Allstate New York Variable Annuity
Allstate Life Insurance Company of New York Prospectus dated May 1, 2000
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
Allstate New York 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 Option") and 12 variable sub-accounts ("Variable Sub-Accounts")
of the Allstate Life of 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, 2000, 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 35 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.
Important Notices
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.
Investments in the Contracts involves investment risks, including possible
loss of principal. The Contracts are available only in New York.
TABLE OF CONTENTS
Page
Overview
Important Terms 3
The Contract At A Glance 4
How the Contract Works 5
Expense Table 6
Financial Information 8
Contract Features
The Contract 9
Purchases 11
Contract Value 12
Investment Alternatives 13
The Variable Sub-Accounts 13
The Fixed Account 14
Transfers 15
Expenses 17
Access To Your Money 19
Income Payments 20
Death Benefits 23
Other Information
More Information
Allstate New York 25
The Variable Account 25
The Portfolios 26
The Contract 26
Qualified Plans 27
Legal Matters 27
Year 2000 27
Taxes 28
Performance Information 31
Appendix A - Accumulation Unit Values 32
Statement of Additional Information Table of Contents 35
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.
Page
Accumulation Phase 5
Accumulation Unit 8
Accumulation Unit Value 8
Allstate New York ("We") 1
Annuitant 4
Automatic Additions Program 4
Automatic Income Withdrawals 4
Beneficiary 5
Contract 1
Contract Anniversary 4
Contract Owner ("You") 4
Contract Value 4
Contract Year 4
Death Benefit 4
Fixed Account 1
Free Withdrawal Amount 4
Fund 1
Income Plan 5
Investment Alternatives 1
Issue Date 5
Payout Phase 5
Payout Start Date 4
Portfolios 1
Qualified Contracts 9
SEC 1
Settlement Value 23
Valuation Date 11
Variable Account 1
Variable Sub-Account 1
<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
("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 ranging from 0% to 6% of purchase payments
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
The Contract offers 13 investment alternatives including:
o The Fixed Account Option (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 Option, 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
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
Death Benefits
If you or the Annuitant dies before the Payout Start Date, we
will pay the death benefit described in the Contract.
Transfers
Before the Payout Start Date, you may transfer your Contract value ("Contract
Value") among the investment alternatives, with certain restrictions. Transfers
must be at least $100 or the total amount in the investment alternative,
whichever is less.
Withdrawals
You may withdraw some or all of your Contract Value at anytime prior to the
Payout Start Date. Full or partial withdrawals are available under limited
circumstances on or after 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 1/2 years old. A withdrawal charge also may apply.
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 Option. If you invest in the Fixed Account Option, 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 20. 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.
The timeline below illustrates how you might use your Contract.
Issue Accumulation Phase Payout Start Payout Phase
Date Date
- -------------------------------------------------------------------------------
| | |
You buy You save for retirement You elect to You can Or you can
a Contract receive income receive receive income
payments or income payments for life
receive a lump payments
sum payment for a set
period
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.
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.
Contract Owner Transaction Expenses
Withdrawal Charge (as a percentage of amount withdrawn)*
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-Account)
Mortality and Expense Risk Charge 1.00%
Total Variable Account Annual Expenses 1.00%
Portfolio Annual Expenses (After Voluntary Reductions and Reimbursements) (as a
percentage of Portfolio average daily net assets)1
Total Portfolio
Portfolio Management Fees Other Expenses Annual 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 0.64% 0.03% 0.67%
Income Builder 0.75% 0.06% 0.81%
Dividend Growth 0.51% 0.01% 0.52%
Capital Growth 0.65% 0.07% 0.72%
Global Dividend Growth 0.75% 0.08% 0.83%
European Growth 0.95% 0.09% 1.04%
Pacific Growth 0.95% 0.47% 1.42%
Equity 0.49% 0.02% 0.51%
Strategist 0.50% 0.02% 0.52%
1 Figures shown are for the year ended December 31, 1999.
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 or tax penalties you may be required to
pay if you surrender your Contract. The example does not include deductions for
premium taxes because New York does not charge premium taxes on annuties.
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 $187
Capital Growth $65 $86 $107 $209
Global Dividend Growth $66 $89 $113 $221
European Growth $68 $96 $124 $244
Pacific Growth $72 $107 $143 $283
Equity $63 $80 $96 $186
Strategist $63 $80 $97 $187
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.
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 $86 $187
Capital Growth $18 $56 $97 $209
Global Dividend Growth $19 $60 $102 $221
European Growth $21 $66 $113 $244
Pacific Growth $25 $78 $133 $283
Equity $16 $50 $86 $186
Strategist $16 $50 $86 $187
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.
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 1990, 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.
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 27.
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 designated 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 named one or more Beneficiaries when you applied 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.
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 the assignor signs it
and files 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.
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 additional purchase payments of at least $25 by automatically
transferring amounts from your bank account or your Morgan Stanley Dean Witter
Active AssetsTM Account. Please consult your Morgan Stanley Dean Witter
Financial Advisor for details.
ALLOCATION OF PURCHASE PAYMENTS
At the time you applied for a Contract, you decided how to allocate your
purchase payments among the investment alternatives. The allocation you
specified on your application were 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 additional 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 use
the term "business day" to refer to 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.
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 or
transfer 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 or transfer. 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 prospectus for the Fund that accompanies 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.
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. Morgan Stanley Dean Witter Advisors, Inc.
serves as the investment advisor to each Portfolio.
<TABLE>
<CAPTION>
PORTFOLIO: Each Portfolio Seeks:
<S> <C>
Money Market Portfolio High current income, preservation of capital, and liquidity
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 of 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.
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.
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 Fixed Account to
the Variable Account in any calendar year to the greater of $1,000 or 25% of the
value in the 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. Eastern Time 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.
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.
EXPENSES
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 up to 6% of the amount you withdraw. 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 6, 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 guarantee
that the total withdrawal charges you pay will not exceed 7% of your purchase
payments.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge and the Free Withdrawal Amount, we will treat
withdrawals as coming from the oldest purchase payments (including earnings
attributable to those 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.
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 also 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 making a provision for taxes. In the future, however, we
may make 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 page 6. We may receive compensation from the
investment adviser or administrator of the Fund for administrative services we
provide to the Fund.
ACCESS TO YOUR MONEY
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 20.
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 also may take partial withdrawals 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, we may require you to 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.
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 taxes.
INCOME PAYMENTS
PAYOUT START DATE
The Payout Start Date is the day that money is applied to an Income Plan. The
Payout Start Date must be:
o at least 30 days after the Issue Date;
o the first day of a calendar month; and
o no later than the first day of the calendar month after the
Annuitant's 85th birthday, or the 10th Contract Anniversary, if later,
but not to exceed the Annuitant's 90th birthday.
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. After the Payout
Start date, you may not make withdrawals (except as described below) or change
your choice of Income Plan.
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.
After the Payout Start Date, you may not make withdrawals (except as described
below) or change your choice of Income Plan.
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 the Variable Sub-Account assets that support 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 is 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.
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 all or part of 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 asociated with the amount withdrawn. To
determine the present value of any remaining variable income payments being
withdrawn, we use a discount rate equal to the assumed annual investment rate
that we use to compute such variable income payments. The minimum amount you may
withdraw under this feature is $1,000. A withdrawal charge may apply.
We also deduct applicable premium taxes from the Contract Value at the Payout
Start Date.
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, any 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.
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.
DEATH BENEFITS
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.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 4 p.m. Eastern Time, we will process the request as
of the end of the following Valuation date. 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.
Option 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.
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
"Settlement 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 Settlement Value within 5 years of the date of death; or
2) receive the Settlement Value as a single lump sum payment 5 years after the
date of death.
Option 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.
MORE INFORMATION
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 Life Insurance
Company, which is a wholly owned subsidiary of Allstate Insurance Company, a
stock property-liability insurance company incorporated under the laws of the
State 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) (Superior). 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.
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 principal underwriter 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, Inc. 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.
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
transaction 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 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 recognized only the last two digits of the year in any date, some
software may have failed to operate properly after the year 1999 if the software
had not been reprogrammed or replaced ("Year 2000 Issue"). Allstate New York
believes that many of its counterparties and suppliers also had potential Year
2000 Issues which could have affected Allstate New York. In 1995, Allstate
Insurance Company commenced a four phase plan intended to mitigate and/or
prevent the adverse effects of Year 2000 Issues. These strategies included
normal development and enhancement of new and existing systems to make them Year
2000 compliant. The plan also included 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. As of the date of this
prospectus, Allstate New York believes that the Year 2000 Issue was successfully
resolved and that such resolution will not materially affect its results of
operations, liquidity or financial position.
TAXES
The following 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.
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.
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.
The income on a qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Allstate New York
reserves the right to limit the availability of the Contract for use with any of
the Qualified Plans listed below. 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 Northbrook is directed to
transfer some or all of the Contract Value to another 403(b) plan.
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.
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.
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APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS
OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE INCEPTION
For the Years Beginning January 1* and Ending December 31
<S> <C> <C> <C> <C> <C>
Sub-Accounts 1990 1991 1992 1993 1994
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $14.532 $15.530 $16.260 $16.651 $16.940
Accumulation Unit Value, End of Period $15.530 $16.260 $16.651 $16.940 $17.411
Number of Units Outstanding, End of Period 76,431 157,103 121,052 85,420 89,195
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $12.097 $12.798 $15.016 $16.096 $18.010
Accumulation Unit Value, End of Period $12.798 $15.016 $16.096 $18.010 $16.648
Number of Units Outstanding, End of Period 48,198 134,798 151,095 150,179 95.868
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $14.993 $10.864 $17.064 $20.008 $24.609
Accumulation Unit Value, End of Period $10.864 $17.064 $20.008 $24.609 $23.759
Number of Units Outstanding, End of Period 632 1,818 2,252 2,748 3,157
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $10.000 $10.365 $12.372 $13.797 $15.804
Accumulation Unit Value, End of Period $10.365 $12.372 $13.797 $15.804 $14.235
Number of Units Outstanding, End of Period 130,055 211,125 205,071 204,333 168,808
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 $14.019
Accumulation Unit Value, End of Period $9.143 $11.564 $12.383 $14.019 $13.425
Number of Units Outstanding, End of Period 231,500 321,598 348,132 350,305 330,200
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - $10.000 $12.735 $12.814 $11.799
Accumulation Unit Value, End of Period - $12.735 $12.814 $11.799 $11.533
Number of Units Outstanding, End of Period - 51,643 58,830 55,497 50,378
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - - - - $10.000
Accumulation Unit Value, End of Period - - - - $9.942
Number of Units Outstanding, End of Period - - - - 28,567
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - $10.000 $12.735 $10.347 $14.433
Accumulation Unit Value, End of Period - $10.050 $12.814 $14.433 $15.484
Number of Units Outstanding, End of Period - 11,103 58,830 18,436 25,704
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - - - - $10.000
Accumulation Unit Value, End of Period - - - - $9.248
Number of Units Outstanding, End of Period - - - - 23,032
<PAGE>
Sub-Accounts 1990 1991 1992 1993 1994
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $18.580 $17.728 $27.916 $27.681 $32.807
Accumulation Unit Value, End of Period $17.728 $27.916 $27.681 $32.807 $30.885
Number of Units Outstanding, End of Period 15,033 19,279 26,610 28,032 23,571
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $12.284 $12.351 $15.684 $16.651 $18.199
Accumulation Unit Value, End of Period $12.351 $15.684 $16.651 $18.199 $18.728
Number of Units Outstanding, End of Period 94,204 113,342 138,065 153,920 160,992
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS
OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE INCEPTION
For the Years Beginning January 1* and Ending December 31
Sub-Accounts 1995 1996 1997 1998 1999
MONEY MARKET SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $17.411 $18.215 $18.995 $19.748 $20.565
Accumulation Unit Value, End of Period $18.215 $18.955 $19.748 $20.565 $21.340
Number of Units Outstanding, End of Period 85,667 47,979 42,094 23,326 24,357
QUALITY INCOME PLUS SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $16.648 $20.498 $20.608 $22.671 $24.392
Accumulation Unit Value, End of Period $20.498 $20.608 $22.671 $24.392 $23.106
Number of Units Outstanding, End of Period 87,651 73,100 40,055 37,269 29,406
HIGH YIELD SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $23.759 $27.055 $29.993 $33.219 $30.823
Accumulation Unit Value, End of Period $27.055 $29.993 $33.219 $30.823 $30.135
Number of Units Outstanding, End of Period 6,184 3,599 913 881 3,828
UTILITIES SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $14.235 $18.132 $19.509 $24.559 $30.092
Accumulation Unit Value, End of Period $18.132 $19.509 $24.559 $30.092 $33.581
Number of Units Outstanding, End of Period 143,537 85,924 47,043 36,286 32,582
INCOME BUILDER SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period - - $10.000 $12.124 $12.389
Accumulation Unit Value, End of Period - - $12.124 $12.389 $13.131
Number of Units Outstanding, End of Period - - 834 1,129 1,129
DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $13.425 $18.128 $22.248 $27,667 $31.302
Accumulation Unit Value, End of Period $18.128 $22.248 $27.667 $31.302 $30.249
Number of Units Outstanding, End of Period 316,921 217,872 143,983 105,536 89,747
<PAGE>
Sub-Accounts 1995 1996 1997 1998 1999
CAPITAL GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $11.533 $15.177 $16.760 $20.666 $24.478
Accumulation Unit Value, End of Period $15.177 $16.760 $20.666 $24.478 $32.303
Number of Units Outstanding, End of Period 48,100 42,448 21,794 13,550 12,452
GLOBAL DIVIDEND GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $9.942 $12.012 $13.984 $15.511 $17.282
Accumulation Unit Value, End of Period $12.012 $13.984 $15.511 $17.282 $19.616
Number of Units Outstanding, End of Period 34,628 34,174 24,523 18,128 19,736
EUROPEAN GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $15.484 $19.299 $24.837 $28.545 $35.033
Accumulation Unit Value, End of Period $19.299 $24.837 $28.545 $35.033 $44.783
Number of Units Outstanding, End of Period 19,230 15,262 12,639 9,449 8,467
PACIFIC GROWTH SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $9.248 $9.682 $9.957 $6.142 $5.448
Accumulation Unit Value, End of Period $9.682 $9.957 $6.142 $5.448 $8.959
Number of Units Outstanding, End of Period 26,915 19,437 14.701 9,180 7,941
EQUITY SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $30.855 $43.585 $48.483 $65.969 $85.200
Accumulation Unit Value, End of Period $43.585 $48.483 $65.969 $85.200 $133.781
Number of Units Outstanding, End of Period 24,927 29,450 14,657 7,526 8,059
STRATEGIST SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $18.728 $20.284 $23.098 $26.006 $32.583
Accumulation Unit Value, End of Period $20.284 $23.098 $26.006 $32.583 $37.855
Number of Units Outstanding, End of Period 137,461 117,180 14,657 26,235 19,825
</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%.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments 2
The Contract 3
Purchases 3
Tax-free Exchanges (1035 Exchanges, Rollovers and
Transfers) 3
Calculation of Accumulation Unit Values 4
Calculation of Variable Income Payments 5
General Matters 6
Incontestability 6
Settlements 6
Safekeeping of the Variable Account's Assets 6
Premium Taxes 6
Tax Reserves 6
Federal Tax Matters 7
Qualified Plans 8
Experts 10
Financial Statements 11
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.
<PAGE>
ALLSTATE NEW YORK VARIABLE ANNUITY
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<S> <C>
Allstate Life Insurance Company of New York Statement of Additional Information
Allstate Life of New York Variable Annuity Account dated May 1, 2000
One Allstate Drive
Farmingville, NY 11738
1 (800) 256 - 9392
</TABLE>
This Statement of Additional Information supplements the information in the
prospectus for the Allstate New York Variable Annuity that we offer. This
Statement of Additional Information is not a prospectus. You should read it with
the prospectus, dated May 1, 2000, 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
Advisor.
Except as otherwise noted, this Statement of Additional Information uses the
same defined terms as the prospectus for the Allstate New York Variable Annuity
that we offer.
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments 2
The Contract 3
Purchases 3
Tax-free Exchanges (1035 Exchanges, Rollovers and
Transfers) 3
Calculation of Accumulation Unit Values 4
Calculation of Variable Income Payments 5
General Matters 6
Incontestability 6
Settlements 6
Safekeeping of the Variable Account's Assets 6
Premium Taxes 6
Tax Reserves 6
Federal Tax Matters 7
Qualified Plans 8
Experts 10
Financial Statements 11
<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. We no longer offer the Contract for sale. If you already own a
Contract, you may continue to make additional purchase payments.
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 4 p.m. Eastern 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
We may require you to return your Contract 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.
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities.
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 income on a
qualified plan and IRA investments is tax deferred and variable annuities held
by such plans do not receive any additional tax deferral. You should review the
annuity features, including all benefits and expenses, prior to purchasing a
variable annuity in a qualified plan or IRA. Allstate New York reserves the
right to limit the availability of the Contract for use with any of the
Qualified Plans listed below. 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 related financial statement schedules of Allstate
New York as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 that appear in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements of the Variable Account as of December 31, 1999 and for
each of the periods in the two years then ended that appear in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and are included in
reliance upon the report 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 the financial statements
and related financial statement schedules of Allstate New York and the
accompanying Independent Auditors' Reports appear in 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 Contacts.
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 Financial Position of Allstate
Life Insurance Company of New York (the "Company", an affiliate of The Allstate
Corporation) as of December 31, 1999 and 1998, 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, 1999. 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, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 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 25, 2000
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1999 1998
------------------ -------------------
<S> <C> <C>
($ in thousands, except par value data)
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $1,858,216 and $1,648,972) $ 1,912,545 $ 1,966,067
Mortgage loans 166,997 145,095
Short-term 46,037 76,127
Policy loans 31,109 29,620
----------------- ------------------
Total investments 2,156,688 2,216,909
Cash 1,135 3,117
Deferred policy acquisition costs 106,932 87,830
Accrued investment income 25,712 22,685
Reinsurance recoverables 1,949 2,210
Other assets 7,803 9,887
Separate Accounts 443,705 366,247
----------------- ------------------
TOTAL ASSETS $ 2,743,924 $ 2,708,885
================= ==================
LIABILITIES
Reserve for life-contingent contract benefits $ 1,098,016 $ 1,208,104
Contractholder funds 839,157 703,264
Current income taxes payable 10,132 14,029
Deferred income taxes 3,077 25,449
Other liabilities and accrued expenses 41,218 23,463
Payable to affiliates, net 4,731 38,835
Separate Accounts 443,705 366,247
----------------- ------------------
TOTAL LIABILITIES 2,440,036 2,379,391
----------------- ------------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 13)
SHAREHOLDER'S EQUITY
Common stock, $25 par value, 100,000 and 80,000
shares authorized, issued and outstanding 2,500 2,000
Additional capital paid-in 45,787 45,787
Retained income 225,367 198,801
Accumulated other comprehensive income:
Unrealized net capital gains 30,234 82,906
----------------- ------------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 30,234 82,906
----------------- ------------------
TOTAL SHAREHOLDER'S EQUITY 303,888 329,494
----------------- ------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 2,743,924 $ 2,708,885
================= ==================
</TABLE>
See notes to financial statements.
2
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($ in thousands) 1999 1998 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
REVENUES
Premiums (net of reinsurance ceded
of $4,253, $3,204 and $3,087 ) $ 63,748 $ 85,771 $ 90,366
Contract charges 38,626 33,281 28,597
Net investment income 148,331 134,413 124,887
Realized capital gains and losses (2,096) 4,697 701
--------- --------- --------
248,609 258,162 244,551
--------- --------- --------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $1,166, $997 and $1,985 ) 178,267 183,839 179,872
Amortization of deferred policy acquisition costs 8,985 7,029 5,023
Operating costs and expenses 20,151 24,703 23,644
--------- --------- --------
207,403 215,571 208,539
--------- --------- --------
INCOME FROM OPERATIONS
BEFORE INCOME TAX EXPENSE 41,206 42,591 36,012
Income tax expense 14,640 14,934 13,296
--------- --------- --------
NET INCOME 26,566 27,657 22,716
--------- --------- --------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER TAX
Change in unrealized net capital gains and losses (52,672) 18,427 27,627
--------- -------- --------
COMPREHENSIVE (LOSS) INCOME $ (26,106) $ 46,084 $ 50,343
========= ======== ========
</TABLE>
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997
------------------ ------------------- -----------------
($ in thousands)
COMMON STOCK
<S> <C> <C> <C>
Balance, beginning of year $ 2,000 $ 2,000 $ 2,000
Issuance of new shares of stock 500 - -
----------------- ----------------- -----------------
Balance, end of year 2,500 2,000 2,000
----------------- ----------------- -----------------
ADDITIONAL CAPITAL PAID-IN $ 45,787 $ 45,787 $ 45,787
----------------- ----------------- -----------------
RETAINED INCOME
Balance, beginning of year $ 198,801 $ 171,144 $ 148,428
Net income 26,566 27,657 22,716
----------------- ----------------- -----------------
Balance, end of year 225,367 198,801 171,144
----------------- ----------------- -----------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 82,906 $ 64,479 $ 36,852
Change in unrealized net capital gains
and losses (52,672) 18,427 27,627
----------------- ----------------- -----------------
Balance, end of year 30,234 82,906 64,479
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY $ 303,888 $ 329,494 $ 283,410
================= ================= =================
</TABLE>
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($ in thousands) 1999 1998 1997
------------------ ------------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 26,566 $ 27,657 $ 22,716
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization and other non-cash items (37,619) (34,890) (31,112)
Realized capital gains and losses 2,096 (4,697) (701)
Interest credited to contractholder funds 36,736 41,200 31,667
Changes in:
Life-contingent contract benefits and
contractholder funds 38,527 53,343 68,114
Deferred policy acquisition costs (17,262) (16,693) (10,781)
Income taxes payable 2,094 13,865 (158)
Other operating assets and liabilities 13,049 (15,974) 8,545
----------------- ----------------- -----------------
Net cash provided by operating activities 64,187 63,811 88,290
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities 161,443 65,281 15,723
Investment collections
Fixed income securities 21,822 159,648 120,061
Mortgage loans 7,479 5,855 5,365
Investments purchases
Fixed income securities (383,961) (292,444) (236,984)
Mortgage loans (31,888) (24,252) (35,200)
Change in short-term investments, net 29,493 (55,846) 16,342
Change in policy loans, net (1,489) (2,020) (2,241)
----------------- ----------------- -----------------
Net cash used in investing activities (197,101) (143,778) (116,934)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 500 - -
Contractholder fund deposits 197,439 137,473 79,384
Contractholder fund withdrawals (67,007) (54,782) (51,374)
----------------- ----------------- -----------------
Net cash provided by financing activities 130,932 82,691 28,010
----------------- ----------------- -----------------
NET (DECREASE) INCREASE IN CASH (1,982) 2,724 (634)
CASH AT THE BEGINNING OF YEAR 3,117 393 1,027
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 1,135 $ 3,117 $ 393
================= ================= =================
</TABLE>
See notes to financial statements.
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 1999 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 through a combination of exclusive agencies, securities firms,
banks, specialized brokers and through direct response marketing. Life insurance
consists of traditional products, including term and whole life,
interest-sensitive life and immediate annuities with life contingencies. Savings
products include deferred annuities and immediate annuities without life
contingencies. Deferred annuities include fixed rate, market value adjusted and
variable annuities. Group pension savings products include immediate annuities
also referred to as retirement annuities. In 1999, annuity premiums and deposits
represented 76.2% of the Company's total statutory premiums and deposits.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may 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 negatively
impact the Company's sales.
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 policy acquisition costs, and certain reserves for life-contingent
contract benefits, is reflected as a component of shareholder's equity.
Provisions are recognized for declines in the value of fixed income securities
that are other than temporary. Such writedowns are included in realized capital
gains and losses.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
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 short-term investment
dividends. 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 financial futures contracts which are derivative financial
instruments. By meeting specific criteria these futures are designated as
accounting hedges and accounted for on a deferral basis. In order to qualify as
accounting hedges, financial futures contracts must reduce the primary market
risk exposure on an enterprise or transaction basis in conjunction with a 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.
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 financial 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 deferred and amortized over the remaining life
of the hedged item.
The Company accounts for financial futures 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. Under deferral accounting, gains and losses on financial futures
contracts are deferred as other liabilities and accrued expenses. Once the
anticipated transaction occurs, the deferred gains and losses are considered
part of the cost basis of the asset and reported net of tax in shareholder's
equity. The gains and losses deferred are then recognized in conjunction with
the earnings on the hedged item. Fees and commissions paid on these derivatives
are also deferred as an adjustment to the carrying value of the hedged item.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Traditional life insurance products consist principally of products with fixed
and guaranteed premiums and benefits, primarily term and whole life insurance
products and certain annuities with life contingencies. Premiums from these
products are recognized as revenue when due. Benefits are recognized in relation
to
7
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
such revenue so as to result in the recognition of profits over the life of
the policy and are reflected in contract benefits.
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to the contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of the related contractholder account balance.
Limited payment contracts, a type of life-contingent immediate annuity or
traditional life product, are contracts that provide insurance protection over a
contract period that extends beyond the period in which premiums are collected.
Gross premiums in excess of the net premium on limited payment contracts are
deferred and recognized over the contract period. Contract benefits are
recognized in relation to such revenue so as to result in the recognition of
profits over the life of the policy.
Contracts that do not subject the Company to significant risks arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities and immediate annuities without life
contingencies are considered investment contracts. Deposits received for such
contracts are reported as deposits to contractholder funds. Contract charge
revenue for investment contracts consists of charges assessed against the
contractholder account balance for contract administration and surrenders.
Contract benefits include interest credited and claims incurred in excess of the
related contractholder account balance.
Crediting rates for fixed rate annuities and interest-sensitive life contracts
are adjusted periodically by the Company to reflect current market conditions.
Investment contracts also include variable annuity contracts which are sold as
Separate Accounts products. The assets supporting these products are legally
segregated and available only to settle Separate Accounts contract obligations.
Deposits received are reported as Separate Accounts liabilities. The Company's
contract charge revenue for these contracts consists of charges assessed against
the Separate Accounts fund balances for contract maintenance, administration,
mortality, expense and surrenders.
DEFERRED POLICY ACQUISITION COSTS
Certain costs which vary with and are primarily related to acquiring life and
savings business, principally agents and brokers remuneration, premium taxes,
certain underwriting costs and direct mail solicitation expenses, are deferred
and amortized into income. Deferred policy acquisition costs are periodically
reviewed as to recoverability and written down where necessary.
For traditional life insurance and limited payment contracts, these costs are
amortized in proportion to the estimated revenue on such business. Assumptions
relating to estimated revenue, as well as to all other aspects of the deferred
acquisition costs and reserve calculations, are determined based upon conditions
as of the date of the policy issue and are generally not revised during the life
of the policy. Any deviations from projected business inforce, resulting from
actual policy terminations differing from expected levels, and any estimated
premium deficiencies change the rate of amortization in the period such events
occur. Generally, the amortization period for these contracts approximates the
estimated lives of the policies.
For interest-sensitive life and investment contracts, the costs are amortized in
proportion to the estimated gross profits on such business over the estimated
lives of the contract periods. Gross profits are determined
8
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
at the date of policy issue and comprise estimated investment, mortality,
expense margins and surrender charges. Assumptions underlying the gross profits
are periodically updated to reflect actual experience, and changes in the amount
or timing of estimated gross profits will result in adjustments to the
cumulative amortization of these costs.
The present value of future profits inherent in acquired blocks of insurance is
classified as a component of deferred policy acquisition costs. The present
value of future profits is amortized over the life of the blocks of insurance
using current crediting rates.
To the extent unrealized gains or losses on securities carried at fair value
would result in an adjustment of estimated gross profits had those gains or
losses actually been realized, the related carrying value of deferred
acquisition costs, including present value of future profits, are adjusted
together with accumulated unrealized net capital gains included in shareholder's
equity.
REINSURANCE RECOVERABLE
In the normal course of business, the Company seeks to limit aggregate and
single exposure to losses on large risks by purchasing reinsurance from other
insurers. Reinsurance recoverables are estimated based upon assumptions
consistent with those used in establishing the underlying reinsured contacts.
Insurance liabilities are reported gross of reinsurance recoverables.
Reinsurance does not extinguish the Company's primary liability under the
policies written and therefore reinsurers and amounts recoverable therefrom are
regularly evaluated by the Company and allowances for uncollectible reinsurance
are established as appropriate.
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred tax
assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities at the enacted tax
rates. The principal assets and liabilities giving rise to such differences are
insurance reserves and deferred policy 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 deferred variable annuity contracts, the assets and
liabilities of which are legally segregated and recorded as assets and
liabilities of the Separate Accounts. Absent any contract provisions wherein the
Company contractually guarantees either a minimum return or account value to the
beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated investment objectives.
The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claims to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
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 and
administration fees, and mortality, surrender and expense charges.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, group retirement annuities, immediate annuities with life
contingencies and certain variable annuity guarantees, is computed on the basis
of assumptions as to mortality, future investment yields, terminations and
9
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
expenses at the time the policy is issued. 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. Detailed
reserve assumptions and reserve interest rates are outlined in Note 7. 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 interest-sensitive life and
certain investment contracts. Deposits received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received, net of
commissions, and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Detailed information
on crediting rates and surrender and withdrawal protection on contractholder
funds are outlined in Note 7.
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. The contractual amounts and fair values of these instruments
are presented in Note 5.
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 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." 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. Adoption of this statement was not material to the
Company's results of operations or financial position.
PENDING ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board delayed the effective
date of Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. This statement
requires that all derivatives be recognized on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in the
fair value of the hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. Additionally, the change in fair value of a derivative
which is not effective as a hedge will be immediately recognized in earnings.
The delay was effected through the issuance of SFAS No. 137, which extends the
SFAS No. 133 requirements to fiscal years beginning after June 15, 2000. As
such, the Company expects to adopt the provisions of SFAS No. 133 as of January
1, 2001. The impact of this statement is dependent upon the Company's derivative
positions and market conditions existing at the date of adoption. Based on
existing interpretations of the requirements of SFAS
10
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
No. 133, the impact of the 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 recoverables 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.
The following amounts were ceded to ALIC under reinsurance agreements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums $ 3,408 $ 2,519 $ 2,171
Policy benefits 211 315 327
</TABLE>
Included in reinsurance recoverables at December 31, 1999 and 1998 are the net
amounts owed to ALIC of $458 and $3, respectively.
STRUCTURED SETTLEMENT ANNUITIES
The Company issued $14,561, $12,747 and $12,766 of structured settlement
annuities, a type of immediate annuity, in 1999, 1998 and 1997, respectively, at
prices determined based upon interest rates in effect at the time of purchase,
to fund structured settlements in matters involving AIC. Of these amounts,
$4,298, $5,152 and $3,468 relate to structured settlement annuities with life
contingencies and are included in premium income in 1999, 1998 and 1997,
respectively. Additionally, the reserve for life-contingent contract benefits
was increased by approximately 94% of such premium received in each of these
years. In most cases, these annuities were issued to Allstate Settlement
Corporation ("ASC"), a subsidiary of ALIC, which, under a "qualified
assignment", assumed AIC's obligation to make the future payments.
AIC has issued surety bonds to guarantee the payment of structured settlement
benefits assumed by ASC (from both AIC and non-related parties) and funded by
certain annuity contracts issued by the Company. ASC has entered into General
Indemnity Agreements pursuant to which it indemnified AIC for any liabilities
associated with the surety bonds and gives AIC certain collateral security
rights with respect to the annuities and certain other rights in the event of
any defaults covered by the surety bonds. Reserves recorded by the Company for
annuities related to the surety bonds were $1.19 billion and $1.08 billion at
December 31, 1999 and 1998, respectively.
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. In
addition, the Company shares the services of employees with AIC. The Company
reimburses AIC and ALIC for the operating expenses incurred on behalf of the
Company. The Company is charged for the cost of these operating expenses based
on the level of services provided. Operating expenses, including compensation
and retirement and other benefit programs, allocated to the Company were
$16,155, $23,369 and $19,425 in 1999, 1998 and 1997, respectively. A
11
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
portion of these expenses relate to the acquisition of 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>
GROSS UNREALIZED
AMORTIZED ---------------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
U.S. government and agencies $ 413,875 $ 53,717 $ (2,705) $ 464,887
Municipal 60,256 997 (1,976) 59,277
Corporate 996,298 36,303 (31,695) 1,000,906
Foreign government 61,987 3,217 (639) 64,565
Mortgage-backed securities 291,304 4,770 (7,370) 288,704
Asset-backed securities 34,496 26 (316) 34,206
-------------- -------------- -------------- --------------
Total fixed income securities $ 1,858,216 $ 99,030 $ (44,701) $ 1,912,545
============== ============== ============== ==============
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
============== ============== ============== ==============
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---- -----
<S> <C> <C>
Due in one year or less $ 6,720 $ 6,798
Due after one year through five years 168,795 168,859
Due after five years through ten years 217,305 218,381
Due after ten years 1,139,596 1,195,597
--------------- ---------------
1,532,416 1,589,635
Mortgage- and asset-backed securities 325,800 322,910
--------------- ---------------
Total $ 1,858,216 $ 1,912,545
=============== ===============
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
12
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 135,561 $ 124,100 $ 116,763
Mortgage loans 12,346 10,309 7,896
Other 3,495 2,940 2,200
------------- ------------- -------------
Investment income, before expense 151,402 137,349 126,859
Investment expense 3,071 2,936 1,972
------------- ------------- -------------
Net investment income $ 148,331 $ 134,413 $ 124,887
============= ============= =============
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (2,207) $ 4,755 $ 955
Mortgage loans 42 (65) (221)
Other 69 7 (33)
------------ ----------- -------------
Realized capital gains and losses (2,096) 4,697 701
Income taxes (765) 1,644 245
------------ ----------- -------------
Realized capital gains and losses, after tax $ (1,331) $ 3,053 $ 456
============ =========== =============
</TABLE>
Excluding calls and prepayments, gross gains of $1,713, $2,905 and $471 and
gross losses of $3,920, $164 and $105 were realized on sales of fixed income
securities during 1999, 1998 and 1997, respectively.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1999 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 $1,858,216 $1,912,545 $ 99,030 $(44,701) $ 54,329
========== ========== ======== ========
Reserve for life-contingent
contract benefits (7,815)
Deferred income taxes (16,280)
--------
Unrealized net capital gains $ 30,234
========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $(262,766) $ 70,948 $123,519
Reserves for life contingent-contract benefits 179,891 (42,251) (80,155)
Deferred income taxes 28,362 (9,922) (14,876)
Deferred policy acquisition costs and other 1,841 (348) (861)
--------- -------- --------
(Decrease) increase in unrealized net capital gains $ (52,672) $ 18,427 $ 27,627
========= ======== ========
</TABLE>
13
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to valuation
allowances on mortgage loans were $114 and $261 in 1998 and 1997, respectively.
There was not a provision for investment losses in 1999.
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, 1999 and 1998.
Valuation allowances for mortgage loans at December 31, 1999, 1998 and 1997 were
$600, $600 and $486, respectively. For the years ended December 31, 1999, 1998
and 1997, there were no reductions of the mortgage loan valuation allowance for
dispositions of impaired loans. Net additions to the mortgage loan valuation
allowances were $114 and $261 for the years ended December 31, 1998 and 1997,
respectively. There were no additions or reductions to the mortgage loan
valuation allowance for the year ended December 31, 1999.
INVESTMENT CONCENTRATION FOR MUNICIPAL BOND AND COMMERCIAL MORTGAGE PORTFOLIOS
AND OTHER INVESTMENT INFORMATION
The Company maintains a diversified portfolio of municipal bonds. The largest
concentrations in the portfolio are presented below. Except for the following,
holdings in no other state exceeded 5% of the portfolio at December 31, 1999:
<TABLE>
<CAPTION>
(% of municipal bond portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
Arizona 22.7% - %
California 20.2 17.4
Ohio 16.4 30.2
Illinois 11.6 21.1
Pennsylvania 7.5 -
Indiana 5.0 -
</TABLE>
The Company's mortgage loans are collateralized by a variety of commercial real
estate property types located throughout the United States. Substantially all of
the commercial mortgage loans are non-recourse to the borrower. The states with
the largest portion of the commercial mortgage loan portfolio are listed below.
Except for the following, holdings in no other state exceeded 5% of the
portfolio at December 31, 1999:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
California 34.9% 41.9%
New York 27.6 26.3
Illinois 13.2 15.8
New Jersey 12.3 6.9
Pennsylvania 9.7 6.2
</TABLE>
14
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
Retail 33.1% 39.5%
Office buildings 18.9 11.7
Warehouse 18.5 19.2
Apartment complex 15.8 18.5
Industrial 4.6 5.5
Other 9.1 5.6
----- -----
100.0% 100.0%
===== =====
</TABLE>
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1999, for loans that were not in foreclosure are as follows:
<TABLE>
<CAPTION>
NUMBER OF LOANS CARRYING VALUE PERCENT
--------------- -------------- -------
<S> <C> <C>
2000 2 $ 4,475 2.7%
2001 5 7,165 4.3
2002 2 5,904 3.5
2004 4 5,289 3.2
Thereafter 33 144,164 86.3
----- --------------- -----
Total 46 $ 166,997 100.0%
===== =============== =====
</TABLE>
In 1999, there were no commercial mortgage loans which were contractually due.
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value of $1,903
were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets, incurs various financial liabilities and enters into agreements
involving derivative financial instruments and other off-balance-sheet financial
instruments. The fair value estimates of financial instruments presented on the
following page are not necessarily indicative of the amounts the Company might
pay or receive in actual market transactions. Potential taxes and other
transaction costs have not been considered in estimating fair value. The
disclosures that follow do not reflect the fair value of the Company as a whole
since a number of the Company's significant assets (including deferred policy
acquisition costs and reinsurance recoverables) and liabilities (including
traditional life and interest-sensitive life insurance reserves and deferred
income taxes) are not considered financial instruments and are not carried at
fair value. Other assets and liabilities considered financial instruments such
as accrued investment income and cash are generally of a short-term nature.
Their carrying values are assumed to approximate fair value.
15
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 1,912,545 $ 1,912,545 $ 1,966,067 $ 1,966,067
Mortgage loans 166,997 159,853 145,095 154,872
Short-term investments 46,037 46,037 76,127 76,127
Policy loans 31,109 31,109 29,620 29,620
Separate Accounts 443,705 443,705 366,247 366,247
</TABLE>
CARRYING VALUE AND FAIR VALUE INCLUDE THE EFFECTS OF DERIVATIVE FINANCIAL
INSTRUMENTS WHERE APPLICABLE.
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Mortgage loans are valued based
on discounted contractual cash flows. Discount rates are selected using current
rates at which similar loans would be made to borrowers with similar
characteristics, using similar properties as collateral. Loans that exceed 100%
loan-to-value are valued at the estimated fair value of the underlying
collateral. Short-term investments are highly liquid investments with maturities
of less than one year whose carrying value are deemed to approximate fair value.
The carrying value of policy loans are deemed to approximate 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:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $ 627,488 $ 605,113 $ 512,239 $ 518,448
Separate Accounts 443,705 443,705 366,247 366,247
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The only derivative financial instruments used by the Company are financial
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.
16
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The following table summarizes the contract amount, credit exposure, fair value
and carrying value of the Company's derivative financial instruments:
<TABLE>
<CAPTION>
CARRYING
VALUE
CONTRACT CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
------ -------- ----- -------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Financial futures contracts $ 8,700 $ - $ (29) $ 588
AT DECEMBER 31, 1998
Financial futures contracts $ 15,000 $ - $ (15) $ (223)
</TABLE>
CARRYING VALUE IS REPRESENTATIVE OF DEFERRED GAINS AND LOSSES.
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 as financial
futures contracts have limited off-balance-sheet credit risk as they are
executed on organized exchanges and require daily cash settlement of margins.
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 financial futures contracts to manage
its market risk related to anticipatory investment purchases and sales.
Financial futures used as hedges of anticipatory transactions pertain to
identified transactions which are probable to occur and are generally completed
within 90 days.
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 into 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
17
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
similar commitments to borrowers. At December 31, 1999, the Company had $10,000
in mortgage loan commitments which had a fair value of $100. The Company had no
mortgage loan commitments at December 31, 1998.
6. DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring business which were deferred and amortized for the
years ended December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, beginning of year $ 87,830 $ 71,946
Acquisition costs deferred 26,247 23,723
Amortization charged to income (8,861) (8,238)
Adjustment from unlocking assumptions (124) 1,209
Effect of unrealized gains/(losses) 1,840 (810)
------------ ------------
Balance, end of year $ 106,932 $ 87,830
============ ============
</TABLE>
7. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, the reserve for life-contingent contract benefits consists of
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Immediate annuities:
Structured settlement annuities $ 1,024,049 $ 1,135,813
Other immediate annuities 2,933 2,577
Traditional life 70,254 68,511
Other 780 1,203
----------- ------------
Total life-contingent contract benefits $ 1,098,016 $ 1,208,104
=========== ============
</TABLE>
The assumptions for mortality generally utilized in calculating reserves
include, the U.S. population with projected calendar year improvements and age
setbacks for impaired lives for structured settlement annuities; the 1983 group
annuity mortality table for other immediate annuities; and actual Company
experience plus loading for traditional life. Interest rate assumptions vary
from 3.5% to 10.3% for immediate annuities and 4.5% to 7.0% for traditional
life. Other estimation methods include the present value of contractually fixed
future benefits for structured settlement annuities, the present value of
expected future benefits based on historical experience for other immediate
annuities and the net level premium reserve method using the Company's
withdrawal experience rates for traditional life.
Premium deficiency reserves are established, if necessary and have been recorded
for the structured settlement annuity business, to the extent the unrealized
gains on fixed income securities would result in a premium deficiency had those
gains actually been realized. A liability of $8 million and $188 million is
included in the reserve for life-contingent contract benefits with respect to
this deficiency for the years ended December 31, 1999 and 1998, respectively.
The decrease in this liability in 1999 reflects declines in unrealized capital
gains on fixed income securities.
18
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest-sensitive life $211,729 $189,970
Fixed annuities:
Immediate annuities 303,564 285,977
Deferred annuities 273,864 177,317
Other investment contracts 50,000 50,000
-------- --------
Total contractholder funds $839,157 $703,264
======== ========
</TABLE>
Contractholder funds are equal to deposits received, net of commissions, and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 5.5% to 6.5% for interest-sensitive life contracts; 3.5% to 9.8% for
immediate annuities; 4.0% to 7.9% for deferred annuities and 6.6% for other
investment contracts. Withdrawal and surrender charge protection includes: i)
for interest-sensitive life, either a percentage of account balance or dollar
amount grading off generally over 20 years; and ii) for deferred annuities not
subject to a market value adjustment, either a declining or a level percentage
charge generally over nine years or less. Approximately 2% of deferred annuities
are subject to a market value adjustment.
8. CORPORATION RESTRUCTURING
On November 10, 1999 the Corporation announced a series of strategic initiatives
to aggressively expand its selling and servicing capabilities. The Corporation
also announced that it is implementing a program to reduce expenses by
approximately $600 million. The reduction will result in the elimination of
approximately 4,000 current non-agent positions, across all employment grades
and categories by the end of 2000, or approximately 10% of the Corporation's
non-agent work force. The impact of the reduction in employee positions is not
expected to materially impact the results of operations of the Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and enhanced
marketing and advertising. As a result of the cost reduction program, the
Corporation recorded restructuring and related charges of $81 million pretax
during the fourth quarter of 1999. The Corporation anticipates that additional
pretax restructuring related charges of approximately $100 million will be
expensed as incurred throughout 2000. The Company's allocable share of these
expenses were immaterial in 1999 and are expected to be immaterial in 2000.
9. INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
(the "Allstate Group") in the filing of a consolidated federal income tax return
and is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this
19
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
results in the Company's annual income tax provision being computed, with
adjustments, as if the Company filed a separate return.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears, Roebuck & Co.
("Sears") and, with its eligible domestic subsidiaries, was included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. Effective June 30, 1995, the Corporation and Sears entered into a new
tax sharing agreement, which governs their respective rights and obligations
with respect to federal income taxes for all periods during which the
Corporation was a subsidiary of Sears, 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:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
DEFERRED ASSETS
Life and annuity reserves $ 42,248 $ 41,073
Discontinued operations 366 364
Other postretirement benefits 296 328
Other assets 1,319 2,023
------------- -------------
Total deferred assets 44,229 43,788
DEFERRED LIABILITIES
Deferred policy acquisition costs (25,790) (20,573)
Unrealized net capital gains (16,280) (44,642)
Difference in tax bases of investments (3,194) (1,784)
Prepaid commission expense (682) (790)
Other liabilities (1,360) (1,448)
------------- -------------
Total deferred liabilities (47,306) (69,237)
------------- -------------
Net deferred liability $ (3,077) $ (25,449)
============= =============
</TABLE>
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 8,650 $ 13,679 $ 14,874
Deferred 5,990 1,255 (1,578)
-------- -------- --------
Total income tax expense $ 14,640 $ 14,934 $ 13,296
======== ======== ========
</TABLE>
The Company paid income taxes of $12,547, $3,788 and $13,350 in 1999, 1998 and
1997, respectively.
20
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
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:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax expense 1.6 1.6 2.2
Other (1.1) (1.5) (.3)
----- ----- -----
Effective income tax rate 35.5% 35.1% 36.9%
===== ===== =====
</TABLE>
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, 1999, 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.
10. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $214,738 and $196,416 at
December 31, 1999 and 1998, respectively. The Company's statutory net income was
$18,767, $13,649 and $18,592 for the years ended December 31, 1999, 1998 and
1997, respectively.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting 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
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, New York, continues to review
codification and existing statutory accounting requirements for desired
revisions to existing state laws and regulations. The requirements are not
expected to have a material impact on the statutory surplus of the Company.
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.
RISK-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and
21
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
interest rate risks. At December 31, 1999, RBC for the Company was significantly
above a level that would require regulatory action.
11. BENEFIT PLANS
PENSION PLANS
Defined benefit pension plans, sponsored by AIC, 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. AIC's funding policy for the
pension plans is to make annual contributions in accordance with accepted
actuarial cost methods. The (benefit) and cost to the Company included in net
income was $(263), $382 and $597 for the pension plans in 1999, 1998 and 1997,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
AIC 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 AIC's established retirement policy and are
continuously insured under AIC's group plans or other approved plans for ten or
more years prior to retirement. AIC shares the cost of the retiree medical
benefits with retirees based on years of service, with AIC's share being subject
to a 5% limit on annual medical cost inflation after retirement. AIC's
postretirement benefit plans currently are not funded. AIC has the right to
modify or terminate these plans.
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries, including the
Company 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 paid $176, $567, $164 in 1999, 1998 and 1997, respectively for
profit sharing.
12. 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>
<CAPTION>
1999 1998 1997
------------------------------ ----------------------------- ------------------------------
AFTER- AFTER- AFTER-
PRETAX TAX TAX PRETAX TAX TAX PRETAX TAX TAX
------ --- ------ ------ --- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNREALIZED CAPITAL GAINS
AND LOSSES:
Unrealized holding
(losses) gains arising
during the period $(83,241) $ 29,134 $(54,107) $ 33,218 $(11,626) $ 21,592 $ 43,686 $(15,290) $ 28,396
Less: reclassification
adjustments (2,207) 772 (1,435) 4,869 (1,704) 3,165 1,183 (414) 769
-------- -------- -------- -------- -------- -------- -------- -------- --------
Unrealized net capital
(losses) gains (81,034) 28,362 (52,672) 28,349 (9,922) 18,427 42,503 (14,876) 27,627
-------- -------- -------- -------- -------- -------- -------- -------- --------
Other comprehensive
(loss) income $(81,034) $ 28,362 $(52,672) $ 28,349 $ (9,922) $ 18,427 $ 42,503 $(14,876) $ 27,627
======== ======== ========= ======== ======== ======== ======== ======== ========
</TABLE>
22
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
13. 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.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expense
related to these funds have been immaterial.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate any exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization which advocates
ethical market conduct.
23
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1999 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 14,140,049 $ 1,066,993 $ 13,073,056
============ =========== ============
Premiums and contract charges:
Life and annuities $ 99,760 $ 3,397 $ 96,363
Accident and health 6,867 856 6,011
------------ ----------- ------------
$ 106,627 $ 4,253 $ 102,374
============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 12,656,826 $ 857,500 $ 11,799,326
============ ========= ============
Premiums and contract charges:
Life and annuities $ 116,455 $ 2,318 $ 114,137
Accident and health 5,801 886 4,915
------------ --------- ------------
$ 122,256 $ 3,204 $ 119,052
============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
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
============ ========= ============
</TABLE>
24
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Allowance for estimated losses
on mortgage loans $ 600 $ - $ - $ 600
============ ============ ============ ============
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
============ ============ ============ ============
</TABLE>
25
<PAGE>
ALLSTATE LIFE OF NEW
YORK VARIABLE
ANNUITY ACCOUNT
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
AND FOR THE PERIODS ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1998 AND INDEPENDENT
AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Allstate Life Insurance Company of New York:
We have audited the accompanying statement of net assets of Allstate Life of New
York Variable Annuity Account as of December 31, 1999 (including the assets
of each of the individual sub-accounts which comprise the Account as
disclosed in Note 1), and the related statements of operations for the period
then ended and the statements of changes in net assets for each of the periods
in the two year period then ended for each of the individual sub-accounts
which comprise the Account. These financial statements are the responsibility
of 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 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. Our procedures included
confirmation of securities owned at December 31, 1999 by correspondence with
the account custodians. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Allstate Life of New York Variable
Annuity Account as of December 31, 1999 (including the assets of each of the
individual sub-accounts which comprise the Account), and the results of
operations for each of the individual sub-accounts for the period then ended
and the changes in their net assets for each of the periods in the two year
period then ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27,2000
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Allocation to Sub-Accounts investing in the Morgan Stanley Dean Witter Variable Investment Series:
Money Market, 519,829 shares (cost $519,829) $ 519,829
High Yield, 26,649 shares (cost $139,449) 115,392
Equity, 20,015 shares (cost $586,450) 1,078,432
Quality Income Plus, 68,929 shares (cost $712,643) 679,640
Strategist, 39,302 shares (cost $493,159) 750,672
Dividend Growth, 148,223 shares (cost $2,136,907) 2,715,443
Utilities, 47,791 shares (cost $615,286) 1,094,406
European Growth, 12,051 shares (cost $205,432) 379,241
Capital Growth, 16,954 shares (cost $233,493) 402,322
Global Dividend Growth, 26,818 shares (cost $342,405) 387,256
Pacific Growth, 8,392 shares (cost $72,594) 71,167
Income Builder, 1,296 shares (cost $14,262) 14,824
------------------
Total Assets 8,208,624
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 2,505
------------------
Net Assets $ 8,206,119
==================
</TABLE>
See notes to financial statements.
2
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
------------------------------------------------------------------------------
For the Year Ended December 31, 1999
-----------------------------------------------------------------------------
Quality
Money High Income
Market Yield Equity Plus Strategist
----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 24,043 $ 17,216 $ 92,116 $ 57,075 $ 16,253
Charges from Allstate Life Insurance Company
of New York:
Mortality and expense risk (5,129) (1,147) (7,604) (8,842) (7,486)
----------- ------------- ------------- ------------- -------------
Net investment income (loss) 18,914 16,069 84,512 48,233 8,767
----------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 186,779 9,467 116,930 287,634 233,037
Cost of investments sold 186,779 10,237 73,256 291,842 168,457
----------- ------------- ------------- ------------- -------------
Net realized gains (losses) - (770) 43,674 (4,208) 64,580
----------- ------------- ------------- ------------- -------------
Change in unrealized gains (losses) - (18,067) 249,830 (94,145) 36,792
----------- ------------- ------------- ------------- -------------
Net gains (losses) on investments - (18,837) 293,504 (98,353) 101,372
----------- ------------- ------------- ------------- -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 18,914 $ (2,768) $ 378,016 $ (50,120) $ 110,139
=========== ============= ============= ============= =============
</TABLE>
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------------
For the Year Ended December 31, 1999
-----------------------------------------------------------------------------
Global
Dividend European Capital Dividend
Growth Utilities Growth Growth Growth
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 505,894 $ 48,801 $ 34,838 $ 40,257 $ 28,159
Charges from Allstate Life Insurance Company
of New York:
Mortality and expense risk (30,815) (10,905) (3,314) (3,252) (3,373)
----------- ------------ ------------- ------------ -------------
Net investment income (loss) 475,079 37,896 31,524 37,005 24,786
----------- ------------ ------------- ------------ -------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 559,156 137,095 47,258 41,972 41,079
Cost of investments sold 371,272 79,754 31,837 26,374 35,921
----------- ------------ ------------- ------------ -------------
Net realized gains (losses) 187,884 57,341 15,421 15,598 5,158
----------- ------------ ------------- ------------ -------------
Change in unrealized gains (losses) (747,378) 23,741 36,310 43,894 9,469
----------- ------------ ------------- ------------ -------------
Net gains (losses) on investments (559,494) 81,082 51,731 59,492 14,627
----------- ------------ ------------- ------------ -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ (84,415) $ 118,978 $ 83,255 $ 96,497 $ 39,413
=========== ============ ============= ============= ==============
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter
Variable Investment Series
Sub-Accounts
----------------------------------------
For the Year Ended
December 31, 1999
----------------------------------------
Pacific Income
Growth Builder
-------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 473 $ 1,014
Charges from Allstate Life Insurance Company
of New York:
Mortality and expense risk (552) (144)
--------------- ---------------
Net investment income (loss) (79) 870
--------------- ---------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 12,437 144
Cost of investments sold 19,787 139
--------------- ---------------
Net realized gains (losses) (7,350) 5
--------------- ---------------
Change in unrealized gains (losses) 34,971 (36)
--------------- ---------------
Net gains (losses) on investments 27,621 (31)
--------------- ---------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 27,542 $ 839
=============== ===============
</TABLE>
See notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------------
Money Market High Yield Equity
---------------------- --------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
FROM OPERATIONS
Net investment income (loss) $ 18,914 $ 37,083 $ 16,069 $ 3,489 $ 84,512 $ 90,681
Net realized gains (losses) - - (770) (461) 43,674 160,542
Change in unrealized gains (losses) - - (18,067) (5,147) 249,830 (82,337)
-------- -------- --------- -------- -------- ---------
Change in net assets resulting from operations 18,914 37,083 (2,768) (2,119) 378,016 168,886
-------- -------- --------- -------- -------- ---------
FROM CAPITAL TRANSACTIONS
Deposits - - 175 4,000 4,646 2,700
Benefit payments - - (5,636) - (10,615) -
Payments on termination (127,619) (428,041) (2,724) (6,267) (73,466) (412,962)
Contract maintenance charges (213) (218) (43) (10) (522) (375)
Transfers among the sub-accounts
and with the Fixed Account - net 148,861 39,583 99,198 1,237 138,806 (83,872)
-------- -------- --------- -------- -------- ---------
Change in net assets resulting
from capital transactions 21,029 (388,676) 90,970 (1,040) 58,849 (494,509)
-------- -------- --------- -------- -------- ---------
INCREASE (DECREASE) IN NET ASSETS 39,943 (351,593) 88,202 (3,159) 436,865 (325,623)
NET ASSETS AT BEGINNING OF PERIOD 479,728 831,321 27,155 30,314 641,238 966,861
-------- -------- --------- -------- -------- ---------
NET ASSETS AT END OF PERIOD $ 519,671 $ 479,728 $ 115,357 $ 27,155 $ 1,078,103 $ 641,238
========= ========= ========= ======== =========== =========
</TABLE>
See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------------
Quality Income Plus Strategist Dividend Growth
---------------------- --------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
FROM OPERATIONS
Net investment income (loss) $ 48,233 $ 46,695 $ 8,767 $ 122,264 $ 475,079 $ 358,256
Net realized gains (losses) (4,208) 19,712 64,580 206,998 187,884 495,613
Change in unrealized gains (losses) (94,145) 2,440 36,792 (58,777) (747,378) (425,000)
--------- --------- --------- ---------- ------------ ------------
Change in net assets resulting from operations (50,120) 68,847 110,139 270,485 (84,415) 428,869
--------- --------- --------- ---------- ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits - - - 200 14,131 16,730
Benefit payments (111,527) (49,907) - (11,838) (15,598) (37,392)
Payments on termination (27,466) (214,033) (116,795) (780,879) (205,659) (1,021,439)
Contract maintenance charges (348) (469) (437) (461) (1,465) (1,828)
Transfers among the sub-accounts
and with the Fixed Account - net (40,152) 196,523 (97,283) (67,272) (295,891) (64,959)
--------- --------- --------- ---------- ------------ ------------
Change in net assets resulting
from capital transactions (179,493) (67,886) (214,515) (860,250) (504,482) (1,108,888)
--------- --------- --------- ---------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS (229,613) 961 (104,376) (589,765) (588,897) (680,019)
NET ASSETS AT BEGINNING OF PERIOD 909,045 908,084 854,819 1,444,584 3,303,512 3,983,531
--------- --------- --------- ---------- ------------ ------------
NET ASSETS AT END OF PERIOD $ 679,432 $ 909,045 $ 750,443 $ 854,819 $ 2,714,615 $ 3,303,512
========= ========= ========= ========= ============ ===========
</TABLE>
See notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------------
Utilities European Growth Capital Growth
---------------------- --------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
FROM OPERATIONS
Net investment income (loss) $ 37,896 $ 74,837 $ 31,524 $ 23,663 $ 37,005 $ 26,943
Net realized gains (losses) 57,341 154,363 15,421 65,413 15,598 72,443
Change in unrealized gains (losses) 23,741 11,060 36,310 (1,544) 43,894 (25,751)
----------- ----------- --------- ---------- --------- ----------
Change in net assets resulting from operations 118,978 240,260 83,255 87,532 96,497 73,635
----------- ----------- --------- ---------- --------- ----------
FROM CAPITAL TRANSACTIONS
Deposits 1,125 1,320 - 3,000 94 -
Benefit payments (36,909) (65,307) (11,413) (527) (8,167) -
Payments on termination (89,169) (244,682) (24,273) (105,417) (11,950) (184,991)
Contract maintenance charges (656) (701) (158) (179) (148) (114)
Transfers among the sub-accounts
and with the Fixed Account - net 8,775 5,698 683 (14,166) (5,801) (7,253)
----------- ----------- --------- ---------- --------- ----------
Change in net assets resulting
from capital transactions (116,834) (303,672) (35,161) (117,289) (25,972) (192,358)
----------- ----------- --------- ---------- --------- ----------
INCREASE (DECREASE) IN NET ASSETS 2,144 (63,412) 48,094 (29,757) 70,525 (118,723)
NET ASSETS AT BEGINNING OF PERIOD 1,091,928 1,155,340 331,031 360,788 331,675 450,398
----------- ----------- --------- ---------- --------- ----------
NET ASSETS AT END OF PERIOD $ 1,094,072 $ 1,091,928 $ 379,125 $ 331,031 $ 402,200 $ 331,675
=========== =========== ========= ========= ========= =========
</TABLE>
See notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------------
Global Dividend Growth Pacific Growth Capital Appreciation (1)
---------------------- --------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
FROM OPERATIONS
Net investment income (loss) $ 24,786 $ 39,526 $ (79) $ 2,702 $ - $ (2)
Net realized gains (losses) 5,158 14,713 (7,350) (28,373) - 444
Change in unrealized gains (losses) 9,469 (19,099) 34,971 15,867 - (366)
---------- ---------- --------- --------- ------- -------
Change in net assets resulting from operations 39,413 35,140 27,542 (9,804) - 76
---------- ---------- --------- --------- ------- -------
FROM CAPITAL TRANSACTIONS
Deposits - 8,400 - 300 - -
Benefit payments (11,931) - (2,685) (154) - -
Payments on termination - (114,593) - (19,776) - (3,215)
Contract maintenance charges (155) (156) (30) (17) - 2
Transfers among the sub-accounts
and with the Fixed Account - net 46,530 4,096 (3,693) (10,826) - -
---------- ---------- --------- --------- ------- -------
Change in net assets resulting
from capital transactions 34,444 (102,253) (6,408) (30,473) - (3,213)
---------- ---------- --------- --------- ------- -------
INCREASE (DECREASE) IN NET ASSETS 73,857 (67,113) 21,134 (40,277) - (3,137)
NET ASSETS AT BEGINNING OF PERIOD 313,281 380,394 50,011 90,288 - 3,137
---------- ---------- --------- --------- ------- -------
NET ASSETS AT END OF PERIOD $ 387,138 $ 313,281 $ 71,145 $ 50,011 $ - $ -
========== ========== ========= ========= ======= =======
</TABLE>
(1) As of the close of business on March 19, 1999, the Capital Appreciation
Sub-Account merged with and into the Equity Sub-Account.
See notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
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Morgan Stanley Dean Witter
Variable Investment Series
Sub-Accounts
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Income Builder
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1999 1998
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FROM OPERATIONS
Net investment income (loss) $ 870 $ 685
Net realized gains (losses) 5 (34)
Change in unrealized gains (losses) (36) (484)
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Change in net assets resulting from operations 839 167
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FROM CAPITAL TRANSACTIONS
Deposits - -
Benefit payments - -
Payments on termination - -
Contract maintenance charges (3) (4)
Transfers among the sub-accounts
and with the Fixed Account - net - 3,710
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Change in net assets resulting
from capital transactions (3) 3,706
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INCREASE (DECREASE) IN NET ASSETS 836 3,873
NET ASSETS AT BEGINNING OF PERIOD 13,984 10,111
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NET ASSETS AT END OF PERIOD $ 14,820 $ 13,984
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See notes to financial statements.
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ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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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 ("Allstate New York"). The
assets of the Account are legally segregated from those of Allstate New
York. Allstate New York is wholly owned by Allstate Life Insurance
Company, a wholly owned subsidiary of Allstate Insurance Company, which is
wholly owned by The Allstate Corporation.
Allstate New York issues the Allstate Variable Annuity contract, the
deposits of which are invested at the direction of the contractholders in
the sub-accounts that comprise the Account. The Account accepts additional
deposits from existing contractholders, but is closed to new customers.
Absent any contract provisions wherein Allstate New York contractually
guarantees either a minimum return or account value to the beneficiaries
of the contractholders in the form of a death benefit, the contractholders
bear the investment risk that the sub-accounts may not meet their stated
objectives. The sub-accounts invest in the following underlying mutual
fund portfolios of the Morgan Stanley Dean Witter Variable Investment
Series (the "Funds").
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
Money Market Utilities
High Yield European Growth
Equity Captial Growth
Quality Income Plus Global Dividend Growth
Strategist Pacific Growth
Dividend Growth Income Builder
Allstate New York provides insurance and administrative services to the
contractholders for a fee. Allstate New York also maintains a fixed
account ("Fixed Account"), to which contractholders may direct their
deposits and receive a fixed rate of return. Allstate New York has sole
discretion to invest the assets of the Fixed Account, subject to
applicable law.
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,
1999.
INVESTMENT INCOME - Investment income consists of dividends declared by
the Funds and is recognized on the ex-dividend date.
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.
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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 Allstate
New York. Allstate New York is taxed as a life insurance company under the
Code. No federal income taxes are allocable to the Account as the Account
did not generate taxable income.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
3. EXPENSES
CONTRACT MAINTENANCE CHARGE - Allstate New York deducts an annual
maintenance charge of $30 on each contract anniversary and guarantees that
this charge will not increase over the life of the contract.
MORTALITY AND EXPENSE RISK CHARGE - Allstate New York assumes mortality
and expense risks related to the operations of the Account and deducts
charges daily at a rate equal to 1.25% per annum of the daily net assets
of the Account. The mortality and expense risk charge covers insurance
benefits available with the contract and certain expenses of the contract.
It also covers the risk that the current charges will not be sufficient in
the future to cover the cost of administering the contract. Allstate New
York guarantees that the rate of this charge will not increase over the
life of the contract.
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4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Unit activity during 1999:
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Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- ----------- ---------- ----------------- -----------------
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Investments in the Morgan Stanley Dean Witter Variable
Investment Series Sub-Accounts:
Money Market 23,326 9,721 (8,690) 24,357 $ 21.34
High Yield 881 3,217 (270) 3,828 30.14
Equity 7,526 1,699 (1,166) 8,059 133.78
Quality Income Plus 37,269 4,041 (11,904) 29,406 23.11
Strategist 26,235 313 (6,723) 19,825 37.86
Dividend Growth 105,536 857 (16,646) 89,747 30.25
Utilities 36,286 310 (4,014) 32,582 33.58
European Growth 9,449 243 (1,225) 8,467 44.78
Capital Growth 13,550 448 (1,546) 12,452 32.30
Global Dividend Growth 18,128 3,759 (2,151) 19,736 19.62
Pacific Growth 9,180 820 (2,059) 7,941 8.96
Income Builder 1,129 - - 1,129 13.13
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
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