FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-62193
33-91916
33-92842
333-00987
GLENBROOK LIFE AND ANNUITY COMPANY
(Exact name of registrant as specified in its charter)
ILLINOIS 35-1113325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive offices)
(Zip Code)
847/402-2400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes../X/.. No
Indicate the number of shares of each of the issuer's classes of common
stock, as of September 30, 1996; there were 4,200 shares of common capital stock
outstanding, par value $500 per share all of which shares are held by Allstate
Life Insurance Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Position As Of
September 30, 1996(Unaudited) and December 31, 1995 3
Statements of Operations
Three Months Ended September 30, 1996 and
September 30, 1995 (Unaudited)
Nine Months Ended September 30, 1996 and
September 30, 1995 (Unaudited) 4
Statements of Cash Flows
Nine Months Ended September 30, 1996 and
September 30, 1995 (Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
Signature Page
2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
($ in thousands) (Unaudited)
<S> <C> <C>
Assets
Investments
Fixed income securities available for sale, at
fair value (amortized cost $45,640 and $44,112) $ 47,264 $ 48,815
Short-term 2,707 2,102
Total investments 49,971 50,917
Reinsurance recoverable from Allstate Life
Insurance Company 1,906,063 1,340,925
Cash 2,314 264
Other assets 2,230 2,021
Separate Accounts 177,487 15,578
Total assets $2,138,065 $1,409,705
Liabilities
Contractholder funds $1,906,063 $1,340,925
Current income taxes 1,586 1,637
Deferred income taxes 1,039 1,828
Net payable to Allstate Life Insurance Company 3,055 255
Separate-Accounts 165,935 5,048
Total liabilities 2,077,678 1,349,693
Shareholder's equity
Common stock, $500 par value, 4,200 shares
authorized, issued and outstanding 2,100 2,100
Additional capital paid-in 49,641 49,641
Unrealized net capital gains 1,885 3,357
Retained income 6,761 4,914
Total shareholder' equity 60,387 60,012
Total liabilities and shareholder's equity $2,138,065 $1,409,705
</TABLE>
See notes to financial statements
3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) 1996 1995 1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Net investment income $ 996 $ 1,027 $ 2,860 $ 3,045
Income from operations before
income tax expense 996 1,027 2,860 3,045
Income tax expense 348 361 1,013 1,078
Net income $ 648 $ 666 $ 1,847 $ 1,967
-------- --------- ------- --------
</TABLE>
See notes to financial statements.
4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
($ in thousands) 1996 1995
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,847 $ 1,967
Adjustments to reconcile net income to net cash
provided by operating activities
Changes in deferred income taxes 3 (632)
Changes in other operating assets and liabilities 2,510 458
Net cash provided by operating activities 4,360 1,793
Cash flows from Investing activities
Fixed income securities available for sale
Investment collections 2,288 1,056
Investment purchases (3,785) (1,491)
Change in short-term investments, net (605) (1,358)
Participation in Separate Accounts (208)
Net cash used in investing activities (2,310) (1,793)
Net increase in cash 2,050 0
Cash at beginning of period 264 0
-------- ------------
Cash at end of period $ 2,314 $ 0
-------- ------------
</TABLE>
See notes to financial statements.
5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Glenbrook Life and Annuity Company (the "Company") is wholly owned by
Allstate Life Insurance Company ("Allstate Life"), which is wholly owned by
Allstate Insurance Company, a wholly-owned subsidiary of The Allstate
Corporation.
The financial statements and notes as of September 30, 1996, and for the
three-month and nine-month periods ended September 30, 1996 and 1995 are
unaudited. These interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for the fair presentation of the financial position,
results of operations and cash flows for the interim periods. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Glenbrook Life and Annuity Company Annual Report on Form
10K for 1995. The results of operations for the interim periods should not be
considered indicative of results to be expected for the full year.
To conform with the 1996 presentation, certain items in the prior year's
financial statements have been reclassified.
2. Reinsurance
The Company reinsures substantially all business with Allstate Life.
Contract charges ceded to Allstate Life under reinsurance agreements were $2.62
million and $1.12 million for the nine-month periods ended September 30, 1996
and 1995, respectively. Credited interest and expenses ceded to Allstate Life
amounted to $82.97 million and $48.2 million for the nine-month periods ended
September 30, 1996 and 1995, respectively. Investment income earned on the
assets which support contractholder funds was excluded from the Company's
financial statements as those assets were transferred to Allstate Life under the
terms of reinsurance treaties. Reinsurance ceded arrangements do not discharge
the Company as the primary insurer.
6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following discussion highlights significant factors influencing
results of operations and changes in financial position of Glenbrook Life and
Annuity Company (the "Company"). It should be read in conjunction with the
discussion and analysis and financial statements and notes thereto found under
Items 7 and 8 of Part II of the Glenbrook Life and Annuity Company Annual Report
on Form 10-K for the year ended December 31, 1995.
The Company, which is wholly owned by Allstate Life Insurance Company
("Allstate Life"), issues flexible premium fixed annuity contracts, indexed
annuity contracts and single premium life insurance policies. In addition, 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 the assets and liabilities of
the Separate Accounts. The Company markets its products through banks and other
financial institutions.
The Company reinsures all of its fixed annuity deposits with Allstate
Life, and all life insurance in force with other unaffiliated reinsurers.
Accordingly, the financial results reflected in the Company's statements of
operations do not include income related to those assets that are transferred to
Allstate Life or other reinsurers under the reinsurance treaties.
Separate Account assets and liabilities are carried at fair value in the
statements of financial position. Certain Separate Account investment portfolios
established in 1995 were initially funded with a $10 million seed money
contribution from the Company in 1995. Investment income and realized gains and
losses of the Separate Account investments, other than the portion related to
the Company's participation, accrue directly to the contractholders (net of
fees) and, therefore, are not included in the Company's statements of
operations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
($ in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net investment income $ 996 $ 1,027 $ 2,860 $ 3,045
Net income $ 648 $ 666 $ 1,847 $ 1,967
Invested assets, at amortized cost $48,347 $54,273 $48,347 $54,273
------- -------- ------- -------
</TABLE>
7
<PAGE>
Pre-tax net investment income decreased 3.0% to $996 thousand for the
third quarter of 1996 compared to $1.03 million for the same period in 1995. For
the nine-month period ended September 30, 1996, pre-tax net investment income
decreased 6.1% to $2.86 million compared to $3.04 million for the same period in
1995. The decreases reflect the impact of the Company's $10 million investment
in the variable funds of the Separate Account, whose assets are invested
predominantly in equity securities. The dividend yield on the variable funds is
significantly below the level of interest earned on fixed income securities in
which the $10 million was invested prior to the fourth quarter of 1995.
FINANCIAL POSITION
Total investments at September 30, 1996 decreased $946 thousand to
$49.97 million from $50.92 million as positive cash flows generated from
operations were partially offset by a decrease of $3.08 million in the
unrealized gain on the fixed income securities portfolio. The decrease in
unrealized gains in the fixed income securities portfolio was due to the effects
of rising interest rates.
At September 30, 1996 both contractholder funds and amounts recoverable
from Allstate Life under reinsurance treaties reflect a 42.1% increase of
$565.14 million as compared to December 31, 1995. These increases result from
sales of the Company's flexible premium fixed annuity contracts, partially
offset by surrenders and withdrawals. Reinsurance recoverable from Allstate Life
relates to policy benefit obligations ceded to Allstate Life.
Separate Account assets increased by $161.91 million and Separate
Account liabilities increased by $160.89 million as compared to December 31,
1995. The increases were primarily attributable to increased sales of flexible
premium deferred variable annuity contracts.
LIQUIDITY AND CAPITAL RESOURCES
Under the terms of intercompany reinsurance agreements, assets of the
Company that relate to insurance in force, excluding Separate Account assets,
are transferred to Allstate Life or other reinsurers, which maintain investment
portfolios that support the Company's products.
8
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would materially
affect the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
(2) None
(3)(i) Articles of Incorporation*
(ii) By-laws*
(4) Glenbrook Life and Annuity Company Flexible Premium
Deferred Variable Annuity Contract and Application**
(10) Reinsurance Agreement between Glenbrook Life
and Annuity Company and Allstate Life
Insurance Company* (11) None (15) None (18) None (19) None (22)
None
(23)(a) Consent of Independent Public Accountants***
(b) Consent of Attorneys****
(24) None
(27) Financial Data Schedule
(99) None
(b) Reports on 8-K
No reports on Form 8-K were filed during the third quarter of 1996.
* Previously filed in Form S-1 Registration Statement No.333-07275 dated June
28, 1996 and incorporated by reference.
** Previously filed in Form S-1 Registration Statement No. 33-91916
dated May 4, 1995 and incorporated by reference. Previously filed in Form S-1
Registration Statement No. 33-92842 dated May 30, 1995 and incorporated by
reference. Previously filed in Form N-4 Registration Statement No. 33-62203
dated November 21, 1995 and incorporated by reference. Previously filed in
Form N-4 Registration Statement No.333-00999 dated August 23, 1996 and
incorporated by reference.
*** Previously filed in Form S-1 Registration Statement No. 33-91916
dated April 10, 1996 and incorporated by reference. Previously filed in Form
S-1 Registration Statement No. 33-92842 dated April 10, 1996 and incorporated
by reference. Previously filed in Form S-1 Registration Statement No. 33-62193
dated March 22, 1996 and incorporated by reference. Previously filed in Form
S-1 Registration Statement No.333-00987 dated August 23, 1996 and incorporated
by reference.
**** Previously filed in Pre-Effective Amendment No. 1 of Form N-4
Registration Statement No. 33-91914 dated September 15, 1995 and incorporated
by reference. Previously filed in Form S-1 Registration Statement No. 33-
92842 dated August 24, 1995 and incorporated by reference. Previously filed
in Form S-1 Registration Statement No. 33-62193 dated November 22, 1995 and
incorporated by reference. Previously filed in Form S-1 Registration
Statement No.333-00987 dated August 23, 1996 and incorporated by reference.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Glenbrook Life and Annuity Company
(Registrant)
November 13, 1996 /s/ LOUIS G. LOWER, II
- ------------------ ------------------------
DATE LOUIS G. LOWER, II
CHAIRMAN OF THE BOARD OF DIRECTORS
and CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
November 13, 1996 /s/KEVIN R. SLAWIN
- ----------------- ------------------
DATE KEVIN R. SLAWIN
VICE PRESIDENT
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
STATEMENTS OF FINANCIAL POSITION AS OF SEP 30, 1996 (UNAUDITED) AND DEC
31, 1995, STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEP 30, 1996 AND
SEP 30, 1995 (UNAUDITED) AND NINE MONTHS ENDED SEP 30, 1996 AND SEP 30,
1995 (UNAUDITED), AND STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEP 30,
1996 AND SEP 30, 1995 (UNAUDITED), AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS)
</LEGEND>
<CIK>0000945094
<NAME>Glenbrook Life and Annuity Company
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 47,264
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 49,971
<CASH> 2,314
<RECOVER-REINSURE> 1,906,063
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 2,138,065
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 1,906,063
<NOTES-PAYABLE> 0
0
0
<COMMON> 2100
<OTHER-SE> 58,287
<TOTAL-LIABILITY-AND-EQUITY> 2,138,065
0
<INVESTMENT-INCOME> 2,860
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 0
<BENEFITS> 0
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 2,860
<INCOME-TAX> 1,013
<INCOME-CONTINUING> 1,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,847
<EPS-PRIMARY> 439.76
<EPS-DILUTED> 439.76
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
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</TABLE>
