FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-47245
33-65355
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(Exact name of registrant as specified in its charter)
NEW YORK 35-2608394
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allstate Drive
Farmingville, New York 11738
(Address of principal executive offices)(Zip Code)
800/256-9392
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes../X/.. No
Indicate the number of shares of each of the issuer's classes of common
stock, as of March 31, 2000; there were 100,000 shares of common capital stock
outstanding, par value $25 per share all of which shares are held by Allstate
Life Insurance Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Statements of Financial Position
March 31, 2000 (Unaudited) and December 31, 1999................. 3
Statements of Operations
Three Months Ended March 31, 2000 and
March 31, 1999 (Unaudited)....................................... 4
Statements of Cash Flows
Three Months Ended March 31, 2000 and
March 31, 1999 (Unaudited)................................. 5
Notes to Financial Statements.................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .................... 9
Item 3. Quantitative and Qualitative Disclosure about Market Risk* N/A
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................... 10
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK*..................................................N/A
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS..................................................17
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS*........................N/A
Item 3. DEFAULTS UPON SENIOR SECURITIES*..................................N/A
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*..............N/A
Item 5. OTHER INFORMATION..................................................17
Item 6. EXHIBITS AND REPORTS ON FORM 8-K...................................17
SIGNATURE PAGE...............................................................18
*Omitted pursuant to General Instruction H(2) of Form 10-Q.
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
March 31, December 31,
2000 1999
----------------- -----------------
----------------- -----------------
(Unaudited)
($ in thousands, except par value data)
<S> <C> <C>
Assets
Investments
Fixed income securities, at fair value
(amortized cost $1,999,892 and $1,858,216) $ 2,114,350 $ 1,912,545
Mortgage loans 195,917 166,997
Policy loans 31,355 31,109
Short-term 4,326 46,037
----------- ------------
Total investments 2,345,948 2,156,688
Cash 1,681 1,135
Deferred policy acquisition costs 118,332 106,932
Accrued investment income 23,674 25,712
Reinsurance recoverables 1,852 1,949
Other assets 11,795 7,803
Separate Accounts 481,167 443,705
------------ ------------
Total assets $ 2,984,449 $ 2,743,924
============ ============
Liabilities
Reserve for life-contingent contract benefits $ 1,179,756 $ 1,098,016
Contractholder funds 949,715 839,157
Current income taxes payable 11,362 10,132
Deferred income taxes 9,485 3,077
Other liabilities and accrued expenses 31,097 41,218
Payable to affiliates, net 2,959 4,731
Separate Accounts 481,167 443,705
------------ ------------
Total liabilities 2,665,541 2,440,036
------------ ------------
Commitments and Contingent Liabilities (Note 3)
Shareholder's equity
Common stock, $25 par value, 100,000 shares
authorized, issued and outstanding 2,500 2,500
Additional capital paid-in 45,787 45,787
Retained income 231,722 225,367
Accumulated other comprehensive income:
Unrealized net capital gains 38,899 30,234
------------ ------------
Total accumulated other comprehensive income 38,899 30,234
------------ ------------
Total shareholder's equity 318,908 303,888
------------ ------------
Total liabilities and shareholder's equity $ 2,984,449 $ 2,743,924
============ ============
See notes to financial statements.
</TABLE>
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
----------------------------------------
($ in thousands) 2000 1999
------------------ ------------------
----------------------------------------
(Unaudited)
<S> <C> <C>
Revenues
Premiums (net of reinsurance ceded
of $1,370 and $1,164 ) $ 27,580 $ 22,044
Contract charges 10,822 9,207
Net investment income 40,566 35,560
Realized capital gains and losses (700) 353
-------- --------
78,268 67,164
-------- --------
Costs and expenses
Contract benefits (net of reinsurance recoveries
of $373 and $569) 59,520 48,480
Amortization of deferred policy acquisition costs 2,533 2,179
Operating costs and expenses 6,500 6,141
-------- --------
68,553 56,800
-------- --------
Income from operations
before income tax expense 9,715 10,364
Income tax expense 3,360 3,679
-------- --------
Net income $ 6,355 $ 6,685
======== ========
</TABLE>
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
----------------------------------------
($ in thousands) 2000 1999
------------------ ------------------
----------------------------------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 6,355 $ 6,685
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization and other non-cash items (9,940) (9,127)
Realized capital gains and losses 700 (353)
Interest credited to contractholder funds 8,043 13,289
Changes in:
Life-contingent contract benefits and
contractholder funds 25,538 11,935
Deferred policy acquisition costs (11,400) (2,770)
Income taxes payable 2,972 3,291
Other operating assets and liabilities (15,209) 5,860
--------- ---------
Net cash provided by operating activities 7,059 28,810
--------- ---------
Cash flows from investing activities
Proceeds from sales of fixed income securities 58,539 12,436
Investment collections
Fixed income securities 11,999 14,263
Mortgage loans 1,233 1,018
Investment purchases
Fixed income securities (203,844) (117,658)
Mortgage loans (30,482) (16,870)
Change in short-term investments, net 44,369 54,740
Change in policy loans, net (246) (365)
--------- ---------
Net cash used in investing activities (118,432) (52,436)
--------- ---------
Cash flows from financing activities
Contractholder fund deposits 135,784 35,571
Contractholder fund withdrawals (23,865) (14,476)
--------- ---------
Net cash provided by financing activities 111,919 21,095
--------- ---------
Net increase (decrease) in cash 546 (2,531)
Cash at the beginning of period 1,135 3,117
--------- ---------
Cash at end of period $ 1,681 $ 586
========= =========
See notes to financial statements.
</TABLE>
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. 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.
The financial statements and notes as of March 31, 2000 and for the
three month periods ended March 31, 2000 and 1999 are unaudited. The
interim financial statements reflect all adjustments (consisting only of
normal recurring accruals) which are, in the opinion of management,
necessary for the fair presentation of the financial position, results
of operations and cash flows for the interim periods. The financial
statements and notes should be read in conjunction with the financial
statements and notes thereto included in the Allstate Life Insurance
Company of New York Annual Report on Form 10-K for 1999. The results of
operations for the interim periods should not be considered indicative
of results to be expected for the full year.
To conform with the 2000 presentation, certain amounts in the prior
years' financial statements and notes have been reclassified.
2. Comprehensive Income
The components of other comprehensive income on a pretax and after-tax
basis for the three months ended March 31, are as follows:
<TABLE>
<CAPTION>
($ in thousands) 2000 1999
-------------------------------------------------------------------------------
After- After-
Pretax Tax tax Pretax Tax tax
<S> <C> <C> <C> <C> <C> <C>
Unrealized capital gains and
and losses:
---------------------------------------
Unrealized holding gains
(losses) arising during
the period $ 12,565 $ (4,397) $ 8,168 $ (40,237) $ 14,083 $ (26,154)
Less: reclassification adjustments (765) 268 (497) 354 (124) 230
---------- ----------- ----------- ---------- ----------- -----------
Other comprehensive income
(loss) $ 13,330 $ (4,665) 8,665 $ (40,591) $ 14,207 (26,384)
========== =========== ========== ===========
Net income 6,355 6,685
------------ -----------
Comprehensive income (loss) $ 15,020 $ (19,699)
============ ===========
</TABLE>
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Commitments and Contingent Liabilities
Regulation and legal proceedings
The Company's business is subject to the effects of a changing social,
economic and regulatory environment. Public and regulatory initiatives
have varied and have included employee benefit regulations, 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 and the tax treatment of insurance
products and its impact on the relative desirability of various personal
investment vehicles. 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.
7
<PAGE>
Allstate Life Insurance Company of New York
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 thereto found under items 7 and 8 of Part
II of the Allstate Life Insurance Company of New York Annual Report on Form 10-K
for the year ended December 31, 1999.
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 (the
"Corporation"), markets a broad line of life insurance and savings products in
the state of New York through a combination of exclusive agencies, securities
firms, banks, specialized brokers and direct response marketing. Life insurance
consists of traditional products, including term and whole life,
interest-sensitive life and immediate annuities with life contingencies. Savings
products include deferred annuities and immediate annuities without life
contingencies. Deferred annuities include fixed rate, market value adjusted and
variable annuities. Group pension savings products include immediate annuities
also referred to as retirement annuities.
The Company has identified itself as a single segment entity.
<TABLE>
<CAPTION>
Financial Highlights
($ in thousands)
Three Months
Ended March 31,
------------------------------------------
2000 1999
------------------- -------------------
<S> <C> <C>
Statutory premiums and deposits $ 194,149 $ 62,922
=============== ===============
Investments $ 2,345,948 $ 2,153,988
Separate Account assets 481,167 374,545
--------------- ---------------
Investments, including Separate Account assets $ 2,827,115 $ 2,528,533
=============== ===============
GAAP Premiums $ 27,580 $ 22,044
Contract charges 10,822 9,207
Net investment income 40,566 35,560
Contract benefits 59,520 48,480
Operating costs and expenses 9,033 8,320
--------------- ---------------
Operating income before tax 10,415 10,011
Income tax expense 3,618 3,556
--------------- ---------------
Operating income (1) 6,797 6,455
Realized capital gains and losses, net of tax (442) 230
--------------- ---------------
Net income $ 6,355 $ 6,685
=============== ===============
</TABLE>
(1) The supplemental operating information presented above allows for a more
complete analysis of results of operations. The net effects of gains and
losses have been excluded due to the volatility between periods and because
such data is often excluded when evaluating the overall financial
performance of insurers. Operating income should not be considered as a
substitute for any GAAP measure of performance. Our method of calculating
operating income may be different from the method used by other companies
and therefore comparability may be limited.
8
<PAGE>
Allstate Life Insurance Company of New York
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Statutory premiums and deposits
Statutory premiums and deposits, which include premiums and deposits for
all products, are used to analyze sales trends. Statutory premiums and deposits
increased $131.2 million or 208.6% for the first quarter of 2000 compared with
the same period last year. The increase was primarily due to higher fixed and
variable annuity sales. The increase in fixed annuity sales was primarily due to
new distribution outlets in the banking distribution channel. Increases in
variable annuities were primarily driven by sales from the new Putnam Allstate
Advisor variable annuity product which was launched in New York in January 2000.
GAAP premiums and contract charges
Under generally accepted accounting principles ("GAAP"), premiums
represent revenue generated from traditional life products with significant
mortality risks. Revenues for interest-sensitive life insurance and fixed and
variable annuity contracts, for which deposits are treated as liabilities, are
reflected as contract charges. Immediate annuities may be purchased with a life
contingency whereby mortality risk is a significant factor. For this reason the
GAAP revenues generated on these contracts are recognized as premiums. Total
premiums increased $5.5 million to $27.6 million for the first quarter of 2000
compared with the same period last year due to higher sales of immediate
annuities with life contingencies.
Contract charges increased 17.5% to $10.8 million in the first three
months of 2000 compared with the same period last year. The increase was
primarily due to higher interest-sensitive life contract charges which were the
result of growth in interest-sensitive life policies in force.
Net investment income
Pretax net investment income for the three month period ended March 31,
2000 increased 14.1% to $40.6 million due to higher investment balances.
Investments at March 31, 2000, excluding Separate Accounts and unrealized gains
on fixed income securities, grew 16.1% from the same period last year.
Operating income
Operating income increased 5.3% to $6.8 million during the first three
months of 2000 compared to the same period last year. Increases in premiums, net
investment income and contract charges were partially offset by higher contract
benefits and expenses as well as less favorable mortality experience.
Realized capital gains and losses
Realized capital losses, after-tax, were $442 thousand for the first
quarter of 2000 compared to realized capital gains, after-tax, of $230 thousand
for the first quarter of 1999. Realized capital losses were generated primarily
from the sale of publicly-traded corporate securities.
9
<PAGE>
Allstate Life Insurance Company of New York
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Investments
The composition of the investment portfolio at March 31, 2000 is
presented in the table below:
Percent
($ in thousands) to total
--------
Fixed income securities (1) $ 2,114,350 90.1%
Mortgage loans 195,917 8.4
Policy loans 31,355 1.3
Short-term 4,326 .2
------------------ -------
Total $ 2,345,948 100.0%
================== =======
(1) Fixed income securities are carried at fair value. Amortized cost for these
securities was $1,999,892 at March 31, 2000.
Total investments were $2.35 billion at March 31, 2000 compared to $2.16
billion at December 31, 1999. The increase was due to positive cash flows
generated from operations and increases in unrealized gains on fixed income
securities. At March 31, 2000, unrealized capital gains on the fixed income
securities portfolio were $114.5 million compared to $54.3 million at December
31, 1999.
At March 31, 2000, substantially all of the Company's fixed income
securities portfolio is rated investment grade, which is defined by the Company
as a security having a National Association of Insurance Commissioners ("NAIC")
rating of 1 or 2, a Moody's rating of Aaa, Aa, A or Baa, or a comparable Company
internal rating.
Separate Accounts
Separate Accounts assets and liabilities increased 8.4% to $481.2 million
at March 31, 2000. The increases were primarily attributable to sales of
variable annuity contracts.
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 90.1% 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 interest-sensitive life insurance products, is subject to discretionary
surrender and withdrawal by contractholders. Total surrenders and withdrawals
were $18.9 million for the first quarter of 2000 compared with $11.3 million for
the same period last year. As the Company's interest-sensitive life policies and
annuity contracts in force grow and age, the dollar amount of surrenders and
withdrawals could increase. Management believes its assets are sufficiently
liquid to meet future obligations to its life and annuity contractholders under
various interest rate scenarios.
10
<PAGE>
Allstate Life Insurance Company of New York
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Pending Accounting Standards
In June 1999, the Financial Accounting Standards Board delayed the
effective date of Statement of Financial Accounting Standards ("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. 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 the
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 delay was effected through the issuance of SFAS No. 137, which extends the
SFAS No. 133 requirements to fiscal years beginning after June 15, 2000. As
such, the Company expects to adopt the provisions of SFAS No. 133 as of January
1, 2001. The impact of this statement is dependent upon the Company's derivative
positions and market conditions existing at the date of adoption. Based on
existing interpretations of the requirements of SFAS No. 133, the impact of the
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.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would
materially affect the Company. The Company is involved in pending and
threatened litigation in the normal course of its business in which claims
for monetary damages are asserted. Management, after consultation with
legal counsel, does not anticipate the ultimate liability arising from such
pending or threatened litigation to have a material effect on the financial
condition of the Company.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
(2) None
(3)(i) Restated Certificate of Incorporation of Allstate Life Insurance Company
of New York (Incorporated herein by reference to the Company's Form 10-K
Annual Report for the year ended December 31, 1998)
(3)(ii) Amended By-laws of Allstate Life Insurance Company of New York
(Incorporated herein by reference to the Company's Form 10-K Annual Report
for the year ended December 31, 1998)
(4) None
(10) None
(11) Not Required
(15) None
(18) None
(19) None
(22) None
(23) Not required
(24) None
(27) Financial Data Schedule
(b) Reports on 8-K
No reports on Form 8-K were filed during the first quarter of 1999.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on the 12th day of May, 2000.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
-------------------------------------------
(Registrant)
/s/ THOMAS J. WILSON, II PRESIDENT
- ------------------------ (Principal Executive Officer)
THOMAS J. WILSON, II
/s/ SAMUEL H. PILCH CONTROLLER
- ------------------------ (Chief Accounting Officer)
SAMUEL H. PILCH
18
<PAGE>
Exhibit Index
Exhibit No. Exhibit
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEUDLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS
OF FINANCIAL POSITION AT MARCH 31, 2000; STATEMENTS OF OPERATIONS THREE MONTHS
ENDED MARCH 31, 2000; AND STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31,
2000.
</LEGEND>
<CIK> 0000839759
<NAME> ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 2,114,350
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 195,917
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,345,948
<CASH> 1,681
<RECOVER-REINSURE> 1,852
<DEFERRED-ACQUISITION> 118,332
<TOTAL-ASSETS> 2,984,449
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 1,179,756
<POLICY-HOLDER-FUNDS> 949,715
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500
<OTHER-SE> 36,399
<TOTAL-LIABILITY-AND-EQUITY> 2,984,449
38,402
<INVESTMENT-INCOME> 40,566
<INVESTMENT-GAINS> (700)
<OTHER-INCOME> 0
<BENEFITS> 59,520
<UNDERWRITING-AMORTIZATION> 2,533
<UNDERWRITING-OTHER> 6,500
<INCOME-PRETAX> 9,715
<INCOME-TAX> 3,360
<INCOME-CONTINUING> 6,355
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,355
<EPS-BASIC> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
