. The Company has duration limits on investment portfolios,
and, as appropriate, on individual components of these portfolios. These
duration limits place restrictions on the amount of interest rate risk which may
be taken. Stress tests measure downside risk to fair value and earnings over
longer time intervals and/or for adverse market scenarios.
The day-to-day management of market risk within defined tolerance ranges
occurs as portfolio managers buy and sell within their respective markets based
upon the acceptable boundaries established by asset allocation, duration and
other limits, including but not limited to credit and liquidity.
INTEREST RATE RISK
Interest rate risk is the risk that the Company will incur economic
losses due to adverse changes in interest rates. This risk arises from the
Company's primary activities, as the Company invests substantial funds in
interest-sensitive assets and also has certain interest-sensitive liabilities.
The Company manages the interest rate risk inherent in its assets
relative to the interest rate risk inherent in its liabilities. One of the
measures the Company uses to quantify this exposure is duration. Duration
measures the sensitivity of the fair value of assets and liabilities to changes
in interest rates. For example, if interest rates increase 1%, the fair value of
an asset with a duration of 5 years is expected to decrease in value by
approximately 5%. At December 31, 1998, the difference between the Company's
liability and asset duration was approximately 3.4 years, which is larger than
the 2.8 gap reported for December 31, 1997. This duration gap indicates that the
fair value of the Company's liabilities is more sensitive to interest rate
movements than the fair value of its assets.
The Company seeks to invest premiums and deposits to create future cash
flows that will fund future claims, benefits and expenses, and earn stable
margins across a wide variety of interest rate and economic scenarios. In order
to achieve this objective and limit its exposure to interest rate risk, the
Company adheres to a philosophy of managing the duration of assets and related
liabilities. The Company uses financial futures to hedge the interest rate risk
related to anticipatory purchases and sales of investments and product sales to
customers.
11
<PAGE>
To calculate duration, the Company projects asset and liability cash
flows, and discounts them to a net present value basis using a risk-free market
rate adjusted for credit quality, sector attributes, liquidity and other
specific risks. Duration is calculated by revaluing these cash flows at an
alternative level of interest rates, and determining the percentage change in
fair value from the base case. The cash flows used in the model reflect the
expected maturity and repricing characteristics of the Company's derivative
financial instruments, all other financial instruments (as depicted in Note 5 to
the financial statements), and certain non-financial instruments including
interest-sensitive annuity liabilities. The projections include assumptions
(based upon historical market and Company specific experience) reflecting the
impact of changing interest rates on the prepayment, lapse, leverage and/or
option features of instruments, where applicable. Such assumptions relate
primarily to mortgage-backed securities, collateralized mortgage obligations,
municipal housing bonds, callable municipal and corporate obligations, and fixed
rate single and flexible premium deferred annuities.
Based upon the information and assumptions the Company uses in its
duration calculation and interest rates in effect at December 31, 1998,
management estimates that a 100 basis point immediate, parallel increase in
interest rates ("rate shock") would decrease the net fair value of its assets
and liabilities identified above by approximately $3.8 million. The selection of
a 100 basis point immediate rate shock should not be construed as a prediction
by the Company's management of future market events; but rather, to illustrate
the potential impact of such an event.
To the extent that actual results differ from the assumptions utilized,
the Company's duration and rate shock measures could be significantly impacted.
Additionally, the Company's calculation assumes that the current relationship
between short-term and long-term interest rates (the term structure of interest
rates) will remain constant over time. As a result, these calculations may not
fully capture the impact of non-parallel changes in the term structure of
interest rates and/or large changes in interest rates.
EQUITY PRICE RISK
Equity price risk is the risk that the Company will incur economic losses
due to adverse changes in equity prices. At December 31, 1998, the Company had
variable annuity funds with balances totaling $366.2 million. The Company earns
mortality and expense fees as a percentage of fund balance. In the event of an
immediate decline of 10% in the fund balances due to equity market declines, the
Company would earn approximately $500 thousand less in annualized fee income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are collections of principal,
interest and dividends from the investment portfolio and the receipt of premiums
and deposits. The primary uses of these funds are to purchase investments and
pay policyholder claims, benefits, contract maturities, contract surrenders and
withdrawals, and operating costs.
The maturity structure of the Company's fixed income securities, which
represent 88.7% of the Company's total investments, is managed to meet the
anticipated cash flow requirements of the underlying liabilities. A portion of
the Company's diversified product portfolio, primarily fixed deferred annuity
and universal life insurance products, is subject to discretionary surrender and
withdrawal by contractholders. Management believes its assets are sufficiently
liquid to meet future obligations to its life and annuity contractholders under
various interest rate scenarios.
12
<PAGE>
At December 31, 1998, the Moody's and Standard and Poor's financial
strength ratings for the Company were Aa2 and AA+, respectively.
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, business, asset and interest rate risks. At December 31,
1998, RBC for the Company was significantly above a level that would require
regulatory action.
YEAR 2000
The Company is dependent upon certain services provided for it by the
Corporation including computer-related systems, and systems and equipment not
typically thought of as computer-related (referred to as "non-IT"). For this
reason, the Company is reliant upon the Corporation for the establishment and
maintenance of its computer-related systems and non-IT.
The Corporation is heavily dependent upon complex computer systems for all
phases of its operations, including customer service, insurance processing,
underwriting, loss reserving, investments and other enterprise systems. Since
many of the Corporation's older computer software programs recognize only the
last two digits of the year in any date, some software may fail to operate
properly in or after the year 1999, if the software is not reprogrammed,
remediated, or replaced, ("Year 2000"). Also, non-IT often contains embedded
hardware or software that may have a Year 2000 sensitive component. The
Corporation believes that many of its counterparties and suppliers also have
Year 2000 issues and non-IT issues which could affect the Corporation.
In 1995, the Corporation commenced a plan consisting of four phases which
are intended to mitigate and/or prevent the adverse effects of Year 2000 issues
on its systems: 1) inventory and assessment of affected systems and equipment,
2) remediation and compliance of systems and equipment through strategies that
include the replacement or enhancement of existing systems, upgrades to
operating systems already covered by maintenance agreements and modifications to
existing systems to make them Year 2000 compliant, 3) testing of systems using
clock-forward testing for both current and future dates and for dates which
trigger specific processing, and 4) contingency planning which will address
possible adverse scenarios and the potential financial impact to the
Corporation's results of operations, liquidity or financial position.
The Corporation believes that the first three steps of this plan,
assessment, remediation and testing, including clock-forward testing which is
being performed on the Corporation's systems and non-IT, are mostly complete for
the Corporation's critical systems. In April 1998, the Corporation announced its
main premium application system, ALERT, which manages more than 20 million auto
and homeowners policies, is Year 2000 compliant. The Corporation is relying on
other remediation techniques for its midrange and personal computer
environments, and certain mainframe applications.
Certain investment processing systems, midrange computers and personal
computer environments are planned to be remediated by the middle of 1999, and
some systems and non-IT related to discontinued or non-critical functions of the
Corporation are planned to be abandoned by the end of 1999.
13
<PAGE>
The Corporation is currently in the process of identifying key processes
and developing contingency plans in the event that the systems supporting these
processes are not Year 2000 compliant at the end of 1999. Management believes
these contingency plans should be completed by mid-1999. Until these plans are
complete, management is unable to determine an estimate of the most reasonably
possible worst case scenario due to issues relating to the Year 2000.
In addition, the Corporation is actively working with its major external
counterparties and suppliers to assess their compliance efforts and the
Corporation's exposure to both their Year 2000 issues and non-IT issues. This
assessment has included the solicitation of external counterparties and
suppliers, evaluating responses received and testing third party interfaces and
interactions to determine compliance. Currently, the Corporation has solicited
approximately 1,500, and has received responses from approximately 75% of its
counterparties and suppliers. The Corporation will continue its efforts to
solicit responses on Year 2000 compliance from these parties. The majority of
these responses have stated that the counterparties and suppliers believe that
they will be Year 2000 compliant and that no transactions will be affected.
However, some key vendors have not provided affirmative responses to date. The
Corporation has also decided to test certain interfaces and interactions to gain
additional assurance on third party compliance. If key vendors are determined to
be unable to meet the Year 2000 requirement, the Corporation is preparing
contingency plans that will allow the Corporation to continue to sell its
products and to service its customers. Management believes these contingency
plans should be completed by mid-1999. The Corporation currently does not have
sufficient information to determine whether or not its external counterparties
and suppliers will be Year 2000 ready.
The Corporation is currently assessing the level of Year 2000 risk
associated with certain personal lines policies that have been issued. To date,
no changes have been made in the coverages provided by the Corporation's
personal auto and homeowners lines policies to specifically exclude coverage for
Year 2000 related claims. This does not mean that all losses, or any particular
type of loss, that might be related to Year 2000 will be covered. Rather, all
claims will continue to be evaluated on a case-by-case basis to determine
whether coverage is available for a particular loss in accordance with the
applicable terms and conditions of the policy in force.
The Corporation also has investments which have been publicly or privately
placed. The Corporation may be exposed to the risk that the issuers of these
investments will be adversely impacted by Year 2000 issues. The Company assesses
the impact which Year 2000 issues have on the Corporation's investments as part
of due diligence for proposed new investments, and in its ongoing review of all
current portfolio holdings. Any recommended actions with respect to individual
investments are determined by taking into account the potential impact of Year
2000 on the issuer. Contingency plans are being created for any securities held
whose issuer is determined to not be Year 2000 compliant.
The Corporation presently believes that it will resolve the Year 2000
issue in a timely manner. Year 2000 costs are expensed as incurred, therefore
the majority of expenses related to this project have been incurred as of
December 31, 1998. The Corporation estimates that a total of approximately $125
million in expenses will be incurred between the years of 1995 and 2000. These
amounts include costs directly related to fixing Year 2000 issues, such as
modifying software and hiring Year 2000 solution providers. These amounts also
include costs to replace certain non-compliant systems which would not have been
otherwise replaced. A portion of these costs will be incurred by the Company on
a pro rata basis of usage of the computer-related systems and non-IT, as
compared to the usage of all entities which share these services with the
Corporation. These amounts are not expected to be material to the results of
operations of the Company.
14
<PAGE>
PENDING ACCOUNTING STANDARDS
In December 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants ("AICPA") issued Statement of
Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for
Insurance-related Assessments." The SOP is required to be adopted in 1999. The
SOP provides guidance concerning when to recognize a liability for
insurance-related assessments and how those liabilities should be measured.
Specifically, insurance-related assessments should be recognized as liabilities
when all of the following criteria have been met: 1) an assessment has been
imposed or it is probable that an assessment will be imposed, 2) the event
obligating an entity to pay an assessment has occurred and 3) the amount of the
assessment can be reasonably estimated. The Company is currently evaluating the
effects of this SOP on its accounting for insurance-related assessments. Certain
information required for compliance is not currently available and therefore the
Company is studying alternatives for estimating the accrual. In addition,
industry groups are working to improve the information available. Adoption of
this standard is not expected to be material to the results of operations or
financial position of the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. The requirements
are effective for fiscal years beginning after June 15, 1999. Earlier
application is encouraged but is only permitted as of the beginning of any
fiscal quarter after issuance. This statement requires that all derivatives be
recognized on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings.
Additionally, the change in fair value of a derivative which is not effective as
a hedge will be immediately recognized in earnings. The Company expects to adopt
SFAS No. 133 as of January 1, 2000. Based on existing interpretations of the
requirements of SFAS No. 133, the impact of adoption is not expected to be
material to the results of operations or financial position of the Company.
FORWARD-LOOKING STATEMENTS
The statements contained in this Management's Discussion and Analysis that
are not historical information are forward-looking statements that are based on
management's estimates, assumptions and projections. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of
1933 and The Securities Exchange Act of 1934 for forward-looking statements.
15
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The pertinent provisions of Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 10 to 12 are herein incorporated by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements filed with this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No disclosure required by this Item.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. FINANCIAL STATEMENTS. The Registrants financial statements, for the year
ended December 31, 1998, together with the Report of Independent Accountants are
set forth on pages F-1 - F-21 of this report.
2. FINANCIAL STATEMENT SCHEDULES. The following are included in Part IV of
this report:
Schedule IV - Reinsurance page F-22
Schedule V - Valuation and Qualifying Accounts page F-23
All other schedules have been omitted because they are not applicable or
not required or because the required information is included in the financial
statements or notes thereto.
3. EXHIBITS. The exhibits required to be filed by Item 601 of Regulation
S-K are listed under the caption "Exhibits" in Item 14(c).
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed for the quarter ended December 31, 1998.
(c) EXHIBITS
Exhibit No. Description
3(i) Restated Certificate of Incorporation, as amended, of
Allstate Life Insurance Company of New York (filed herewith)
3(ii) Amended By-laws of Allstate Life Insurance Company of New
York (filed herewith)
27 Financial Data Schedule (filed herewith)
17
<PAGE>
Financial Statements
Index
-----
Page
----
Independent Auditors' Report...............................................F-1
Financial Statements:
Statements of Financial Position,
December 31, 1998 and 1997...............................F-2
Statements of Operations and Comprehensive Income for the Years Ended
December 31, 1998, 1997 and 1996.........................F-3
Statements of Shareholder's Equity for the Years Ended
December 31, 1998, 1997 and 1996.........................F-4
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.........................F-5
Notes to Financial Statements.....................................F-6
Schedule IV - Reinsurance for the Years Ended
December 31, 1998, 1997 and 1996.........................F-22
Schedule V - Valuation and Qualifying Accounts
December 31, 1998, 1997 and 1996.........................F-23
18
<PAGE>
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", an affiliate of The Allstate
Corporation) as of December 31, 1998 and 1997, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1998. 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 the Company as of December 31, 1998 and
1997, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 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 19, 1999
F-1
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
December 31,
------------
($ in thousands) 1998 1997
---- ----
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $1,648,972 and $1,510,110) $1,966,067 $1,756,257
Mortgage loans 145,095 114,627
Short-term 76,127 9,513
Policy loans 29,620 27,600
---------- ----------
Total investments 2,216,909 1,907,997
Deferred acquisition costs 87,830 71,946
Accrued investment income 22,685 21,725
Reinsurance recoverables 2,210 1,726
Cash 3,117 393
Other assets 9,887 6,167
Separate Accounts 366,247 308,595
---------- ----------
TOTAL ASSETS $2,708,885 $2,318,549
========== ==========
LIABILITIES
Reserve for life-contingent contract benefits $1,208,104 $1,084,409
Contractholder funds 703,264 607,474
Current income taxes payable 14,029 1,419
Deferred income taxes 25,449 16,990
Other liabilities and accrued expenses 23,463 10,985
Payable to affiliates, net 38,835 5,267
Separate Accounts 366,247 308,595
---------- ----------
TOTAL LIABILITIES 2,379,391 2,035,139
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 10)
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
Retained income 198,801 171,144
Accumulated other comprehensive income:
Unrealized net capital gains 82,906 64,479
---------- ----------
Total accumulated other comprehensive income 82,906 64,479
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 329,494 283,410
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,708,885 $2,318,549
========== ==========
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums and contract charges (net of reinsurance
ceded of $3,204, $3,087 and $2,273) $ 119,052 $ 118,963 $ 117,106
Net investment income 134,413 124,887 112,862
Realized capital gains and losses 4,697 701 (1,581)
--------- --------- ---------
258,162 244,551 228,387
--------- --------- ---------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $997, $1,985 and $2,827) 183,839 179,872 172,772
Amortization of deferred acquisition costs 7,029 5,023 6,512
Operating costs and expenses 24,703 23,644 16,874
--------- --------- ---------
215,571 208,539 196,158
--------- --------- ---------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE 42,591 36,012 32,229
Income tax expense 14,934 13,296 11,668
--------- --------- ---------
NET INCOME 27,657 22,716 20,561
--------- --------- ---------
OTHER COMPREHENSIVE INCOME
Change in unrealized net capital gains and losses 18,427 27,627 (37,561)
--------- --------- ---------
COMPREHENSIVE INCOME $ 46,084 $ 50,343 $ (17,000)
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
December 31,
------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK $ 2,000 $ 2,000 $ 2,000
--------- --------- ---------
ADDITIONAL CAPITAL PAID-IN 45,787 45,787 45,787
--------- --------- ---------
RETAINED INCOME
Balance, beginning of year 171,144 148,428 127,867
Net income 27,657 22,716 20,561
--------- --------- ---------
Balance, end of year 198,801 171,144 148,428
--------- --------- ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year 64,479 36,852 74,413
Change in unrealized net capital gains and losses 18,427 27,627 (37,561)
--------- --------- ---------
Balance, end of year 82,906 64,479 36,852
--------- --------- ---------
Total shareholder's equity $ 329,494 $ 283,410 $ 233,067
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 27,657 $ 22,716 $ 20,561
Adjustments to reconcile net income to net
cash provided by operating activities
Amortization and other non-cash items (34,890) (31,112) (26,172)
Realized capital gains and losses (4,697) (701) 1,581
Interest credited to contractholder funds 41,200 31,667 25,817
Changes in:
Life-contingent contract benefits
and contractholder funds 53,343 68,114 75,217
Deferred acquisition costs (16,693) (10,781) (6,859)
Accrued investment income (960) (1,404) (1,493)
Income taxes payable 13,865 (158) 1,986
Other operating assets and liabilities (15,014) 9,949 (5,963)
--------- --------- ---------
Net cash provided by operating activities 63,811 88,290 84,675
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities 65,281 15,723 28,454
Investment collections
Fixed income securities 159,648 120,061 72,751
Mortgage loans 5,855 5,365 12,508
Investment purchases
Fixed income securities (292,444) (236,984) (236,252)
Mortgage loans (24,252) (35,200) (10,325)
Change in short-term investments, net (55,846) 16,342 (18,598)
Change in policy loans, net (2,020) (2,241) (2,574)
--------- --------- ---------
Net cash used in investing activities (143,778) (116,934) (154,036)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 137,473 79,384 115,420
Contractholder fund withdrawals (54,782) (51,374) (46,504)
--------- --------- ---------
Net cash provided by financing activities 82,691 28,010 68,916
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 2,724 (634) (445)
CASH AT BEGINNING OF YEAR 393 1,027 1,472
--------- --------- ---------
CASH AT END OF YEAR $ 3,117 $ 393 $ 1,027
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-5
<PAGE>
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"), a wholly owned subsidiary of
Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate
Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation
(the "Corporation"). These financial statements have been prepared in conformity
with generally accepted accounting principles.
To conform with the 1998 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets a broad line of life insurance and savings 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. Savings products 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, which include
life specialists as well as banks, independent insurance agents, brokers and
direct 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. Annuity contracts and life insurance policies issued by the Company
are subject to discretionary withdrawal or surrender by customers, subject to
applicable surrender charges. In low interest rate environments, 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 monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal and
state regulation and legislation that, if passed, would allow banks greater
participation in the securities and insurance businesses. Such events would
present an increased level of competition for sales of the Company's products.
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 demand for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in capital
markets.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control of these
non-affliliated entities with which the Company has alliances could have a
detrimental effect on the Company's sales.
F-6
<PAGE>
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 and annuity policy 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 market
conditions, and other factors.
Short-term investments are carried at cost or amortized cost which approximates
fair value, and includes collateral received in connection with securities
lending activities. Policy loans are carried at the unpaid principal balances.
Investment income consists primarily of interest and dividends on short-term
investments. Interest is recognized on an accrual basis and dividends are
recorded at the ex-dividend date. 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.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes futures contracts which are derivative financial
instruments. When futures contracts meet specific criteria they may be
designated as accounting hedges and accounted for on either a fair value or
deferral basis, depending upon the nature of the hedge strategy and the method
used to account for the hedged item. Derivatives that are not designated as
accounting hedges are accounted for on a fair value basis.
If, subsequent to entering into a hedge transaction, the futures contract
becomes ineffective (including if the 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 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 either the hedge or the hedged item, whichever is shorter, or
are reported in shareholder's equity, consistent with the accounting for the
hedged item. Futures contracts must reduce the primary market risk exposure on
an enterprise or transaction 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.
DEFERRAL ACCOUNTING Under deferral accounting, gains and losses on futures
contracts 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 contracts as hedges using deferral accounting for
anticipatory investment purchases and sales when the criteria for futures
(discussed above) are met. In addition, anticipated transactions must be
probable of occurrence and their significant terms and characteristics
identified.
F-7
<PAGE>
Changes in fair values of these types of 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 and certain life-contingent annuities
are recognized as revenue when due. Accident and disability premiums are earned
on a pro rata basis over the policy period. Revenues on universal life-type
insurance policies 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 balance. Gross premium in excess of the net premium on limited
payment contracts are deferred and recognized over the contract period.
REINSURANCE
The Company has reinsurance agreements whereby certain premiums and contract
benefits are ceded and reflected net of such reinsurance in the statements of
operations and comprehensive income. Reinsurance recoverable and the related
reserves for life-contingent contract benefits and contractholder funds are
reported separately in the statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.
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
insurance, limited payment contracts and accident and disability insurance,
these costs are amortized in proportion to the estimated revenues on such
business. For universal life-type policies 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.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates. 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 and losses
on fixed income securities carried at fair value.
SEPARATE ACCOUNTS
The Company issues flexible premium deferred variable annuities, 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. The Company's Separate Accounts consist 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. Each of the Separate Accounts
are unit investment trusts registered with the Securities and Exchange
Commission.
F-8
<PAGE>
Assets of the Separate Accounts are carried at fair value. Investment income and
realized capital gains and losses of the Separate Accounts accrue directly to
the contractholders and, therefore, are not included in the Company's statements
of operations and comprehensive income. 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 retirement 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 11.0% during 1998. To the extent that unrealized gains on
fixed income 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 policies and
contracts that include an investment component, including most fixed annuities
and universal life policies. Payments received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the contractholder less withdrawals, mortality
charges and administrative expenses. During 1998, credited interest rates on
contractholder funds ranged from 3.46% to 11.00% for those contracts with fixed
interest rates and from 3.50% to 7.75% for those with flexible rates.
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.
NEW ACCOUNTING STANDARDS
In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities" under the guidance of SFAS No. 127 "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125". As a
result, the Company has recorded an asset and corresponding liability
representing the collateral received in connection with the Company's securities
lending program.
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income is a measurement of certain changes in shareholder's equity
that result from transactions and other economic events other than transactions
with shareholders. For the Company, these consist of changes in unrealized gains
and losses on the investment portfolio (See Note 9).
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 redefines how segments are
determined and requires additional segment disclosures for both annual and
interim financial reporting. The Company has identified itself as a single
operating segment.
F-9
<PAGE>
PENDING ACCOUNTING STANDARDS
In December 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
97-3, "Accounting by Insurance and Other Enterprises for Insurance-related
Assessments." The SOP is required to be adopted in 1999. The SOP provides
guidance concerning when to recognize a liability for insurance-related
assessments and how those liabilities should be measured. Specifically,
insurance-related assessments should be recognized as liabilities when all of
the following criteria have been met: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. The Company is currently evaluating the effects of this
SOP on its accounting for insurance-related assessments. Certain information
required for compliance is not currently available and therefore the Company is
studying alternatives for estimating the accrual. In addition, industry groups
are working to improve the information available. Adoption of this standard is
not expected to be material to the results of operations or financial position
of the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. The requirements
are effective for fiscal years beginning after June 15, 1999. Earlier
application is encouraged but is only permitted as of the beginning of any
fiscal quarter after issuance. This statement requires that all derivatives be
recognized on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings.
Additionally, the change in fair value of a derivative which is not effective as
a hedge will be immediately recognized in earnings. The Company expects to adopt
SFAS No. 133 as of January 1, 2000. Based on existing interpretations of the
requirements of SFAS No. 133, the impact of adoption is not expected to be
material to the results of operations or financial position of the Company.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements with ALIC in order to limit aggregate and
single exposure on large risks. A portion of the Company's premiums and policy
benefits are ceded to ALIC and reflected net of such reinsurance in the
statements of operations and comprehensive income. Reinsurance recoverable and
the related reserve for life-contingent contract benefits and contractholder
funds are reported separately in the statements of financial position. The
Company continues to have primary liability as the direct insurer for risks
reinsured.
F-10
<PAGE>
The following amounts were ceded to the ALIC under reinsurance agreements.
YEAR ENDED DECEMBER 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
Premiums $ 2,519 2,171 $ 1,383
Policy benefits 315 327 1,662
Included in the reinsurance recoverable at December 31, 1998 and 1997 are
amounts due from the ALIC of $532 and $342, respectively.
STRUCTURED SETTLEMENT ANNUITIES
AIC, through an affiliate, purchased $12,747, $12,766 and $15,610 of structured
settlement annuities from the Company in 1998, 1997 and 1996, respectively. Of
these amounts, $5,152, $3,468 and $8,517 relate to structured settlement
annuities with life contingencies and are included in premium income in 1998,
1997 and 1996, 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 performed by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The cost to the Company is determined by various allocation methods
and is primarily related to the level of services provided. Operating expenses,
including compensation and retirement and other benefit programs, allocated to
the Company were $32,326, $27,632 and $23,134 in 1998, 1997 and 1996,
respectively. A portion of these expenses relate to the acquisition of life and
annuity business which are 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>
AMORTIZED GROSS UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1998
U.S. government and agencies $ 443,930 $ 179,455 $ (1) $ 623,384
Municipal 31,617 2,922 (19) 34,520
Corporate 848,289 121,202 (899) 968,592
Mortgage-backed securities 291,520 14,294 (700) 305,114
Asset-backed securities 33,616 869 (28) 34,457
---------- ---------- ---------- ----------
Total fixed income securities $1,648,972 $ 318,742 $ (1,647) $1,966,067
========== ========== ========== ==========
AT DECEMBER 31, 1997
U.S. government and agencies $ 416,203 $ 126,824 $ (212) $ 542,815
Municipal 35,382 2,449 (22) 37,809
Corporate 803,935 103,700 (479) 907,156
Mortgage-backed securities 215,465 13,442 (166) 228,741
Asset-backed securities 39,125 642 (31) 39,736
---------- ---------- ---------- ----------
Total fixed income securities $1,510,110 $ 247,057 $ (910) $1,756,257
========== ========== ========== ==========
</TABLE>
F-11
<PAGE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1998:
AMORTIZED FAIR
COST VALUE
---- -----
Due in one year or less $ 14,903 $ 15,087
Due after one year through five years 79,333 84,372
Due after five years through ten years 227,770 250,208
Due after ten years 1,001,830 1,276,829
---------- ----------
1,323,836 1,626,496
Mortgage- and asset-backed securities 325,136 339,571
---------- ----------
Total $1,648,972 $1,966,067
========== ==========
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
NET INVESTMENT INCOME
YEAR ENDED DECEMBER, 31 1998 1997 1996
---- ---- ----
Fixed income securities $124,100 $116,763 $104,583
Mortgage loans 10,309 7,896 7,113
Other 2,940 2,200 2,942
-------- -------- --------
Investment income, before expense 137,349 126,859 114,638
Investment expense 2,936 1,972 1,776
-------- -------- --------
Net investment income $134,413 $124,887 $112,862
======== ======== ========
REALIZED CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
Fixed income securities $ 4,755 $ 955 $(1,522)
Mortgage loans (65) (221) (59)
Other 7 (33) --
------- ------- -------
Realized capital gains and losses 4,697 701 (1,581)
Income tax 1,644 245 (553)
------- ------- -------
Realized capital gains and losses, after tax $ 3,053 $ 456 $(1,028)
======= ======= =======
Excluding calls and prepayments, gross gains of $2,905, $471 and $480 and gross
losses of $164, $105 and $2,308 were realized on sales of fixed income
securities during 1998, 1997 and 1996, respectively.
F-12
<PAGE>
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
COST/ GROSS UNREALIZED UNREALIZED
AMORTIZED COST FAIR VALUE GAINS LOSSES NET GAINS
-------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Fixed income securities $ 1,648,972 $ 1,966,067 $ 318,742 $ (1,647) $ 317,095
=========== =========== =========== ===========
Reserve for life-contingent
contract benefits (187,706)
Deferred income taxes (44,642)
Deferred acquisition costs
and other (1,841)
-----------
Unrealized net capital gains $ 82,906
===========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 70,948 $ 123,519 $ (82,847)
Reserves for life contingent-contract benefits (42,251) (80,155) 24,300
Deferred income taxes (9,922) (14,876) 20,224
Deferred acquisition costs and other (348) (861) 762
--------- --------- ---------
Increase (decrease) in unrealized net
capital gains $ 18,427 $ 27,627 $ (37,561)
========= ========= =========
</TABLE>
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to other than
temporary declines in value of fixed income securities and valuation allowances
on mortgage loans were $114, $261 and $208 in 1998, 1997 and 1996, respectively.
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, 1998, 1997 and 1996.
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. There were
no impaired loans during 1998 and 1997. In 1996, the Company recognized interest
income of $281 on impaired loans, which was received in cash during the year.
The average recorded investment in impaired loans was $5,154 during 1996.
Valuation allowances for mortgage loans at December 31, 1998, 1997 and 1996 were
$600, $486 and $225, respectively. There were no direct write-downs of mortgage
loan valuation allowances for the years ended December 31, 1998 and 1997. For
the year ended December 31, 1996, direct write-downs of mortgage loan valuation
allowances were $1,431. Net (reductions) additions to the mortgage loan
valuation allowances were $114, $261 and $(296) for the years ended December 31,
1998, 1997 and 1996, respectively.
F-13
<PAGE>
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 5% of the portfolio at December 31, 1998 and
1997:
(% of municipal bond portfolio carrying value) 1998 1997
---- ----
Ohio 30.2% 28.4%
Illinois 21.1 19.8
California 17.4 22.7
Maryland 8.2 8.0
Minnesota 5.9 5.5
New York 5.7 5.4
Maine 5.3 5.6
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 listed below.
Except for the following, holdings in no other state exceeded 5% of the
portfolio at December 31, 1998 and 1997:
(% of commercial mortgage portfolio carrying value) 1998 1997
---- ----
California 41.9% 47.7%
New York 26.3 30.5
Illinois 15.8 15.3
New Jersey 6.9 -
Pennsylvania 6.2 3.3
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
(% of commercial mortgage portfolio carrying value) 1998 1997
---- ----
Retail 39.5% 38.8%
Warehouse 19.2 25.4
Apartment complex 18.5 14.9
Office buildings 11.7 15.3
Industrial 5.5 4.9
Other 5.6 .7
------ ------
100.0% 100.0%
===== =====
F-14
<PAGE>
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1998, for loans that were not in foreclosure are as follows:
NUMBER OF LOANS CARRYING VALUE PERCENT
--------------- -------------- -------
1999 1 $ 2,832 2.0%
2000 4 7,762 5.3
2001 5 7,066 4.9
2002 2 6,154 4.2
Thereafter 31 121,281 83.6
-------- -------- --------
Total 43 $145,095 100.0%
======== ======== ========
In 1998, there were no commercial mortgage loans which were contractually due.
SECURITIES ON DEPOSIT
At December 31, 1998, fixed income securities with a carrying value of $2,109
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 traditional life and universal
life-type insurance reserves and deferred income taxes) are not considered
financial instruments and are not carried at fair value. Other assets and
liabilities considered financial instruments such as accrued investment income
and cash are generally of a short-term nature. Their carrying values are assumed
to approximate fair value.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
Fixed income securities $1,966,067 $1,966,067 $1,756,257 $1,756,257
Mortgage loans 145,095 154,872 114,627 120,849
Short-term investments 76,127 76,127 9,513 9,513
Policy loans 29,620 29,620 27,600 27,600
Separate Accounts 366,247 366,247 308,595 308,595
Carrying value and fair value include the effects of derivative financial
instruments where applicable.
F-15
<PAGE>
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 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. Separate
Accounts assets are carried in the statements of financial position at fair
value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
Contractholder funds on
investment contracts $512,239 $518,448 $437,449 $466,136
Separate Accounts 366,247 366,247 308,595 308,595
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 only derivative financial instruments used by the Company are interest rate
futures contracts. The Company primarily uses this derivative financial
instrument to reduce its exposure to market risk, specifically 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 amount, credit exposure, fair value
and carrying value of the Company's derivative financial instruments:
CARRYING
VALUE
CONTRACT CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
------ -------- ----- -------------
AT DECEMBER 31, 1998
- --------------------
Financial futures contracts $15,000 $ -- $ (15) $ (223)
AT DECEMBER 31, 1997
- --------------------
Financial futures contracts $29,800 $ -- $ (153) $ (810)
Carrying value is representative of deferred gains and losses.
F-16
<PAGE>
The contract 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 measured by the
fair value of contracts with a positive fair value at the reporting date. The
Company manages its exposure to credit risk primarily by establishing risk
control limits. 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. Dealer and
exchange quotes are used to value 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 anticipatory investment purchases and sales, as well as
other risk management purposes. Futures used as hedges of anticipatory
transactions pertain to identified transactions which are probable to occur and
are generally completed within 90 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.
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 control 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 and liabilities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans are agreements to lend to a borrower
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.
The Company had no mortgage loan commitments at December 31, 1998. At December
31, 1997 the Company had $18,000 in mortgage loan commitments which had a fair
value of $180.
F-17
<PAGE>
6. INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
(the "Allstate Group") in the filing of a consolidated federal income tax return
and is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this results
in the Company's annual income tax provision being computed, with adjustments,
as if the Company filed a separate return.
Prior to Sears, Roebuck and Co.'s ("Sears") distribution ("Sears distribution")
on June 30, 1995 of its 80.3% ownership in the Corporation to Sears
shareholders, 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.
As a result of the Sears distribution, the Allstate Group was no longer included
in the Sears Tax Group, and the Tax Sharing Agreement was terminated.
Accordingly, the Allstate Group and Sears Group entered into a new tax sharing
agreement, which adopts many of the principles of the Tax Sharing Agreement and
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Sears distribution, including the treatment
of audits of tax returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
The components of the deferred income tax assets and liabilities at December 31,
are as follows:
1998 1997
---- ----
DEFERRED ASSETS
Life and annuity reserves $ 41,073 $ 34,084
Difference in tax bases of investments -- 742
Discontinued operations 364 364
Other postretirement benefits 328 352
Other assets 2,023 255
-------- --------
Total deferred assets 43,788 35,797
-------- --------
DEFERRED LIABILITIES
Unrealized net capital gains (44,642) (34,720)
Deferred acquisition costs (20,573) (15,821)
Difference in tax bases of investments (1,784) --
Prepaid commission expense (790) (792)
Other liabilities (1,448) (1,454)
-------- --------
Total deferred liabilities (69,237) (52,787)
-------- --------
Net deferred liability $(25,449) $(16,990)
======== ========
F-18
<PAGE>
Although realization is not assured, management believes it is more likely than
not that the deferred tax assets will be realized based on the assumptions that
certain levels of income will be achieved.
The components of income tax expense for the year ended December 31, are as
follows:
1998 1997 1996
-------- -------- --------
Current $ 13,679 $ 14,874 $ 11,411
Deferred 1,255 (1,578) 257
-------- -------- --------
Total income tax expense $ 14,934 $ 13,296 $ 11,668
======== ======== ========
The Company paid income taxes of $3,788, $13,350 and $11,968 in 1998, 1997 and
1996, respectively. The Company had a current income tax liability of $14,029
and $1,419 at December 31, 1998 and 1997, respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
1998 1997 1996
------ ------ ------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax expense 1.6 2.2 2.4
Other (1.5) (.3) (1.2)
------ ------ ------
Effective income tax rate 35.1% 36.9% 36.2%
====== ====== ======
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, 1998, approximately $389,
will result in federal income taxes payable of $136 if distributed by the
Company. 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 have
been permitted since the Tax Reform Act of 1984.
7. STATUTORY FINANCIAL INFORMATION
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
("NAIC"), 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 significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of revised
statutory accounting principles. While the NAIC has approved a January 1, 2001
implementation date for the newly developed guidance, companies must adhere to
the implementation date adopted by their state of domicile. The Company's state
of domicile, New York, is continuing its comparison of codification and current
statutory accounting requirements to determine necessary revisions to existing
state laws and regulations. The requirements are not expected to have a material
impact on the statutory surplus of the Company.
F-19
<PAGE>
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 $382, $597 and $490 for the pension
plans in 1998, 1997 and 1996, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Corporation also 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 ten 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's contributions are based on the
Corporation's matching obligation and performance.
The Company's contribution to the Allstate Plan was $567, $164 and $111 in 1998,
1997 and 1996, respectively.
F-20
<PAGE>
9. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
1998 1997 1996
------------------------------- ------------------------------------------------------------------
After- After- After-
Pretax Tax tax Pretax Tax tax Pretax Tax tax
------ --- --- ------ --- --- ------ --- ---
Unrealized capital gains
and losses:
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized holding gains
(losses) arising during
the period $75,817 $(26,536) $49,281 $ 124,702 $(43,645) $ 81,057 $(86,096) $ 30,133 $(55,963)
Adjustments to unrealized
capital gains and losses
arising during the period:
Deferred acquisition costs (348) 122 (226) (861) 301 (560) 762 (267) 495
Reserve for life insurance
policy benefits (42,251) 14,788 (27,463) (80,155) 28,054 (52,101) 24,300 (8,505) 15,795
------- -------- ------- --------- -------- -------- -------- -------- --------
Net unrealized holding
gains arising during the
period 33,218 (11,626) 21,592 43,686 (15,290) 28,396 (61,034) 21,361 (39,673)
------- -------- ------- --------- -------- -------- -------- -------- --------
Less: reclassification
adjustment for realized
net capital gains included
in net income 4,869 (1,704) 3,165 1,183 (414) 769 (3,249) 1,137 (2,112)
------- -------- ------- --------- -------- -------- -------- -------- --------
Unrealized net capital
gains (losses) 28,349 (9,922) 18,427 42,503 (14,876) 27,627 (57,785) 20,224 (37,561)
------- -------- ------- --------- -------- -------- -------- -------- --------
OTHER COMPREHENSIVE
INCOME $28,349 $ (9,922) $18,427 $ 42,503 $(14,876) $ 27,627 $(57,785) $ 20,224 $(37,561)
======= ======== ======= ========= ======== ======== ======== ======== ========
</TABLE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATIONS AND LEGAL PROCEEDINGS
The Company's business is subject to the effect of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulation, controls on medical care costs,
removal of barriers preventing banks from engaging in the securities and
insurance business, tax law changes affecting the taxation of insurance
companies, the tax treatment of insurance products and its impact on the
relative desirability of various personal investment vehicles, and proposed
legislation to prohibit the use of gender in determining insurance rates and
benefits. The ultimate changes and eventual effects, if any, of these
initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
F-21
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV--REINSURANCE
($ in thousands)
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $12,656,826 $ 857,500 $11,799,326
=========== =========== ===========
Premiums and contract charges:
Life and annuities $ 116,678 $ 2,541 $ 114,137
Accident and health 5,578 663 4,915
----------- ----------- -----------
$ 122,256 $ 3,204 $ 119,052
=========== =========== ===========
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $11,339,990 $ 721,040 $10,618,950
=========== =========== ===========
Premiums and contract charges:
Life and annuities $ 116,167 $ 2,185 $ 113,982
Accident and health 5,883 902 4,981
----------- ----------- -----------
$ 122,050 $ 3,087 $ 118,963
=========== =========== ===========
GROSS NET
YEAR ENDED DECEMBER 31, 1996 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
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 5,083 875 4,208
----------- ----------- -----------
$ 119,379 $ 2,273 $ 117,106
=========== =========== ===========
F-22
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
($ in thousands)
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
- ----------------------------
Allowance for estimated losses
on mortgage loans $ 486 $ 114 $ - $ 600
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1997
- ----------------------------
Allowance for estimated losses
on mortgage loans $ 225 $ 261 $ - $ 486
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1996
- ----------------------------
Allowance for estimated losses
on mortgage loans $ 1,952 $ (296) $ 1,431 $ 225
============ ============ ============ ============
</TABLE>
F-23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
By /s/ LOUIS G. LOWER, II
----------------------
Louis G. Lower, II
Chairman of the Board of Directors and Director
(Principal Executive Officer)
Date March 2, 1999
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By /s/ LOUIS G. LOWER, II
----------------------
Louis G. Lower, II
Chairman of the Board of Directors and Director
(Principal Executive Officer)
Date March 2, 1999
--------------
By /s/ MICHAEL J. VELOTTA
----------------------
Michael J. Velotta
Vice President, Secretary, General Counsel and Director
Date March 19, 1999
--------------
By /s/ MARLA G. FRIEDMAN
----------------------
Marla G. Friedman
Vice President and Director
Date March 2, 1999
--------------
By /s/VINCENT A. FUSCO
---------------------
Vincent A. Fusco
Chief Operations Officer and Director
Date March 8, 1999
---------------
By /s/ GERARD F. McDERMOTT
-------------------------
Gerard F. McDermott
Director
Date March 8, 1999
----------------
By /s/ TIMOTHY H. PLOHG
----------------------
Timothy H. Plohg
Vice President and Director
Date March 15, 1999
-----------------
19
<PAGE>
By
----------------------
Kevin R. Slawin
Vice President and Director
Date March , 1999
-----------------
By
-----------------------
Patricia A. Wilson
Assistant Vice President and Director
Date March , 1999
-----------------
By /s/ KEITH A. HAUSCHILDT
------------------------
Keith A. Hauschildt
Assistant Vice President and Controller
(Chief Accounting Officer)
Date March 18, 1999
------------------
By /s/MARCIA D. ALAZRAKI
---------------------
Marcia D. Alazraki
Director
Date March 10, 1999
-----------------
By /s/CLEVELAND JOHNSON, JR.
-------------------------
Cleveland Johnson, Jr.
Director
Date March 1, 1999
-----------------
By /s/KENNETH R. O'BRIEN
---------------------
Kenneth R. O'Brien
Director
Date March 2, 1999
-----------------
By /s/JOHN R. RABEN, JR.
---------------------
John R. Raben, Jr.
Director
Date March 1, 1999
-----------------
By /s/ SALLY A. SLACKE
-------------------
Sally A. Slacke
Director
Date March 1, 1999
-----------------
By /s/ THOMAS J. WILSON, II
------------------------
Thomas J. Wilson, II
President and Director
Date March 15, 1999
-----------------
20
<PAGE>
EXHIBIT INDEX
The Allstate Life Insurance Company of New York
Form 10-K for the year ended December 31, 1998
Exhibit No. Description
3(i) Restated Certificate of Incorporation, as amended, of Allstate Life
Insurance Company of New York
(filed herewith)
3(ii) Amended By-laws of Allstate Life Insurance Company of New York
(filed herewith)
27 Financial Data Schedule (filed herewith)
E-1
CERTIFICATE OF AMENDMENT
OF THE RESTATED CERTIFICATE OF INCORPORATION
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
UNDER SECTION 1206 OF THE BUSINESS INSURANCE LAW
AND SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the Chairman of the Board and President and Vice
President, Secretary and General Counsel of Allstate Life Insurance Company of
New York, do hereby certify and set forth:
(1) The name of the corporation is Allstate Life Insurance Company of New York.
The Corporation was previously named PM Life Insurance Company. The name
under which the Corporation was originally incorporated was Financial Life
Insurance Company.
(2) The Certificate of Incorporation of the Corporation was filed with the
State of New York Insurance Department on January 25, 1967. The Certificate
of Incorporation was restated (pursuant to Section 1206 of the Insurance
Law and Section 807 of the Business Corporation Law) on May 16, 1978.
(3) The Restated Certificate of Incorporation of Allstate Life Insurance
Company of New York is hereby amended, pursuant to Section 801(b)(14) of
the Business Corporation Law, to provide for a change in gender and
Director requirements to read as follows:
"Article 'FIFTH', designating the number of Directors of the
Corporation, is amended to read as follows:
"FIFTH: The number of Directors of this Corporation shall not be less
than thirteen nor more than fifteen in number, and shall be determined by
or under the By-Laws. As used in this paragraph, `number of Directors'
means the total number of Directors which the Corporation would have if
there were no vacancies. Directors shall be elected at each annual meeting
of shareholders and each Director so elected shall hold office until the
next annual meeting of shareholders and until his or her successor is
elected and qualified or until his or her earlier death, resignation or
removal. In the event that the number of Directors duly elected and serving
shall be less than thirteen, the Corporation shall not for that reason be
dissolved, but the vacancy or vacancies shall be filled as provided in
Article SEVENTH hereof. Each Director shall be at least twenty-one years of
age. At all times a majority of the Directors shall be citizens and
residents of the United States and not less than three of the Directors
shall be residents of New York. The Directors need not be shareholders of
the Corporation. Not less than one-third of the Directors of the
Corporation shall be persons who are not officers of employees of the
Corporation or of any entity controlling, controlled by, or under common
control with such Corporation and who are not beneficial owners of a
controlling interest in the voting stock of such Corporation."
4. The manner in which this change to the Restated Certificate of
Incorporation was authorized was, pursuant tot he Business Corporation Law
Section 614, by the holder of all outstanding shares of the Corporation
entitled to vote thereon. This Special Shareholders meeting was held
September 7, 1995.
IN WITNESS WHEREOF the undersigned has executed and signed this Certificate
and affirmed it as true this 3rd day of November, 1995.
/s/ LOUIS G. LOWER, II
-----------------------
Louis G. Lower, II
Chairman of the Board
and President
/s/ MICHAEL J. VELOTTA
- ------------------------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
Sworn to before me this 3rd day of November, 1995.
/s/ CHRISTA ROSE FRONCZAK
- --------------------------------------------
Christa Rose Fronczak
Notary Public, State of Illinois
My Commission Expires: 6/23/96
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE RESTATED CERTIFICATE OF INCORPORATION
PM LIFE INSURANCE COMPANY
Under Section 53 of the Insurance Law and
Section 805 of the Business Corporation Law.
The undersigned hereby certify:
1. The name of the Corporation is Allstate Life Insurance Company of New York.
The Corporation was previously named PM Life Insurance Company. The name
under which the Corporation was originally incorporated was Financial Life
Insurance Company.
2. The Certificate of Incorporation of the Corporation was filed with the
State of new York Insurance Department on January 25, 1967. The Certificate
of Incorporation was restated (pursuant to Section 53 of the Insurance Law
and Section 807 of the Business Corporation Law on May 16, 1978.
3. The amendments effected by this Certificate of Amendment are as follows:
A. Article "FIRST", specifying the name of the Corporation, is amended to
read as follows:
FIRST: The name of this corporation shall be: Allstate Life Insurance
Company of New York.
B. Article "SECOND", designating the principal office of the Corporation,
is amended to read as follows:
SECOND: The principal office of the Corporation shall be located in
Huntington Station, County of Suffolk, State of New York.
C. Article "FIFTH", providing requirements for Directors, is amended to
read as follows:
FIFTH: The number of Directors of this corporation shall not be less
than thirteen nor more than fifteen in number, and shall be determined
by or under the By-Laws. As used in this paragraph, "number of
Directors" means the total number of Directors which the corporation
would have if there were no vacancies. Directors shall be elected at
each annual meeting of shareholders and each Director so elected shall
hold office until the next annual meeting of shareholders and until
his successor is elected and qualified or until his earlier death,
resignation or removal. In the event that the number of Directors duly
elected and serving shall be less than thirteen, the corporation shall
not for that reason be dissolved, but the vacancy or vacancies shall
be filled as provided in Article SEVENTH hereof. Each Director shall
be at least twenty-one years of age. At all times a majority of the
Directors shall be citizens and residents of the United States and not
less than three of the Directors of the United States and not less
than three of the Directors shall be residents of New York. The
Directors need not be shareholders of the corporation. The Directors
who are officers and salaried employees of the corporation shall at
all times be less than a majority of the Board of Directors.
4. The foregoing amendments to the Certificate of Incorporation were
authorized by the holder of all the outstanding shares of the Corporation
at a meeting of Shareholders held on the 19th day of December, 1983.
IN WITNESS WHEREOF, the undersigned has signed this Certificate and
affirmed in as true this 27th day of January, 1984.
/s/ ROBERT S. SEILER
--------------------------------
Robert S. Seiler
Senior Vice President
Attest: /s/ JAMES D. CLEMENTS
------------------------------------
James D. Clements
Assistant Secretary
Subscribed and sworn to before me this 27th day of January, 1984.
/s/ MARY KAY CAMERON
- ------------------------------------
Notary Public
(My commission expires 9/26/87)
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
PM LIFE INSURANCE COMPANY
Under Section 53 of the Insurance Law and
Section 807 of the Business Corporation Law
The undersigned, being President and Secretary of PM Life Insurance
Company, hereby certify:
1. The name of the corporation is PM LIFE INSURANCE COMPANY. The name under
which the corporation was originally incorporated was FINANCIAL LIFE INSURANCE
COMPANY.
2. The Certificate of Incorporation of the corporation was filed by the New
York State Insurance Department on January 25, 1967.
3. The Certificate of Incorporation of the corporation, as heretofore
amended and now in effect, is hereby amended, as authorized by Section 53 of the
Insurance Law and Section 801 of the Business Corporation Law, (a) to delete
detailed definitions relating to the kinds of insurance business the corporation
is authorized to transact, (b) to increase the total number of Shares, par value
$25.00 per share, which the corporation is authorized to issue from 60,000 to
80,000, (c) to change references in the Certificate of Incorporation from
"stock" to "shares" and from "stockholders" to "shareholders", (d) to delete
provisions of the Certificate of Incorporation relating to the initial
Directors, (e) to delete the provisions of the Certificate of Incorporation
relating to the quorum and notice requirements for shareholders' meetings and to
the removal of Directors, which shall be governed by the By-Laws of the
corporation, (f) to revise the provision relating to the filling of vacancies on
the Board of Directors and (g) to make other changes generally reorganizing and
simplifying the Certificate of Incorporation.
4. The text of the Certificate of Incorporation, as heretofore amended, and
as further amended by the filing of this Restated Certificate of Incorporation,
is hereby restated to read in full as follows:
FIRST: The name of the corporation is PM LIFE INSURANCE COMPANY.
SECOND: The principal office of the corporation shall be located in
the Village of Armonk, County of Westchester, State of New York.
THIRD: The business to be transacted by the corporation shall be: the
kinds of insurance specified in paragraph 1, 2 and 3 of Section 46 of the
Insurance Law of the State of New York, and any amendments to such
paragraphs or provisions in substitution therefore which may be hereafter
adopted, and such other kind or kinds of business to the extent necessarily
or properly incidental to the kind or kinds of insurance business which the
corporation is authorized to do.
FOURTH: The corporate owners of this corporation shall be exercised by
a Board of Directors, by committees thereof, and by such officers,
employees and agents as such Board shall empower.
FIFTH: The number of Directors of this corporation shall not be less
than thirteen nor more than fifteen in number, and shall be determined by
or under the By-Laws. As used in this paragraph, "number of Directors"
means the total number of Directors which the corporation would have if
there were no vacancies. Directors shall be elected at each annual meeting
or shareholders and each Director so elected shall hold office until the
next annual meeting of shareholders and until his successor is elected and
qualified or until his earlier death, resignation or removal. In the event
that the number of Directors duly elected and serving shall be less than
thirteen, the corporation shall not for that reason be dissolved, but the
vacancy or vacancies shall be filled as provided in Article SEVENTH hereof.
Each Director shall be at least twenty-one years of age. At all times a
majority of the Directors shall be citizens and residents of New York or of
adjoining states and not less than three of the Directors shall be
residents of New York. The Directors need not be shareholders of the
corporation. The Directors who are officers and salaried employees of the
corporation shall at all times be less than a majority of the Board of
Directors.
SIXTH: Annual meetings and special meetings of the shareholders of the
corporation shall be held at such place, within or without the State of New
York, as may be fixed by or under the By-Laws, and at such times as may be
fixed by or under the By-Laws. Notice of the time and place of such meeting
shall be given as prescribed in the By-laws and as required by law,
including notice to the Superintendent of Insurance of the State of New
York to the extent required by law. At the annual meeting of shareholders,
the shareholders shall elect a Board of Directors and shall transact such
other business as may legally come before the meeting.
SEVENTH: Any vacancies occurring in the Board of Directors may be
filled by the Board of Directors or by the shareholders in the manner
specified in the By-Laws. Notice of any election of a Director pursuant to
the By-Laws to fill a vacancy shall be given to the Superintendent of
Insurance of the State of New York in the manner and to the extent required
by law. Any or all of the Directors may be removed at any time, either for
or without cause, by vote of the shareholders or, for cause, by vote of a
majority of the Directors then in office. If the removal of a Director is
requested by the Superintendent of Insurance of the State of New York, the
Chairman of the Board of Directors shall immediately call a special meeting
of the Board of Directors to respond to such request.
EIGHTH: The duration of the corporate existence of the corporation
shall be perpetual.
NINTH: The amount of capital of the corporation shall be Two Million
Dollars ($2,000,000) and shall consist of eighty thousand (80,000) Shares,
par value twenty-five dollars ($25.00) per share.
TENTH: In the manner specified in the By-Laws, the Board of Directors
shall elect officers at its annual meeting, and officers may be elected or
removed and a vacancy in any office may be filled by the Board of Directors
at any meeting.
ELEVENTH: No shareholder of this corporation shall have a prior right
because of his shareholdings to have first or at any time offered to him
any part of any of the presently authorized shares of this corporation
hereafter optioned, issued or sold, or any part of any security of this
corporation presently authorized whether or not issued, and subject to
statutory requirements all securities of this corporation which may
hereafter be authorized may at any time be sold, optioned and contracted
for sales of subscription and/or sold and disposed of by authorization of
the Board of Directors of this corporation to such person or persons and
upon such terms and conditions as may to said Board of Directors seem
proper or advisable without first offering said shares or security or any
part thereof to existing shareholders.
TWELFTH: The corporation may issue both participating policies or
contracts and non-participating policies or contracts, upon receiving a
special permit from the Superintendent of Insurance of the State of New
York so to do and in compliance and pursuant to the provisions of Section
216 of the Insurance Law of the State of New York.
5. The foregoing Amendment and Restatement of the Certificate of
Incorporation was authorized, pursuant to Sections 615 and 807 of the Business
Corporation law and Section 53 of the Insurance Law, by the written consent of
the holder of all of the outstanding shares of the corporation entitled to vote
thereon dated May 16, 1978.
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirmed it as true under the penalties of perjury this 16th day of May, 1978.
/s/ MICHAEL E. FISHER
----------------------------------
Michael E. Fisher
President
/s/ VINCENT H. VENSKE
----------------------------------
Vincent H. Venske
Secretary
<PAGE>
CERTIFICATION
I, PAUL N. KIERIG, Assistant Secretary of Allstate Life Insurance Company
of New York, a New York corporation, hereby certify that the following are true,
complete and correct copies of resolutions concerning the amendment of the
Restated Certificate of Incorporation, adopted at a meeting of the Board of
Directors of the corporation held on June 20, 1994, and a resolution adopted by
written consent of the Shareholders of the corporation, effective September 1,
1994, and that they are now in full force and effect:
RESTATED CERTIFICATE OF INCORPORATION - AMENDMENT (Board of Directors)
BE IT RESOLVED, That the following amendment to the Restated Certificate of
Incorporation for Allstate Life Insurance Company of New York, which provides
for a change in the location of the principal office, be submitted to the
Shareholders for approval:
Article "SECOND", designating the principal office of the Corporation, is
amended to read as follows:
SECOND: The principal office of the Corporation shall be located in
Farmingville, County of Suffolk, State of New York
RESTATED CERTIFICATE OF INCORPORATION - AMENDMENT (Shareholders)
Upon motion duly made, seconded and unanimously carried, the recommendation
made by the Board of Directors at the Annual Board of Directors Meeting held on
June 20, 1994, concerning the change of address for Allstate Life Insurance
Company of New York, is hereby adopted.
IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the
Corporation to be affixed this 27th day of September, 1994.
/s/ PAUL N. KIERIG
-------------------------------
Paul N. Kierig
Assistant Secretary
(Corporate Seal)
December 16, 1998
AMENDED BY-LAWS OF
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ARTICLE I
DIRECTORS
Section 1. The property, business and affairs of the Company shall be
managed and controlled by a Board of Directors composed of not less than
thirteen nor more than fifteen members. The number of Directors may be changed
by amendment of these By-Laws, as provided by Article VI, Section 4. No decrease
in the number of Directors shall shorten the term of any incumbent Director. The
Directors shall be elected, pursuant to notice under Section 12 of this Article,
at each annual meeting of the shareholders of the Company for a term of one
year. Each Director shall hold office for the term for which he was elected and
until the election and qualification of his successor.
Each Director shall be at least twenty-one years of age. At all times, a
majority of the Directors shall be citizens and residents of the United States
and not less than three Directors shall be residents of New York. The Directors
need not be shareholders of the Company. Not less than one-third of the
Directors of the Company shall be persons who are not officers or employees of
the Company or of any entity controlling, controlled by, or under common control
with the Company and who are not beneficial owners of a controlling interest in
the voting stock of such Corporation (each such Director an "Outside Director").
Section 2. In the event of a vacancy occurring in the Board of Directors,
the shareholders of the Company shall, by a majority vote at a special meeting
called for that purpose or at the next annual meeting of shareholders, elect a
director to fill such vacancy, who shall hold office during the unexpired
portion of the term of the director whose place he was elected to fill. Any
Director elected pursuant to this section of the By-Laws shall not take office
nor exercise the duties thereof until ten days after written notice of election
is filed with the Superintendent of Insurance.
Section 3. The Board of Directors may declare dividends payable out of the
surplus funds of the Company when warranted by law, however, no dividend shall
be declared until after 30 days written notice to the Superintendent of
Insurance.
Section 4. The Board of Directors shall elect all the general officers of
the Company hereafter provided and may prescribe additional descriptive titles
for any such officers.
The Board of Directors may from time to time appoint Assistant Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers of
the Company.
The Board of Directors may prescribe the duties, and fix the compensation
as provided by Article VI, Section 5 of these By-Laws, of any elected or
appointed officer and may require from any officer security for his faithful
service and for his proper accounting for monies and property from time to time
in his possession.
All officers of the Company shall hold office at the will of the Board of
Directors.
Section 5. The Board of Directors shall designate in what bank or banks the
funds of the Company shall be deposited and the person or persons who may sign,
on behalf of the Company, checks or drafts against such deposits. Such
designations may also be made by such person or persons as shall be appointed
for that purpose by the Board of Directors.
Section 6. The Board of Directors shall have the power to make rules and
regulations not inconsistent with the laws of the state of New York, the
Articles of Incorporation of the Company, or these By-Laws, for the conduct of
its own meetings and the management of the affairs of the Company.
Section 7. The Board of Directors may authorize payment of compensation to
directors for their services as directors, and fix the amount thereof.
Section 8. The Board of Directors shall have the power to appoint
committees and to grant them powers not inconsistent with the laws of the state
of New York, the Articles of Incorporation of the Company, or these By-Laws.
Section 9. An annual meeting of the Board of Directors shall be held each
year immediately after the adjournment of the annual meeting of the
shareholders. Other meetings of the Board of Directors may be held at such time,
and such place (within or without the state of New York), as the Board of
Directors may determine or when called by the Chairman of the Board or by a
majority of the Board of Directors.
Notice of every meeting of the Directors other than the stated annual
meeting shall be given by letter or telegraph sent to each Director at his
business address, not less than three days previous to the meeting. Any Director
may, in writing, waive notice of any meeting, and the presence of a Director at
any meeting shall be considered a waiver by him of notice of such meeting,
except as otherwise provided by law.
Any one or more members of the Board, or any Committee thereof, may
participate in a meeting of the Board or such Committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at the meeting.
Section 10. A majority of the whole Board of Directors shall constitute a
quorum for the transaction of business, but if at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting, from time to time, until a quorum shall have been
obtained. The term "quorum" as used in this Section means the number of members
of the Board of Directors required to be present before the Board or a Committee
thereof can proceed to transact business and it must include at least one
Outside Director.
Section 11. Any action required or permitted to be taken at any meeting of
the Board of Directors, or of any Committee thereof, may be taken without a
meeting if all members of the Board or such Committee, as the case may be,
consent thereto in writing. Such writing or writings shall be filed with the
minutes of proceedings of the Board or such Committee.
Section 12. No election of Directors pursuant to Section 1 of this Article
shall be valid unless a notice of election shall have been filed with the
Superintendent of Insurance at least 10 days prior to such election.
Section 13. Any or all of the Directors may be removed at any time, either
for or without cause, by vote of the shareholders or, for cause, by vote of a
majority of the Directors then in office. Any vacancy in the Board caused by the
removal of a Director by vote of the shareholders may be filled by the
shareholders entitled to vote for the election of the Director so removed, in
the manner provided in Section 2 of this article. If the removal of a Director
is requested by the Superintendent of Insurance, the Chairman shall immediately
call a special meeting of Directors to respond to the request of the
Superintendent of Insurance.
Section 14. The Operations Review Committee of the Board of Directors shall
be comprised solely of directors who are not officers or employees of the
Company or of any entity controlling, controlled by, or under common control
with the Company and who are not beneficial owners of a controlling interest in
the voting stock of the Company or any such entity. Such committee shall have
responsibility for recommending the selection of independent certified public
accountants, reviewing the Company's financial condition, the scope and results
of the independent audit and any internal audit, nominating candidates for
director for election by shareholders, evaluating the performance of officers
deemed by such committee to be principal officers of the Company and
recommending to the Board of Directors the selection and compensation of such
principal officers and recommending to the Board of Directors any plan to issue
options to its officers and employees for the purchase of shares of stock,
pursuant to section one thousand two hundred seven of Article 12 Chapter 28 of
the Consolidated Laws of New York Insurance Law.
Section 15. Unless a higher number is otherwise required in the By-Laws,
not less than one-third of the members of each committee of the Board of
Directors of the Company shall be persons who are not officers or employees of
the Company or of any entity controlling, controlled by, or under common control
with the Company and who are not beneficial owners of a controlling interest in
the voting stock of such Corporation. At least one such person must be included
in any quorum for the transaction of business at any meeting of the board of
directors or any committee thereof.
ARTICLE II
OFFICERS
Section 1. The general officers of the Company shall consist of a Chairman
of the Board, President, two or more Vice Presidents, a Secretary and a
Treasurer, who shall be elected annually by the Board of Directors at the stated
annual meeting held upon adjournment of the annual shareholders= meeting, and if
not elected at such meeting, such officers may be elected at any meeting of the
Board of Directors held thereafter, Such officers shall be elected by a majority
of the Directors, and shall hold office for one year and until their respective
successors are elected and qualified, subject to removal at will by the Board of
Directors. In case of a vacancy in any of the general offices of the Company,
such vacancy may be filled by the vote of a majority of the Board of Directors.
Any two of the aforesaid offices may be filled by the same person, with the
exception of the offices of President and Vice President, or President and
Secretary.
Section 2. The Chairman of the Board shall preside at all meetings of the
shareholders and of the Board of Directors. He shall be the Chief Executive
Officer of the Company, shall have general and active management of the business
of the Company subject to the supervision of the Board of Directors, and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall also perform such other duties as shall be prescribed from time
to time by the Board of Directors.
Section 3. The President shall have general administrative control and
supervision over the operations of the Company subject to the supervision of the
Chairman of the Board. He shall, in the absence or inability of the Chairman of
the Board, perform the duties and exercise the powers of the Chairman of the
Board. He shall execute bonds, mortgages, and other contracts requiring a seal,
under the seal of the Company, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Company. He shall also perform such other duties as may properly
belong to his office or as shall be prescribed from time to time by the Chairman
of the Board or by the Board of Directors.
Section 4. Each Vice President shall have such powers and shall perform
such duties as may be assigned to him by the Chairman of the Board, or by the
President or by the Board of Directors. In the absence or in the case of the
inability of the Chairman of the Board and the President to act, the Board of
Directors may designate which one of the Vice Presidents shall be the acting
Chief Executive Officer of the Company during such absence or inability,
whereupon such acting Chief Executive Officer shall have all the powers and
perform all of the duties incident to the office of Chairman during the absence
or inability of the Chairman and President to act.
Section 5. The Secretary shall keep the minutes of all meetings of the
Board of Directors, and of all meetings of the shareholders, in books provided
by the Company for such purpose. He shall attend to the giving of all notices of
meetings of the Board of Directors or shareholders. He may sign with the
Chairman of the Board, the President or a Vice President in the name of the
Company when authorized by the Board of Directors so to do, all contracts and
other instruments requiring the seal of the Company and may affix the seal
thereto. He shall, in general, perform all of the duties which are incident to
the office of Secretary and such other duties as the Board of Directors or
Chairman of the Board may from time to time prescribe.
Section 6. The Treasurer shall deposit the monies of the Company in the
Company's name in depositories designated by the Board of Directors, or by such
person or persons as shall be appointed for that purpose by the Board of
Directors. He shall, in general, perform all of the duties which are incident to
the office of Treasurer and such other duties as the Board of Directors or
Chairman of the Board may from time to time prescribe. The Board of Directors
may, in its discretion, require him to give bond for the faithful discharge of
his duties.
ARTICLE III
SHAREHOLDERS' MEETINGS
Section 1. The annual meeting of the shareholders shall be held at the
principal office of the Company in the state of New York, or at such other
location within or without the state of New York as may be set forth in the
notice of call, on the fourth Tuesday in February of each year, except when such
day shall be a legal holiday, in which case the meeting shall be held on the
next succeeding business day. The Chairman of the Board or the Board of
Directors may at any time call a special meeting of the shareholders, and the
Chairman of the Board shall call such special meeting when requested, in
writing, so to do by the owners of not less than one-fifth of the outstanding
shares of the Company.
Section 2. Notice of every meeting of the shareholders shall be given by
mailing notice thereof at least 10 days, but no more than 50 days before such
meeting to all the shareholders at their respective post office addresses last
furnished by them, respectively, to the Company. Notice of a special meeting
shall also state the purpose for which the meeting is called. The shareholders
may waive notice of any such meeting, in writing, and the presence of a
shareholder, either in person or by proxy, shall be considered a waiver of
notice, except as otherwise provided by law.
Section 3. The presence at such meeting in person or by proxy of
shareholders of the Company representing at least fifty-one percent of the then
outstanding shares of the Company shall be necessary to constitute a quorum for
the purpose of transacting business, except as otherwise provided by law, but a
smaller number may adjourn the meeting form time to time until a quorum shall be
obtained. Each shareholder shall be entitled to cast one vote in person or by
proxy for each share of stock of the Company held and of record in his or her
name on the books of the Company.
Section 4. A shareholder may vote at any meeting of the shareholders either
in person or by proxy duly constituted in writing. No special form of proxy
shall be necessary, however, no proxy shall be valid after eleven months from
its date unless otherwise provided in the proxy.
ARTICLE IV
SHARES
Section 1. Share certificates shall be signed by the President or a Vice
President and countersigned by the Secretary or an Assistant Secretary, shall be
sealed with the corporate seal of the Company, and shall be registered upon the
Share Register of the Company. Each certificate shall express on its face the
name of the Company, the number of the certificate, the number of shares for
which it is issued, the name of the person to whom it is issued, the par value
of each of the said shares, and the amount actually received by the Company for
each share represented by said certificate.
Section 2. Transfers of shares of the Company shall be made only on the
books of the Company by the holder thereof in person or by his attorney duly
authorized, in writing, and upon the surrender of the certificates or
certificate for the share transfer, upon which surrender and transfer new
certificates will be issued. However, no transfer shall be made until ten days
after notice of such transfer shall have been given to the Superintendent of
Insurance. The Board of Directors may, by resolution, close the share transfer
books of the Company for a period not exceeding ten days before the holding of
any annual or special meeting of the shareholders. The Board of Directors, may,
by resolution, also close the transfer books of the Company for a period not
exceeding ten days before the payment of any dividends which may be declared
upon the shares of the Company.
ARTICLE V
POLICIES OF INSURANCE
Section 1. All policies of insurance issued by this Company shall be
signed, either manually or by facsimile, by the President and the Secretary or
by such other officer or officers as the President may designate, and shall be
countersigned by a duly licensed resident agent where so required by law or
regulation.
ARTICLE VI
MISCELLANEOUS
Section 1
(a) As used in this Section:
(i) "acted properly" as to any person shall mean that such person
(A) acted in good faith;
(B) acted in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the Company; and
(C) with respect to any criminal action or proceeding, had no
reasonable cause to believe that his or her conduct was
unlawful.
The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption
that the person did not act properly.
(ii) "covered person" shall mean an Indemnitee (as defined below) or
an Employee Indemnitee (as defined below).
(iii)"Employee Indemnitee" shall mean any non-officer employee of the
Company (but not a non-officer employee of a subsidiary of the
Company).
(vi) "expenses" shall include attorneys' fees and expenses and any
attorneys' fees and expenses of establishing a right to
indemnification under this Section.
(v) "Indemnitee" shall mean any person who is or was
(A) a director or officer of the Company and/or any subsidiary;
(B) a trustee or a fiduciary under any employee pension, profit
sharing, welfare or similar plan or trust of the Company
and/or any subsidiary; or
(C) serving at the request of the Company as a director or
officer of or in a similar capacity in another corporation,
partnership, joint venture, trust or other enterprise,
(which shall, for the purpose of this Section be deemed to
include not-for-profit or for-profit entities of any type),
whether acting in such capacity or in any other capacity
including, without limitation, as a trustee or fiduciary
under any employee pension, profit sharing, welfare or
similar plan or trust.
(vi) "proceeding" shall mean any threatened, pending or completed
action or proceeding, whether civil or criminal, and whether
judicial, legislative or administrative and shall include
investigative action by any person or body.
(vii)"subsidiary" shall mean a corporation, 50% or more of the shares
of which at the time outstanding having voting power for the
election of directors are owned directly or indirectly by the
Company or by one or more subsidiaries or by the Company and one
or more subsidiaries.
(b) The Company shall indemnify any Indemnitee to the fullest
extent permitted under law (as the same now or hereafter
exists), who was or is a party or is threatened to be made a
party to any proceeding by reason of the fact that such
person is or was an Indemnitee against liabilities,
expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her.
(c) The Company shall indemnify any Employee Indemnitee who was
or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the
Company) by reason of the fact that such person is or was an
employee against liabilities, expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred
by him or her in connection with such proceeding, if such
person acted properly.
(d) The Company shall indemnify any Employee Indemnitee who was
or is a party or is threatened to be made a party to any
proceeding by or in the right of the Company to procure a
judgment in its favor by reason of the fact that such person
is or was an employee against amounts paid in settlement and
against expenses actually and reasonably incurred by him or
her in connection with the defense or settlement of such
proceeding if he or she acted properly, except that no
indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance
of his or her duty to the Company unless and only to the
extent that the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which
such court shall deem proper.
(e) Expenses incurred in defending a proceeding shall be paid by
the Company to or on behalf of a covered person in advance
of the final disposition of such proceeding if the Company
shall have received an undertaking by or on behalf of such
person to repay such amounts, unless it shall ultimately be
determined that he or she is entitled to be indemnified by
the Company as authorized in this Section.
(f) Any indemnification or advance under this Section (unless
ordered by a court) shall be made by the Company only as
authorized in the specific proceeding upon a determination
that indemnification or advancement to a covered person is
proper in the circumstances. Such determination shall be
made:
(i) by the Board of Directors, by a majority vote of a
quorum consisting of directors who were not made
parties to such proceeding, or
(ii) if such a quorum is not obtainable, or, even if
obtainable and a quorum of disinterested directors so
directs, by independent legal counsel in a written
opinion, or
(iii)in the absence of a determination made under (i) or
(ii), by the shareholders.
(g) The Company shall indemnify or advance funds to any
Indemnitee described in Section (a)(v)(C), above, only after
such person shall have sought indemnification or an advance
from the corporation, partnership, joint venture, trust or
other enterprise in which he or she was serving at the
Company's request, shall have failed to receive such
indemnification or advance and shall have assigned
irrevocably to the Company any right to receive
indemnification which he or she might be entitled to assert
against such other corporation, partnership, joint venture,
trust or other enterprise.
(h) The indemnification provided to a covered person by this
Section:
(i) shall not be deemed exclusive of any other rights to
which such person may be entitled by law or under any
articles of incorporation, by-law, agreement, vote of
shareholders or disinterested directors or otherwise;
(ii) shall inure to the benefit of the legal representatives
of such person or his or her estate, whether such
representatives are court appointed or otherwise
designated, and to the benefit of the heirs of such
person; and
(iii)shall be a contract right between the Company and each
such person who serves in any such capacity at any time
while this Section is in effect, and any repeal or
modification of this Section shall not affect any
rights or obligations then existing with respect to any
state of facts or any proceedings then existing.
(i) The indemnification and advances provided to a covered
person by this Section shall extend to and include claims
for such payments arising out of any proceeding commenced or
based on actions of such person taken prior to the effective
date of this Section; provided that payment of such claims
had not been agreed to or denied by the Company at the
effective date.
(j) The Company shall have the power to purchase and maintain
insurance on behalf of any covered person against any
liability asserted against him or her and incurred by him or
her as a covered person or arising out of his or her status
as such, whether or not the Company would have the power to
indemnify him or her against such liability under the
provisions of this Section. The Company shall also have
power to purchase and maintain insurance to indemnify the
Company for any obligation which it may incur as a result of
the indemnification of covered persons under the provisions
of this Section.
(k) No payment of indemnification or advance shall be made
unless a notice has been filed with the Superintendent of
Insurance pursuant to Section 1216 of the New York Insurance
Law at least 30 days prior to such payment.
(l) If any provision of this Section is contrary to the law of
New York with respect to indemnification of an agent of the
Company, such provision is hereby amended to conform to the
limitations of such law.
(m) The invalidity or unenforceability of any provision in this
Section shall not affect the validity or enforceability of
the remaining provisions of this Section.
Section 2. The fiscal year of the Company shall begin in each year on the
first day of January and end on the thirty-first day of December following.
Section 3. The common seal of the Company shall be circular in form and
shall contain the name of the Company and the words: "CORPORATE SEAL" and "NEW
YORK." An impression of the Company's seal is affixed hereto.
Section 4. Except to the extent otherwise required by law, the books and
records of the Company shall be kept at such place or places within or without
the state of New York as may be determined from time to time by the Board of
Directors.
Section 5. The compensation of the principal officers of the Company shall
be fixed from time to time by the Board of Directors. In addition, the Company
shall make no agreement with any of its officers, agents or salaried employees
that will extend beyond a period of twenty four months from the date of such
agreement. All pensions payable to a salaried officer or employee, or to a
former salaried officer or employee, at the time of his retirement by reason of
age or disability and all life insurance benefits payable at his death shall be
pursuant to the terms of an employee benefit and retirement plan adopted by the
Board of Directors.
Section 6. These By-Laws may be amended or repealed by the vote of a
majority of the Directors present at any meeting at which a quorum is present.
If any by-law regulating an impending election of Directors is adopted, amended
or repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of shareholders for the election of Directors the by-law so
adopted, amended or repealed, together with a concise statement of the changes
made.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
By: ___________________________________
Louis G. Lower, II
Chairman of the Board
Attest:
- -------------------------------
Michael J. Velotta
Secretary
SEAL
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<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
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DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
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