AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1999
- --------------------------------------------------------------------------------
FILE NOS. 033-24228
811-05789
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 14 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 15/X/
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
ONE ALLSTATE DRIVE
P.O. BOX 9095
FARMINGVILLE, NEW YORK 11738
(Address and Telephone Number of Depositor's Principal Offices)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
3100 SAUNDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-2400
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
RICHARD T. CHOI, ESQUIRE CHRISTINE A. EDWARDS, ESQUIRE
FREEDMAN, LEVY, KROLL & SIMONDS DEAN WITTER REYNOLDS INC.
1050 CONNECTICUT AVENUE, N.W. TWO WORLD TRADE CENTER
SUITE 825 NEW YORK, NEW YORK 10048
WASHINGTON, D.C. 20036-5366
<PAGE>
Approximate date of proposed public offering: Continuous
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 1999 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on (date) pursuant to paragraph (a)(i) of Rule 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / This post-effective amendment
designates a new effective date for
a previously filed post-effective
amendment.
Title of Securities Being Registered: Units of Interest in the Allstate Life of
New York Variable Annuity Account under deferred variable annuity contracts.
<PAGE>
ALLSTATE VARIABLE ANNUITY
Allstate Life Insurance Company of New York Prospectus dated May 1, 1999
P.O. Box 94040
Palatine, IL 60094
Telephone Number: 1-800-256-9392
Allstate Life Insurance Company of New York ("Allstate New York") has issued the
Variable Annuity, an individual flexible premium deferred variable annuity
contract ("Contract"). This prospectus contains information about the Contract
that you should know before investing. Please keep it for future reference.
The Contract currently offers 13 investment alternatives ("investment
alternatives"). The investment alternatives include a fixed account option
("Fixed Account") and 12 variable sub-accounts ("Variable Sub-Accounts") of the
Allstate New York Variable Annuity Account ("Variable Account"). Each Variable
Sub-Account invests exclusively in shares of the following mutual fund
portfolios ("Portfolios") of the Morgan Stanley Dean Witter Variable Investment
Series ("Fund"):
Money Market Portfolio Global Dividend Growth Portfolio
Quality Income Plus Portfolio European Growth Portfolio
High Yield Portfolio Pacific Growth Portfolio
Utilities Portfolio Capital Growth Portfolio
Income Builder Portfolio Equity Portfolio
Dividend Growth Portfolio Strategist Portfolio
We (Allstate New York) have filed a Statement of Additional Information, dated
May 1, 1999, with the Securities and Exchange Commission ("SEC"). It contains
more information about the Contract and is incorporated herein by reference,
which means that it is legally a part of this prospectus. Its table of contents
appears on page __ of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally a part of this prospectus, at the SEC's Web
site.
The Securities and Exchange Commission has not approved
or disapproved the securities described in this
prospectus, nor has it passed on the accuracy or the
adequacy of this prospectus. Anyone who tells you
otherwise is committing a federal crime.
The Contracts are not FDIC insured.
IMPORTANT
NOTICES The Contracts are available only in New York.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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<S> <C> <C>
Page
Important Terms....................................................................................
The Contract At A Glance...........................................................................
Overview How the Contract Works.............................................................................
Expense Table......................................................................................
Financial Information..............................................................................
The Contract.......................................................................................
Purchases..........................................................................................
Contract Value.....................................................................................
Investment Alternatives............................................................................
The Variable Sub-Accounts.................................................................
The Fixed Account.........................................................................
Contract Features Transfers.................................................................................
Expenses...........................................................................................
Access To Your Money...............................................................................
Income Payments....................................................................................
Death Benefits.....................................................................................
More Information About:
Allstate New York.........................................................................
The Variable Account......................................................................
The Portfolios............................................................................
The Contract..............................................................................
Other Information Qualified Plans...........................................................................
Legal Matters.............................................................................
Year 2000.................................................................................
Taxes..............................................................................................
Performance Information............................................................................
Appendix A--Accumulation Unit Values...............................................................
Statement of Additional Information Table of Contents.............................................
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
IMPORTANT TERMS
- ------------------------------------------------------------------------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
<S> <C>
Page
Accumulation Phase.....................................................
Accumulation Unit .....................................................
Accumulation Unit Value ...............................................
Allstate New York ("We")...............................................
Annuitant..............................................................
Automatic Additions Program............................................
Automatic Income Withdrawals...........................................
Beneficiary............................................................
Contract ..............................................................
Contract Anniversary...................................................
Contract Owner ("You") ................................................
Contract Value ........................................................
Contract Year.........................................................
Death Benefit..........................................................
Dollar Cost Averaging Program..........................................
Fixed Account..........................................................
Free Withdrawal Amount ................................................
Fund...................................................................
Income Plan ...........................................................
Investment Alternatives ...............................................
Issue Date ............................................................
Payout Phase...........................................................
Payout Start Date ....................................................
Portfolios.............................................................
Qualified Contracts....................................................
SEC....................................................................
Settlement Value .....................................................
Valuation Date.........................................................
Variable Account ......................................................
Variable Sub-Account ..................................................
</TABLE>
3
<PAGE>
THE CONTRACT AT A GLANCE
- --------------------------------------------------------------------------------
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
- ---------------------------------- ---------------------------------------------
Flexible Payments
Although we are no longer offering new Contracts, you can
add to your current Contract as often and as much as you
like, but each payment must be at least $25. We may limit
the total payments you can make in a "Contract Year," which
we measure from the date we issue your Contract and each
Contract anniversary.
- --------------------------------------------------------------------------------
Expenses You will bear the following expenses:
o Total Variable Account annual fees equal to 1.00% of
average daily net assets
o Annual contract maintenance charge of $30
o Withdrawal charges not to exceed 6% of
purchase payment withdrawn (with certain exceptions)
o State premium tax (New York currently does not impose
one)
In addition, each Portfolio pays expenses That you will bear
indirectly if you invest in a Variable Sub-Account.
- --------------------------------------------------------------------------------
Investment
Alternatives The Contract offers 13 investment alternatives including:
o The Fixed Account (which credits interest at rates we
guarantee), and
o 12 Variable Sub-Accounts investing in Portfolios
offering professional money management by Morgan
Stanley Dean Witter Advisors, Inc.
To find out current rates being paid on the Fixed Account,
or to find out how the Variable Sub-Accounts have performed,
calL us at 1-800-256-9392.
- --------------------------------------------------------------------------------
Special Services For your convenience, we offer these special services:
o Automatic Additions Program
o Automatic Income Withdrawals
o Dollar Cost Averaging Program
- ----------------------------------- --------------------------------------------
Income Payments You can choose fixed income payments,
variable income payments, or a combination of the two. You
can receive your income payments in one of the following
ways:
o life income with payments guaranteed for 10 years
o joint and survivor life income
o guaranteed payments for a specified period
- --------------------------------------------------------------------------------
4
<PAGE>
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If you or the Annuitant die before the Payout
Death Benefits Start Date, we will pay the death benefit described in the
Contract.
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Before the Payout Start Date, you may transfer your Contract
value ("Contract Value") among the investment alternatives,
Transfers with certain restrictions. Transfers must be at least $100
or the total amount in the investment alternative, whichever
is less.
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Withdrawals You may withdraw some or all of your Contract Value at
anytime prior to the Payout Start Date. You may take partial
withdrawals automatically through monthly Automatic Income
Withdrawals. In general, you must withdraw at least $500 at
a time or the total amount in the investment alternative, if
less. A 10% federal tax penalty may apply if you withdraw
before you are 59-1/2years old. A withdrawal charge also may
apply.
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5
<PAGE>
HOW THE CONTRACT WORKS
- --------------------------------------------------------------------------------
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the Contract owner)
save for retirement because you can invest in up to 13 investment alternatives
and pay no federal income taxes on any earnings until you withdraw them. You do
this during what we call the "Accumulation Phase" of the Contract. The
Accumulation Phase begins on the date we issue your Contract (we call that date
the "Issue Date") and continues until the Payout Start Date, which is the date
we apply your money to provide income payments. During the Accumulation Phase,
you may allocate your purchase payments to any combination of the Variable
Sub-Accounts and/or the Fixed Account. If you invest in the Fixed Account, you
will earn a fixed rate of interest that we declare periodically. If you invest
in any of the Variable Sub-Accounts, your investment return will vary up or down
depending on the performance of the corresponding Portfolios.
Second, the Contract can help you plan for retirement because you can
use it to receive retirement income for life and/or for a pre-set number of
years, by selecting one of the income payment options (we call these "Income
Plans") described on page __. You receive income payments during what we call
the "Payout Phase" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Portfolios. The amount of money you accumulate
under your Contract during the Accumulation Phase and apply to an Income Plan
will determine the amount of your income payments during the Payout Phase.
<TABLE>
The timeline below illustrates how you might use your Contract.
<S> <C> <C> <C> <C> <C>
Issue Payout Start
Date Accumulation Phase Date Payout Phase
- -----------------------------------------------------------------------------------------------------------------------------
You save for retirement ?
You buy You elect to receive You can receive Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
</TABLE>
As the Contract owner, you exercise all of the rights and privileges
provided by the Contract. If you die, any surviving Contract owner or, if there
is none, the Beneficiary will exercise the rights and privileges provided by the
Contract. See "The Contract." In addition, if you die before the Payout Start
Date, we will pay a death benefit to any surviving Contract owner, or if there
is none, to your Beneficiary. See "Death Benefits."
Please call us at 1-800-256-9392 if you have any question about how the
Contract works.
6
<PAGE>
EXPENSE TABLE
- --------------------------------------------------------------------------------
The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the accompanying
prospectus for the Fund.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
<S> <C> <C> <C> <C> <C> <C> <C>
Number of Complete Years
Since We Received the Purchase
Payment Being Withdrawn: 0 1 2 3 4 5 6+
Applicable Charge: 6% 5% 4% 3% 2% 1% 0%
Annual Contract Maintenance Charge....................................................$30.00
Transfer Fee..........................................................................None
* Each Contract Year, you may make one withdrawal of up to
10% of your aggregate purchase payments, excluding those made
one year before the withdrawal, without incurring a withdrawal
charge. The cumulative total of all withdrawal charges is
guaranteed never to exceed 7% of your purchase payments (not
including earnings attributable to these payments).
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of daily net asset value deducted from each Variable Sub-Accounts)
Mortality and Expense Risk Charge.....................................................1.00%
Total Variable Account Annual Expenses.........................................1.00%
</TABLE>
7
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<PAGE>
PORTFOLIO ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements)
(as a percentage of Portfolio average daily net assets)
Total
Portfolio
Management Other Annual
Portfolio Fees Expenses Expenses
--------- ---- -------- --------
Money Market 0.50% 0.02% 0.52%
Quality Income Plus 0.50% 0.02% 0.52%
High Yield 0.50% 0.03% 0.53%
Utilities 0.65% 0.02% 0.67%
Income Builder 0.75% 0.06% 0.81%
Dividend Growth 0.52% 0.01% 0.53%
Capital Growth 0.65% 0.05% 0.70%
Global Dividend Growth 0.75% 0.09% 0.84%
European Growth 0.99% 0.12% 1.11%
Pacific Growth 0.99% 0.52% 1.51%
Equity(1) 0.50% 0.02% 0.52%
Strategist 0.50% 0.02% 0.52%
(1) As of the close of business on March 19, 1999, the Capital Appreciation
Portfolio merged with and into the Equity Portfolio.
- --------------------------------------------------------------------------------
8
<PAGE>
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested $1,000 in a Variable Sub-Account,
o earned a 5% annual return on your investment, and
o surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period.
The example does not include any taxes, tax penalties or withdrawal charge you
may be required to pay if you surrender your Contract.
<TABLE>
<S> <C> <C> <C> <C>
VARIABLE SUB-ACCOUNT 1 Year 3 Years 5 Years 10 Years
- -------------------- ------ ------- ------- --------
Money Market $63 $80 $ 97 $187
Quality Income Plus $63 $80 $ 97 $187
High Yield $63 $80 $ 97 $188
Utilities $64 $85 $105 $204
Income Builder $66 $89 $112 $219
Dividend Growth $63 $80 $ 97 $188
Capital Growth $65 $86 $106 $207
Global Dividend Growth $66 $90 $114 $222
European Growth $69 $98 $127 $251
Pacific Growth $72 $110 $148 $292
Equity $63 $80 $ 97 $187
Strategist $63 $80 $ 97 $187
</TABLE>
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for a specified period of
at least 120 months at the end of each period.
<TABLE>
<S> <C> <C> <C> <C>
VARIABLE SUB-ACCOUNT 1 Year 3 Years 5 Years 10 Years
- -------------------- ------ ------- ------- --------
Money Market $16 $50 $ 86 $187
Quality Income Plus $16 $50 $ 86 $187
High Yield $16 $50 $ 87 $188
Utilities $18 $55 $ 94 $204
Income Builder $19 $59 $101 $219
Dividend Growth $16 $50 $ 87 $188
Capital Growth $18 $56 $ 96 $207
Global Dividend Growth $19 $60 $103 $222
European Growth $22 $68 $117 $251
Pacific Growth $26 $81 $138 $292
Equity $16 $50 $ 86 $187
Strategist $16 $50 $ 86 $187
</TABLE>
Please remember that you are looking at examples and not a representation of
past or future expenses. Your actual expenses may be lower or greater than those
shown above. Similarly, your rate of return may be lower or greater than 5%,
which is not guaranteed. [To reflect the contract maintenance charge in the
examples, we estimated an equivalent percentage charge, based on an assumed
average Contract size of $55,351.]
9
<PAGE>
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "Accumulation Unit."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "Accumulation Unit Value." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since 1989, or inception, if later. To
obtain a fuller picture of each Variable Sub-Account's finances, please refer to
the Variable Account's financial statements contained in the Statement of
Additional Information. The financial statements of Allstate New York also
appear in the Statement of Additional Information.
10
<PAGE>
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
The Variable Annuity is a contract between you, the Contract owner, and Allstate
New York, a life insurance company. As the Contract owner, you may exercise all
of the rights and privileges provided to you by the Contract. That means it is
up to you to select or change (to the extent permitted):
o the investment alternatives during the Accumulation and Payout Phases,
o the amount and timing of your purchase payments and withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement income,
o the Annuitant (either yourself or someone else) on whose life the
income payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits that
the Contract provides when you die, and
o any other rights that the Contract provides.
If you die, any surviving Contract owner, or , if none, the Beneficiary will
exercise the rights and privileges provided to them by the Contract.
You can use the Contract with or without a qualified plan. A "qualified plan" is
a personal retirement savings plan, such as an IRA or tax-sheltered annuity,
that meets the requirements of the Internal Revenue Code. Qualified plans may
limit or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract used with a qualified plan. See
"Qualified Plans" on page __.
ANNUITANT
The Annuitant is the individual whose life span we use to determine income
payments as well as the latest Payout Start Date. You initially designate an
Annuitant in your application.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract owner if the sole surviving Contract owner dies before
the Payout Start Date. If the sole surviving Contract owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
name different Beneficiaries in the event of the Owner's death or the
Annuitant's death. You may change or add Beneficiaries at any time while you or
the Annuitant, as applicable, is living by writing to us, unless you have
designated an irrevocable Beneficiary. We will provide a change of Beneficiary
form to be signed and filed with us. Any change will be effective at the time
you sign the written notice, whether or not you or the Annuitant, as applicable,
is living when we receive the notice. Until we receive your written notice to
change a Beneficiary, we are entitled to rely on the most recent Beneficiary
information in our files. We will not be liable as to any payment or settlement
made prior to receiving the written notice. Accordingly, if you wish to change
your Beneficiary, you should deliver your written notice to us promptly.
11
<PAGE>
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Beneficiaries, the new Beneficiary will be you or your
estate.
If more than one Beneficiary survives you, or the Annuitant, as applicable, we
will divide the death benefit among your Beneficiaries according to your most
recent written instructions. If you have not given us written instructions, we
will pay the death benefit in equal amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only an Allstate New York officer may approve a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
You may assign the Contract prior to the Payout Start Date and during the
Annuitant's life, subject to the rights of any irrevocable Beneficiary. No
Beneficiary may assign benefits under the Contract until they are payable to the
Beneficiary. We will not be bound by any assignment until you sign it and file
it with us. We are not responsible for the validity of any assignment. Federal
law prohibits or restricts the assignment of benefits under many types of
retirement plans and the terms of such plans may themselves contain restrictions
on assignments. An assignment may also result in taxes or tax penalties. You
should consult with an attorney before trying to assign your Contract.
12
<PAGE>
PURCHASES
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
You may make additional purchase payments of at least $25 at any time prior to
the Payout Start Date. We reserve the right to limit the amount of purchase
payments we will accept.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $25 by automatically
transferring amounts from your bank account or your Dean Witter Active AssetsTM
Account. Please consult your Morgan Stanley Dean Witter Financial Advisor for
details.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. The minimum you may allocate
to any investment alternative is $100. You can change your allocations by
notifying us in writing.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit additional purchase payments to the Contract at the close of the
business day on which we receive the purchase payment at our home office. We are
open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "Valuation Dates."
Our business day closes when the New York Stock Exchange closes, usually 4 p.m.
Eastern Time. If we receive your purchase payment after 4 p.m. Eastern Time on
any Valuation Date, we will credit your purchase payment using the Accumulation
Unit Values computed on the next Valuation Date.
13
<PAGE>
CONTRACT VALUE
- --------------------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your investment in the Fixed Account.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment you
have allocated to a Variable Sub-Account by (ii) the Accumulation Unit Value of
that Variable Sub-Account next computed after we receive your payment. For
example, if we receive a $10,000 purchase payment allocated to a Variable
Sub-Account when the Accumulation Unit Value for the Sub-Account is $10, we
would credit 1,000 Accumulation Units of that Variable Sub-Account to your
Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
o changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
o the deduction of amounts reflecting the mortality and expense risk
charge and any provision for taxes that have accrued since we last
calculated the Accumulation Unit Value.
We determine contract maintenance charges, and withdrawal charges, separately
for each Contract. They do not affect Accumulation Unit Value. Instead, we
obtain payment of those charges by redeeming Accumulation Units. For details on
how we calculate Accumulation Unit Value, please refer to the Statement of
Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date.
You should refer to the prospectuses for the Fund that accompany this prospectus
for a description of how the assets of each Portfolio are valued, since that
determination directly bears on the Accumulation Unit Value of the corresponding
Variable Sub-Account and, therefore, your Contract Value.
14
<PAGE>
INVESTMENT ALTERNATIVES: The Variable Sub-Accounts
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 12 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectus for
the Fund. You should carefully review the Fund prospectus before allocating
amounts to the Variable Sub-Accounts.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Investment Adviser:
Portfolio: Each Portfolio Seeks:
-----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series
-----------------------------------------------------------------------------------------------------------------------
----------------------------------- ------------------------------------------------------------ ----------------------
<S> <C> <C>
Money Market Portfolio High current income, preservation of capital, and liquidity
Morgan Stanley Dean
Witter Advisors, Inc.
----------------------------------- ------------------------------------------------------------ ----------------------
Quality Income Plus Portfolio High current income and, as a secondary objective, capital
appreciation when consistent with its primary objective
----------------------------------- ------------------------------------------------------------ ----------------------
High Yield Portfolio High current income and, as a secondary objective, capital
appreciation when consistent with its primary objective
----------------------------------- ------------------------------------------------------------ ----------------------
Utilities Portfolio Current income and long-term growth of income and capital
----------------------------------- ------------------------------------------------------------ ----------------------
Income Builder Portfolio Reasonable income and, as a secondary objective, growth of
capital
----------------------------------- ------------------------------------------------------------ ----------------------
Dividend Growth Portfolio Reasonable current income and long-term growth of income
and capital
----------------------------------- ------------------------------------------------------------ ----------------------
Capital Growth Portfolio Long-term capital growth
----------------------------------- ------------------------------------------------------------ ----------------------
Global Dividend Growth Portfolio Reasonable current income and long-term growth of income
and capital
----------------------------------- ------------------------------------------------------------ ----------------------
European Growth Portfolio To maximize the capital appreciation on its investments
----------------------------------- ------------------------------------------------------------ ----------------------
Pacific Growth Portfolio To maximize the capital appreciation of its investments
----------------------------------- ------------------------------------------------------------ ----------------------
Equity Portfolio Growth of capital and, as a secondary objective, income
when consistent with its primary objective
----------------------------------- ------------------------------------------------------------ ----------------------
Strategist Portfolio High total investment return
----------------------------------- ------------------------------------------------------------ ----------------------
</TABLE>
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Portfolios in which those Variable Sub-Accounts invest. You bear the
investment risk that the Portfolios might not meet their investment objectives.
Shares of the Portfolios are not deposits, or obligations of, or guaranteed or
endorsed by any bank and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
15
<PAGE>
INVESTMENT ALTERNATIVES : The Fixed Account
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. The Fixed Account supports our insurance and annuity obligations. The
Fixed Account consists of our general assets other than those in segregated
asset accounts. We have sole discretion to invest the assets of the Fixed
Account, subject to applicable law. Any money you allocate to the Fixed Account
does not entitle you to share in the investment experience of the Fixed Account.
We bear the investment risk for all amounts that you allocate to the Fixed
Account. That is because we credit amounts that you allocate to the Fixed
Account at a net effective rate of at least 4.0% per year. We may use a higher
rate that we determine periodically. We credit this rate, regardless of the
actual investment experience of the Fixed Account.
Money that you deposit in the Fixed account earns the interest rate that is in
effect at the time of your allocation or transfer until the first renewal date.
The first renewal date is January 1 following the date of your allocation or
transfer of money into the Fixed Account. Subsequent renewal dates are on
anniversaries of the first renewal date. On or about each renewal date, we will
notify you of the interest rate for the next calendar year. We may declare more
than one interest rate for different monies based on their date of allocation or
transfer to the Fixed Account.
16
<PAGE>
INVESTMENT ALTERNATIVES: Transfers
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may request transfers in writing on a form that we
provide or by telephone according to the procedure described below. The minimum
amount that you may transfer is $100 or the total amount in the investment
alternative, whichever is less.
You may transfer amounts from the Variable Sub-Accounts to the Fixed Account
only once every 30 days. If you invested amounts in the Fixed Account prior to
its revision, you may transfer these amounts only once every six months.
We limit the maximum amount which may be transferred from the revised Fixed
Account to the Variable Account in any calendar year to the greater of $1,000 or
25% of the value in the revised Fixed Account as of December 31 of the prior
calendar year (except with respect to amounts which were allocated to the Fixed
Account prior to the date of availability).
We will process transfer requests that we receive before 4:00 p.m. Eastern Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 4:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. We may restrict transfers
to once every 30 days. If we do so, we will give you at least 30 days' notice of
that restriction.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive fixed income payments
into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments. Your transfers must be at
least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-256-9392 if you first send
us a completed authorization form. The cut off time for telephone transfer
requests is 4:00 p.m. Eastern time. In the event that the New York Stock
Exchange closes early, i.e., before 4:00 p.m. Eastern Time, or in the event that
the Exchange closes early for a period of time but then reopens for trading on
the same day, we will process telephone transfer requests as of the close of the
Exchange on that particular day. We will not accept telephone requests received
at any telephone number other than the number that appears in this paragraph or
received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
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We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
DOLLAR COST AVERAGING PROGRAM
Under the Dollar Cost Averaging Program, you may automatically transfer a set
amount at regular intervals during the Accumulation Phase from the Money Market
Sub-Account to any other Variable Sub-Account. Transfers made through Dollar
Cost Averaging must be for $100 or more.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
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EXPENSES
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As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$30 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. During the Payout
Phase, we will deduct the charge proportionately from each income payment. If
you surrender your Contract, we will deduct the full contract maintenance
charge.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in billing and
collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and policy changes; proxy statements; calculating Accumulation Unit
Values and income payments; and issuing reports to Contract owners and
regulatory agencies. We cannot increase the charge.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.00%
of the average daily net assets you have invested in the Variable Sub-Accounts.
The mortality and expense risk charge is for all the insurance benefits
available with your Contract (including our guarantee of annuity rates and the
death benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will not be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then we will bear the loss.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both during the Accumulation
Phase and the Payout Phase.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of 6% of the purchase payment(s) you withdraw
if the amount being withdrawn has been invested in the Contract for less than 1
year. The charge declines annually to 0% after 6 complete years from the day we
receive the purchase payment being withdrawn. A schedule showing how the charge
declines is shown on page ____, above. During each Contract Year, you can make
one withdrawal up to 10% of the aggregate amount of your purchase payments,
excluding those made less than one year before the withdrawal, without paying
the charge. Unused portions of this 10% "Free Withdrawal Amount" are not carried
forward to future Contract Years. The maximum portion of the Free Withdrawal
Amount you may withdraw from the Fixed Account is limited to the proportion that
your value in the Fixed Account bears to your Total Contract Value.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge, we will treat withdrawals as coming from the
oldest purchase payments first. However, for federal income tax purposes, please
note that withdrawals are considered to have come first from earnings which
means you pay taxes on the earnings portion of your withdrawal.
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In certain cases, we may deduct a withdrawal charge when you take distributions
required by federal tax law (see the Statement of Additional Information for
"IRS Required Distribution at Death Rules"). We may deduct withdrawal charges
from the Contract Value you apply to an Income Plan with a specified period of
less than 120 months.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax. You should
consult your own tax counsel or other tax advisers regarding any withdrawals.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We reserve the
right to deduct New York State premium taxes or other taxes relative to the
Contract in the future.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not it was sufficient. Our status under the Internal Revenue Code is
briefly described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Fund. For a summary of current estimates of
those charges and expenses, see pages ___ above. We may receive compensation
from the investment adviser or administrator of the Fund for administrative
services we provide to the Fund.
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ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "Income Plans" on page __.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our home office, less any withdrawal
charges, contract maintenance charges, income tax withholding, penalty tax, and
any premium taxes.
You can withdraw money from the Variable Account or the Fixed Account. To
complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes. We will pay withdrawals from the Variable
Account within 7 days of receipt of the request, subject to postponement in
certain circumstances.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $500 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
AUTOMATIC INCOME WITHDRAWALS
You may also take partial withdrawal automatically through Automatic Income
Withdrawals. You may request Automatic Income Withdrawals of $100 or more at any
time before the Payout Starting Date. Please consult with your Dean Witter
Financial Advisor for detailed information about Automatic Income Withdrawals.
If you request a total withdrawal, you must return your Contract to us. We also
will deduct a contract maintenance charge of $30.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1) The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2) An emergency exists as defined by the SEC; or
3) The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account for up to
6 months or shorter period if required by law. If we delay payment or transfer
for 30 days or more, we will pay interest as required by law. Any interest would
be payable from the date we receive the withdrawal request to the date we make
the payment or transfer.
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MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce your Contract Value to
less than $500, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, less withdrawal and other applicable charges, and premium taxes.
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INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that money is applied to an Income Plan. The Payout Start Date must be
no later than the first day of the calendar month after the Annuitant reaches
age 85, or the 10th Contract Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date in your Contract.
INCOME PLANS
You may choose and change your choice of Income Plan until 30 days before the
Payout Start Date. If you do not select an Income Plan, we will make income
payments in accordance with Income Plan 1 with guaranteed payments for 10 years.
Three Income Plans are available under the Contract. Each is available to
provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The three Income Plans are:
Income Plan 1 -- Life Income with Payments Guaranteed for 10 Years.
Under this plan, we make periodic income payments for at least as long
as the Annuitant lives. If the Annuitant dies before we have made all
of the guaranteed income payments, we will continue to pay the
remainder of the guaranteed income payments as required by the
Contract.
Income Plan 2 -- Joint and Survivor Life Income. Under this plan, we
make periodic income payments for as long as either the Annuitant or
the joint Annuitant is alive.
Income Plan 3 -- Guaranteed Payments for a Specified Period. Under this
plan, we make periodic income payments for the period you have chosen.
These payments do not depend on the Annuitant's life. A withdrawal
charge may apply if the specified period is less than 120 months. We
will deduct the mortality and expense risk charge from variable income
payments even though we may not bear any mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we will
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant are alive
before we make each payment. If you choose an Income Plan with no guaranteed
payments, it is possible for the payee to receive only one income payment if the
Annuitant and any joint Annuitant die prior to the second income payment, or two
income payments if they die prior to the third income payment, and so on.
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Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate the Variable Account portion of the income
payments at any time and receive a lump sum equal to the present value of the
remaining variable payments due. A withdrawal charge may apply. We also assess
applicable premium taxes against all income payments.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You must apply at least the Contract Value in the Fixed Account on the Payout
Start Date to fixed income payments. If you wish to apply any portion of your
Fixed Account balance to provide variable income payments, you should plan ahead
and transfer that amount to the Variable Sub-Accounts prior to the Payout Start
Date. If you do not tell us how to allocate your Contract Value among fixed and
variable income payments, we will apply your Contract Value in the Variable
Account to variable income payments and your Contract Value in the Fixed Account
to fixed income payments.
We will apply your Contract Value, less applicable taxes, to your Income Plan on
the Payout Start Date. If the amount available to apply under an Income Plan is
less than $2,000 or not enough to provide an initial payment of at least $20, we
may:
o pay you the Contract Value, less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen, or
o reduce the frequency of your payments so that each payment will be at
least $20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Portfolios; and (b) the Annuitant could live longer or shorter than
we expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 4%. If actual net investment
return of the Variable Sub-Accounts you choose is less than this assumed
investment rate, then the dollar amount of your variable income payments will
decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. You should consult the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
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FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from the Fixed Account for the
duration of the Income Plan. We calculate the fixed income payments by:
o deducting any applicable premium tax; and
o applying the resulting amount to the greater of (a) the appropriate
value from the income payment table in your Contract or (b) such other
value as we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or any
shorter time state law may require. If we defer payments for 30 days or more, we
will pay interest as required by law from the date we receive the withdrawal
request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables, you should consult
with legal counsel as to whether the purchase of a Contract is appropriate.
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DEATH BENEFITS
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We will pay a death benefit prior to the Payout Start Date on:
1) the death of any Contract owner, or
2) the death of the Annuitant, if the Contract owner is not the same
person as the Annuitant.
We will pay the death benefit to the new Contract owner as determined
immediately after the death. The new Contract owner would be a surviving
Contract owner or, if none, the Beneficiary, or, if none, the Contract owner's
estate.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greater of:
(1) the Contract Value, and (2) sum of all purchase payments, less amounts,
including withdrawal charges, deducted in connection with any partial
withdrawals. We will calculate the value of the death benefit as of the date we
receive a complete request for payment of the death benefit.
A claim for a distribution on death must include Due Proof of Death. We will
accept the following documentation as "Due Proof of Death":
o a certified copy of a death certificate;
o a certified copy of a decree of a court of competent jurisdiction as
to the finding of death, or
o any other proof acceptable to us.
DEATH BENEFIT OPTIONS
Upon death of the Contract owner, the new Contract owner generally has the
following options:
1) receive the death benefit in a lump sum or apply the death benefit to
an Income Plan; or
2) continue the Contract, subject to certain conditions.
Options 1 is only available if we receive Due Proof of Death within 180 days of
the date of death. We are currently waiving the 180 day limitation but may
enforce it in the future.
If Option 2 is elected, and the new Contract owner is a natural person, the
following conditions apply:
(1) the Contract is continued subject to charges, including all applicable
withdrawal charges; and
(2) if the prior Contract owner was also the Annuitant, the new Contract
owner will become the new Annuitant.
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A surviving spouse may continue the Contract in the Accumulation Phase as if the
death had not occurred. Otherwise, the new Contract owner may continue the
Contract and elect either of the following options:
(1) receive income payments under an Income Plan, with income payments
beginning within one year of the date of death. Income payments must
be made over the life of the new Contract owner, or a period not to
exceed the life expectancy of the new Contract owner; or
(2) receive, within 5 years of the date of death, the "Cash Surrender
Value," which is the Contract Value, less withdrawal charges and
taxes.
If , however, the new Contract owner is a non-natural person, the new Contract
owner has the following options when continuing the Contract:
(1) elect to receive the Cash Surrender Value within 5 years of the date
of death; or
(2) receive the Cash Settlement Value as a single lump sum payment 5 years
after the date of death.
Options 1 is only available if we receive Due Proof of Death within 180 days of
the date of death. We are currently waiving the 180 day limitation but may
enforce it in the future.
Please refer to your Contract for more details on the above options.
If the Annuitant dies, we will pay the named Beneficiary a death benefit as
described above, depending on whether the Beneficiary is a natural or
non-natural person. Please refer to your Contract for more details.
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MORE INFORMATION
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ALLSTATE NEW YORK
Allstate New York is the issuer of the Contract. Allstate New York is a stock
life insurance company organized under the laws of the State of New York.
Allstate New York was incorporated in 1967 and was known as "Financial Life
Insurance Company" from 1967 to 1978. From 1978 to 1984, Allstate New York was
known as "PM Life Insurance Company." Since 1984 the company has been known as
"Allstate Life Insurance Company of New York."
Our home office is located in Farmingville, New York. Our customer service
office is located in Palatine, Illinois.
Allstate New York is a wholly owned subsidiary of Allstate Insurance Company, a
stock property-liability insurance company incorporated under the laws of
Illinois. With the exception of directors qualifying shares, all of the
outstanding capital stock of Allstate Insurance Company is owned by The Allstate
Corporation.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns Allstate New York the rating of A+(g). Standard & Poor's
Insurance Rating Services assigns an AA+ (Very Strong) financial strength rating
and Moody's assigns an Aa2 (Excellent) financial strength rating to Allstate New
York. These ratings do not reflect the investment performance of the Variable
Account. We may from time to time advertise these ratings in our sales
literature.
THE VARIABLE ACCOUNT
Allstate New York established the Variable Account on June 26, 1987. We have
registered the Variable Account with the SEC as a unit investment trust. The SEC
does not supervise the management of the Variable Account or Allstate New York.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under New York law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Allstate New York.
The Variable Account consists of 12 Variable Sub-Accounts, each of which invests
in a corresponding Portfolio. We may add new Variable Sub-Accounts or eliminate
one or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Portfolios. We may use the Variable Account to fund our
other annuity contracts. We will account separately for each type of annuity
contract funded by the Variable Account.
THE PORTFOLIOS
Dividends and Capital Gain Distributions. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
Voting Privileges. As a general matter, you do not have a direct right to vote
the shares of the Portfolios held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Portfolios that we
hold directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
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As a general rule, before the Payout Start Date, the Contract owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Portfolio as of the record
date of the meeting. After the Payout Start Date the person receiving income
payments has the voting interest. The payee's number of votes will be determined
by dividing the reserves for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Portfolio as
of the record date of the meeting. The votes decrease as income payments are
made and as the reserves for the Contract decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Portfolio shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
Changes in Portfolios. If the shares of any of the Portfolios are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940 and state law. We also may
add new Variable Sub-Accounts that invest in additional mutual funds. We will
notify you in advance of any change.
Conflicts of Interest. Certain of the Portfolios sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance separate accounts and variable annuity separate accounts to invest in
the same Portfolio. The board of directors of the Fund monitors for possible
conflicts among separate accounts buying shares of the Portfolios. Conflicts
could develop for a variety of reasons. For example, differences in treatment
under tax and other laws or the failure by a separate account to comply with
such laws could cause a conflict. To eliminate a conflict, the Fund's board of
directors may require a separate account to withdraw its participation in a
Portfolio. A Portfolio's net asset value could decrease if it had to sell
investment securities to pay redemption proceeds to a separate account
withdrawing because of a conflict.
THE CONTRACT
Distribution. Dean Witter Reynolds Inc. ("Dean Witter"), located at Two World
Trade Center, 74th Floor, New York, NY 10048, serves as distributor of the
Contracts. Dean Witter is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co. Dean Witter is a registered broker-dealer under the Securities
Exchange Act of 1934, as amended and is a member of the National Association of
Securities Dealers. Dean Witter is also registered with the SEC as an investment
adviser.
We may pay up to a maximum sales commission of 5.75% of purchase payments.
The General Agency Agreement between Allstate New York and Dean Witter provides
that Allstate New York will indemnify Dean Witter for certain damages that may
be caused by actions, statements or omissions by Allstate New York.
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Administration. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
o issuance of the Contracts;
o maintenance of Contract owner records;
o Contract owner services;
o calculation of unit values;
o maintenance of the Variable Account; and
o preparation of Contract owner reports.
We will send you Contract statements at least annually. You should notify us
promptly in writing of any address change. You should read your statements and
confirmations carefully and verify their accuracy. You should contact us
promptly if you have a question about a periodic statement. We will investigate
all complaints and make any necessary adjustments retroactively, but you must
notify us of a potential error within a reasonable time after the date of the
questioned statement. If you wait too long, we reserve the right to make the
adjustment as of the date that we receive notice of the potential error.
We will also provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Allstate New York
on certain federal securities law matters. All matters of state insurance law
pertaining to the Contracts, including the validity of the Contracts and
Allstate New York's right to issue such Contracts under state insurance law,
have been passed upon by Michael J. Velotta, General Counsel of Allstate New
York.
YEAR 2000
Allstate New York is heavily dependent upon complex computer systems for all
phases of its operations, including customer service, and policy and contract
administration. Since many of Allstate New York'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 or replaced ("Year 2000 Issue"). Allstate New York believes
that many of its counterparties and suppliers also have Year 2000 Issues which
could affect Allstate New York. In 1995, Allstate Insurance Company commenced a
plan intended to mitigate and/or prevent the adverse effects of Year 2000
Issues. These strategies include normal development and enhancement of new and
existing systems, upgrades to operating systems already covered by maintenance
agreements and modifications to existing systems to make them Year 2000
compliant. The plan also includes Allstate New York actively working with its
major external counterparties and suppliers to assess their compliance efforts
and Allstate New York's exposure to them. Allstate New York presently believes
that it will resolve the Year 2000 Issue in a timely manner, and the financial
impact will not materially affect its results of operations, liquidity or
financial position. Year 2000 costs are and will be expensed as incurred.
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TAXES
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ing discussion is general and is not intended as tax advice. Allstate New York
makes no guarantee regarding the tax treatment of any Contract or transaction
involving a Contract.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
Taxation of Annuities in General
Tax Deferral. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1) the Contract owner is a natural person,
2) the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3) Allstate New York is considered the owner of the Variable Account
assets for federal income tax purposes.
Non-natural Owners. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for Contracts owned by non-natural
persons.
Diversification Requirements. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Allstate New York does not have control over the Portfolios or
their investments, we expect the Portfolios to meet the diversification
requirements.
Ownership Treatment. The IRS has stated that you will be considered the owner of
Variable Account assets if you possess incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. At the time
the diversification regulations were issued, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of separate account investments may cause an investor to be
treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Allstate New York does not know what
standards will be set forth in any regulations or rulings which the Treasury
Department may issue. It is possible that future standards announced by the
Treasury Department could adversely affect the tax treatment of your Contract.
We reserve the right to modify the Contract as necessary to attempt to prevent
you from being considered the federal tax owner of the assets of the Variable
Account. However, we make no guarantee that such modification to the Contract
will be successful.
31
<PAGE>
Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the Contract owner's death,
o attributable to the Contract owner being disabled, or
o for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1) if distributed in a lump sum, the amounts are taxed in the same manner
as a full withdrawal, or
2) if distributed under an annuity option, the amounts are taxed in the
same manner as an annuity payment. Please see the Statement of
Additional Information for more detail on distribution at death
requirements.
32
<PAGE>
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2.
However, no penalty tax is incurred on distributions:
1) made on or after the date the Contract owner attains age 59 1/2;
2) made as a result of the Contract owner's death or disability;
3) made in substantially equal periodic payments over the Contract
owner's life or life expectancy,
4) made under an immediate annuity, or
5) attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
Aggregation of Annuity Contracts. All non-qualified deferred annuity contracts
issued by Allstate New York (or its affiliates) to the same Contract owner
during any calendar year will be aggregated and treated as one annuity contract
for purposes of determining the taxable amount of a distribution.
TAX QUALIFIED CONTRACTS
Contracts may be used as investments with certain qualified plans such as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code; o Roth IRAs under Section 408A of the Code; o Simplified Employee Pension
Plans under Section 408(k) of the Code; o Savings Incentive Match Plans for
Employees (SIMPLE) Plans under Section 408(p) of the Code; o Tax Sheltered
Annuities under Section 403(b) of the Code; o Corporate and Self Employed
Pension and Profit Sharing Plans; and o State and Local Government and
Tax-Exempt Organization Deferred Compensation Plans.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
Restrictions Under Section 403(b) Plans. Section 403(b) of the Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any Contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after 12/31/88, and all earnings on salary reduction
contributions, may be made only:
1) on or after the date of employee
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
2) on account of hardship (earnings on salary reduction contributions may
not be distributed on the account of hardship).
These limitations do not apply to withdrawals where Allstate New York is
directed to transfer some or all of the Contract Value to another 403(b) plan.
33
<PAGE>
INCOME TAX WITHHOLDING
Allstate New York is required to withhold federal income tax at a rate of 20% on
all "eligible rollover distributions" unless you elect to make a "direct
rollover" of such amounts to an IRA or eligible retirement plan. Eligible
rollover distributions generally include all distributions from Qualified
Contracts, excluding IRAs, with the exception of:
1) required minimum distributions, or
2) a series of substantially equal periodic payments made over a period
of at least 10 years, or,
3) over the life (joint lives) of the participant (and beneficiary).
Allstate New York may be required to withhold federal and state income taxes on
any distributions from non-Qualified Contracts or Qualified Contracts that are
not eligible rollover distributions, unless you notify us of your election to
not have taxes withheld.
34
<PAGE>
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Yield refers to the income generated by an
investment in a Variable Sub-Account over a specified period. Total return
represents the change, over a specified period of time, in the value of an
investment in a Variable Sub-Account after reinvesting all income distributions.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect the deduction of insurance charges, the
contract maintenance charge, and withdrawal charge. Performance advertisements
also may include total return figures that reflect the deduction of insurance
charges, but not the contract maintenance or withdrawal charges. The deduction
of such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the variable account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
35
<PAGE>
APPENDIX A
Accumulation Unit Value and Number of Accumulation Units
Outstanding for Each Variable Sub-Account Since Inception
Basic Policy
------------
<TABLE>
<CAPTION>
For the Years Beginning January 1* and
Ending December 31
<S> <C> <C> <C> <C> <C>
Sub-Accounts 1989 1990 1991 1992 1993
- ------------------------------------------------------- ------- ------- ------- ------- -------
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $13.628 $14.532 $15.530 $16.260 $16.651
Accumulation Unit Value, End of Period ................ $14.532 $15.530 $16.260 $16.651 $16.940
Number of Units Outstanding, End of Period ............ 7,963 76,431 157,103 121,052 85,420
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.843 $12.097 $12.798 $15.016 $16.096
Accumulation Unit Value, End of Period ................ $12.097 $12.798 $15.016 $16.096 $18.010
Number of Units Outstanding, End of Period ............ 3,462 48,198 134,798 151,095 150,179
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $17.977 $14.993 $10.864 $17.064 $20.008
Accumulation Unit Value, End of Period ................ $14.993 $10.864 $17.064 $20.008 $24.609
Number of Units Outstanding, End of Period ............ 571 632 1,818 2,252 2,748
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $10.000 $10.365 $12.372 $13.797
Accumulation Unit Value, End of Period ................ -- $10.365 $12.372 $13.797 $15.804
Number of Units Outstanding, End of Period ............ -- 130,055 211,125 205,071 204,333
INCOME BUILDER SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period ................ -- -- -- -- --
Number of Units Outstanding, End of Period ............ -- -- -- -- --
DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $10.000 $ 9.143 $11.564 $12.383
Accumulation Unit Value, End of Period ................ -- $ 9.143 $11.564 $12.383 $14.019
Number of Units Outstanding, End of Period ............ -- 231,500 321,598 348,132 350,305
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $10.000 $12.735 $12.814
Accumulation Unit Value, End of Period ................ -- -- $12.735 $12.814 $11.799
Number of Units Outstanding, End of Period ............ -- -- 51,643 58,830 55,497
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period ................ -- -- -- -- --
Number of Units Outstanding, End of Period ............ -- -- -- -- --
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... -- -- $10.000 $12.735 $10.347
Accumulation Unit Value, End of Period ................ -- -- $10.050 $12.814 $14.433
Number of Units Outstanding, End of Period ............ -- -- 11,103 58,830 18,436
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period ................ -- -- -- -- --
Number of Units Outstanding, End of Period ............ -- -- -- -- --
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $16.368 $18.580 $17.728 $27.916 $27.681
Accumulation Unit Value, End of Period ................ $18.580 $17.728 $27.916 $27.681 $32.807
Number of Units Outstanding, End of Period ............ 15,551 15,033 19,279 26,610 28,032
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $11.324 $12.284 $12.351 $15.684 $16.651
Accumulation Unit Value, End of Period ................ $12.284 $12.351 $15.684 $16.651 $18.199
Number of Units Outstanding, End of Period ............ 56,148 94,204 113,342 138,065 153,920
</TABLE>
<TABLE>
<CAPTION>
APPENDIX A
Accumulation Unit Value and Number of Accumulation Units
Outstanding for Each Variable Sub-Account Since Inception
Basic Policy
------------
For the Years Beginning January 1* and
Ending December 31
<S> <C> <C> <C> <C> <C>
Sub-Accounts 1994 1995 1996 1997 1998
- ------------------------------------------------------- ------- ------- ------- ------- -------
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $16.940 $17.411 $18.215 $18.995 $19.748
Accumulation Unit Value, End of Period ................ $17.411 $18.215 $18.955 $19.748 $20.565
Number of Units Outstanding, End of Period ............ 89,195 85,667 47,979 42,094 23,326
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $18.010 $16.648 $20.498 $20.608 $22.671
Accumulation Unit Value, End of Period ................ $16.648 $20.498 $20.608 $22.671 $24.392
Number of Units Outstanding, End of Period ............ 95,868 87,651 73,100 40,055 37,269
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $24.609 $23.759 $27.055 $29.993 $33.219
Accumulation Unit Value, End of Period ................ $23.759 $27.055 $29.993 $33.219 $30.823
Number of Units Outstanding, End of Period ............ 3,157 6,184 3,599 913 881
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $15.804 $14.235 $18.132 $19.509 $24.559
Accumulation Unit Value, End of Period ................ $14.235 $18.132 $19.509 $24.559 $30.092
Number of Units Outstanding, End of Period ............ 168,808 143,537 85,924 47,043 36,286
INCOME BUILDER SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... -- -- -- -- $12.124
Accumulation Unit Value, End of Period ................ -- -- -- $12.124 $12.389
Number of Units Outstanding, End of Period ............ -- -- -- 834 1,129
DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $14.019 $13.425 $18.128 $22.248 $27,667
Accumulation Unit Value, End of Period ................ $13.425 $18.128 $22.248 $27.667 $31.302
Number of Units Outstanding, End of Period ............ 330,200 316,921 217,872 143,983 105,536
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $11.799 $11.533 $15.177 $16.760 $20.666
Accumulation Unit Value, End of Period ................ $11.533 $15.177 $16.760 $20.666 $24.478
Number of Units Outstanding, End of Period ............ 50,378 48,100 42,448 21,794 13,550
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $10.000 $ 9.942 $12.012 $13.984 $15.511
Accumulation Unit Value, End of Period ................ $ 9.942 $12.012 $13.984 $15.511 $17.282
Number of Units Outstanding, End of Period ............ 28,567 34,628 34,174 24,523 18,128
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $14.433 $15.484 $19.299 $24.837 $28.545
Accumulation Unit Value, End of Period ................ $15.484 $19.299 $24.837 $28.545 $35.033
Number of Units Outstanding, End of Period ............ 25,704 19,230 15,262 12,639 9,449
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period ........ $10.000 $ 9.248 $ 9.682 $ 9.957 $ 6.142
Accumulation Unit Value, End of Period ................ $ 9.248 $ 9.682 $ 9.957 $ 6.142 $ 5.448
Number of Units Outstanding, End of Period ............ 23,032 26,915 19,437 14.701 9,180
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $32.807 $30.855 $43.585 $48.483 $65.969
Accumulation Unit Value, End of Period ................ $30.885 $43.585 $48.483 $65.969 $85.200
Number of Units Outstanding, End of Period ............ 23,571 24,927 29,450 14,657 7,526
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period......... $18.199 $18.728 $20.284 $23.098 $26.006
Accumulation Unit Value, End of Period ................ $18.728 $20.284 $23.098 $26.006 $32.583
Number of Units Outstanding, End of Period ............ 160,992 137,461 117,180 14,657 26,235
</TABLE>
* The Money Market, High Yield, Equity, Quality Income Plus and Strategist
Sub-Accounts commenced operations on March 1, 1989. The Utilities and Dividend
Growth Sub-Accounts commenced operations on March 1, 1990. The Capital Growth
and European Growth Sub-Accounts commenced operations on March 1, 1991. The
Global Dividend Growth and Pacific Growth Sub-Accounts commenced operations on
February 23, 1994. The Income Builder Sub-Account commenced operations on
January 21, 1997. The Accumulation Unit Value for each of these Sub-Accounts was
initially set at $10.000. The Accumulation Unit Values in this table reflect a
Mortality and Expense Risk Charge of 1%. After the close of business on March
19, 1999, the Capital Appreciation Variable Sub-Account was combined with the
Equity Variable Sub-Account in conjunction with the merger of the underlying
Portfolios.
36
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<S> <C>
Description Page
Additions, Deletions or Substitutions of Investments............................
The Contract....................................................................
Purchases..............................................................
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)...........
Calculation of Accumulation Unit Values.........................................
Calculation of Variable Income Payments.........................................
General Matters.................................................................
Incontestability.......................................................
Settlements............................................................
Safekeeping of the Variable Account's Assets...........................
Premium Taxes..........................................................
Tax Reserves...........................................................
Federal Tax Matters.............................................................
Qualified Plans.................................................................
Experts.........................................................................
Financial Statements............................................................
-----------------------------------------------
</TABLE>
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made. We do not authorize anyone to provide
any information or representations regarding the offering described in this
prospectus other than as contained in this prospectus.
[back cover]
37
<PAGE>
ALLSTATE VARIABLE ANNUITY
Allstate Life Insurance Company of New York Statement of Additional Information
Allstate Life of New York dated May 1, 1999
Variable Annuity Account
One Allstate Drive
Farmingville, NY 11738
1 (800) 256 - 9392
This Statement of Additional Information supplements the information in the
prospectus for the Variable Annuity I Contract that we offer. This Statement of
Additional Information is not a prospectus. You should read it with the
prospectus, dated May 1, 1999, for each form of Contract. You may obtain a
prospectus by calling or writing us at the address or telephone number listed
above, or by calling or writing your Morgan Stanley Dean Witter financial
adviser.
Except as otherwise noted, this Statement of Additional Information uses the
same defined terms as the prospectus for the Allstate of New York Variable
Annuity I Contract that we offer.
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments
The Contract
Purchases
Tax-free Exchanges (1035 Exchanges, Rollovers and
Transfers)
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
Federal Tax Matters
Qualified Plans
Experts
Financial Statements
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
- --------------------------------------------------------------------------------
We may add, delete, or substitute the Portfolio shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any
Portfolio with those of another Portfolio of the same or different mutual
Portfolio if the shares of the Portfolio are no longer available for investment,
or if we believe investment in any Portfolio would become inappropriate in view
of the purposes of the Variable Account.
We will not substitute shares attributable to a Contract owner's interest in a
Variable Sub-Account until we have notified the Contract owner of the change,
and until the Securities and Exchange Commission has approved the change, to the
extent such notification and approval are required by law. Nothing contained in
this Statement of Additional Information shall prevent the Variable Account from
purchasing other securities for other series or classes of contracts, or from
effecting a conversion between series or classes of contracts on the basis of
requests made by Contract owners.
We also may establish additional Variable Sub-Accounts or series of Variable
Sub-Accounts. Each additional Variable Sub-Account would purchase shares in a
new Portfolio of the same or different mutual fund. We may establish new
Variable Sub-Accounts when we believe marketing needs or investment conditions
warrant. We determine the basis on which we will offer any new Variable
Sub-Accounts in conjunction with the Contract to existing Contract owners. We
may eliminate one or more Variable Sub-Accounts if, in our sole discretion,
marketing, tax or investment conditions so warrant.
We may, by appropriate endorsement, change the Contract as we believe necessary
or appropriate to reflect any substitution or change in the Portfolios. If we
believe the best interests of persons having voting rights under the Contracts
would be served, we may operate the Variable Account as a management company
under the Investment Company Act of 1940 or we may withdraw its registration
under such Act if such registration is no longer required.
2
<PAGE>
THE CONTRACT
- --------------------------------------------------------------------------------
The Contract is primarily designed to aid individuals in long-term financial
planning. You can use it for retirement planning regardless of whether the
retirement plan qualifies for special federal income tax treatment.
PURCHASE OF CONTRACTS
Dean Witter Reynolds, Inc., is the principal underwriter and distributor of the
Contracts. The offering of the Contracts is continuous. We do not anticipate
discontinuing the offering of the Contracts, but we reserve the right to do so
at any time.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract owner
contemplating any such exchange, rollover or transfer of a Contract should
contact a competent tax adviser with respect to the potential effects of such a
transaction.
3
<PAGE>
Calculation of Accumulation Unit Values
- --------------------------------------------------------------------------------
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Portfolio shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m.
Central Time).
The Accumulation Unit Value of a Variable Sub-Account for any Valuation Period
equals the Accumulation Unit Value as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor (described below) for that
Sub-Account for the current Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor for a Valuation Period is a number representing the
change, since the last Valuation Period, in the value of Sub-account assets per
Accumulation Unit due to investment income, realized or unrealized capital gain
or loss, deductions for taxes, if any, and deductions for the mortality and
expense risk charge and administrative expense charge. We determine the Net
Investment Factor for each Variable Sub-Account for any Valuation Period by
dividing (A) by (B) and subtracting (C) from the result, where:
(A) is the sum of:
(1) the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined at the end of the current
Valuation Period; plus,
(2) the per share amount of any dividend or capital gain
distributions made by the Portfolio underlying the Variable
Sub-Account during the current Valuation Period;
(B) is the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period; and
(C) is the annualized mortality and expense risk and administrative
expense charges divided by 365 and then multiplied by the number of
calendar days in the current Valuation Period.
4
<PAGE>
CALCULATION OF VARIABLE INCOME PAYMENTS
- --------------------------------------------------------------------------------
We calculate the amount of the first variable income payment under an Income
Plan by applying the Contract Value allocated to each Variable Sub-Account less
any applicable premium tax charge deducted at the time, to the income payment
tables in the Contract. We divide the amount of the first variable annuity
income payment by the Variable Sub-Account's then current Annuity Unit value to
determine the number of annuity units ("Annuity Units") upon which later income
payments will be based. To determine income payments after the first, we simply
multiply the number of Annuity Units determined in this manner for each Variable
Sub-Account by the then current Annuity Unit value ("Annuity Unit Value") for
that Variable Sub-Account.
CALCULATION OF ANNUITY UNIT VALUES
Annuity Units in each Variable Sub-Account are valued separately and Annuity
Unit Values will depend upon the investment experience of the particular
Portfolio in which the Variable Sub-Account invests. We calculate the Annuity
Unit Value for each Variable Sub-Account at the end of any Valuation Period by:
o multiplying the Annuity Unit Value at the end of the immediately
preceding Valuation Period by the Variable Sub-Account's Net
Investment Factor (described in the preceding section) for the Period;
and then
o dividing the product by the sum of 1.0 plus the assumed investment
rate for the Valuation Period.
The assumed investment rate adjusts for the interest rate assumed in the
income payment tables used to determine the dollar amount of the first variable
income payment, and is at an effective annual rate which is disclosed in the
Contract.
We determine the amount of the first variable income payment paid under an
Income Plan using the income payment tables set out in the Contracts. The
Contracts include tables that differentiate on the basis of sex, except in
states that require the use of unisex tables.
5
<PAGE>
GENERAL MATTERS
- --------------------------------------------------------------------------------
INCONTESTABILITY
We will not contest the Contract after we issue it.
SETTLEMENTS
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract owner(s) death (or Annuitant's death if there is a
non-natural Contract owner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the Portfolio shares
held by each of the Variable Sub-Accounts.
The Portfolios do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the
Portfolios' prospectuses for a more complete description of the custodian of the
Portfolios.
PREMIUM TAXES
Applicable premium tax rates depend on the Contract owner's state of residency
and the insurance laws and our status in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations, or judicial acts.
TAX RESERVES
We do not establish capital gains tax reserves for any Variable Sub-Account nor
do we deduct charges for tax reserves because we believe that capital gains
attributable to the Variable Account will not be taxable. However, we reserve
the right to deduct charges to establish tax reserves for potential taxes on
realized or unrealized capital gains.
6
<PAGE>
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. WE MAKE
NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION
INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on the individual circumstances
of each person. If you are concerned about any tax consequences with regard to
your individual circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE NEW YORK LIFE INSURANCE COMPANY
Allstate New York is taxed as a life insurance company under Part I of
Subchapter L of the Internal Revenue Code. Since the Variable Account is not an
entity separate from Allstate New York, and its operations form a part of
Allstate New York, it will not be taxed separately as a "Regulated Investment
Company" under Subchapter M of the Code. Investment income and realized capital
gains of the Variable Account are automatically applied to increase reserves
under the contract. Under existing federal income tax law, Allstate New York
believes that the Variable Account investment income and capital gains will not
be taxed to the extent that such income and gains are applied to increase the
reserves under the contract. Accordingly, Allstate New York does not anticipate
that it will incur any federal income tax liability attributable to the Variable
Account, and therefore Allstate New York does not intend to make provisions for
any such taxes. If Allstate New York is taxed on investment income or capital
gains of the Variable Account, then Allstate New York may impose a charge
against the Variable Account in order to make provision for such taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that annuity contracts held by
a non-natural owner are not treated as annuity contracts for federal income tax
purposes. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity which holds the Contract as agent for a
natural person. However, this special exception will not apply in the case of an
employer who is the nominal owner of an annuity contract under a non-qualified
deferred compensation arrangement for its employees. Other exceptions to the
non-natural owner rule are: (1) contracts acquired by an estate of a decedent by
reason of the death of the decedent; (2) certain qualified contracts; (3)
contracts purchased by employers upon the termination of certain qualified
plans; (4) certain contracts used in connection with structured settlement
agreements, and (5) contracts purchased with a single premium when the annuity
starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax purposes,
an annuity contract must provide: (1) if any owner dies on or after the annuity
start date but before the entire interest in the contract has been distributed,
the remaining portion of such interest must be distributed at least as rapidly
as under the method of distribution being used as of the date of the owner's
death; (2) if any owner dies prior to the annuity start date, the entire
interest in the contract will be distributed within five years after the date of
the owner's death. These requirements are satisfied if any portion of the
owner's interest which is payable to (or for the benefit of) a designated
beneficiary is distributed over the life of such beneficiary (or over a period
not extending beyond the life expectancy of the beneficiary) and the
distributions begin within one year of the owner's death. If the owner's
designated beneficiary is the surviving spouse of the owner, the contract may be
continued with the surviving spouse as the new owner. If the owner of the
contract is a non-natural person, then the annuitant will be treated as the
owner for purposes of applying the distribution at death rules. In addition, a
change in the annuitant on a contract owned by a non-natural person will be
treated as the death of the owner.
7
<PAGE>
QUALIFIED PLANS
- --------------------------------------------------------------------------------
The Contract may be used with several types of qualified plans. The tax rules
applicable to participants in such qualified plans vary according to the type of
plan and the terms and conditions of the plan itself. Adverse tax consequences
may result from excess contributions, premature distributions, distributions
that do not conform to specified commencement and minimum distribution rules,
excess distributions and in other circumstances. Contract owners and
participants under the plan and annuitants and beneficiaries under the Contract
may be subject to the terms and conditions of the plan regardless of the terms
of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity. An IRA generally may
not provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid and the Contract's Cash Value. The Contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the Contract Value. It is possible that the death benefit could
be viewed as violating the prohibition on investment in life insurance contracts
with the result that the Contract would not be viewed as satisfying the
requirements of an IRA.
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth Individual
Retirement Annuity. Roth Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. "Qualified distributions" from Roth Individual
Retirement Annuities are not includible in gross income. "Qualified
distributions" are any distributions made more than five taxable years after the
taxable year of the first contribution to the Roth Individual Retirement
Annuity, and which are made on or after the date the individual attains age 59
1/2, made to a beneficiary after the owner's death, attributable to the owner
being disabled or for a first time home purchase (first time home purchases are
subject to a lifetime limit of $10,000). "Nonqualified distributions" are
treated as made from contributions first and are includible in gross income to
the extent such distributions exceed the contributions made to the Roth
Individual Retirement Annuity. The taxable portion of a "nonqualified
distribution" may be subject to the 10% penalty tax on premature distributions.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The taxable portion of a conversion or rollover distribution is
includible in gross income, but is exempted from the 10% penalty tax on
premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified employee
pension plans for their employees using the employees' individual retirement
annuities if certain criteria are met. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to their individual retirement annuities. Employers intending to use
the Contract in connection with such plans should seek competent advice. In
particular, employers should consider that an IRA generally may not provide life
insurance, but it may provide a death benefit that equals the greater of the
premiums paid and the contract's cash value. The Contract provides a death
benefit that in certain circumstances may exceed the greater of the payments and
the Contract Value.
8
<PAGE>
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS)
Sections 408(p) and 401(k) of the Code allow employers with 100 or fewer
employees to establish SIMPLE retirement plans for their employees. SIMPLE plans
may be structured as a SIMPLE retirement account using an employee's IRA to hold
the assets or as a Section 401(k) qualified cash or deferred arrangement. In
general, a SIMPLE plan consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to use the Contract in conjunction with SIMPLE plans should seek
competent tax and legal advice.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees of
certain types of tax-exempt organizations (specified in Section 501(c)(3) of the
Code) to have their employers purchase annuity contracts for them, and subject
to certain limitations, to exclude the purchase payments from the employees'
gross income. An annuity contract used for a Section 403(b) plan must provide
that distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee attains age 59 1/2, separates from service,
dies, becomes disabled or on the account of hardship (earnings on salary
reduction contributions may not be distributed for hardship). These limitations
do not apply to withdrawals where Allstate New York is directed to transfer some
or all of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of tax favored retirement plans for employees. The Self-Employed
Individuals Retirement Act of 1962, as amended, (commonly referred to as "H.R.
10" or "Keogh") permits self-employed individuals to establish tax favored
retirement plans for themselves and their employees. Such retirement plans may
permit the purchase of annuity contracts in order to provide benefits under the
plans.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION
DEFERRED COMPENSATION PLANS
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. To the extent the Contracts are used in connection with an
eligible plan, employees are considered general creditors of the employer and
the employer as owner of the contract has the sole right to the proceeds of the
contract. Generally, under the non-natural owner rules, such Contracts are not
treated as annuity contracts for federal income tax purposes. Under these plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. However, under a
Section 457 plan all the compensation deferred under the plan must remain solely
the property of the employer, subject only to the claims of the employer's
general creditors, until such time as made available to the employee or a
beneficiary.
9
<PAGE>
EXPERTS
- --------------------------------------------------------------------------------
The financial statements and the related financial statement schedules included
in this statement of additional information have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports appearing herein,
and are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
10
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of the Variable Account and Allstate New York and the
accompanying Independent Auditors' Report appear on the pages that follow. The
financial statements of Allstate New York included herein should be considered
only as bearing upon the ability of Allstate New York to meet its obligations
under the Contracts.
11
<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 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>
-------------------------------------------------------------------------------
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
Financial Statements as of December 31, 1998 and
for the periods ended December 31, 1998 and
December 31, 1997, and Independent Auditors' Report
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
Independent Auditors' Report 1
STATEMENTS OF NET ASSETS AS OF DECEMBER 31, 1998 FOR THE FOLLOWING:
Investments in the Morgan Stanley Dean Witter Variable Investment
Series Portfolios: 2
Money Market
High Yield
Equity
Quality Income Plus
Strategist
Dividend Growth
Utilities
European Growth
Capital Growth
Global Dividend Growth
Pacific Growth
Capital Appreciation
Income Builder
STATEMENTS OF OPERATIONS FOR THE FOLLOWING:
FOR THE YEAR ENDED DECEMBER 31, 1998
Investments in the Morgan Stanley Dean Witter Variable Investment
Series Portfolios:
Money Market 3
High Yield
Equity
Quality Income Plus
Strategist
Dividend Growth
Utilities
European Growth 4
Capital Growth
Global Dividend Growth
Pacific Growth
Capital Appreciation
Income Builder
STATEMENTS OF CHANGES IN NET ASSETS FOR THE FOLLOWING:
FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Investments in the Morgan Stanley Dean Witter Variable Investment
Series Portfolios:
Money Market 5,7
High Yield
Equity
Quality Income Plus
Strategist
Dividend Growth
Utilities
European Growth 6,8
Capital Growth
Global Dividend Growth
Pacific Growth
Capital Appreciation
Income Builder
NOTES TO FINANCIAL STATEMENTS 9 - 11
<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 net assets of each of the
sub-accounts ("portfolios" for the purposes of this report), listed in the table
of contents, that comprise Allstate Life of New York Variable Annuity Account
(the "Account"), a Separate Account of Allstate Life Insurance Company of New
York, an affiliate of The Allstate Corporation, as of December 31, 1998, and the
related statements of operations and changes in net assets for the applicable
periods indicated in the table of contents. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. Our procedures included
confirmation of securities owned at December 31, 1998. 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 each of the portfolios, listed in the table
of contents, that comprise the Account as of December 31, 1998, and the results
of their operations, and the changes in their net assets for each of the
periods, indicated in the table of contents, in conformity with generally
accepted accounting principles.
/s/ Deliotte & Touche LLP
Chicago, Illinois
March 18, 1999
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF NET ASSETS
DECEMBER 31, 1998
- -------------------------------------------------------------------------
($ and shares in thousands)
ASSETS
Investments in the Morgan Stanley Dean Witter Variable
Investment Series Portfolios:
Money Market, 480 shares (cost $480) $ 480
High Yield, 5 shares (cost $33) 27
Equity, 17 shares (cost $399) 641
Quality Income Plus, 83 shares (cost $849) 909
Strategist, 51 shares (cost $634) 854
Dividend Growth, 149 shares (cost $1,979) 3,305
Utilities, 51 shares (cost $636) 1,092
European Growth, 12 shares (cost $195) 332
Capital Growth, 16 shares (cost $207) 332
Global Dividend Growth, 23 shares (cost $277) 313
Pacific Growth, 10 shares (cost $87) 50
Capital Appreciation, 0 shares (cost $0) -
Income Builder, 1 share (cost $14) 14
----------
Total assets 8,349
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 3
----------
Net assets $ 8,346
==========
See notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Morgan Stanley Dean Witter Variable Investment Series Portfolios
------------------------------------------------------------------------------------------
For the Year Ended December 31, 1998
----------------------------------------------------------------------------------------
Quality
Money High Income Dividend
Market Yield Equity Plus Strategist Growth Utilities
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 42 $ 3 $ 98 $ 56 $ 134 $ 393 $ 85
Charges from Allstate Life
Insurance Company of New York:
Mortality and expense risk (5) -- (8) (9) (12) (35) (10)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income 37 3 90 47 122 358 75
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from
sales of investments:
Proceeds from sales 630 6 511 275 884 1,179 347
Cost of investments sold 630 6 350 255 677 683 193
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net realized gains (losses) -- -- 161 20 207 496 154
Change in unrealized gains (losses) -- (5) (82) 2 (59) (425) 11
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net gains (losses) on
investments -- (5) 79 22 148 71 165
---------- ---------- ---------- ---------- ---------- ---------- ----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 37 $ (2) $ 169 $ 69 $ 270 $ 429 $ 240
========== ========== ========== ========== ========== ========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------
($ in thousands)
Morgan Stanley Dean Witter Variable Investment Series Portfolios
---------------------------------------------------------------------------
For the Year Ended December 31, 1998
---------------------------------------------------------------------------
Global
European Capital Dividend Pacific Capital Income
Growth Growth Growth Growth Appreciation Builder
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 27 $ 31 $ 43 $ 3 $ -- $ 1
Charges from Allstate Life
Insurance Company of New York:
Mortality and expense risk (3) (4) (4) (1) -- --
---------- ---------- ---------- ---------- ---------- ----------
Net investment income 24 27 39 2 -- 1
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from
sales of investments:
Proceeds from sales 132 192 132 37 3 --
Cost of investments sold 66 119 117 65 3 --
---------- ---------- ---------- ---------- ---------- ----------
Net realized gains (losses) 66 73 15 (28) -- --
Change in unrealized gains (losses) (2) (26) (19) 16 -- (1)
---------- ---------- ---------- ---------- ---------- ----------
Net gains (losses) on
investments 64 47 (4) (12) -- (1)
---------- ---------- ---------- ---------- ---------- ----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 88 $ 74 $ 35 $ (10) $ -- $ --
========== ========== ========== ========== ========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
Morgan Stanley Dean Witter Variable Investment Series Portfolios
----------------------------------------------------------------------------------------
For the Year Ended December 31, 1998
----------------------------------------------------------------------------------------
Quality
Money High Income Dividend
Market Yield Equity Plus Strategist Growth Utilities
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income $ 37 $ 3 $ 90 $ 47 $ 122 $ 358 $ 75
Net realized gains (losses) -- -- 161 20 207 496 154
Change in unrealized gains (losses) -- (5) (82) 2 (59) (425) 11
---------- ---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting
from operations 37 (2) 169 69 270 429 240
FROM CAPITAL TRANSACTIONS
Deposits -- 4 3 -- -- 17 1
Benefit payments -- -- -- (50) (12) (37) (65)
Payments on termination (428) (6) (413) (214) (781) (1,021) (245)
Contract maintenance charges -- -- -- -- -- (2) (1)
Transfers among the portfolios and with
the Fixed Account - net 39 1 (86) 195 (66) (64) 7
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from
capital transactions (389) (1) (496) (69) (859) (1,107) (303)
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS (352) (3) (327) -- (589) (678) (63)
NET ASSETS AT BEGINNING OF YEAR 832 30 968 909 1,443 3,981 1,154
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 480 $ 27 $ 641 $ 909 $ 854 $ 3,303 $ 1,091
========== ========== ========== ========== ========== ========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
($ in thousands)
Morgan Stanley Dean Witter Variable Investment Series Portfolios
---------------------------------------------------------------------------
For the Year Ended December 31, 1998
---------------------------------------------------------------------------
Global
European Capital Dividend Pacific Capital Income
Growth Growth Growth Growth Appreciation Builder
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income $ 24 $ 27 $ 39 $ 2 $ -- $ 1
Net realized gains (losses) 66 73 15 (28) -- --
Change in unrealized gains (losses) (2) (26) (19) 16 -- (1)
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting
from operations 88 74 35 (10) -- --
FROM CAPITAL TRANSACTIONS
Deposits 3 -- 8 -- -- --
Benefit payments (1) -- -- -- -- --
Payments on termination (105) (185) (115) (20) (3) --
Contract maintenance charges -- -- -- -- -- --
Transfers among the portfolios and with
the Fixed Account - net (15) (8) 5 (11) -- 3
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from
capital transactions (118) (193) (102) (31) (3) 3
---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS (30) (119) (67) (41) (3) 3
NET ASSETS AT BEGINNING OF YEAR 362 451 380 91 3 11
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 332 $ 332 $ 313 $ 50 $ -- $ 14
========== ========== ========== ========== ========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
($ and units in thousands, except value per unit)
Dean Witter Variable Investment Series Portfolios
----------------------------------------------------------------------------------------
For the Year Ended December 31, 1997
----------------------------------------------------------------------------------------
Quality
Money High Income Dividend
Market Yield Equity Plus Strategist Growth Utilities
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income $ 50 $ 8 $ 102 $ 58 $ 97 $ 272 $ 53
Net realized gains (losses) -- (3) 295 16 308 893 249
Change in unrealized gains (losses) -- 2 75 6 (105) (114) 1
---------- ---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from
operations 50 7 472 80 300 1,051 303
FROM CAPITAL TRANSACTIONS
Deposits 10 6 8 -- 7 85 --
Benefit payments -- -- -- -- -- -- (4)
Payments on termination (712) (62) (895) (675) (1,476) (1,820) (678)
Contract maintenance charges -- -- -- -- (1) (3) (1)
Transfers among the portfolios and with
the Fixed Account - net 574 (29) (45) (2) (93) (178) (142)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from
capital transactions (128) (85) (932) (677) (1,563) (1,916) (825)
---------- ---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS (78) (78) (460) (597) (1,263) (865) (522)
NET ASSETS AT BEGINNING OF YEAR 910 108 1,428 1,506 2,706 4,846 1,676
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 832 $ 30 $ 968 $ 909 $ 1,443 $ 3,981 $ 1,154
========== ========== ========== ========== ========== ========== ==========
Net asset value per unit at end
of period $ 19.75 $ 33.22 $ 65.97 $ 22.67 $ 26.01 $ 27.67 $ 24.56
========== ========== ========== ========== ========== ========== ==========
Units outstanding at end of period 42 1 15 40 56 144 47
========== ========== ========== ========== ========== ========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHNAGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
($ and units in thousands, except value per unit)
Dean Witter Variable Investment Series Portfolios
--------------------------------------------------------------------------
For the Year Ended December 31, 1997
--------------------------------------------------------------------------
Global
European Capital Dividend Pacific Capital Income
Growth Growth Growth Growth Appreciation Builder
---------- ---------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income $ 21 $ 79 $ 23 $ -- $ -- $ 1
Net realized gains (losses) 38 163 43 (7) -- 2
Change in unrealized gains (losses) (1) (74) (15) (58) -- 1
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from
operations 58 168 51 (65) -- 4
FROM CAPITAL TRANSACTIONS
Deposits 5 5 22 2 3 4
Benefit payments -- -- -- -- -- --
Payments on termination (89) (428) (97) (17) -- (23)
Contract maintenance charges -- -- -- -- -- --
Transfers among the portfolios and with
the Fixed Account - net 8 (6) (74) (23) -- 26
---------- ---------- ---------- ---------- ---------- ----------
Change in net assets resulting from
capital transactions (76) (429) (149) (38) 3 7
---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN NET ASSETS (18) (261) (98) (103) 3 11
NET ASSETS AT BEGINNING OF YEAR 380 712 478 194 -- --
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AT END OF YEAR $ 362 $ 451 $ 380 $ 91 $ 3 $ 11
========== ========== ========== ========== ========== ==========
Net asset value per unit at end
of period $ 28.54 $ 20.67 $ 15.51 $ 6.14 $ 11.21 $ 12.12
========== ========== ========== ========== ========== ==========
Units outstanding at end of period 13 22 25 15 1 1
========== ========== ========== ========== ========== ==========
<FN>
See notes to financial statements.
</FN>
</TABLE>
8
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
Allstate Life of New York Variable Annuity Account (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of Allstate
Life Insurance Company of New York ("ALNY"). The assets of the Account are
legally segregated from those of ALNY. ALNY is wholly owned by Allstate
Life Insurance Company a wholly owned subsidiary of Allstate Insurance
Company, which is wholly owned by The Allstate Corporation.
ALNY issues certain annuity contracts, the deposits of which are invested
at the direction of the contractholder in the sub-accounts ("portfolios"
for the purposes of this report) that comprise the Account. Contractholders
bear all investment risk for amounts allocated to the Account. The
portfolios invest in the Morgan Stanley Dean Witter Variable Investment
Series (the "Fund"). The Account accepts additional deposits from existing
contractholders, but is closed to new customers.
ALNY provides insurance and administrative services to the contractholder
for a fee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices at December 31,
1998.
INVESTMENT INCOME - Investment income consists of dividends declared by the
Funds and is recognized on the date of record.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included in the tax return of ALNY. ALNY is
taxed as a life insurance company under the Code. No federal income taxes
are payable by the Account in 1998 as the Account did not generate taxable
income.
9
<PAGE>
3. CONTRACT CHARGES
ALNY assumes mortality and expense risks related to the operations of the
Account and deducts charges daily at a rate equal to 1.0% per annum of the
daily net assets of the Account. ALNY guarantees that the rate of this
charge will not increase over the life of the contract.
ALNY charges an annual contract maintenance charge of $30.
4. FINANCIAL INSTRUMENTS
The investments of the Account are carried at fair value, based on quoted
market prices. Accrued contract maintenance charges are of a short-term
nature. It is assumed that their carrying value approximates fair value.
10
<PAGE>
<TABLE>
<CAPTION>
5. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
Unit activity during 1998:
----------------------------------------
Units Units Accumulation
Outstanding Outstanding Unit Value
December Units Units December December
31, 1997 Issued Redeemed 31, 1998 31, 1998
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley Dean Witter
Variable Investment Series:
Money Market ................................ 42,094 12,391 (31,159) 23,326 20.57
High Yield .................................. 913 152 (184) 881 30.82
Equity Fund ................................. 14,657 216 (7,347) 7,526 85.20
Quality Income Plus ......................... 40,055 8,433 (11,219) 37,269 24.39
Strategist .................................. 55,548 7 (29,320) 26,235 32.58
Dividend Growth ............................. 143,983 2,262 (40,709) 105,536 31.30
Utilities ................................... 47,043 1,524 (12,281) 36,286 30.09
European Growth ............................. 12,639 444 (3,634) 9,449 35.03
Capital Growth .............................. 21,794 -- (8,244) 13,550 24.48
Global Dividend Growth ...................... 24,523 1,768 (8,163) 18,128 17.28
Pacific Growth .............................. 14,701 1,200 (6,721) 9,180 5.45
Capital Appreciation ........................ 280 -- (280) -- --
Income Builder .............................. 834 295 -- 1,129 12.39
</TABLE>
Units relating to accrued contract maintenance charges are included in units
redeemed.
11
<PAGE>
PART C
OTHER INFORMATION
24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
Allstate Life Insurance Company of New York Financial Statements and Financial
Schedules and Allstate Life of New York Variable Annuity Account Financial
Statements are included in Part B of this Registration Statement.
(b) EXHIBITS
The following exhibits, correspond to those required by paragraph (b) of item 24
as to exhibits in Form N-4:
(1) Form of Resolution of the Board of Directors of Allstate Life Insurance
Company of New York authorizing establishment of the Variable Annuity
Account (Previously filed in Post-Effective Amendment No. 12 to this
Registration Statement (File No.
033-24228) dated December 31, 1996.)
(2) Not Applicable
(3) General Agent's Agreement (Incorporated herein by reference to
Post-Effective Amendment No. 14 to Depositor's Registration Statement
(File No. 033-35445) dated April 17, 1998.)
(4) Form of Contract (Previously filed in Post-Effective Amendment
No. 12 to this Registration Statement (File No. 033-24228) dated
December 31, 1996.)
(5) Form Application for a Contract (Previously filed in
Post-Effective Amendment No. 12 to this Registration Statement
(File No. 033-24228) dated December 31, 1996.)
(6)(a) Restated Certificate of Incorporation of Allstate Life Insurance
Company of New York (Incorporated herein by reference to Depositor's
Form 10-K annual report dated March 30, 1999.)
(6)(b) Amended By-laws of Allstate Life Insurance Company of New York
(Incorporated herein by reference to Depositor's Form 10-K annual
report dated March 30, 1999.)
(7) Not applicable
(8) Participation Agreement (Previously filed in Post-Effective
Amendment No. 11 to this Registration Statement (File No.
033-24228) dated April 30, 1996.)
(9)(a) Opinion and Consent of General Counsel (Previously filed in
Post-Effective Amendment No. 12 to this Registration Statement (File
No. 033-24228) dated December 31, 1996.)
(9)(b) Opinion and Consent of General Counsel
(10)(a) Independent Auditors' Consent
(10)(b) Consent of Freedman, Levy, Kroll & Simonds
(11) Not Applicable
<PAGE>
(12) Not Applicable
(13) Performance Data Calculations (Previously filed in
Post-effective Amendment No. 13 to this Registration Statement
(File No. 033-24228) dated April 15, 1997.)
(14) Not Applicable
(99)(a) Powers of Attorney for Timothy H. Plohg and Gerard F. McDermott
(Previously filed in Post-Effective Amendment No. 11 to this
Registration Statement (File No. 033-24228) dated April 30,
1996.)
(99)(b) Powers of Attorney for Keith A. Hauschildt and Kevin R. Slawin
(Previously filed in Post-Effective Amendment No. 12 to this
Registration Statement (File No. 033-24228) dated December 31,
1996.)
(99)(c) Powers of Attorney for Louis G. Lower, II, Thomas J. Wilson, II,
Marcia D. Alazraki, Cleveland Johnson, Jr., Joseph P. McFadden,
John R. Raben, Jr. and Sally A. Slacke
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITION AND OFFICE WITH
BUSINESS ADDRESS DEPOSITOR OF THE ACCOUNT
- ---------------- ------------------------
Louis G. Lower, II Director and Chairman of the Board of Directors
Thomas J. Wilson, II Director and President
Michael J. Velotta Director, Vice President, Secretary and
General Counsel
Marcia D. Alazraki Director
Marla G. Friedman Director and Vice President
Vincent A. Fusco Director and Chief Operations Officer
Cleveland Johnson, Jr. Director
Gerard F. McDermott Director
Kenneth R. O'Brien Director
Timothy H. Plohg Director and Vice President
John R. Raben, Jr. Director
Sally A. Slacke Director
Kevin R. Slawin Director and Vice President
Patricia W. Wilson Director
Karen C. Gardner Vice President
Peter H. Heckman Vice President
Thomas A. McAvity, Jr. Vice President
Casey J. Sylla Chief Investment Officer
James P. Zils Treasurer
Sharmaine M. Miller Chief Administrative Officer
Richard L. Baker Assistant Vice President
D. Steven Boger Assistant Vice President
Dorothy E. Even Assistant Vice President
John M. Goense Assistant Vice President
Judith P. Greffin Assistant Vice President
Keith A. Hauschildt Assistant Vice President and Controller
Ronald A. Johnson Assistant Vice President
Kenneth S. Klimala Assistant Vice President
Charles D. Mires Assistant Vice President
Barry S. Paul Assistant Vice President
Robert N. Roeters Assistant Vice President
C. Nelson Strom Assistant Vice President and Corporate Actuary
Timothy N. Vander Pas Assistant Vice President
David A. Walsh Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
<PAGE>
Paul N. Kierig Assistant Secretary
Brenda D. Sneed Assistant Secretary and Assistant General Counsel
Ralph A. Bergholtz Assistant Treasurer
Mark A. Bishop Assistant Treasurer
Robert B. Bodett Assistant Treasurer
Barbra S. Brown Assistant Treasurer
Nancy M. Bufalino Assistant Treasurer
Adrian Corbiere Assistant Treasurer
Peter S. Horos Assistant Treasurer
Thomas C. Jensen Assistant Treasurer
David L. Kocourek Assistant Treasurer
Daniel C. Leimbach Assistant Treasurer
Beth K. Marder Assistant Treasurer
Ronald A. Mendel Assistant Treasurer
R. Steven Taylor Assistant Treasurer
Louise J. Walton Assistant Treasurer
Jerry D. Zinkula Assistant Treasurer
The principal business address of Mr. McDermott is P.O. Box 9095, Farmingville,
New York 11738. The principal business address of the other foregoing officers
and directors is 3100 Sanders Road, Northbrook, Illinois 60062.
26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT
Incorporated herein by reference to Annual Report on Form 10-K, filed by the
Allstate Corporation on March 26, 1999 (File No. 1-11840).
27. NUMBER OF CONTRACT OWNERS
As of April 13, 1999 there were 142 nonqualified contracts and 16 qualified
contracts.
28. INDEMNIFICATION
The General Agent's Agreement (Exhibit 3) has a provision in which Allstate Life
Insurance Company of New York agrees to indemnify Dean Witter Reynolds as
Underwriter for certain damages and expenses that may be caused by actions,
statements or omissions by Allstate Life Insurance Company of New York.
Insofar as indemnification for liability arising out of the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the registrant of expenses incurred by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of is counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
<PAGE>
29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Dean Witter Reynolds Inc., is also the
principal underwriter for the following affiliated investment companies:
Northbrook Variable Annuity Account
Northbrook Variable Annuity Account II
Northbrook Life Variable Life Separate Account A
Allstate Life of New York Variable Annuity Account II
(b) The directors and principal officers of the principal underwriter are:
Name and Principal Business Positions and Offices
Address* of Each Such Person with Underwriter
- ---------------------------- ----------------
Philip J. Purcell Director, Chairman and Chief Executive Officer
Richard M. Demartini Director, President and Chief Operating Officer
Dean Witter Capital
James F. Higgins Director, President and Chief Operating Officer
Dean Witter Financial
Stephen R. Miller Director and Senior Executive Vice President
Robert J. Dwyer Director, Executive Vice President and
National Sales Director
Christine A. Edwards Director, Executive Vice President,
Secretary and General Counsel
Mitchell M. Merin Director, Executive Vice President and
Chief Administrative Officer
Richard F. Powers, II Director and Executive Vice President
Thomas C. Schneider Director and Executive Vice President
William B. Smith Director and Executive Vice President
Raymond J. Drop Executive Vice President
Fredrick J. Frohne Executive Vice President
E. Davisson Hardman, Jr. Executive Vice President
Jeremiah A. Mullins Executive Vice President
John H. Schaffer Executive Vice President
Robert B. Sculthorpe Executive Vice President
Anthony Basile Senior Vice President
Ronald T. Carmen Senior Vice President, Associate General Counsel
and Assistant Secretary
Michael T. Cunningham Senior Vice President
Mary E. Curran Senior Vice President
David Diaz Senior Vice President
Paul J. Dubow Senior Vice President and Deputy General Counsel
Michael T. Gregg Senior Vice President and Deputy General Counsel
Lorena J. Kern Senior Vice President
George R. Ross Senior Vice President
Robert P Seass Senior Vice President
Joseph G. Siniscalchi Senior Vice President and Controller
Dean Witter Financial
Michael H. Stone Senior Vice President
Charles F. Vadala, Jr. Senior Vice President and Chief Financial Officer
Kelly McNamara Senior Vice President and
Director of Governmental Affairs
Michael D. Browne Assistant Secretary
Marilyn K. Cranney Assistant Secretary
Sabrina Hurley Assistant Secretary
<PAGE>
* The principal business address of the above-named individuals is Two World
Trade Center, New York, New York 10048.
(c) Compensation of Dean Witter Reynolds Inc.
The following commissions and other compensation were received by each principal
underwriter, directly or indirectly, from the Registrant during the Registrant's
last fiscal year.
<TABLE>
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Net Underwriting
Name of Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
Dean Witter Reynolds [ALLSTATE TO
Inc. PROVIDE NUMBERS]
</TABLE>
30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Allstate Life Insurance Company of New York, is located at One
Allstate Drive, P.O. Box 9095, Farmingville, New York 11738. The Distributor,
Dean Witter Reynolds Inc., is located at Two World Trade Center, New York, New
York 10048.
Each company maintains those accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the rules
promulgated thereunder.
31. MANAGEMENT SERVICES
None
32. UNDERTAKINGS
The Registrant undertakes to file a post-effective amendment to the Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in the Registration Statement are never more than 16 months old for
so long as payments under the variable annuity contracts may be accepted.
Registrant furthermore agrees to include either, as part of any application to
purchase a contract offered by the prospectus, a toll-free number that an
applicant can call to request a Statement of Additional Information or a post
card or similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional Information.
Finally, the Registrant agrees to deliver any Statement of Additional
Information and any Financial Statements required to be made available under
this Form N-4 promptly upon written or oral request.
REPRESENTATIONS PURSUANT TO SECTION 403(B) OF THE INTERNAL
REVENUE CODE
The Company represents that it is relying upon a November 28, 1988 Securities
and Exchange Commission no-action letter issued to the American Council of Life
Insurance ("ACLI") and that the provisions of paragraphs 1-4 of the no-action
letter have been complied with.
<PAGE>
REPRESENTATION REGARDING CONTRACT EXPENSES
Allstate Life Insurance Company of New York represents that the fees and charges
deducted under the Individual Variable Annuity Contracts hereby registered by
this Registration Statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by Allstate Life Insurance Company of New York.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Allstate Life of New York Variable Annuity Account,
certifies that it meets the requirements of the Securities Act Rule 485 for
effectiveness of this amended Registration Statement and has caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
Township of Northfield, State of Illinois, on the 27th day of April, 1999.
ALLSTATE LIFE OF NEW YORK
VARIABLE ANNUITY ACCOUNT
(REGISTRANT)
BY: ALLSTATE LIFE INSURANCE COMPANY
OF NEW YORK
(DEPOSITOR)
(SEAL)
Attest: /s/Brenda D. Sneed By: /s/Michael J. Velotta
Brenda D. Sneed Michael J. Velotta
Assistant Secretary Vice President, Secretary and
And Assistant General Counsel General Counsel
As required by the Securities Act of 1933, this amended Registration Statement
has been duly signed below by the following Directors and Officers of Allstate
Life Insurance Company of New York on the 27th day of April, 1999.
*/LOUIS G. LOWER, II Chairman of the Board and Director
Louis G. Lower, II (Principal Executive Officer)
*/THOMAS J. WILSON, II President and Director
Thomas J. Wilson, II (Principal Operating Officer)
/s/ MICHAEL J. VELOTTA Vice President, Secretary, General
Michael J. Velotta Counsel and Director
*/KEVIN R. SLAWIN Vice President and Director
Kevin R. Slawin (Principal Financial Officer)
*/KEITH A. HAUSCHILDT Assistant Vice President and Controller
Keith A. Hauschildt (Principal Accounting Officer)
*/TIMOTHY H. PLOHG Vice President and Director
Timothy H. Plohg
*/MARCIA D. ALAZRAKI Director
Marcia D. Alazraki
*/CLEVELAND JOHNSON, JR. Director
Cleveland Johnson, Jr.
*/GERARD F. MCDERMOTT Director
Gerard F. McDermott
*/JOHN R. RABEN, JR. Director
John R. Raben, Jr.
*/SALLY A. SLACKE Director
Sally A. Slacke
*/ By Michael J. Velotta, pursuant to Power of Attorney, previously filed or
filed herewith.
<PAGE>
EXHIBIT INDEX
Exhibit Description
(9)(b) Opinion and Consent General Counsel
(10)(a) Independent Auditors' Consent
(10)(b) Consent of Freedman, Levy, Kroll & Simonds
(99)(b) Power of Attorney for Louis G. Lower, II, Thomas J. Wilson, II,
Marcia D. Alazraki, Cleveland Johnson, Jr., John R. Raben, Jr.,
and Sally A. Slacke
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
LAW AND REGULATION DEPARTMENT
3100 Sanders Road, J5B
Northbrook, Illinois 60062
Direct Dial Number 847-402-2400
Facsimile 847-402-4371
Michael J. Velotta Please direct reply to:
Vice President, Secretary Post Office Box 3005
and General Counsel Northbrook, Illinois 60065-3005
April 14, 1998
TO: ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
FARMINGVILLE, NEW YORK 11738-9075
FROM: MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
RE: FORM N-4 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF
1940
FILE NO. 033-24228, 811-07467
With reference to the Registration Statement on Form N-4 filed by Allstate
Life Insurance Company of New York (the "Company"), as depositor, and Allstate
Life of New York Variable Annuity Account, as registrant, with the Securities
and Exchange Commission covering the Flexible Premium Deferred Variable Annuity
Contracts, I have examined such documents and such law as I have considered
necessary and appropriate, and on the basis of such examination, it is my
opinion that:
1. The Company is duly organized and existing under the laws of the State of
New York and has been duly authorized to do business by the Director of
Insurance of the State of New York.
2. The securities registered by the above Registration Statement when issued
will be valid, legal and binding obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the above
referenced Registration Statement and to the use of my name under the caption
"Legal Matters" in the Prospectus constituting a part of the Registration
Statement.
Sincerely,
/s/ MICHAEL J. VELOTTA
- -------------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
Exhibit 10(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 14 to Registration
Statement No. 033-24228 of Allstate Life of New York Variable Annuity Account of
Allstate Life Insurance Company of New York on Form N-4 of our report dated
February 19, 1999 relating to the financial statements and the related financial
statement schedules of Allstate Life Insurance Company of New York, and our
report dated March 18, 1999 relating to the financial statements of Allstate
Life of New York Variable Annuity Account, contained in the Statement of
Additional Information (which is incorporated by reference in the Prospectus of
Allstate Life of New York) Variable Annuity Account of Allstate Life Insurance
Company of New York which is part of such Registration Statement, and to the
reference to us under the heading "Experts" in such Statement of Additional
Information.
/s/ DELOITTE & TOUCHE LLP
Chicago Illinois
April 26, 1999
Freedman, Levy, Kroll & Simonds
CONSENT OF
FREEDMAN, LEVY, KROLL & SIMONDS
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus contained in Post-Effective Amendment No. 14 to the
Form N-4 Registration Statement of Allstate Life of New York Variable Annuity
Account (File No. 033-24228).
/s/FREEDMAN, LEVY, KROLL & SIMONDS
Washington, D.C.
April 26, 1999
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Michael J. Velotta, whose signature
appears below, constitutes and appoints Louis G. Lower, II and Brenda D. Sneed,
his attorneys-in-fact, with power of substitution, and each of them in any and
all capacities, to sign any registration statements and amendments thereto for
Allstate Life Insurance Company of New York, Allstate Life of New York Variable
Annuity Account and related Contracts and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his or her substitute or substitutes, may do or cause to be
done by virtue hereof.
April 26, 1999
Date
/s/Michael J. Velotta
Vice President, Secretary,
General Counsel and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Louis G. Lower, II, whose signature
appears below, constitutes and appoints Michael J. Velotta and Brenda D. Sneed,
his attorneys-in-fact, with power of substitution, and in any and all
capacities, to sign any registration statements and amendments thereto for
Allstate Life Insurance Company of New York, Allstate Life of New York Variable
Annuity Account and related Contracts and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his or her substitute or substitutes, may do or cause to be
done by virtue hereof.
April 26, 1999
Date
/s/LOUIS G. LOWER, II
Louis G. Lower, II
Chairman of the Board and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Thomas J. Wilson, II, whose
signature appears below, constitutes and appoints Louis G. Lower, II and Michael
J. Velotta, his attorneys-in-fact, with power of substitution, and each of them
in any and all capacities, to sign any registration statements and amendments
thereto for Allstate Life Insurance Company of New York, Allstate Life of New
York Variable Annuity Account and related Contracts and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
April 26, 1999
Date
/s/Thomas J. Wilson
Thomas J. Wilson
President and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Marcia D. Alazraki, whose signature
appears below, constitutes and appoints Louis G. Lower, II and Michael J.
Velotta, her attorneys-in-fact, with power of substitution, and each of them in
any and all capacities, to sign any registration statements and amendments
thereto for Allstate Life Insurance Company of New York, Allstate Life of New
York Variable Annuity Account and related Contracts and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
April 26, 1999
Date
/s/Marcia D. Alazraki
Marcia D. Alazraki
Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Cleveland Johnson, Jr., whose
signature appears below, constitutes and appoints Louis G. Lower, II and Michael
J. Velotta, his attorneys-in-fact, with power of substitution, and each of them
in any and all capacities, to sign any registration statements and amendments
thereto for Allstate Life Insurance Company of New York, Allstate Life of New
York Variable Annuity Account and related Contracts and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
April 26, 1999
Date
/s/Cleveland Johnson, Jr.
Cleveland Johnson, Jr.
Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
Know all men by these presents that John R. Raben, Jr., whose signature
appears below, constitutes and appoints Louis G. Lower, II and Michael J.
Velotta, his attorneys-in-fact, with power of substitution, and each of them in
any and all capacities, to sign any registration statements and amendments
thereto for Allstate Life Insurance Company of New York, Allstate Life of New
York Variable Annuity Account and related Contracts and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
April 26, 1999
Date
/s/John R. Raben, Jr.
John R. Raben, Jr.
Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
Know all men by these presents that Sally Slacke, whose signature
appears below, constitutes and appoints Louis G. Lower, II and Michael J.
Velotta, her attorneys-in-fact, with power of substitution, and each of them in
any and all capacities, to sign any registration statements and amendments
thereto for Allstate Life Insurance Company of New York, Allstate Life of New
York Variable Annuity Account and related Contracts and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
April 26, 1999
Date
/s/Sally A. Slacke
Sally A. Slacke
Director
