<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
FILE NO.: 33-35445
FILE NO.: 811-6117
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 13 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14 /X/
--------------------
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(EXACT NAME OF REGISTRANT)
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
ONE ALLSTATE DRIVE
FARMINGVILLE, NEW YORK 11738
1-800-256-9392
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
RICHARD T. CHOI, ESQ. CHRISTINE A. EDWARDS, ESQ.
FREEDMAN, LEVY, KROLL & SIMONDS DEAN WITTER REYNOLDS, INC.
1050 CONNECTICUT AVE., NW SUITE 825 TWO WORLD TRADE CENTER
WASHINGTON, DC 20036 NEW YORK, NEW YORK 10048
--------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
X immediately upon filing pursuant to paragraph (b) of Rule 485
- - ---
on (date) pursuant to paragraph (b) of Rule 485
- - ---
60 days after filing pursuant to paragraph (a)(1) of Rule 485
- - ---
on (date) pursuant to paragraph (a)(1) of Rule 485
- - ---
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
- - --- previously filed post-effective amendment
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
Showing Location in Part A (Prospectus) and Part B of Registration Statement of
Information Required by Form N-4
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- - ---------------- ------------------
<S> <C>
1. Cover Page Cover Page
2. Definitions Glossary
3. Synopsis Introduction; Summary of Separate Account Expenses
4. Condensed Financials
(a) Chart Condensed Financial Statements
(b) Performance Data Performance Data
(c) Location of Others Previously Filed with Registration Statement
5. General
(a) Depositor Allstate Life Insurance Co. of New York
(b) Registrant The Variable Account
(c) Portfolio Company Dean Witter Variable Investment Series
(d) Fund Prospectus Dean Witter Variable Investment Series
(e) Voting Rights Voting Rights
(f) Administrators Charges & Other Deductions
Contract Maintenance Charge
6. Deductions & Expenses Charges & Other Deductions
(a) General Charges & Other Deductions
(b) Sales Load Early Withdrawal Charge
(c) Special Purchase Plans N/A
(d) Commissions Sales Commission
(e) Fund Expenses Summary of Expenses; Dean Witter Variable
Investment Series Expenses
(f) Organizational Expenses N/A
7. Contracts
(a) Persons with Rights The Contracts; Benefits; Income Payments;
Voting Rights; Assignments; Beneficiaries;
Contract Owners
(b)(i) Allocation of Purchase Payments Allocation of Purchase Payments
(ii) Transfers Transfers
(iii) Exchanges N/A
(c) Changes Modification
(d) Inquiries Customer Inquiries
8. Annuity Period Income Payments
(a) Material Factors Amount of Variable Annuity Income Payments
<PAGE>
(b) Dates Payout Start Date
(c) Frequency, duration & level Amount of Variable Annuity Income Payments
(d) AIR Amount of Variable Annuity Income Payments
(e) Minimum Amount of Variable Annuity Income Payments
(f) -- Change Options Income Plans
-- Transfer --
9. Death Benefit Benefits Under the Contract
10. Purchases & Contract Value
(a) Purchases Purchase of the Contract: Crediting of Purchase Payments
(b) Valuation Value of Variable Account Accumulation Units
(c) Daily Calculation Value of Variable Account Accumulation Units; Allocation
of Purchase Payments
(d) Underwriter Dean Witter Reynolds Inc.
11. Redemptions
(a) -- By Owners Surrender & Withdrawals
(b) -- By Annuitant Income Plans
(c) Texas ORP N/A
(d) Lapse Default
(e) Free Look Introduction
12. Taxes Federal Tax Matters
13. Legal Proceedings N/A
14. SAI Contents SAI Table of Contents
15. Cover Page SAI: Cover Page
16. Table of Contents SAI: Table of Contents
17. General Information & History
(a) Depositor's Name Allstate Life Insurance Company of New York
(b) Assets of Sub-Account The Variable Account
(c) Control of Depositor Allstate Life Insurance Company of New York
18. Services
(a) Fees & Expenses of Registrant Contract Maintenance Charge
(b) Management Contracts Contract Maintenance Charge; Sales Commissions
(c) Custodian SAI: Safekeeping of the Variable Account's Assets
Independent Public Accountant SAI: Experts
<PAGE>
(d) Assets of Registrant SAI: Safekeeping of the Variable Account Assets
(e) Affiliated Persons N/A
(f) Principal Underwriter Dean Witter Reynolds Inc.
19. Purchase of Securities Being Offered
(a) Offering SAI: Purchase of Contracts
(b) Sales load SAI: Sales Commissions
20. Underwriters
(a) Principal Underwriter N/A
(b) Continuous offering SAI: Purchase of Contracts
(c) Commissions SAI: Sales Commissions; Dean Witter Reynolds Inc.
(d) Unaffiliated Underwriters N/A
21. Calculation of Performance Data SAI: Performance Data
22. Annuity Payments SAI: Income Payments
23. Financial Statements
(a) Financial Statements of Registrant SAI: Allstate Life of New York Variable
Annuity Account II Financial Statements
(b) Financial Statements of Depositor SAI: Allstate Life Insurance Company of
New York Financial Statements
24a. Financial Statements Part C. Financial Statements
24b. Exhibits Part C. Exhibits
25. Directors and Officers Part C. Directors & Officers of Depositor
26. Persons Controlled By or Under
Common Control with Depositor
or Registrant Part C. Persons Controlled by or Under Common Control
with Depositor or Registrant
27. Number of Contract Owners Part C. Number of Contract Owners
28. Indemnification Part C. Indemnification
29a. Relationship of Principal Underwriter
to Other Investment Companies Part C. Relationship of Principal Underwriter
to Other Investment Companies
29b. Principal Underwriters Part C. Principal Underwriters
29c. Compensation of Underwriter Part C. Compensation of Dean Witter
30. Location of Accounts and Records Part C. Location of Accounts and Records
31. Management Services Part C. Management Services
32. Undertakings Part C. Undertakings
</TABLE>
<PAGE>
Registrant is filing this Post-Effective Amendment No. 13 to include updated
audited financial statements and related financial information in the
Registration Statement and to give effect to certain optional enhancements to
the Contracts described therein. These enhancements include an expanded Dollar
Cost Averaging Program (including the addition of a Dollar Cost Averaging Fixed
Account), a later Payout Start Date, and the addition of a Performance Death
Benefit, Automatic Portfolio Rebalancing, and a Widow/Widower Withdrawal Charge
Waiver.
Registrant does not intend for this Post-Effective Amendment No. 13 to amend or
delete any other part of this Registration Statement, except as specifically
noted herein.
<PAGE>
SUPPLEMENT DATED APRIL 3, 1998
TO THE PROSPECTUS DATED MAY 1, 1997,
AS SUPPLEMENTED JANUARY 1, 1998,
OF ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
OF ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
Allstate Life Insurance Company of New York ("Allstate Life of NY") is
pleased to announce the availability of new optional enhancements, described
below, to the Contracts described in the Prospectus. Capitalized terms have the
same meaning as given to them in the Prospectus. Please retain this Supplement
for future reference.
DOLLAR COST AVERAGING PROGRAM
Allstate Life of NY now permits automatic transfers among any Sub-Account
of the Variable Account in the Dollar Cost Averaging Program and offers a Dollar
Cost Averaging Fixed Account. Accordingly, your Prospectus is amended as
follows:
Page 3: Replace the "Dollar Cost Averaging" definition in the Glossary with the
following definition:
Dollar Cost Averaging Program - A method to transfer $100 or more of the
Cash Value in any Sub-Account of the Variable Account or the Dollar Cost
Averaging Fixed Account automatically to any Sub-Accounts on a monthly basis or
other frequencies that may be offered by the Company.
Page 5: Under Question 4, in the third sentence, replace "the Money Market
Sub-Account to other Sub-Accounts" with "any Sub-Account of the Variable Account
or the Dollar Cost Averaging Fixed Account, but not from both, to any
Sub-Accounts". Also change "Dollar Cost Averaging" to "The Dollar Cost
Averaging Program".
Page 13: Under "Transfers":
1) After the second sentence in the first paragraph add the following
sentence:
Transfers into the Dollar Cost Averaging Fixed Account are not permitted.
2) In the fifth paragraph replace each instance of "Dollar Cost Averaging"
with "the Dollar Cost Averaging Program" and replace "the Money Market
Sub-Account to any other" with "any Sub-Account of the Variable Account or
the Dollar Cost Averaging Fixed Account, but not from both, to any".
<PAGE>
Page 19: Under the continuation of "The Fixed Account":
1) Add the following sentence at the end of the second paragraph:
"The Company is also currently offering a Dollar Cost Averaging Fixed
Account."
2) Add the following paragraph after the second paragraph:
The Dollar Cost Averaging Fixed Account
Purchase Payments may also be allocated to the Dollar Cost Averaging Fixed
Account. Transfers are not allowed into the Dollar Cost Averaging Fixed
Account. Once Purchase Payments have been allocated to the Dollar Cost
Averaging Fixed Account, interest is earned for a one year period at a current
rate in effect at the time of allocation. This rate may be different from the
rate of the one year Fixed Account Guarantee Period discussed above. After the
one year period, a renewal rate will be declared. Subsequent renewal dates will
be every twelve months for each Purchase Payment. The renewal rate will be
guaranteed by the Company for a full year and will not be less than the minimum
guaranteed rate found in the Contract.
3) Under "Transfers, Surrenders, and Withdrawals" in the first sentence of the
first paragraph after the first reference to "Fixed Account" insert:
(but not the Dollar Cost Averaging Fixed Account)
4) Under "Transfers, Surrenders, and Withdrawals" at the end of the second
paragraph add:
These restrictions do not apply to transfers pursuant to the Dollar Cost
Averaging Program. Also, the Company reserves the right to waive these
restrictions.
AUTOMATIC PORTFOLIO REBALANCING
Allstate Life of NY now offers Automatic Portfolio Rebalancing.
Accordingly, your Prospectus is amended as follows:
Page 13: Add the following paragraphs after the fifth paragraph under
"Transfers":
Transfers may also be made automatically through Automatic Portfolio
Rebalancing prior to the Payout Start Date. By electing Automatic Portfolio
Rebalancing, all of the money allocated to Sub-Accounts of the Variable Account
will be rebalanced to the desired allocation on a quarterly basis (or other
frequencies that may be offered by the Company), determined from the first date
that you decide to rebalance. Upon rebalancing, your money will be transferred
among Sub-Accounts of the Variable Account to achieve the desired allocation.
<PAGE>
The desired allocation will be the allocation initially selected, unless
subsequently changed. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive the written request.
Transfers made through Automatic Portfolio Rebalancing are not assessed a
$25 charge and are not counted towards the twelve free transfers per Contract
Year. Any money allocated to the Fixed Account or the Dollar Cost Averaging
Fixed Account will not be included in the rebalancing.
WIDOW/WIDOWER WITHDRAWAL CHARGE WAIVER
Allstate Life of NY now offers a Widow/Widower Withdrawal Charge Waiver.
Accordingly, your Prospectus is amended as follows:
Page 16: Under number 4, please add the following sentence to the end of the
first paragraph:
If the Contract is continued prior to the Payout Start Date, the surviving
spouse may make a single withdrawal of any amount within one year of the date of
death without incurring an Early Withdrawal Charge.
PAYOUT START DATE
Allstate Life of NY now allows a later Payout Start Date. Accordingly your
prospectus is amended as follows:
Page 17: Under "Payout Start Date", replace the two references to "age 85" with
"age 90".
PERFORMANCE DEATH BENEFIT
Allstate Life of NY now offers, at the time the Contract is purchased, the
option to elect the Performance Death Benefit. Accordingly, your Prospectus is
amended as follows:
Page 4: Add the definition of Performance Death Benefit:
Performance Death Benefit - An additional death benefit option which can be
selected at the time the Contract is purchased.
Page 5: Question 6, after the first sentence insert the following:
For Contracts with the optional Performance Death Benefit provision, an
additional Mortality and Expense Risk Charge of .13% is assessed. As a result,
Contracts with the optional Performance Death Benefit provision will have a
Mortality and Expense Risk Charge of 1.38% and an Administrative Expense Charge
of .10%.
<PAGE>
Page 6: Question 7, before the last sentence of the first paragraph insert the
following:
For Contracts with the optional Performance Death Benefit provision, the
Death Benefit will be the greatest of (1) through (3) above, or (4) the
Performance Death Benefit. If the optional Performance Death Benefit is
selected, it applies only at the death of Owner. It does not apply to the death
of the Annuitant if different from the Owner unless the Owner is a nonnatural
person.
Page 7: Replace the "Separate Account Annual Expenses" chart in its entirety
with the following chart:
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average account value)
<TABLE>
<CAPTION>
Without the Optional With the Optional
Performance Performance
Death Benefit Death Benefit
Provision Provision
-------------------- -----------------
<S> <C> <C>
Mortality and Expense Risk Charge 1.25% 1.38%
Administrative Expense Charge .10% .10%
Total Separate Account Annual Expenses 1.35% 1.48%
</TABLE>
Replace the existing chart for Fund expenses in its entirety with the following
chart:
Dean Witter Variable Investment Series, Inc. ("Fund") Expenses
(as a percentage of Fund average assets)
<TABLE>
<CAPTION>
Management Other Total Fund
Portfolio Fees Expenses Annual Expenses
- - --------- ---------- -------- ---------------
<S> <C> <C> <C>
Money Market .50% .02% .52%
Quality Income Plus .50%(1) .03% .53%
High Yield .50% .03% .53%
Utilities .65%(2) .02% .67%
Income Builder(4) .75% .24% .99%
Dividend Growth .53%(3) .01% .54%
Capital Growth .65% .06% .71%
Global Dividend Growth .75% .09% .84%
European Growth 1.00% .12% 1.12%
Pacific Growth 1.00% .44% 1.44%
Capital Appreciation(4) .75% .22% .97%
Equity .50%(5) .02% .52%
Strategist .50% .02% .52%
</TABLE>
(1) This percentage is applicable to Portfolio net assets of up to $500
million. For net assets which exceed $500 million, the management fee
will be 0.45%.
(2) This percentage is applicable to Portfolio net assets of up to $500
million. For net assets which exceed $500 million, the management fee
will be 0.55%.
<PAGE>
(3) The management fee will be 0.625% for net assets of up to $500 million.
For net assets which exceed $500 million, but to not exceed $1 billion,
the management fee will be 0.50% and for net assets that exceed $1
billion, the management fee will be 0.475%.
(4) Dean Witter InterCapital has undertaken to assume all expenses until the
pertinent portfolio has $50 million in assets or until July 31, 1998,
whichever occurs first. Income Builder obtained $50 million on December
3, 1997 resulting in fees being applied on that date and thereafter.
(5) This percentage is applicable to Portfolio net assets of up to $1
billion. For net assets which exceed $1 billion, the management fee will
be 0.475%.
Page 8: Replace the "Example" chart with the following:
Add the following table under the section: "If you surrender your
Contract ...."
<TABLE>
<CAPTION>
(without the Performance Death Benefit**) 1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Money Market Sub-Account $62 $87 $113 $226
Quality Income Plus Sub-Account $62 $87 $114 $227
High Yield Sub-Account $62 $87 $114 $227
Utilities Sub-Account $64 $91 $121 $242
Income Builder Sub-Account $67 $101 $138 $276
Dividend Growth Sub-Account $63 $87 $114 $228
Capital Growth Sub-Account $64 $93 $123 $246
Global Dividend Growth Sub-Account $66 $97 $130 $260
European Growth Sub-Account $68 $105 $144 $289
Pacific Growth Sub-Account $72 $115 $161 $321
Capital Appreciation Sub-Account $67 $101 $137 $273
Equity Sub-Account $62 $87 $113 $226
Strategist Sub-Account $62 $87 $113 $226
<CAPTION>
(with the Performance Death Benefit***) 1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Money Market Sub-Account $64 $91 $120 $240
Quality Income Plus Sub-Account $64 $91 $121 $241
High Yield Sub-Account $64 $91 $121 $241
Utilities Sub-Account $65 $95 $128 $256
Income Builder Sub-Account $68 $105 $144 $289
Dividend Growth Sub-Account $64 $91 $121 $242
Capital Growth Sub-Account $66 $97 $130 $260
Global Dividend Growth Sub-Account $67 $101 $137 $273
European Growth Sub-Account $70 $109 $151 $302
Pacific Growth Sub-Account $73 $119 $167 $333
Capital Appreciation Sub-Account $68 $105 $143 $287
Equity Sub-Account $64 $91 $120 $240
Strategist Sub-Account $64 $91 $120 $240
</TABLE>
Add the following table under the section: "If you do not surrender your
Contract ...."
<PAGE>
<TABLE>
<CAPTION>
(without the Performance Death Benefit**) 1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Money Market Sub-Account $20 $61 $105 $226
Quality Income Plus Sub-Account $20 $61 $105 $227
High Yield Sub-Account $20 $61 $105 $227
Utilities Sub-Account $21 $66 $113 $242
Income Builder Sub-Account $25 $76 $129 $276
Dividend Growth Sub-Account $20 $62 $106 $228
Capital Growth Sub-Account $22 $67 $115 $246
Global Dividend Growth Sub-Account $23 $71 $122 $260
European Growth Sub-Account $26 $80 $136 $289
Pacific Growth Sub-Account $29 $89 $152 $321
Capital Appreciation Sub-Account $24 $75 $128 $273
Equity Sub-Account $20 $61 $105 $226
Strategist Sub-Account $20 $61 $105 $226
<CAPTION>
(with the Performance Death Benefit***) 1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Money Market Sub-Account $21 $65 $112 $240
Quality Income Plus Sub-Account $21 $65 $112 $241
High Yield Sub-Account $21 $65 $112 $241
Utilities Sub-Account $23 $70 $120 $256
Income Builder Sub-Account $26 $80 $136 $289
Dividend Growth Sub-Account $21 $66 $113 $242
Capital Growth Sub-Account $23 $71 $122 $260
Global Dividend Growth Sub-Account $24 $75 $128 $273
European Growth Sub-Account $27 $84 $143 $302
Pacific Growth Sub-Account $31 $93 $159 $333
Capital Appreciation Sub-Account $26 $79 $135 $287
Equity Sub-Account $21 $65 $112 $240
Strategist Sub-Account $21 $65 $112 $240
</TABLE>
** Total Separate Account Expenses of 1.35%.
*** Total Separate Account Expenses of 1.48%.
Page 9: Add the following column to the Condensed Financial Information table:
<TABLE>
<CAPTION>
1997
----
<S> <C>
Money Market Sub-Account
Accumulation Unit Value, Beginning of Period $ 12.084
Accumulation Unit Value, End of Period $ 12.546
Number of Units Outstanding, End of Period 1,168,562
Quality Income Plus Sub-Account
Accumulation Unit Value, Beginning of Period $ 16.404
Accumulation Unit Value, End of Period $ 17.983
Number of Units Outstanding, End of Period 1,668,020
High Yield Sub-Account
Accumulation Unit Value, Beginning of Period $ 24.148
Accumulation Unit Value, End of Period $ 26.652
<PAGE>
Number of Units Outstanding, End of Period 438,022
Utilities Sub-Account
Accumulation Unit Value, Beginning of Period $ 19.298
Accumulation Unit Value, End of Period $ 24.208
Number of Units Outstanding, End of Period 1,061,445
Income Builder Sub-Account
Accumulation Unit Value, Beginning of Period $ 10.000
Accumulation Unit Value, End of Period $ 12.084
Number of Units Outstanding, End of Period 136,370
Dividend Growth Sub-Account
Accumulation Unit Value, Beginning of Period $ 26.298
Accumulation Unit Value, End of Period $ 32.590
Number of Units Outstanding, End of Period 2,609,873
Capital Growth Sub-Account
Accumulation Unit Value, Beginning of Period $ 16.421
Accumulation Unit Value, End of Period $ 20.177
Number of Units Outstanding, End of Period 280,082
Global Dividend Growth Sub-Account
Accumulation Unit Value, Beginning of Period $ 13.845
Accumulation Unit Value, End of Period $ 15.304
Number of Units Outstanding, End of Period 1,363,172
European Growth Sub-Account
Accumulation Unit Value, Beginning of Period $ 24.335
Accumulation Unit Value, End of Period $ 27.870
Number of Units Outstanding, End of Period 716,444
Pacific Growth Sub-Account
Accumulation Unit Value, Beginning of Period $ 9.858
Accumulation Unit Value, End of Period $ 6.059
Number of Units Outstanding, End of Period 702,114
Capital Appreciation Sub-Account
Accumulation Unit Value, Beginning of Period $ 10.000
Accumulation Unit Value, End of Period $ 11.177
Number of Units Outstanding, End of Period 77,395
Equity Sub-Account
Accumulation Unit Value, Beginning of Period $ 28.669
Accumulation Unit Value, End of Period $ 38.873
Number of Units Outstanding, End of Period 853,934
Strategist Sub-Account
Accumulation Unit Value, Beginning of Period $ 19.199
Accumulation Unit Value, End of Period $ 21.540
Number of Units Outstanding, End of Period 1,549,369
</TABLE>
Page 15: Under "Mortality and Expense Risk Charge" insert the following
before the last sentence of the first paragraph:
<PAGE>
For Contracts with the optional Performance Death Benefit provision, the
Mortality and Expense Risk Charge will be deducted daily, at a rate equal on an
annual basis, to 1.38% of the daily net assets in the Variable Account. The
assessment of the additional .13% for the optional Performance Death Benefit is
attributed to the assumption of additional mortality risks (see pages 16-17, for
a full description of the Death Benefit options).
Page 16: Insert the following paragraphs after the first paragraph under
"Benefits Under The Contract":
If the Performance Death Benefit option is selected, it applies only at
the death of Owner. It does not apply to the death of the Annuitant if
different from the Owner unless the Owner is a nonnatural person. For
Contracts with the optional Performance Death Benefit provision, the Death
Benefit will be the greatest of (a) through (c) above, or (d) the Performance
Death Benefit.
The optional Performance Death Benefit is equal to the greatest of the
anniversary values as of the date the Company calculates the Death Benefit. The
anniversary value is equal to the Cash Value on a Contract Anniversary:
1. Increased by any purchase payments made since the Contract
Anniversary; and
2. Reduced by an adjustment for any partial withdrawals made since
the Contract Anniversary.
This adjustment is equal to the Cash Value on the Contract Anniversary
multiplied by the ratio of the withdrawal amount to the Cash Value
just before the withdrawal.
On each Contract Anniversary, the Performance Death Benefit will be
recalculated until the oldest Owner or the Annuitant, if the Owner is a
nonnatural person, attains age 85. After age 85, we will only recalculate
the Performance Death Benefit to reflect additional Purchase Payments and
withdrawals. The Performance Death Benefit on the date of issue is equal to
the initial purchase payment. In the absence of any withdrawals or Purchase
Payments, the Performance Death Benefit will be the greatest of all Contract
Anniversary Cash Values on or before the date the Company calculates the
Death Benefit.
The Performance Death Benefit will never be greater than the maximum death
benefit allowed by any non-forfeiture laws which govern this Contract.
Page 18: In the first paragraph under "General Description", at the end of the
sentence within the parenthesis, please insert:
"or 1.48% if the optional Performance Death Benefit provision has been
selected"
<PAGE>
SUPPLEMENT DATED APRIL 3, 1998 TO
THE STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1997
OF ALLSTATE LIFE OF NEW YORK ANNUITY ACCOUNT II
OF ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
The Statement of Additional Information is amended as set forth below. Please
retain this Supplement for future reference.
Under "Standardized Total Return" replace the existing table with the following
tables for the periods ended December 31, 1997:
<TABLE>
<CAPTION>
(Without the Optional Performance Death Benefit)
10-Years or Since
Sub-Account 1 Year 5-Years Inception (if less)
- - ----------- ------ ------- -------------------
<S> <C> <C> <C>
Money Market -0.49% 2.90% 2.89%
Quality Income Plus 5.31% 6.53% 7.32%
High Yield 6.05% 10.12% 12.04%
Utilities 21.14% 11.67% 12.74%
Income Builder NA NA 16.72%
Dividend Growth 19.61% 16.89% 15.54%
Capital Growth 18.56% 9.47% 10.21%
Global Dividend Growth 6.22% NA 11.13%
European Growth 10.21% 21.96% 18.08%
Pacific Growth -42.85% NA -13.23%
Capital Appreciation NA NA 7.03%
Equity 31.28% 18.42% 16.78%
Strategist 7.88% 8.77% 9.10%
<CAPTION>
(With the Optional Performance Death Benefit)
10-Years or Since
Sub-Account 1 Year 5-Years Inception (if less)
- - ----------- ------ ------- -------------------
<S> <C> <C> <C>
Money Market -0.62% 2.76% 2.75%
Quality Income Plus 5.17% 6.39% 7.18%
High Yield 5.91% 9.97% 11.89%
Utilities 20.97% 11.52% 12.59%
Income Builder NA NA 16.56%
Dividend Growth 19.45% 16.74% 15.39%
Capital Growth 18.40% 9.32% 10.07%
Global Dividend Growth 6.08% NA 10.98%
European Growth 10.07% 21.80% 17.93%
Pacific Growth -42.93% NA -13.35%
Capital Appreciation NA NA 6.88%
Equity 31.10% 18.26% 16.63%
Strategist 7.74% 8.63% 8.96%
</TABLE>
<PAGE>
Above the first paragraph on page 5, add the heading "Adjusted Historical
Return". Replace the existing table that follows that paragraph with the
following tables for the periods ended December 31, 1997:
Adjusted Historical Return
<TABLE>
<CAPTION>
(Without the Optional Performance Death Benefit)
10-Years or Since
Sub-Account 1 Year 5-Years Inception (if less)
- - ----------- ------ ------- -------------------
<S> <C> <C> <C>
Money Market -0.49% 2.90% 4.51%
Quality Income Plus 5.31% 6.53% 8.33%
High Yield 6.05% 10.12% 7.72%
Utilities 21.14% 11.67% 11.84%
Income Builder NA NA 16.72%
Dividend Growth 19.61% 16.89% 13.15%
Capital Growth 18.56% 9.47% 10.76%
Global Dividend Growth 6.22% NA 11.13%
European Growth 10.21% 21.96% 16.13%
Pacific Growth -42.85% NA -13.23%
Capital Appreciation NA NA 7.03%
Equity 31.28% 18.42% 16.32%
Strategist 7.88% 8.77% 9.98%
<CAPTION>
(With the Optional Performance Death Benefit)
10-Years or Since
Sub-Account 1 Year 5-Years Inception (if less)
- - ----------- ------ ------- -------------------
<S> <C> <C> <C>
Money Market -0.62% 2.76% 4.48%
Quality Income Plus 5.17% 6.39% 8.30%
High Yield 5.91% 9.97% 7.69%
Utilities 20.97% 11.52% 11.80%
Income Builder NA NA 16.56%
Dividend Growth 19.45% 16.74% 13.51%
Capital Growth 18.40% 9.32% 10.62%
Global Dividend Growth 6.08% NA 10.98%
European Growth 10.07% 21.80% 15.98%
Pacific Growth -42.93% NA -13.35%
Capital Appreciation NA NA 6.88%
Equity 31.10% 18.26% 16.29%
Strategist 7.74% 8.63% 9.95%
</TABLE>
<PAGE>
Under "Other Total Return" replace the existing table with the following tables
for the periods ended December 31, 1997:
<TABLE>
<CAPTION>
(Without the Optional Performance Death Benefit)
10-Years or Since
Sub-Account 1 Year 5-Years Inception (if less)
- - ----------- ------ ------- -------------------
<S> <C> <C> <C>
Money Market 3.82% 3.11% 2.95%
Quality Income Plus 9.62% 6.53% 7.32%
High Yield 10.37% 10.29% 12.08%
Utilities 25.45% 11.83% 12.78%
Income Builder NA NA 22.24%
Dividend Growth 23.92% 17.03% 15.59%
Capital Growth 22.87% 9.65% 10.27%
Global Dividend Growth 10.54% NA 11.66%
European Growth 14.53% 22.07% 18.12%
Pacific Growth -38.54% NA -12.18%
Capital Appreciation NA NA 12.53%
Equity 35.59% 18.55% 16.82%
Strategist 12.19% 8.95% 9.15%
<CAPTION>
(With the Optional Performance Death Benefit)
10-Years or Since
Sub-Account 1 Year 5-Years Inception (if less)
- - ----------- ------ ------- -------------------
<S> <C> <C> <C>
Money Market 3.69% 2.97% 2.82%
Quality Income Plus 9.48% 6.58% 7.23%
High Yield 10.22% 10.13% 11.93%
Utilities 25.29% 11.69% 12.63%
Income Builder NA NA 22.08%
Dividend Growth 23.76% 16.88% 15.44%
Capital Growth 22.71% 9.50% 10.12%
Global Dividend Growth 10.39% NA 11.52%
European Growth 14.38% 21.92% 17.96%
Pacific Growth -38.62% NA -12.29%
Capital Appreciation NA NA 12.39%
Equity 35.42% 18.40% 16.67%
Strategist 12.05% 8.80% 9.01%
</TABLE>
After page 12, the following replaces the financial statements appearing on
pages F-1 through F-37, and the reports of the independent auditors thereon:
<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") as of December 31, 1997 and
1996, and the related Statements of Operations, Shareholder's Equity and Cash
Flows for each of the three years in the period ended December 31, 1997. 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, 1997 and
1996, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1997 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 20, 1998
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
($ in thousands) 1997 1996
---- ----
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value (amortized cost
$1,510,110 and $1,378,155) $1,756,257 $1,500,783
Mortgage loans 114,627 84,657
Policy loans 27,600 25,359
Short-term 9,513 25,855
---------- ----------
Total investments 1,907,997 1,636,654
Deferred acquisition costs 71,946 61,559
Accrued investment income 21,725 20,321
Reinsurance recoverables 1,726 2,566
Cash 393 1,027
Other assets 6,167 7,489
Separate Accounts 308,595 260,668
---------- ----------
Total assets $2,318,549 $1,990,284
---------- ----------
---------- ----------
LIABILITIES
Reserve for life-contingent contract benefits $1,084,409 $ 911,457
Contractholder funds 607,474 572,480
Income taxes payable 1,419 -
Deferred income taxes 16,990 3,692
Other liabilities and accrued expenses 10,985 6,405
Net payable to affiliates 5,267 2,515
Separate Accounts 308,595 260,668
---------- ----------
Total liabilities 2,035,139 1,757,217
---------- ----------
SHAREHOLDER'S EQUITY
Common stock, $25 par value, 80,000 shares
authorized, issued and outstanding 2,000 2,000
Additional capital paid-in 45,787 45,787
Unrealized net capital gains 64,479 36,852
Retained income 171,144 148,428
---------- ----------
Total shareholder's equity 283,410 233,067
---------- ----------
Total liabilities and shareholder's equity $2,318,549 $1,990,284
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
($ in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums (net of reinsurance
ceded of $3,087, $2,273 and $2,147) $ 90,366 $ 91,825 $126,713
Contract charges 28,597 25,281 21,603
Net investment income 124,887 112,862 104,384
Realized capital gains and losses 701 (1,581) (1,846)
-------- -------- --------
244,551 228,387 250,854
-------- -------- --------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $1,985, $2,827 and $1,581) 179,872 172,772 198,055
Amortization of deferred acquisition costs 5,023 6,512 5,502
Operating costs and expenses 23,644 16,874 17,864
-------- -------- --------
208,539 196,158 221,421
-------- -------- --------
INCOME FROM OPERATIONS BEFORE
INCOME TAX EXPENSE 36,012 32,229 29,433
INCOME TAX EXPENSE 13,296 11,668 9,911
-------- -------- --------
NET INCOME $ 22,716 $ 20,561 $ 19,522
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to financial statements.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
($ in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK $ 2,000 $ 2,000 $ 2,000
-------- -------- --------
ADDITIONAL CAPITAL PAID-IN 45,787 45,787 45,787
-------- -------- --------
UNREALIZED NET CAPITAL GAINS
Balance, beginning of year 36,852 74,413 (6,891)
Net change 27,627 (37,561) 81,304
-------- -------- --------
Balance, end of year 64,479 36,852 74,413
-------- -------- --------
RETAINED INCOME
Balance, beginning of year 148,428 127,867 108,345
Net income 22,716 20,561 19,522
-------- -------- --------
Balance, end of year 171,144 148,428 127,867
-------- -------- --------
Total shareholder's equity $283,410 $233,067 $250,067
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to financial statements.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
($ in thousands) 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 22,716 $ 20,561 $ 19,522
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, amortization and other
non-cash items (31,112) (26,172) (22,348)
Realized capital gains and losses (701) 1,581 1,846
Interest credited to contractholder funds 31,667 25,817 26,924
Increase in life-contingent contract
benefits and contractholder funds 68,114 75,217 103,513
Increase in deferred acquisition costs (10,781) (6,859) (5,537)
Increase in accrued investment income (1,404) (1,493) (2,497)
Change in deferred income taxes (1,578) 257 (2,677)
Changes in other operating assets and
liabilities 11,369 (4,234) 3,897
--------- --------- ---------
Net cash provided by operating
activities 88,290 84,675 122,643
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities 15,723 28,454 13,526
Investment collections
Fixed income securities available for sale 120,061 72,751 30,871
Fixed income securities held to maturity - - 3,067
Mortgage loans 5,365 12,508 6,499
Investment purchases
Fixed income securities available for sale (236,984) (236,252) (142,205)
Fixed income securities held to maturity - - (32,046)
Mortgage loans (35,200) (10,325) (9,864)
Change in short-term investments, net 16,342 (18,598) (45)
Change in policy loans, net (2,241) (2,574) (859)
--------- --------- ---------
Net cash used in investing activities (116,934) (154,036) (131,056)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 79,384 115,420 76,534
Contractholder fund withdrawals (51,374) (46,504) (68,412)
--------- --------- ---------
Net cash provided by financing
activities 28,010 68,916 8,122
--------- --------- ---------
NET DECREASE IN CASH (634) (445) (291)
CASH AT BEGINNING OF YEAR 1,027 1,472 1,763
--------- --------- ---------
CASH AT END OF YEAR $ 393 $ 1,027 $ 1,472
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to financial statements.
<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"). The Company is wholly owned by a
wholly owned subsidiary ("Parent") of Allstate Insurance Company ("AIC"), a
wholly owned subsidiary of The Allstate Corporation (the "Corporation"). On
June 30, 1995, Sears, Roebuck and Co. ( "Sears") distributed its 80.3%
ownership in the Corporation to Sears common shareholders through a tax-free
dividend (the "Distribution"). These financial statements have been prepared in
conformity with generally accepted accounting principles.
To conform with the 1997 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 annuity products in the
State of New York. Life insurance includes traditional products such as whole
life and term life insurance, as well as universal life and other
interest-sensitive life products. Annuities include deferred annuities, such as
variable annuities and fixed rate single and flexible premium annuities, and
immediate annuities such as structured settlement annuities. The Company
distributes its products using a combination of Allstate agents which include
life specialists, banks, independent agents, brokers and direct response
marketing.
Structured settlement annuity contracts issued by the Company are long-term in
nature and involve fixed guarantees relating to the amount and timing of benefit
payments. Single and flexible premium deferred annuity contracts issued by the
Company are subject to discretionary withdrawal or surrender by the customers,
subject to applicable surrender charges. In a low interest rate environment,
funds from maturing investments, particularly those supporting long-term
structured settlement annuity obligations, may be reinvested at substantially
lower interest rates than those which prevailed when the funds were previously
invested.
The Company utilizes various modeling techniques in managing the relationship
between assets and liabilities. The fixed income securities supporting the
Company's obligations have been selected to meet, to the extent possible, the
anticipated cash flow requirements of the related liabilities. The Company
employs strategies to minimize its exposure to interest rate risk and to
maintain investments which are sufficiently liquid to meet obligations to
contractholders in various interest rate scenarios.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be new and proposed
federal and state regulation and legislation that would allow banks greater
participation in the securities and insurance businesses, which will present an
increased level of competition for sales of the Company's life and annuity
products. Furthermore, the market for deferred annuities and interest-sensitive
life insurance is enhanced by the tax incentives available under current law.
Any legislative
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
changes which lessen these incentives are likely to negatively impact the demand
for these products.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, consolidation within that
industry and specifically, a change in control of those entities with which the
Company partners, could affect the Company's sales.
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; (2) increasing competition in capital
markets; and (3) reopening stock/mutual company disagreements related to such
issues as taxation disparity between mutual and stock insurance companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed and asset-backed
securities. All fixed income securities are carried at fair value and may be
sold prior to their contractual maturity ("available for sale"). The difference
between amortized cost and fair value, net of deferred income taxes, certain
deferred acquisition costs, and reserves for life-contingent contract benefits,
is reflected as a component of shareholder's equity. Provisions are recognized
for declines in the value of fixed income securities that are other than
temporary. Such writedowns are included in realized capital gains and losses.
Mortgage loans are carried at outstanding principal balance, net of unamortized
premium or discount and valuation allowances. Valuation allowances are
established for impaired loans when it is probable that contractual principal
and interest will not be collected. Valuation allowances for impaired loans
reduce the carrying value to the fair value of the collateral or the present
value of the loan's expected future repayment cash flows discounted at the
loan's original effective interest rate. Valuation allowances on loans not
considered to be impaired are established based on consideration of the
underlying collateral, borrower financial strength, current and expected future
market conditions, and other factors.
Short-term investments are carried at amortized cost which approximates fair
value. Policy loans are carried at the unpaid principal balances.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed and asset-backed securities is
determined on the effective yield method, based on estimated principal
repayments. Accrual of income is suspended for fixed income securities and
mortgage loans that are in default or when the receipt of interest payments is
in doubt. Realized capital gains and losses are determined on a specific
identification basis.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes futures contracts which are derivative financial
instruments. When futures meet specific criteria they may be designated as
accounting hedges and accounted for on a deferral basis, depending upon the
nature of the hedge strategy and the method used to account for the hedged item.
If, subsequent to entering into a hedge transaction, the futures contract
becomes ineffective (including if the hedged item is sold or otherwise
extinguished or the occurrence of a hedged anticipatory transaction is no longer
probable), the Company terminates the derivative position. Gains and losses on
these terminations are reported in realized capital gains and losses in the
period they occur. The Company may also terminate derivatives as a result of
other events or circumstances. Gains and losses on these terminations are
either deferred and amortized over the remaining life of either the hedge or the
hedged item, whichever is shorter, or are reported in shareholder's equity,
consistent with the accounting for the hedged item. Futures contracts must
reduce the primary market risk exposure on an enterprise basis in conjunction
with the hedge strategy; be designated as a hedge at the inception of the
transaction; and be highly correlated with the fair value of, or interest income
or expense associated with, the hedged item at inception and throughout the
hedge period.
Under deferral accounting, gains and losses on derivatives are deferred on the
statement of financial position and recognized in earnings in conjunction with
earnings on the hedged item. The Company accounts for interest rate futures
contracts as hedges using deferral accounting for anticipatory investment
purchases and sales when the criteria for futures (discussed above) are met. In
addition, anticipated transactions must be probable of occurrence and their
significant terms and characteristics identified.
Changes in fair values of these types of derivatives are initially deferred as
other liabilities and accrued expenses. Once the anticipated transaction
occurs, the deferred gains or losses are considered part of the cost basis of
the asset and reported net of tax in shareholder's equity or recognized as a
gain or loss from disposition of the asset, as appropriate. The Company reports
initial margin deposits on futures in short-term investments. Fees and
commissions paid on these derivatives are also deferred as an adjustment to the
carrying value of the hedged item.
RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES
Premiums for traditional life insurance are recognized as revenue when due.
Accident and disability premiums are earned on a pro rata basis over the policy
period. Revenues on interest-sensitive life insurance policies are comprised of
contract charges and fees, and are recognized when assessed against the
policyholder account balance. Revenues on most annuities, which are considered
investment contracts, include contract charges and fees for contract
administration and surrenders. These revenues are recognized when levied
against the contract balance. Gross premium in excess of the net premium on
limited payment contracts, primarily structured settlement annuities when sold
with life contingencies, are deferred and recognized over the contract period.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
REINSURANCE
Certain premiums and contract benefits are ceded and reflected net of such
cessions in the statements of operations. Reinsurance recoverable and the
related reserves for life-contingent contract benefits are reported separately
in the statements of financial position. The Company continues to have primary
liability as the direct insurer for risks reinsured.
DEFERRED ACQUISITION COSTS
Certain costs of acquiring life and annuity business, principally agents'
remuneration, premium taxes, certain underwriting costs and direct mail
solicitation expenses are deferred and amortized to income. For traditional life
insurance, limited payment contracts and accident and disability insurance,
these costs are amortized in proportion to the estimated revenues on such
business. For universal life-type policies and investment contracts, the costs
are amortized in relation to the present value of estimated gross profits on
such business. Changes in the amount or timing of estimated gross profits will
result in adjustments in the cumulative amortization of these costs. To the
extent that unrealized gains or losses on fixed income securities carried at
fair value would result in an adjustment of deferred acquisition costs had those
gains or losses actually been realized, the related unamortized deferred
acquisition costs are recorded as a reduction of the unrealized gains or losses
included in shareholder's equity, net of deferred income taxes.
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 acquisition costs. Deferred income taxes also
arise from unrealized capital gains and losses on fixed income securities
carried at fair value.
SEPARATE ACCOUNTS
The Company issues flexible premium deferred variable annuity contracts, the
assets and liabilities of which are legally segregated and reflected in the
accompanying statements of financial position as assets and liabilities of the
Separate Accounts (Allstate Life of New York Variable Annuity Account, Allstate
Life of New York Variable Annuity Account II and Allstate Life of New York
Separate Account A, unit investment trusts registered with the Securities and
Exchange Commission).
The assets of the Separate Accounts carried at fair value. Investment income and
realized capital gains and losses of the Separate Accounts accrue directly to
the contractholders and, therefore, are not included in the Company's statements
of operations. Revenues to the Company from the Separate Accounts consist of
contract maintenance fees, administration fees and mortality and expense risk
charges.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, group annuities and structured settlement annuities with life
contingencies, disability insurance
<PAGE>
and accident insurance, is computed on the basis of assumptions as to future
investment yields, mortality, morbidity, terminations and expenses. These
assumptions, which for traditional life insurance are applied using the net
level premium method, include provisions for adverse deviation and generally
vary by such characteristics as type of coverage, year of issue and policy
duration. Reserve interest rates ranged from 4.00% to 11.00% during 1997. 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, net of deferred income taxes.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group policies and
contracts that include an investment component, including most annuities and
universal life policies. Payments received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the contractholder less withdrawals, mortality
charges and administrative expenses. Credited interest rates on contractholder
funds ranged from 3.30% to 9.75% for those contracts with fixed interest rates
and from 3.25% to 7.75% for those with flexible rates during 1997.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans have only off-balance-sheet risk because
their contractual amounts are not recorded in the Company's statements of
financial position.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company cedes business to the Parent under reinsurance treaties to limit
aggregate and single exposures on large risks. Premiums and policy benefits
ceded totaled $2,171 and $327 in 1997, $1,383 and $1,662 in 1996, and $1,259 and
$278 in 1995, respectively. Included in the reinsurance recoverable at December
31, 1997 and 1996 are amounts due from the Parent of $342 and $965,
respectively.
STRUCTURED SETTLEMENT ANNUITIES
AIC, through an affiliate, purchased $12,766, $15,610 and $11,243 of structured
settlement annuities from the Company in 1997, 1996 and 1995, respectively. Of
these amounts, $3,468, $8,517 and $4,164 relate to structured settlement
annuities with life contingencies and are included in premium income in 1997,
1996 and 1995, respectively. Additionally, the reserve for life-contingent
contract benefits was increased by approximately 94% of such premium received in
each of these years.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on behalf of the Company. The
cost to the Company is determined by various allocation methods and is primarily
related to the level of services provided. Expenses allocated to the Company
were $27,632, $23,134 and $21,288 in 1997, 1996 and 1995, respectively. A
portion of these expenses related to the acquisition of life and annuity
business is deferred and amortized over the contract period.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
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, 1997
- - --------------------
U.S. government and agencies $ 416,203 $126,824 $ (212) $ 542,815
Municipal 35,382 2,449 (22) 37,809
Corporate 803,935 103,700 (479) 907,156
Mortgage-backed securities 215,465 13,442 (166) 228,741
Asset-backed securities 39,125 642 (31) 39,736
---------- -------- ------- ----------
Total fixed income securities $1,510,110 $247,057 $ (910) $1,756,257
---------- -------- ------- ----------
---------- -------- ------- ----------
AT DECEMBER 31, 1996
- - --------------------
U.S. government and agencies $ 387,806 $ 54,349 $(2,642) $ 439,513
Municipal 36,158 1,883 (406) 37,635
Corporate 734,500 68,022 (4,592) 797,930
Mortgage-backed securities 188,480 6,793 (1,106) 194,167
Asset-backed securities 31,211 394 (67) 31,538
---------- -------- ------- ----------
Total fixed income securities $1,378,155 $131,441 $(8,813) $1,500,783
---------- -------- ------- ----------
---------- -------- ------- ----------
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1997:
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
----------- ----------
<S> <C> <C>
Due in one year or less $ 18,751 $ 18,839
Due after one year through five years 74,886 77,931
Due after five years through ten years 221,116 237,020
Due after ten years 940,767 1,153,990
----------- ----------
1,255,520 1,487,780
Mortgage- and asset-backed securities 254,590 268,477
----------- ----------
Total $1,510,110 $1,756,257
----------- ----------
----------- ----------
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- - ----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $116,763 $104,583 $ 95,212
Mortgage loans 7,896 7,113 7,999
Other 2,200 2,942 2,744
-------- -------- --------
Investment income, before expense 126,859 114,638 105,955
Investment expense 1,972 1,776 1,571
-------- -------- --------
Net investment income $124,887 $112,862 $104,384
-------- -------- --------
-------- -------- --------
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996 1995
- - ----------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 922 $ (1,522) $ 422
Mortgage loans (221) (59) (2,268)
-------- -------- --------
Realized capital gains and losses 701 (1,581) (1,846)
Income tax expense (benefit) 245 (553) (646)
-------- -------- --------
Realized capital gains and losses, after tax $ 456 $ (1,028) $ (1,200)
-------- -------- --------
-------- -------- --------
</TABLE>
Excluding calls and prepayments, gross gains of $471, $480 and $172 and gross
losses of $105, $2,308 and $105 were realized on sales of fixed income
securities during 1997, 1996 and 1995, respectively.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
COST/ UNREALIZED
AMORTIZED FAIR NET
COST VALUE GAINS
---- ----- -----
<S> <C> <C> <C>
Fixed income securities $1,510,110 $1,756,257 $246,147
---------- ----------
---------- ----------
Reserves for life insurance policy benefits (145,455)
Deferred income taxes (34,720)
Deferred acquisition costs and other (1,493)
--------
Unrealized net capital gains $64,479
--------
--------
</TABLE>
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1997 1996 1995
- - ----------------------- ---- ---- ----
<S> <C>
Fixed income securities $123,519 $ (82,847) $216,975
Reserves for life insurance policy benefits (80,155) 24,300 (89,600)
Deferred income taxes (14,876) 20,224 (43,779)
Deferred acquisition costs and other (861) 762 (2,292)
-------- --------- --------
Increase (decrease) in unrealized net
capital gains $ 27,627 $ (37,561) $ 81,304
-------- --------- --------
-------- --------- --------
</TABLE>
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to other than
temporary declines in value of fixed income securities and valuation allowances
on mortgage loans were $261, $208 and $2,448 in 1997, 1996 and 1995,
respectively.
MORTGAGE LOAN IMPAIRMENT
A mortgage loan is impaired when it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement.
The Company had no impaired loans at December 31, 1997 and 1996. The net
carrying value of impaired loans at December 31, 1995 was $9,647, measured at
the fair value of the collateral. The total investment in impaired mortage
loans before valuation allowance at December 31, 1995 was $11,581 and the
related allowance on these impaired loans ws $1,934.
Activity in the valuation allowance for all mortgage loans for the years ended
December 31, 1997, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at January 1 $ 225 $1,952 $1,179
Net additions (reductions) 261 (296) 1,923
Direct write-downs - (1,431) (1,150)
------ ------ ------
Balance at December 31 $ 486 $ 225 $1,952
------ ------ ------
------ ------ ------
</TABLE>
Interest income is recognized on a cash basis for impaired loans carried at the
fair value of the collateral, beginning at the time of impairment. For other
impaired loans, interest is accrued based on the net carrying value. There were
no impaired loans during 1997. The Company recognized interest income of
$281 and $1,398 on impaired loans during 1996 and 1995, respectively, of which
$281 and $1,194 was received in cash during 1996 and 1995, respectively. The
average recorded investment in impaired loans was $5,154 and $8,900 during
1996 and 1995, respectively.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
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, 1997 and 1996:
<TABLE>
<CAPTION>
(% of municipal bond portfolio carrying value) 1997 1996
---- ----
<S> <C> <C>
Ohio 28.4% 25.9%
California 22.7 24.3
Illinois 19.8 19.0
Maryland 8.0 7.8
Maine 5.6 5.7
Minnesota 5.5 5.3
New York 5.4 5.3
</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 exceed 5% of the
portfolio at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1997 1996
---- ----
<S> <C> <C>
California 47.7% 49.1%
New York 30.5 21.1
Illinois 15.3 21.3
</TABLE>
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1997 1996
---- ----
<S> <C> <C>
Retail 38.8% 39.1%
Warehouse 25.4 24.2
Office buildings 15.3 14.3
Apartment complex 14.9 14.6
Industrial 4.9 6.8
Other 0.7 1.0
----- -----
100.0% 100.0%
----- -----
----- -----
</TABLE>
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1997, for loans that were not in foreclosure are as follows:
<TABLE>
<CAPTION>
NUMBER OF LOANS CARRYING VALUE PERCENT
--------------- -------------- -------
<S> <C> <C> <C>
1999 3 $5,302 4.6%
2000 4 7,927 6.9
2001 5 7,340 6.4
2002 2 6,385 5.6
Thereafter 23 87,673 76.5
---- -------- -----
Total 37 $114,627 100.0%
---- -------- -----
---- -------- -----
</TABLE>
In 1997, $7.3 million of commercial mortgage loans were contractually due. Of
these, 20.9% were paid as due and 79.1% were refinanced at prevailing market
terms.
SECURITIES ON DEPOSIT
At December 31, 1997, fixed income securities with a carrying value of $1,981
were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets, incurs various financial liabilities and enters into agreements
involving derivative financial instruments and other off-balance-sheet financial
instruments. The fair value estimates of financial instruments presented below
are not necessarily indicative of the amounts the Company might pay or receive
in actual market transactions. Potential taxes and other transaction costs have
not been considered in estimating fair value. The disclosures that follow do not
reflect the fair value of the Company as a whole since a number of the Company's
significant assets (including deferred acquisition costs and reinsurance
recoverables) and liabilities (including reserve for life-contingent contract
benefits and deferred income taxes) are not considered financial instruments and
are not carried at fair value. Other assets and liabilities considered
financial instruments, accrued investment income and cash are generally of a
short-term nature. It is assumed that their carrying value approximates fair
value.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Fixed income securities $1,756,257 $1,756,257 $1,500,783 $1,500,783
Mortgage loans 114,627 120,849 84,657 83,789
Short-term investments 9,513 9,513 25,855 25,855
Policy loans 27,600 27,600 25,359 25,359
Separate Accounts 308,595 308,595 260,668 260,668
</TABLE>
Carrying value and fair value include the effects of derivative financial
instruments where applicable.
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Mortgage loans are valued based
on discounted contractual cash flows. Discount rates are selected using current
rates at which similar loans would be made to borrowers with similar
characteristics, using similar properties as collateral. Loans that exceed 100%
loan-to-value are valued at the estimated fair value of the underlying
collateral. Short-term investments are highly liquid investments with maturities
of less than one year whose carrying value approximates fair value.
The carrying value of policy loans approximates its fair value. Separate
Accounts assets are carried in the statements of financial position at fair
value.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $437,449 $466,136 $421,642 $430,696
Separate Accounts 308,595 308,595 260,668 260,668
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company primarily uses derivative financial instruments to reduce its
exposure to market risk, specifically interest rate risk, in conjunction with
asset/liability management. The Company does not hold or issue these
instruments for trading purposes.
The following table summarizes the contract or notional amount, credit exposure,
fair value and carrying value of the Company's derivative financial instruments:
<TABLE>
<CAPTION>
CONTRACT/ CARRYING VALUE
NOTIONAL CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
------- -------- ------- --------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1997
- - --------------------
Financial futures contracts $29,800 $ - $ (153) $ (810)
AT DECEMBER 31, 1996
- - --------------------
Financial futures contracts $ 6,700 $ 56 $ 56 $ 266
</TABLE>
The contract or notional amounts are used to calculate the exchange of
contractual payments under the agreements and are not representative of the
potential for gain or loss on these agreements.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Credit exposure represents the Company's potential loss if all of the
counterparties failed to perform under the contractual terms of the contracts
and all collateral, if any, became worthless. This exposure is represented by
the fair value of contracts with a positive fair value at the reporting date
reduced by the effect, if any, of master netting agreements.
The Company manages its exposure to credit risk by utilizing highly rated
counterparties, establishing risk control limits, executing legally enforceable
master netting agreements and obtaining collateral where appropriate. To date,
the Company has not incurred any losses on derivative financial instruments due
to counterparty nonperformance.
Fair value is the estimated amount that the Company would receive (pay) to
terminate or assign the contracts at the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer and
exchange quotes are available for the Company's derivatives.
Financial futures are commitments to either purchase or sell designated
financial instruments at a future date for a specified price or yield. They may
be settled in cash or through delivery. As part of its asset/liability
management, the Company generally utilizes futures contracts to manage its
market risk related to fixed income securities and anticipatory investment
purchases and sales. Futures used as hedges of anticipatory transactions pertain
to identified transactions which are probable to occur and are generally
completed within ninety days. Futures contracts have limited
off-balance-sheet credit risk as they are executed on organized exchanges and
require security deposits, as well as the daily cash settlement of margins.
Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. Market risk exists for all of the
derivative financial instruments that the Company currently holds, as these
instruments may become less valuable due to adverse changes in market
conditions. The Company mitigates this risk through established risk limits set
by senior management. In addition, the change in the value of the Company's
derivative financial instruments designated as hedges are generally offset by
the change in the value of the related assets and liabilities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans are agreements to lend to a borrower
provided there is no violation of any condition established in the contract. The
Company enters these agreements to commit to future loan fundings at a
predetermined interest rate. Commitments generally have fixed expiration dates
or other termination clauses. Commitments to extend mortgage loans, which are
secured by the underlying properties, are valued based on estimates of fees
charged by other institutions to make similar commitments to similar borrowers.
At December 31, 1997 and 1996, the Company had $18,000 and $6,190 in mortgage
loan commitments which had a fair value of $180 and $62, respectively.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
6. INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
in the filing of a consolidated federal income tax return (the "Allstate Group")
and is party to a federal income tax allocation agreement (the "Tax Sharing
Agreement"). Under the Tax Sharing Agreement, the Company paid to or received
from the Corporation the amount, if any, by which the Allstate Group's federal
income tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return. Effectively, this results in the
Company's annual income tax provision being computed, with adjustments, as if
the Company filed a separate return.
Prior to the Distribution, the Corporation and all of its eligible domestic
subsidiaries, including the Company, joined with Sears and its domestic business
units (the "Sears Group") in the filing of a consolidated federal income tax
return (the "Sears Tax Group") and were parties to a federal income tax
allocation agreement (the "Sears Tax Sharing Agreement"). Under the Sears Tax
Sharing Agreement, the Company, through the Corporation, paid to or received
from the Sears Group the amount, if any, by which the Sears Tax Group's federal
income tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return. Effectively, this resulted in the
Company's annual income tax provision being computed as if the Allstate Group
filed a separate consolidated return, except that items such as net operating
losses, capital losses or similar items, which might not be recognized in a
separate return, were allocated according to the Sears Tax Sharing Agreement.
The Allstate Group and Sears Group have entered into an agreement which governs
their respective rights and obligations with respect to federal income taxes for
all periods prior to the Distribution ("Consolidated Tax Years"). The agreement
provides that all Consolidated Tax Years will continue to be governed by the
Sears Tax Sharing Agreement with respect to the Allstate Group's federal income
tax liability.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The components of the deferred income tax assets and liabilities at December
31, are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
DEFERRED ASSETS
Life-contingent contract reserves and
contractholder funds $34,084 $27,951
Difference in tax bases of investments 742 270
Loss on disposal of discontinued operations 364 375
Other postretirement benefits 352 524
Other assets 255 1,789
------- -------
Total deferred assets 35,797 30,909
------- -------
DEFERRED LIABILITIES
Unrealized net capital gains (34,720) (19,844)
Deferred acquisition costs (15,821) (14,020)
Prepaid commission expense (792) (717)
Other liabilities (1,454) (20)
------- -------
Total deferred liabilities (52,787) (34,601)
------- -------
Net deferred liability $(16,990) $(3,692)
-------- -------
-------- -------
</TABLE>
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current $14,874 $11,411 $12,588
Deferred (1,578) 257 (2,677)
------- ------- -------
Total income tax expense $13,296 $11,668 $ 9,911
------- ------- -------
------- ------- -------
</TABLE>
The Company paid income taxes of $13,350, $11,968 and $12,096 in 1997, 1996 and
1995, respectively. The Company had an income tax payable of $1,419 at December
31, 1997 and an income tax recoverable of $105 at December 31, 1996.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax expense 2.2 2.4 2.3
Other (.3) (1.2) (1.3)
---- ---- ----
Effective income tax rate 36.9% 36.2% 36.0%
---- ---- ----
---- ---- ----
</TABLE>
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
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, 1997, 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 are
allowed under the Tax Reform Act of 1984.
7. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income for the year ended December 31, and
shareholder's equity at December 31, as reported herein in conformity with
generally accepted accounting principles with statutory net income and capital
and surplus, determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities:
<TABLE>
<CAPTION>
NET INCOME
----------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance per generally accepted accounting
principles $ 22,716 $ 20,561 $ 19,522
Deferred acquisition costs (10,782) (6,858) (5,537)
Deferred income taxes (1,578) 257 (2,677)
Statutory reserves 7,749 6,101 11,380
Other postretirement and postemployment
benefits (36) (34) 71
Other 522 (1,882) 441
--------- --------- ---------
Balance per statutory accounting practices $ 18,591 $ 18,145 $ 23,200
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER'S EQUITY
--------------------
1997 1996
---- ----
<S> <C> <C>
Balance per generally accepted accounting principles $ 283,410 $ 233,067
Deferred acquisition costs (71,946) (61,559)
Deferred income taxes 16,990 3,692
Unrealized gain/loss on fixed income securities (246,147) (122,628)
Non-admitted assets (4,301) (2,739)
Statutory reserves 207,163 115,725
Other postretirement and postemployment benefits 1,007 1,074
Other (1,556) (1,613)
---------- ----------
Balance per statutory accounting practices $ 184,620 $ 165,019
---------- ----------
---------- ----------
</TABLE>
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the New York
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed. The Company does not follow any permitted statutory accounting
practices that have a material effect on statutory surplus, statutory net income
or risk-based capital.
Final approval of the NAIC's proposed "Comprehensive Guide" on statutory
accounting principles is expected in early 1998. The requirements may be
effective as early as January 1, 1999, and are not expected to have a material
impact on 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.
8. BENEFIT PLANS
PENSION PLANS
Defined benefit pension plans, sponsored by the Corporation, cover domestic
full-time employees and certain part-time employees. Benefits under the pension
plans are based upon the employee's length of service, average annual
compensation and estimated social security retirement benefits. The
Corporation's funding policy for the pension plans is to make annual
contributions in accordance with accepted actuarial cost methods. The costs to
the Company included in net income were $597, $490 and $446 for the pension
plans in 1997, 1996 and 1995, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Corporation provides certain health care and life insurance benefits for
retired employees. Qualified employees may become eligible for these benefits if
they retire in accordance with the Corporation's established retirement policy
and are continuously insured under the Corporation's group plans or other
approved plans for 10 or more years prior to retirement. The Corporation shares
the cost of the retiree medical benefits with retirees based on years of
service, with the Corporation's share being subject to a 5% limit on annual
medical cost inflation after retirement. The Corporation's postretirement
benefit plans currently are not funded. The Corporation has the right to modify
or terminate these plans.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries are also eligible to
become members of The Savings and Profit Sharing Fund of Allstate Employees
("Allstate Plan"). The Corporation's contributions are based on the
Corporation's matching obligation and performance. The Allstate Plan includes an
Employee Stock Ownership Plan ("Allstate ESOP") to pre-fund a portion of the
Corporation's anticipated contribution. The Allstate Plan and the Allstate ESOP
split from The Savings and Profit Sharing Fund of Sears Employees ("Sears Plan")
on the date of the Distribution. In connection with this, the Corporation paid
Sears $327 million, and in return received a note from the Allstate ESOP for a
like principal amount and 50% of the unallocated shares. The note has a fixed
interest rate of 7.9% and matures in 2019. The Corporation expects to make net
contributions to the Allstate ESOP annually in the amount necessary to allow the
Allstate ESOP to fund interest and principal payments on the note after
considering the dividends paid on ESOP shares, which are available for debt
service.
The Company's defined contribution to the Allstate Plan was $164 and $111 in
1997 and 1996, respectively.
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV--REINSURANCE
($in thousands)
<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 5,846 864 4,982
----------- --------- ------------
$ 122,013 $ 3,049 $ 118,964
----------- --------- ------------
----------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1996 AMOUNT CEDED AMOUNT
- - ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 9,962,300 $ 553,628 $ 9,408,672
----------- --------- ------------
----------- --------- ------------
Premiums and contract charges:
Life and annuities $ 114,296 $ 1,398 $ 112,898
Accident and health 5,044 834 4,210
----------- --------- ------------
$ 119,340 $ 2,232 $ 117,108
----------- --------- ------------
----------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1995 AMOUNT CEDED AMOUNT
- - ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 8,513,295 $ 398,025 $ 8,115,270
----------- --------- ------------
----------- --------- ------------
Premiums and contract charges:
Life and annuities $ 146,732 $ 1,246 $ 145,486
Accident and health 3,731 901 2,830
----------- --------- ------------
$ 150,463 $ 2,147 $ 148,316
----------- --------- ------------
----------- --------- ------------
</TABLE>
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
$in thousands) BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
- - ----------------------------
Allowance for estimated losses
on mortgage loans $ 225 $ 261 $ - $ 486
------ ------ ------ ------
------ ------ ------ ------
YEAR ENDED DECEMBER 31, 1996
- - ----------------------------
Allowance for estimated losses
on mortgage loans $1,952 $ (296) $1,431 $ 225
------ ------ ------ ------
------ ------ ------ ------
YEAR ENDED DECEMBER 31, 1995
- - ----------------------------
Allowance for estimated losses
on mortgage loans $1,179 $1,923 $1,150 $1,952
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
<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 II (the "Account") as of December 31, 1997, and
the related statement of operations for the year then ended and the statements
of changes in net assets for the year ended December 31, 1997 of the Money
Market, High Yield, Equity, Quality Income Plus, Strategist, Dividend Growth,
Utilities, European Growth, Capital Growth, Global Dividend Growth, Pacific
Growth, Capital Appreciation, and Income Builder portfolios of the Dean Witter
Variable Investment Series that comprise the Account and for the year ended
December 31, 1996 of the Money Market, High Yield, Equity, Quality Income Plus,
Strategist, Dividend Growth, Utilities, European Growth, Capital Growth, Global
Dividend Growth, and Pacific Growth portfolios of the Dean Witter Variable
Investment Series that comprise the Account. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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, 1997. 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 Account as of December 31, 1997, the
results of its operations for the year then ended and the changes in its net
assets for each of the two years in the period then ended, of each of the
portfolios comprising the Account, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 1998
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
- - --------------------------------------------------------------------------------
($ and shares in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in the Dean Witter Variable Investment Series Portfolios:
Money Market, 14,661 shares (cost $14,661) $ 14,661
High Yield, 1,908 shares (cost $12,219) 11,674
Equity, 989 shares (cost $24,219) 33,195
Quality Income Plus, 2,785 shares (cost $29,524) 29,995
Strategist, 2,255 shares (cost $28,643) 33,373
Dividend Growth, 3,938 shares (cost $55,939) 85,056
Utilities, 1,382 shares (cost $18,410) 25,696
European Growth, 848 shares (cost $14,044) 19,967
Capital Growth, 309 shares (cost $4,513) 5,651
Global Dividend Growth, 1,502 shares (cost $17,458) 20,861
Pacific Growth, 695 shares (cost $6,733) 4,254
Capital Appreciation, 76 shares (cost $841) 865
Income Builder, 140 shares (cost $1,530) 1,648
----------
Total assets 286,896
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 81
----------
Net assets $ 286,815
----------
----------
</TABLE>
See notes to financial statements.
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- - ---------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
DEAN WITTER VARIABLE INVESTMENT SERIES PORTFOLIOS
----------------------------------------------------------------------------------------
QUALITY
MONEY HIGH INCOME DIVIDEND
MARKET YIELD EQUITY PLUS STRATEGIST GROWTH UTILITIES
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 772 $ 1,301 $ 1,983 $ 1,980 $ 1,670 $ 5,399 $ 1,108
Charges from Allstate Life Insurance
Company of New York:
Mortality and expense risk (189) (133) (341) (368) (401) (988) (289)
Administrative expense (15) (11) (27) (29) (32) (79) (23)
--------- --------- --------- --------- --------- --------- ---------
Net investment income (loss) 568 1,157 1,615 1,583 1,237 4,332 796
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of
investments:
Proceeds from sales 8,360 1,250 2,104 4,496 2,976 8,306 4,062
Cost of investments sold (8,360) (1,264) (1,647) (4,576) (2,696) (5,501) (3,362)
--------- --------- --------- --------- --------- --------- ---------
Net realized gains (losses) - (14) 457 (80) 280 2,805 700
--------- --------- --------- --------- --------- --------- ---------
Change in unrealized gains (losses) - (76) 6,140 1,182 2,086 9,518 3,847
--------- --------- --------- --------- --------- --------- ---------
Net gains (losses) on investments - (90) 6,597 1,102 2,366 12,323 4,547
--------- --------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 568 $ 1,067 $ 8,212 $ 2,685 $ 3,603 $ 16,655 $ 5,343
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES PORTFOLIOS
----------------------------------------------------------------------------------------
GLOBAL
EUROPEAN CAPITAL DIVIDEND PACIFIC CAPITAL INCOME
GROWTH GROWTH GROWTH GROWTH APPRECIATION BUILDER TOTAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,205 $ 516 $ 1,142 $ 113 $ - $ 41 $ 17,230
Charges from Allstate Life Insurance
Company of New York:
Mortality and expense risk (242) (60) (243) (89) (5) (9) (3,357)
Administrative expense (19) (5) (19) (7) - (1) (267)
--------- --------- --------- --------- --------- --------- ---------
Net investment income (loss) 944 451 880 17 (5) 31 13,606
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of
investments:
Proceeds from sales 2,369 737 1,441 1,944 40 50 38,135
Cost of investments sold (1,679) (558) (1,185) (2,315) (40) (49) (33,232)
--------- --------- --------- --------- --------- --------- ---------
Net realized gains (losses) 690 179 256 (371) - 1 4,903
--------- --------- --------- --------- --------- --------- ---------
Change in unrealized gains (losses) 985 220 638 (2,588) 24 118 22,094
--------- --------- --------- --------- --------- --------- ---------
Net gains (losses) on investments 1,675 399 894 (2,959) 24 119 26,997
--------- --------- --------- --------- --------- --------- ---------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,619 $ 850 $ 1,774 $ (2,942) $ 19 $ 150 $ 40,603
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
- - ---------------------------------------------------------------------------------------------------------------------------------
($ and units in thousands, except value per unit)
DEAN WITTER VARIABLE INVESTMENT SERIES PORTFOLIOS
----------------------------------------------------------------------------------------
QUALITY
MONEY HIGH INCOME DIVIDEND
MARKET YIELD EQUITY PLUS STRATEGIST GROWTH UTILITIES
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 568 $ 1,157 $ 1,615 $ 1,583 $ 1,237 $ 4,332 $ 796
Net realized gains (losses) - (14) 457 (80) 280 2,805 700
Change in unrealized gains (losses) - (76) 6,140 1,182 2,086 9,518 3,847
--------- --------- --------- --------- --------- --------- ---------
Change in net assets resulting
from operations 568 1,067 8,212 2,685 3,603 16,655 5,343
FROM CAPITAL TRANSACTIONS
Deposits 6,064 1,493 3,214 1,148 2,496 8,237 560
Benefit payments (141) (36) (351) (498) (141) (601) (256)
Payments on termination (2,101) (721) (2,153) (2,534) (2,935) (10,838) (2,179)
Contract maintenance charges (6) (5) (16) (16) (21) (45) (14)
Transfers among the portfolios and
with the Fixed Account - net (4,803) 99 2,304 (1,304) 427 2,845 (1,509)
--------- --------- --------- --------- --------- --------- ---------
Change in net assets resulting from
capital transactions (987) 830 2,998 (3,204) (174) (402) (3,398)
--------- --------- --------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS (419) 1,897 11,210 (519) 3,429 16,253 1,945
NET ASSETS AT BEGINNING OF YEAR 15,076 9,775 21,977 30,506 29,933 68,778 23,742
--------- --------- --------- --------- --------- --------- ---------
NET ASSETS AT END OF YEAR $ 14,657 $ 11,672 $ 33,187 $ 29,987 $ 33,362 $ 85,031 $ 25,687
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net asset value per unit at end of year $ 12.55 $ 26.65 $ 38.87 $ 17.98 $ 21.54 $ 32.59 $ 24.21
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Units outstanding at end of year 1,168 438 854 1,668 1,549 2,610 1,062
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES PORTFOLIOS
----------------------------------------------------------------------------------------
GLOBAL
EUROPEAN CAPITAL DIVIDEND PACIFIC CAPITAL INCOME
GROWTH GROWTH GROWTH GROWTH APPRECIATION BUILDER TOTAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 944 $ 451 $ 880 $ 17 $ (5) $ 31 $ 13,606
Net realized gains (losses) 690 179 256 (371) - 1 4,903
Change in unrealized gains (losses) 985 220 638 (2,588) 24 118 22,094
--------- --------- --------- --------- --------- --------- ---------
Change in net assets resulting
from operations 2,619 850 1,774 (2,942) 19 150 40,603
FROM CAPITAL TRANSACTIONS
Deposits 2,373 657 3,319 621 316 728 31,226
Benefit payments (156) (13) (116) (49) - - (2,358)
Payments on termination (1,563) (343) (1,752) (468) (2) (6) (27,595)
Contract maintenance charges (11) (3) (12) (3) - (1) (153)
Transfers among the portfolios and
with the Fixed Account - net (184) 374 1,391 (1,094) 533 776 (145)
--------- --------- --------- --------- --------- --------- ---------
Change in net assets resulting
from capital transactions 459 672 2,830 (993) 847 1,497 975
--------- --------- --------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS 3,078 1,522 4,604 (3,935) 866 1,647 41,578
NET ASSETS AT BEGINNING OF YEAR 16,885 4,125 16,250 8,190 - - 245,237
--------- --------- --------- --------- --------- --------- ---------
NET ASSETS AT END OF YEAR $ 19,963 $ 5,647 $ 20,854 $ 4,255 $ 866 $ 1,647 $ 286,815
--------- --------- --------- --------- --------- --------- ---------
Net asset value per unit at end of year $ 27.87 $ 20.18 $ 15.30 $ 6.06 $ 11.18 $ 12.08
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Units outstanding at end of year 717 280 1,362 702 77 136
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
- - --------------------------------------------------------------------------------------------------------------------
($ and units in thousands, except value per unit)
DEAN WITTER VARIABLE INVESTMENT SERIES PORTFOLIOS
---------------------------------------------------------------------------
QUALITY
MONEY HIGH INCOME DIVIDEND
MARKET YIELD EQUITY PLUS STRATEGIST GROWTH
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 481 $ 878 $ 2,150 $ 1,727 $ 1,000 $ 2,016
Net realized gains (losses) - (41) 119 (157) 178 847
Change in unrealized gains (losses) - (32) (378) (1,699) 2,509 9,042
--------- --------- --------- --------- --------- ---------
Change in net assets resulting from
operations 481 805 1,891 (129) 3,687 11,905
FROM CAPITAL TRANSACTIONS
Deposits 5,196 2,216 4,073 1,274 1,305 8,044
Benefit payments (55) (10) (105) (275) (100) (447)
Payments on termination (1,541) (347) (511) (1,880) (2,978) (3,461)
Contract maintenance charges (7) (5) (12) (18) (21) (40)
Transfers among the portfolios and
with the Fixed Account - net (366) 49 1,300 (2,867) (1,400) 2,142
--------- --------- --------- --------- --------- ---------
Change in net assets resulting from
capital transactions 3,227 1,903 4,745 (3,766) (3,194) 6,238
--------- --------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS 3,708 2,708 6,636 (3,895) 493 18,143
NET ASSETS AT BEGINNING OF YEAR 11,368 7,067 15,341 34,401 29,440 50,635
--------- --------- --------- --------- --------- ---------
NET ASSETS AT END OF YEAR $ 15,076 $ 9,775 $ 21,977 $ 30,506 $ 29,933 $ 68,778
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net asset value per unit at end of year $ 12.08 $ 24.14 $ 28.67 $ 16.40 $ 19.20 $ 26.30
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Units outstanding at end of year 1,246 405 767 1,860 1,559 2,615
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES PORTFOLIOS
-------------------------------------------------------------------------
GLOBAL
EUROPEAN CAPITAL DIVIDEND PACIFIC
UTILITIES GROWTH GROWTH GROWTH GROWTH TOTAL
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 622 $ 530 $ 19 $ 427 $ (9) $ 9,841
Net realized gains (losses) 388 153 90 75 12 1,664
Change in unrealized gains (losses) 651 2,748 223 1,476 55 14,595
--------- --------- --------- --------- --------- ---------
Change in net assets resulting
from operations 1,661 3,431 332 1,978 58 26,100
FROM CAPITAL TRANSACTIONS
Deposits 1,052 1,959 590 3,269 1,620 30,598
Benefit payments (49) (108) (2) (111) (57) (1,319)
Payments on termination (1,153) (304) (216) (485) (175) (13,051)
Contract maintenance charges (15) (10) (2) (10) (5) (145)
Transfers among the portfolios and
with the Fixed Account - net (2,252) 997 166 1,579 1,175 523
--------- --------- --------- --------- --------- ---------
Change in net assets resulting from
capital transactions (2,417) 2,534 536 4,242 2,558 16,606
--------- --------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS (756) 5,965 868 6,220 2,616 42,706
NET ASSETS AT BEGINNING OF YEAR 24,498 10,920 3,257 10,030 5,574 202,531
--------- --------- --------- --------- --------- ---------
NET ASSETS AT END OF YEAR $ 23,742 $ 16,885 $ 4,125 $ 16,250 $ 8,190 $ 245,237
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net asset value per unit at end of year $ 19.30 $ 24.33 $ 16.42 $ 13.84 $ 9.86
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Units outstanding at end of year 1,230 694 251 1,174 831
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
NOTES TO FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 1997
- - --------------------------------------------------------------------------------
1. ORGANIZATION
Allstate Life of New York Variable Annuity Account II (the "Account"), a
unit investment trust registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, is a Separate Account
of Allstate Life Insurance Company of New York ("ALNY"). The assets of the
Account are legally segregated from those of ALNY. ALNY is wholly owned by
a wholly owned subsidiary of Allstate Insurance Company, which is wholly
owned by The Allstate Corporation.
ALNY writes certain annuity contracts, the proceeds of which are invested
at the direction of the contractholder. Contractholders primarily invest
in units of the portfolios comprising the Account, for which they bear all
of the investment risk, but may also invest in the general account of ALNY
(the "Fixed Account"). The Account, in turn, invests in shares of the
portfolios of the Dean Witter Variable Investment Series (the "Fund").
ALNY provides administrative and insurance services to the Account for a
fee.
Dean Witter Reynolds Inc., a wholly owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co., is a distributor of ALNY's flexible premium
deferred variable annuity contracts and certain single and flexible premium
annuities. Dean Witter InterCapital Inc. ("InterCapital"), a wholly owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co., is the
investment manager for the Fund. InterCapital receives investment
management fees from the Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares in the portfolios
of the Fund and are stated at fair value based on quoted market prices.
RECOGNITION OF INVESTMENT INCOME - Investment income consists of dividends
declared by the portfolios of the Fund and is recognized on the date of
record.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of shares by the Account and the
cost of such shares, which is determined on a weighted average basis.
CONTRACTHOLDER ACCOUNT ACTIVITY - Account activity is reflected in
individual contractholder accounts on a daily basis.
FEDERAL INCOME TAXES - The Account is intended to qualify as a segregated
asset account as defined in the Internal Revenue Code ("Code"). As such,
the operations of the Account are included with and taxed as a part of
ALNY. ALNY is taxed as a life insurance company under the Code. Under
current law, no federal income taxes are payable by the Account.
ACCOUNT VALUE - Certain calculations that could be made in the financial
statements may differ from published amounts due to the truncation of
actual Account values.
<PAGE>
3. CONTRACT MAINTENANCE, MORTALITY AND EXPENSE RISK, AND ADMINISTRATIVE
EXPENSE CHARGES
For each year or portion of a year a contract is in effect, ALNY deducts a
fixed annual contract maintenance charge of $30 as reimbursement for
expenses related to the maintenance of each contract and the Account. The
amount of this charge is guaranteed not to increase over the life of the
contract.
ALNY 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. ALNY guarantees that the rate of this
charge will not increase over the life of the contract.
ALNY deducts administrative expense charges daily at a rate equal to .10%
per annum of the daily net assets of the Account. This charge is designed
to cover administrative expense.
4. FINANCIAL INSTRUMENTS
The investments of the Account are carried at fair value, based upon quoted
market prices. Accrued contract maintenance charges are of a short-term
nature. It is assumed that their carrying value approximates fair value.
<PAGE>
5. UNITS ISSUED AND REDEEMED
Units issued and redeemed by the Account during 1997 were as follows:
<TABLE>
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES PORTFOLIOS
----------------------------------------------------------------------------------------
(Units in thousands) QUALITY
MONEY HIGH INCOME DIVIDEND
MARKET YIELD EQUITY PLUS STRATEGIST GROWTH UTILITIES
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at beginning of year 1,246 405 767 1,860 1,559 2,615 1,230
Unit activity during 1997:
Issued 767 90 182 92 172 421 36
Redeemed (845) (57) (95) (284) (182) (426) (204)
------ ------ ------ ------ ------ ------ ------
Units outstanding at end of year 1,168 438 854 1,668 1,549 2,610 1,062
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
<CAPTION>
DEAN WITTER VARIABLE INVESTMENT SERIES PORTFOLIOS
(Units in thousands) --------------------------------------------------------------------------
GLOBAL
EUROPEAN CAPITAL DIVIDEND PACIFIC CAPITAL INCOME
GROWTH GROWTH GROWTH GROWTH APPRECIATION BUILDER
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at beginning of year 694 251 1,174 831 - -
Unit activity during 1997:
Issued 138 70 349 131 81 141
Redeemed (115) (41) (161) (260) (4) (5)
------ ------ ------ ------ ------ ------
Units outstanding at end of year 717 280 1,362 702 77 136
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>
Units relating to accrued contract maintenance charges are included in units
redeemed.
******
<PAGE>
PART C
OTHER INFORMATION
24A. FINANCIAL STATEMENTS
PART B: Financial Statements for Allstate Life Insurance Company of New
York and Allstate Life of New York Variable Annuity Account II
24B. EXHIBITS
The following exhibits:
The following exhibits correspond to those required by paragraph (b) of
item 24 as to exhibits in Form N-4:
(1) Resolution of the Board of Directors of Allstate Life Insurance
Company of New York authorizing establishment of the Variable Annuity
Account II**
(2) Not Applicable
(3) General Agent's Agreement*****
(4) Form of Contract**
(5) Form of application for a Contract**
(6) (a) Certificate of Incorporation of Allstate Life Insurance
Company of New York***
(b) By-laws of Allstate Life Insurance Company of New York***
(7) Not applicable
(8) Participation Agreement****
(9) Opinion of Robert S. Seiler, Senior Vice President, Secretary and
General Counsel of Allstate Life Insurance Company of New York**
(10) (a) Consent of Accountants
(b) Consent of Attorneys**
(11) Not applicable
(12) Not applicable
(13) Performance Data*
(99) Powers of Attorney*, **, ****
- - --------------
* Previously filed in Form N-4 Registration Statement No. 33-35445 dated
February 2, 1998.
** Previously filed in Form N-4 Registration Statement No. 33-35445 dated
December 31, 1996.
*** Previously filed in Form N-4 Registration Statement No. 33-65381 dated
September 20, 1996.
**** Previously filed in Form N-4 Registration Statement No. 33-35445 dated
April 30, 1996.
***** Previously filed in Form N-4 Registration Statement No. 33-35445 dated
June 15, 1990
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal Position and Office With Depositor
Business Address of the Trust
- - ----------------------- -----------------------------------------
Louis G. Lower, II* Chairman of the Board of Directors and President
Michael J. Velotta* Director, Vice President, Secretary and General
Counsel
Sharmaine M. Miller** Director and Chief Administrative Officer
Marcia D. Alazraki* Director
Joseph F. Carlino* Director
Marla G. Friedman* Director and Vice President
Cleveland Johnson, Jr.* Director
Gerard F. McDermott** Director
Joseph P. McFadden* Director
John R. Raben, Jr.* Director
Sally A. Slacke* Director
Kevin R. Slawin* Director and Vice President
Timothy H. Plohg* Director and Vice President
Karen C. Gardner* Vice President
Peter H. Heckman* Vice President
Thomas A. McAvity, Jr.* Vice President
Keith A. Hauschildt* Assistant Vice President and Controller
James P. Zils* Treasurer
Casey J. Sylla* Chief Investment Officer
Richard L. Baker* Assistant Vice President
Mark A. Bishop* Assistant Treasurer
Barbara S. Brown* Assistant Treasurer
Dorothy E. Even* Assistant Vice President
Judith P. Greffin* Assistant Vice President
Peter S. Horos* Assistant Treasurer
John R. Hunter* Assistant Vice President
Thomas C. Jensen* Assistant Treasurer
Emma M. Kalaidjian* Assistant Secretary
Paul N. Kierig* Assistant Secretary and Assistant General Counsel
Kenneth S. Klimala* Assistant Vice President
Ronald A. Mendel* Assistant Treasurer
Mary J. McGinn* Assistant Secretary
Deborah K. Miller* Assistant Treasurer
Barry S. Paul* Assistant Vice President
C. Nelson Strom* Assistant Vice President and Corporate Actuary
Brenda D. Sneed* Assistant Secretary
Patricia W. Wilson* Assistant Vice President
Ralph A. Bergholtz* Assistant Treasurer
D. Steven Boger* Assistant Vice President
<PAGE>
Adrian B. Corbiere* Assistant Treasurer
Louise J. Walton* Assistant Treasurer
Jerry D. Zinkula* Assistant Treasurer
* Principal business address is 3100 Sanders Road, Northbrook, Illinois 60062.
** Principal business address is One Allstate Drive, Farmingville, New York
11738.
26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT
Incorporated by reference to 10-K Commission File # 1-11840, The Allstate
Corporation.
27. NUMBER OF CONTRACT OWNERS
As of March 27, 1998 there were in force 470 qualified and 4,976
non-qualified contracts. The Registrant began operations on September 24,
1991.
28. INDEMNIFICATION
The General Agent's Agreement (Exhibit 3) has a provision in which Allstate
Life Insurance Company of New York agrees to indemnify Dean Witter Reynolds as
Underwriter for certain damages and expenses that may be caused by actions,
statements or omissions by Allstate Life Insurance Company of New York. The
Agreement to Purchase Shares contains a similar provision in paragraph 16 of
Exhibit 12.
Insofar as indemnification for liability arising out of the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the registrant of expenses incurred by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit, or proceeding) is asserted such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
29a. RELATIONSHIP OF PRINCIPAL UNDERWRITER TO OTHER INVESTMENT COMPANIES
Dean Witter Reynolds Inc. is the principal underwriter for the following
affiliated investment companies:
Allstate Life of New York Variable Annuity Account
Northbrook Variable Annuity Account
Northbrook Variable Annuity Account II
<PAGE>
29b. PRINCIPAL UNDERWRITER
Name and Principal Business Positions and Offices
Address of Each Such Person with Underwriter
-------------------------------- ---------------------
DEAN WITTER REYNOLDS INC. UNDERWRITER
("DEAN WITTER")
Philip J. Purcell Chairman, Chief Executive Officer
and Director
Richard M. DeMartini President, Chief Operating Officer and
Director, Dean Witter Capital
James F. Higgins President, Chief Operating Officer and
Director, Dean Witter Financial
Stephen R. Miller Senior Executive Vice President and
Director
Raymond J. Drop Executive Vice President
Robert J. Dwyer Executive Vice President, National
Sales Director and Director
Christine A. Edwards Executive Vice President, Secretary,
General Counsel and Director
Charles A. Fiumefreddo Executive Vice President and Director
Alfred J. Golden Executive Vice President
E. Davisson Hardman, Jr. Executive Vice President
Mitchell M. Merin Executive Vice President, Chief
Administrative Officer and Director
Jeremiah A. Mullins Executive Vice President
Richard F. Powers, III Executive Vice President and Director
John H. Schaefer Executive Vice President
Thomas C. Schneider Executive Vice President, Chief
Financial Officer and Director
Robert B. Sculthorpe Executive Vice President
William B. Smith Executive Vice President and Director
Samuel H. Wolcott, III Executive Vice President
Anthony Basile Senior Vice President
Ronald T. Carman Senior Vice President, Associate General
Counsel and Assistant Secretary
Michael T. Cunningham Senior Vice President
Mary E. Curran Senior Vice President
David Diaz Senior Vice President
Raymond F. Douglas Senior Vice President
Paul J. Dubow Senior Vice President
Michael T. Gregg Senior Vice President and Deputy
General Counsel
George R. Ross Senior Vice President
<PAGE>
Robert P. Seass Senior Vice President
Joseph G. Siniscalchi Senior Vice President and Controller,
Dean Witter Financial
Michael H. Stone Senior Vice President
Lawrence Volpe Senior Vice President and Controller,
Dean Witter Reynolds Inc. and Dean
Witter Capital
Lorena J. Kern Senior Vice President
Kathryn M. McNamara Senior Vice President and Director of
Governmental Affairs
Michael D. Browne Assistant Secretary
Linda M. Butler Assistant Secretary
Marilyn Cranney Assistant Secretary
Sheldon Curtis Assistant Secretary
Barry Fink Assistant Secretary
Sabrina Hurley Assistant Secretary
Barbara B. Kiley Assistant Secretary
The principal address of Dean Witter is Two World Trade Center, New York,
New York 10048.
29c. COMPENSATION OF DEAN WITTER
The following commissions and other compensation were received by each
principal underwriter, directly or indirectly, from the Registrant during the
Registrant's last fiscal year:
(1) (2) (3) (4) (5)
Net Compensation
Underwriting or
Discounts Redemption
Name of and or Brokerage
Principal Commissions Annuitization Commissions Compensation
- - --------- ----------- ------------- ----------- ------------
Dean Witter $1,718,335
Reynolds Inc.
30. LOCATION OF ACCOUNTS AND RECORDS
Allstate Life Insurance Company of New York
One Allstate Drive
Farmingville, New York 11738
31. MANAGEMENT SERVICES
None
<PAGE>
32. UNDERTAKINGS
The Registrant promises to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted. Registrant furthermore agrees to include either as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a statement of Additional Information or a post
card or similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional Information.
Finally the Registrant agrees to deliver any Statement of Additional Information
and any Financial Statements required to be made available under this Form N-4
promptly upon written or oral request.
33. REPRESENTATIONS PURSUANT TO SECTION 403(b) OF THE INTERNAL REVENUE CODE
The Company represents that it is relying upon a November 28, 1988
Securities and Exchange Commission no-action letter issued to the American
Council of Life Insurance ("ACLI") and that the provisions of paragraphs 1-4 of
the no-action letter have been complied with.
34. REPRESENTATION REGARDING CONTRACT EXPENSES
Allstate Life Insurance Company of New York ("ALIC NY") represents that
the fees and charges deducted under the Individual Variable Annuity Contracts
hereby registered by this Registration Statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by ALIC NY.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Allstate Life of New York Variable Annuity Account II,
certifies that it meets the requirements of Securities Act Rule 485 (b) for
effectiveness of this amended Registration Statement and has caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, and its seal to be hereunto affixed and attested, in the
Township of Northfield, and State of Illinois on this 2nd day of April 1998.
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(DEPOSITOR)
(SEAL)
Attest /s/ BRENDA D. SNEED By /s/ MICHAEL J. VELOTTA
--------------------------------- ----------------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary Vice President, Secretary and
General Counsel
As required by the Securities Act of 1933, this amended Registration
Statement has been duly signed below by the following Directors and Officers
of Allstate Life Insurance Company of New York on the 2nd day of April, 1998.
*/LOUIS G. LOWER, II Chairman of the Board of Directors and
- - ----------------------------- President (Principal Executive Officer)
Louis G. Lower, II
/s/ MICHAEL J. VELOTTA Director, Vice President, Secretary and
- - ----------------------------- General Counsel
Michael J. Velotta
*/SHARMAINE M. MILLER Director and Chief Administrative Officer
- - -----------------------------
Sharmaine M. Miller
<PAGE>
*/MARLA G. FRIEDMAN Director and Vice President
- - -----------------------------
Marla G. Friedman
*/VINCENT A. FUSCO Director and Chief Operations Officer
- - -----------------------------
Vincent A. Fusco
*/PETER H. HECKMAN Vice President
- - -----------------------------
Peter H. Heckman
*/KAREN C. GARDNER Vice President
- - -----------------------------
Karen C. Gardner
*/THOMAS A. MCAVITY, JR. Vice President
- - -----------------------------
Thomas A. McAvity, Jr.
*/TIMOTHY H. PLOHG Director and Vice President
- - -----------------------------
Timothy H. Plohg
*/KEVIN R. SLAWIN Director and Vice President
- - ----------------------------- (Principal Financial Officer)
Kevin R. Slawin
*/MARCIA D. ALAZRAKI Director
- - -----------------------------
Marcia D. Alazraki
*/JOSEPH F. CARLINO Director
- - -----------------------------
Joseph F. Carlino
*/CLEVELAND JOHNSON, JR. Director
- - -----------------------------
Cleveland Johnson, Jr.
*/GERARD F. MCDERMOTT Director
- - -----------------------------
Gerard F. McDermott
<PAGE>
*/JOSEPH MCFADDEN Director
- - -----------------------------
Joseph McFadden
*/JOHN R. RABEN, JR. Director
- - -----------------------------
John R. Raben, Jr.
*/SALLY A. SLACKE Director
- - -----------------------------
Sally A. Slacke
*/PATRICIA W. WILSON Director
- - -----------------------------
Patricia W. Wilson
*/JAMES P. ZILS Treasurer
- - ----------------------------
James P. Zils
*/CASEY J. SYLLA Chief Investment Officer
- - ----------------------------
Casey J. Sylla
*/KEITH A. HAUSCHILDT Assistant Vice President and Controller
- - ----------------------------- (Principal Accounting Officer)
Keith A. Hauschildt
*/ By Michael J. Velotta pursuant to Power of Attorney previously filed.
<PAGE>
Exhibit (10)(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 13 to Registration
Statement No. 033-35445 of Allstate Life Insurance of New York Variable Annuity
Account II of Allstate Life Insurance Company of New York on Form N-4 of our
report dated February 20, 1998 relating to the financial statements and
financial statement schedules of Allstate Life Insurance Company of New York and
our report dated February 20, 1998 relating to the financial statements of
Allstate Life of New York Variable Annuity Account II, contained in the
Statement of Additional Information (which is incorporated by reference in the
Prospectus of Allstate Life of New York Variable annuity Account II of Allstate
Life Insurance Company of New York), which is part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Statement of Additional Information.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 31, 1998
