<PAGE>
As filed with the Securities and Exchange Commission on June 28, 1996
Registration No. 33-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-----------------------------
Glenbrook Life and Annuity Company
(Exact Name of Registrant as Specified in its Charter)
-----------------------------
Illinois 6311
(State or other Jurisdiction (Primary Standard Industrial
of Incorporation or Organization) Classification Code Number)
35-1113325
(I.R.S. Employer Identification Number)
-----------------------------
3100 Sanders Road
Northbrook, Illinois 60062
(Address of Principal Executive Office)
-----------------------------
Michael J. Velotta, Esquire
Vice President, Secretary and General Counsel
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, Illinois 60062
847/402-2400
(Name and Complete Address of Agent for Service)
-----------------------------
Copy To: Copy To:
Stephen E. Roth, Esq. John R. Hedrick, Esq.
Sutherland, Asbill and Brennan Allstate Life Financial Services, Inc.
1275 Pennsylvania Avenue, N.W. 3100 Sanders Road J5B
Washington, D.C. 20004 Northbrook, Illinois 60062
Approximate date of commencement of proposed sale to the public: The
Annuity Contract covered by this registration statement is to be issued promptly
and from time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: [x]
Calculation of Registration Fee
Title of Each Class Amount Proposed Proposed Amount
Class of to be Maximum Maximum of
Securities Registered Offering Aggregate Registration
to be Registered Price Offering Fee
Per Unit Price
Deferred Annuity $290,000 * * $100
Contracts and
Participating
Interests therein
* These Contracts are not issued in predetermined amounts or units
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(b)
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
- -------------------------------- ---------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front Cover
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges................... Inside Front Cover; The Accumulation Phase
4. Use of Proceeds.................................. Investments
5. Determination of Offering Price.................. Not Applicable
6. Dilution......................................... Not Applicable
7. Selling Security Holders......................... Not Applicable
8. Plan of Distribution............................. Purchase of the Contracts; Distribution of the
Contracts
9. Description of Securities to be Registered....... The Purchase of the Contract; The Parties to the
Contract; The Death Benefit Provisions; The Payout
Phase; Federal Tax Matters; Taxation of Annuities
in General
10. Interests of Named Experts and Counsel.......... Not Applicable
11. Information with Respect to the Registrant...... The Company; Business; Selected Financial Data;
Competition; Employees; Properties; State and Federal
Regulation; Executive Officers and Directors of the
Company; Executive Compensation; Legal Proceedings
12. Disclosure of Commission Position on Indemni-
fication for Securities Act Liabilities....... Not Applicable
</TABLE>
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(800)766-6978
SINGLE PAYMENT DEFERRED ANNUITY CONTRACTS
This prospectus describes the Single Payment Deferred Annuity Contract
("Contract") offered by Glenbrook Life and Annuity Company ("Company"), a wholly
owned subsidiary of Allstate Life Insurance Company. Allstate Life Financial
Services, Inc. is the principal underwriter.
The Contracts are issued as individual Contracts or as group Contracts. In
states where the Contracts are available only as group Contracts, a certificate
is issued that summarizes the provisions of the group Contract. For convenience,
this prospectus refers to both Contracts and certificates as "Contracts."
The Contract has the flexibility to allow you to shape an annuity to fit your
particular needs. It is designed to aid you in your choice of short-term, mid-
term, or long-term financial planning and can be used for retirement planning
regardless of whether the plan qualifies for special federal income tax
treatment. The Company will accept a minimum purchase payment of $5,000 ($2,000
for a Qualified Contract).
Withdrawals under the Contract may be subject to a Market Value Adjustment.
Therefore, the Owner bears some investment risk under the Contract.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS WHICH HAVE
RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF
SUCH BANKS; HOWEVER, THE CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR
GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL. THESE CONTRACTS ARE NOT FDIC INSURED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THE DATE OF THIS PROSPECTUS IS ______, 1996.
THE CONTRACT MAY NOT BE AVAILABLE IN ALL STATES.
At least once each Contract Year prior to the Payout Start Date, the Company
will send the Owner an annual statement that contains certain information
pertinent to the individual Owner's Contract. The annual statement details
values and specific Contract data that apply to each particular Contract. The
annual statement does not contain financial statements of the Company although
the Company's financial statements are on page F-1 of this prospectus. In
addition, the Company is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files reports and
other information with the Securities and Exchange Commission. Reports and other
information filed by the Company can be inspected at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such material can be obtained from the Public Reference
Section of the Commission at prescribed rates.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN,
OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
--------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
GLOSSARY........................................................................
THE CONTRACTS...................................................................
The Purchase of the Contract...................................................
The Accumulation Phase.........................................................
Adjustments to Account Value (Withdrawal Charge, Market Value
Adjustment and Taxes).........................................................
The Parties to the Contract....................................................
The Death Benefit Provisions...................................................
The Payout Phase...............................................................
AMENDMENT OF THE CONTRACTS......................................................
DISTRIBUTION OF THE CONTRACTS...................................................
FEDERAL TAX MATTERS.............................................................
Introduction...................................................................
Taxation of the Company........................................................
Taxation of Annuities in General...............................................
Tax Deferral.................................................................
Taxation of Partial and Full Withdrawals.....................................
Taxation of Annuity Payments.................................................
Taxation of Annuity Death Benefits...........................................
Penalty Tax on Premature Distributions.......................................
Aggregation of Annuity Contracts.............................................
IRS Required Distribution at Death Rules.....................................
Qualified Plans..............................................................
Types of Qualified Plans.....................................................
Individual Retirement Annuities............................................
Simplified Employee Pension Plans..........................................
Tax Sheltered Annuities....................................................
Corporate and Self-Employed Pension and Profit Sharing Plans...............
State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.......................................................
Income Tax Withholding.......................................................
THE COMPANY.....................................................................
Business.......................................................................
Reinsurance Agreements.........................................................
Investments by the Company.....................................................
SELECTED FINANCIAL DATA.........................................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................................
General......................................................................
Results of Operations........................................................
Financial Position...........................................................
Liquidity and Capital Resources..............................................
COMPETITION.....................................................................
EMPLOYEES.......................................................................
PROPERTIES......................................................................
STATE AND FEDERAL REGULATION....................................................
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY.................................
EXECUTIVE COMPENSATION..........................................................
LEGAL PROCEEDINGS...............................................................
EXPERTS.........................................................................
LEGAL MATTERS...................................................................
FINANCIAL STATEMENTS.........................................................F-1
APPENDIX A...................................................................A-1
<PAGE>
GLOSSARY
ACCOUNT -- An Account consists of funds that are allocated to a Guarantee
Period. An Account is established when a purchase payment is made or when a
previous Guarantee Period expires and a new Guarantee Period is selected.
ACCOUNT VALUE -- The Account Value is equal to the funds allocated to an Account
plus interest credited less any withdrawals.
ANNUITANT(S) -- The person or persons whose life determines the latest Payout
Start Date and the amount and duration of any income payments for Income Plan
options other than Guaranteed Payments for a Specified Period.
BENEFICIARY(IES) -- The person(s) to whom any benefits are due when a Death
Benefit is payable and there is no surviving Owner.
COMPANY("WE," "US") -- Glenbrook Life and Annuity Company.
CONTRACT -- The Glenbrook Life and Annuity Company Single Payment Deferred
Annuity Contract, known as "The XXX MVA" that is described in this prospectus.
CONTRACT ANNIVERSARY -- An anniversary of the date that the Contract was issued.
CONTRACT VALUE -- The sum of the Account Values.
CONTRACT YEAR -- A period of 12 months starting with the issue date or any
Contract Anniversary.
DEATH BENEFIT -- The Death Benefit is equal to either the Contract Value or the
amount that would have been payable in the event of a full withdrawal of the
Contract Value on the date we determine the Death Benefit.
FREE WITHDRAWAL AMOUNT -- A portion of the Account Value which may be withdrawn
each year without incurring a Withdrawal Charge or a Market Value Adjustment.
GUARANTEE PERIOD -- A period of years for which a specified effective annual
interest rate is guaranteed by the Company.
INCOME PLAN -- One of several ways in which a series of payments are made after
the Payout Start Date. Income payments are based on the Contract Value adjusted
by any applicable Market Value Adjustment on the Payout Start Date.
ISSUE DATE -- The date the Contract becomes effective.
MARKET VALUE ADJUSTMENT -- The Market Value Adjustment is an increase in Death
Benefit payment, an increase or decrease in a withdrawal payment or in the
amount applied to an Income Plan reflecting the impact of changes in interest
rates between the time the Account was established and the time of distribution.
OWNER(S)("YOU") -- The person or persons designated as the Owner in the
Contract.
PAYOUT START DATE -- The date the Contract Value adjusted by any Market Value
Adjustment is applied to an Income Plan.
TREASURY RATE -- The U.S. Treasury Note Constant Maturity weekly yield as
reported in Federal Reserve Bulletin Release H.15.
WITHDRAWAL CHARGE -- The charge that is assessed by the Company on withdrawals
in excess of the Free Withdrawal Amount.
- ---------------------------------------------------------
<PAGE>
THE CONTRACTS
THE PURCHASE OF CONTRACTS
1. WHAT IS THE PURPOSE OF THE CONTRACT?
The Contract described in this prospectus is designed to aid you in your choice
of short-term, mid-term, or long-term financial planning and can be used for
retirement planning regardless of whether the plan qualifies for special federal
income tax treatment. The Contract has an accumulation phase and a payout phase.
The accumulation phase is the first of the two phases and begins on the Issue
Date and continues until the Payout Start Date. During the accumulation phase,
interest is credited to your purchase payment and both a cash withdrawal benefit
and a Death Benefit are available. The payout phase begins on the Payout Start
Date and provides income payments under an Income Plan. The payout phase
continues until the Company makes the last payment as provided by the Income
Plan.
2. HOW IS A CONTRACT PURCHASED?
The minimum purchase payment the Company will accept is $5,000 ($2,000 for a
qualified contract). The Owner must select the Guarantee Period(s) in which to
allocate the purchase payment. The Owner may elect to allocate the purchase
payment to one Guarantee Period or may split the purchase payment between many
Guarantee Periods. The Company currently offers Guarantee Periods for 1, 3, 5,
6, 7, 8, 9 and 10 years. Guarantee Periods will be offered at the Company's
discretion and may range from one to fifteen years. The Company reserves the
right to limit or increase the amount of the purchase payment it will accept.
3. DOES THIS CONTRACT HAVE A FREE-LOOK PROVISION?
Yes. The Owner may cancel the Contract any time within 20 days after receipt of
the Contract, or longer if required by state law, and receive a full refund of
the purchase payment.
4. ONCE A CONTRACT IS PURCHASED, HOW IS THE OWNER INFORMED AS TO THE STATUS OF
THE CONTRACT?
At least once a year, prior to the Payout Start Date, the Owner will be sent a
statement containing Account Value information of the Contract. In addition, the
Owner can call the Company's Customer Support Unit directly at 1-800-776-6978 at
anytime.
THE ACCUMULATION PHASE
5. HOW IS INTEREST CREDITED TO THE CONTRACT?
Interest will be credited to the purchase payment from the Issue Date. No
deductions are made from the purchase payment. Therefore, the full amount of the
purchase payment is invested in an Account for accumulation of interest.
Interest is credited daily to each Guarantee Period in the Contract and is based
upon the interest rate of the Guarantee Period which has been chosen. For
<PAGE>
current interest rate information, please contact your sales representative or
the Company's Customer Support Unit at 1-800-776-6978.
The following example illustrates how an Account Value would grow given an
assumed purchase payment, Guarantee Period, and effective annual interest rate.
The effective annual interest rate is defined as the yield resulting when
interest credited at the underlying daily rate has compounded for a full year.
EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD:
Purchase Payment:............................... $10,000.00
Guarantee Period:............................... 5 years
Effective Annual Rate:.......................... 5.25%
END OF CONTRACT YEAR:
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Beginning Account Value $10,000.00
X (1 + Effective Annual Rate) 1.0525
----------
$10,525.00
Account Value at end of Contract $10,525.00
year 1 X (1 + Effective Annual 1.0525
Rate) ----------
$11,077.56
Account Value at end of Contract $11,077.56
year 2 X (1 + Effective Annual 1.0525
Rate) ----------
$11,659.13
Account Value at end of Contract $11,659.13
year 3 X (1 + Effective Annual 1.0525
Rate) ----------
$12,271.24
Account Value at end of Contract $12,271.24
year 4 X (1 + Effective Annual 1.0525
Rate) ----------
Account Value at end of Guarantee
Period: $12,915.47
==========
</TABLE>
TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $2,915.47 ($12,915.47 - $10,000.00)
NOTE: The above illustration assumes no withdrawals of any amount during the
entire five-year period. A Market Value Adjustment and Withdrawal Charge would
apply to any such interim withdrawal in excess of the Free Withdrawal Amount.
The hypothetical interest rate is for illustrative purposes only and is not
intended to predict future interest rates to be declared under the Contract.
Actual interest rates declared for any given Guarantee Period may be more or
less than shown above.
The Company has no specific formula for determining the rate of interest that it
will declare initially or in the future. Such interest rates will be reflective
of investment returns available at the time of the determination. In addition,
the management of the Company may also consider various other factors in
determining interest rates, including regulatory and tax requirements, sales
commissions and administrative expenses borne by the Company, general economic
trends, and competitive factors.
THE MANAGEMENT OF THE COMPANY WILL MAKE THE FINAL DETERMINATION AS TO THE
INTEREST RATES TO BE DECLARED. THE COMPANY CAN NEITHER PREDICT NOR GUARANTEE
FUTURE INTEREST RATES TO BE DECLARED.
<PAGE>
6. WHAT HAPPENS TO THE ACCOUNT VALUE AT THE END OF A GUARANTEE
PERIOD?
Prior to the end of a Guarantee Period, a notice will be mailed to the
Owner outlining the options available at the end of a Guarantee Period. Within
30 days after the end of a Guarantee Period the Owner may:
- take no action and the Company will automatically apply the Account
Value to a new Guarantee Period of the same duration as the expiring
Guarantee Period to be established on the day the previous Guarantee
Period expired; or
- notify the Company to apply the Account Value to a new Guarantee
Period(s) to be established on the day the previous Guarantee Period
expired; or
- receive a portion of the Account Value or the entire Account Value
through a partial or full withdrawal that is not subject to a Market
Value Adjustment (Withdrawal Charges may apply). In this case, the
amount withdrawn will be deemed to have been withdrawn on the day
the Guarantee Period expired.
7. IS IT POSSIBLE TO PRESELECT A RENEWAL GUARANTEE PERIOD AT THE POINT
OF PURCHASE?
Yes. The Automatic Laddering Program allows the Owner to choose, in
advance, one renewal Guarantee Period for the renewing Account. The Owner can
select the Automatic Laddering Program at any time during the accumulation
phase, including on the Issue Date. The Automatic Laddering Program will
continue until the Owner gives written notice to the Company.
8. CAN A PARTIAL WITHDRAWAL OR A FULL WITHDRAWAL BE TAKEN AT ANY
TIME?
Yes. As long as the Contract is still in the accumulation phase and
has not entered the payout phase, the Owner may withdraw money from the Contract
or surrender the Contract at any time (a Withdrawal Charge, Market Value
Adjustment and taxes may apply, including a 10% penalty tax for withdrawals
prior to the Owner attaining age 59 1/2). Partial withdrawals may be taken
automatically through systematic withdrawals. The Owner must specify the Account
from which the withdrawal will be taken. If a partial withdrawal reduces the
Contract Value to less than $2,000, the withdrawal will be treated as a request
to withdraw the entire Contract Value. If you withdraw the entire Contract
Value, the Contract will terminate. The Company may defer payment of any partial
withdrawal or full withdrawal for a period not exceeding six months from the
date of the receipt of the request.
<PAGE>
ADJUSTMENTS TO ACCOUNT VALUE (WITHDRAWAL CHARGE, MARKET VALUE ADJUSTMENT AND
TAXES)
9. IF A PARTIAL WITHDRAWAL OR FULL WITHDRAWAL IS REQUESTED, HOW IS THE
AMOUNT RECEIVED DETERMINED?
The main component in determining the amount received by the Owner is the
amount which was requested, however, there may be adjustments to the requested
amount. A Withdrawal Charge may reduce the amount requested. A Market Value
Adjustment may apply which may reduce or increase the amount requested. Premium
taxes and federal income tax withholding may apply and would reduce the amount
requested. In summary:
The amount received by the Owner under a partial withdrawal or full
withdrawal request equals the amount requested less a Withdrawal Charge (if
applicable) plus or minus a Market Value Adjustment (if applicable) less premium
taxes and withholding (if applicable).
The questions which follow further clarify the components used in
determining the amount received upon a partial withdrawal or full withdrawal.
10. UPON A PARTIAL WITHDRAWAL OR FULL WITHDRAWAL, IS THE ENTIRE AMOUNT
REQUESTED SUBJECT TO A WITHDRAWAL CHARGE AND A MARKET VALUE ADJUSTMENT?
No. Only amounts in excess of the Free Withdrawal Amount will be subject to
a Withdrawal Charge and a Market Value Adjustment. Each year the Free Withdrawal
Amount is equal to 10% of the purchase payment. Any Free Withdrawal Amount which
is not actually withdrawn in a year may not be carried over to increase the Free
Withdrawal Amount in a subsequent year.
In addition to the Free Withdrawal Amount, any funds withdrawn which are
within the first 30 days of their renewal Guarantee Period will be completely
free from any Market Value Adjustment.
11. WHAT IS THE WITHDRAWAL CHARGE UPON A PARTIAL WITHDRAWAL OR FULL
WITHDRAWAL?
The amount withdrawn from the Account Value in excess of the Free
Withdrawal Amount is subject to the following Withdrawal Charge:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACT YEAR 1 2 3 4 5 6 7 8 AND LATER
- -------------- ---- ---- ---- ---- ---- ---- ---- -----------------
Percentage 7% 7% 6% 5% 4% 3% 2% 0%
</TABLE>
For each withdrawal, the year in the above table is measured once from the
date the funds are first allocated to the original Guarantee Period.
<PAGE>
The Withdrawal Charge is determined by multiplying the percentage corresponding
to the year the Contract has been in-force times that part of each withdrawal
that is in excess of the Free Withdrawal Amount.
The Company will waive any Withdrawal Charge and any Market Value Adjustment
prior to the Payout Start Date if at least 30 days after the Issue Date any
Owner (or Annuitant if the Owner is not a natural person) 1) is first confined
to a long-term care facility or hospital for at least 90 consecutive days,
confinement is prescribed by a physician and is medically necessary, and the
request for a withdrawal and adequate written proof of confinement are received
by us no later than 90 days after discharge; or 2) is first diagnosed by a
physician as having a terminal illness and a request for a withdrawal and
adequate proof of diagnosis are received by us.
12. WHAT IS THE MARKET VALUE ADJUSTMENT UPON A PARTIAL OR FULL WITHDRAWAL, AT
DEATH, OR APPLIED TO AN INCOME PLAN?
The Market Value Adjustment will be applied to all amounts withdrawn, paid at
death or applied to an Income Plan, which are not exempt from adjustment as
discussed in question 10.
The Market Value Adjustment reflects the relationship between (1) the current
Treasury Rate for the time of death or the request for withdrawal or income plan
payment request for a maturity equal to the Account Guarantee Period, and (2)
the original Treasury Rate at the time the Account was established for a
maturity equal to the Account Guarantee Period. Since current Treasury Rates are
the basis for the investment yields at the time, and current interest rates are
based, in part, upon investment yields available when the Account was
established, the effect of the Market Value Adjustment will be closely related
to the levels of such yields. As such, the Owner bears some investment risk
under the Contract.
Generally, if the original Treasury Rate at the time the Account was established
is higher than the applicable current Treasury Rate (interest rate for a period
equal to the Account Guarantee Period), then the Market Value Adjustment will
result in a higher amount payable to the Owner. Similarly, if the original
Treasury Rate at the time the Account was established is lower than the current
Treasury Rate, then the Market Value Adjustment will result in a lower amount
payable to the Owner.
For example, assume the Owner purchases a Contract and selects an initial
Guarantee Period of five years and the Treasury Rate for that duration is 6.34%.
Assume that at the end of three years, the Owner makes a partial withdrawal. If,
at that later time, the current Treasury Rate for a five year Guarantee Period
is 5.84%, then the Market Value Adjustment will be positive, which will result
in an increase in the amount payable to the Owner. Similarly, if the current
Treasury Rate for the five year Guarantee Period is 6.84%, then the Market Value
Adjustment will be negative, which will result in a decrease in the amount
payable to the Owner.
The formula for calculating the Market Value Adjustment is set forth in Appendix
A to this prospectus which also contains additional illustrations of the
application of the Market Value Adjustment.
<PAGE>
13. THE IRS REQUIRES ANNUAL WITHDRAWALS TO BE TAKEN FROM QUALIFIED CONTRACTS
UPON ATTAINMENT OF AGE 70. WILL THESE WITHDRAWALS INCUR WITHDRAWAL CHARGES AND
MARKET VALUE ADJUSTMENTS?
No. Both the Withdrawal Charge and Market Value Adjustment will be waived on
withdrawals taken to satisfy IRS required minimum distribution rules for this
Contract.
14. WHAT ARE THE TAX IMPLICATIONS ASSOCIATED WITH THE CONTRACT?
It varies based upon the Owner's circumstances. Generally, the two areas which
may give rise to a taxable situation are personal federal and state income
taxation and taxation of the Company.
With respect to personal federal and state income tax, an annuity contract owner
who is a natural person is not taxed on increases in the contract value until a
distribution occurs. For federal income tax purposes, distributions include the
receipt of proceeds from an assignment or pledge of any portion of the value of
the contract, as well as withdrawals, income payments, or death benefits. In
addition, personal federal and state income tax withholding may be deducted from
partial withdrawal and full withdrawal payments. Amounts withheld for personal
taxes do not necessarily represent the owner's entire income tax liability.
With respect to taxation of the Company, premium taxes and other applicable
taxes imposed on the Company may be deducted from the Contract's purchase
payment or Contract Value upon a full withdrawal or annuitization of the
Contract. Current premium tax rates range from 0 to 3.5%, but are subject to
change by state regulation.
There are several exceptions to the above generalizations. More complete
information can be found in the "Federal Tax Matters" section found on page ___
of this prospectus.
THE PARTIES TO THE CONTRACT
15. WHAT RIGHTS DOES AN OWNER HAVE UNDER THIS CONTRACT?
This Contract offers the Owner several rights. The Owner may:
- receive any withdrawals or periodic income payments from the
Contract, unless the Owner has directed the Company to pay them to
someone else;
- name and change the Owner, Beneficiary, and Annuitant (only if the
Owner is a natural person);
- assign periodic income payments under the Contract prior to the
Payout Start Date;
- elect a Death Benefit option upon death of a co-owner or Annuitant
if the Owner is not a natural person; and
<PAGE>
- terminate the Contract.
The above may be subject to the rights of any irrevocable Beneficiary.
16. WHAT PURPOSE DOES THE ANNUITANT SERVE?
The Annuitant's life determines the income payments which will begin on the
Payout Start Date. This Contract requires an Annuitant at all times during the
accumulation phase and on the Payout Start Date. The Annuitant must be a natural
person. A Death Benefit may be payable upon the death of the Annuitant only if
the Owner is not a natural person. Joint annuitants are only permitted on or
after the Payout Start Date.
17. WHO IS THE BENEFICIARY TO THE CONTRACT?
The Beneficiary varies based upon who the Owner is, and the designation of the
parties to the Contract by the Owner. The Beneficiary will be determined from
the most recent written request of the Owner. If the Owner does not name a
Beneficiary or if the Beneficiaries named are no longer living, the Beneficiary
will be:
- a contingent beneficiary named by the Owner; otherwise
- the Owner's spouse if living; otherwise
- the Owner's children, equally, if living; otherwise
- the Owner's estate.
18. WHAT PURPOSE DOES THE BENEFICIARY SERVE?
The Beneficiary becomes the new Owner if the sole surviving Owner dies prior to
the Payout Start Date. If the sole surviving Owner dies after the Payout Start
Date, the Beneficiary will receive any guaranteed income payments scheduled to
continue.
THE DEATH BENEFIT PROVISIONS
19. UPON DEATH OF THE OWNER, WHO IS THE NEW OWNER OF THE CONTRACT?
The new Owner is any surviving joint Owner(s) or if none, the Beneficiary.
20. UPON DEATH OF THE OWNER, WHAT OPTIONS DOES THE NEW OWNER HAVE?
If the Owner eligible to receive a distribution upon death is not a natural
person, then the Owner may elect to receive the distribution upon death in one
or more distributions. Otherwise, if the
<PAGE>
Owner is a natural person, the Owner may elect to receive a distribution upon
death in one or more distributions or periodic payments through an Income Plan.
A Death Benefit will be paid: 1) if the Owner elects to receive the Death
Benefit in a single payment distributed within 180 days of the date of death;
and 2) if the Death Benefit is paid as of the day the value of the Death Benefit
is determined. Otherwise the settlement value will be paid. The settlement value
is the same amount that would be paid in the event of withdrawal of the Contract
Value. The Company will calculate the settlement value at the end of the period
coinciding with the requested distribution date for payment or on the mandatory
distribution date of 5 years after the date of death.
In any event, the entire distribution upon death must be distributed within five
years after the date of death unless an Income Plan is selected or a surviving
spouse continues the Contract in accordance with the following sections:
Payments from the Income Plan must begin within one year of the date of death
and must be payable throughout:
. the life of the Owner; or
. a period not to exceed the life expectancy of the Owner; or
. the life of the Owner with payments guaranteed for a period not to
exceed the life expectancy of the owner.
Prior to the Payout Start Date, the benefit is equal to the greatest of:
(a) the Contract Value on the date the Company determines the death
benefit; or
(b) the amount that would have been payable in the event of a full
withdrawal of the Contract Value on the date the Company
determines the death benefit; or
If the new Owner is the spouse of the deceased Owner, the new Owner may elect to
continue the Contract. See question 21, below.
The Company will not settle any death claims until it receives due proof of
death.
21. IF THE NEW OWNER IS THE SURVIVING SPOUSE OF THE DECEASED OWNER, WHAT
HAPPENS TO THE CONTRACT UPON THE OWNER'S DEATH?
In addition to the options available in question 20, a surviving spousal Owner
has the following options:
- continue the Contract as if the death had not occurred; and
- if the Contract is continued, one withdrawal of any amount within
one year of the date of death is allowed without incurring a
Withdrawal Charge. However, a Market Value Adjustment will apply.
<PAGE>
22. IF THE OWNER IS NOT THE ANNUITANT AND THE ANNUITANT DIES PRIOR TO THE PAYOUT
START DATE, WHAT HAPPENS TO THE CONTRACT?
In most cases, the Contract will continue as if the death had not occurred and
the new Annuitant will be the youngest Owner. However, when the Annuitant dies
and the Owner is not a natural person, the Owner may elect to receive the
distribution upon death in one or more distributions within five years of the
Annuitant's death. A Death Benefit will be paid: 1) if the Owner elects to
receive the Death Benefit in a single payment distributed within 180 days of the
date of death; and 2) if the Death Benefit is paid as of the day the value of
the Death Benefit is determined. Otherwise, the settlement value will be paid.
THE PAYOUT PHASE
23. WHAT IS THE PAYOUT START DATE?
The date on which the accumulation phase ceases and the payout phase begins.
During the payout phase, the Owner receives income payments based upon an Income
Plan selected by the Owner from the Contract. The payout phase will continue
until the Company makes the last payment as provided by the Income Plan chosen.
The Owner may change the Payout Start Date at any time by notifying the Company
in writing of the change at least 30 days before the scheduled Payout Start
Date. The Payout Start Date must be at least one month after the Issue Date and
on or before the later of:
- the Annuitant's 90th birthday; or
- the 10th anniversary of the Contract's Issue Date.
24. WHAT TYPES OF INCOME PLANS ARE AVAILABLE IN THE CONTRACT?
Income payments are made under an Income Plan which may be chosen by the Owner.
The types of Income Plans which are available are as follows:
- Life Income with Guaranteed Payments -- If the Annuitant dies
before all the guaranteed payments have been made, the remainder
of the guaranteed payments will be made to the Owner; or
- Joint and Survivor Life Income with Guaranteed Payments -- If
both the Annuitant and Joint Annuitant die before the guaranteed
payments have been made, the remainder of the guaranteed payments
will be made to the Owner; or
- Guaranteed Payments for a Specified Period -- Payments under this
option do not depend on the continuation of the Annuitant's life.
Any period for which payments are guaranteed may range from 60 to 360 months. If
any Owner dies, guaranteed income payments will continue as scheduled. Up to 30
days before the Payout Start Date, the Owner may change the Income Plan or
request any other form of Income Plan
<PAGE>
agreeable to both the Company and the Owner. If the Company does not receive a
written choice from the Owner, the Income Plan will be life income with 120
monthly payments guaranteed. If an Income Plan is chosen which depends on the
Annuitant's or Joint Annuitant's life, proof that the Annuitant or Joint
Annuitant is still alive before each payment and proof of age and sex may be
required before income payments begin. The Company reserves the right to offer
other Income Plans.
25. HOW ARE THE INCOME PAYMENTS FROM AN INCOME PLAN DETERMINED?
To determine the income payments, the Contract Value, adjusted by any Market
Value Adjustment less any applicable premium taxes, will be applied to the
greater of:
- payment plan rates declared by the Company; or
- guaranteed payment plan rates as described in the Contract.
If the monthly income payments determined under the Income Plan are less than
$20, the Company may pay the Contract Value, adjusted by any Market Value
Adjustment less any applicable premium taxes, in a lump sum or change the
payment frequency to an interval which results in income payments of at least
$20.
The Contracts are based on life annuity tables that provide for different
benefit payments to men and women of the same age (except in states which
require unisex annuity tables). Nevertheless, in accordance with the U.S.
Supreme Court's decision in ARIZONA GOVERNING COMMITTEE V. NORRIS, in certain
employment-related situations, annuity tables that do not vary on the basis of
sex may be used. Accordingly, if the Contract is to be used in connection with
an employment-related retirement or benefit plan, consideration should be given
in consultation with legal counsel, to the impact of NORRIS on any such plan
before making any contributions under these Contracts.
The dollar amount of income payments is generally affected by the duration of
the Income Plan selected. For example, if an Income Plan Guaranteed for Life is
chosen, the income payments may be greater or less than income payments under an
Income Plan for a specified period depending on the life expectancy of the
Annuitant. Also, the Company may require proof that the Annuitant or joint
Annuitant is still alive before the Company makes each payment that depends on
their continued life.
26. CAN PARTIAL WITHDRAWALS BE TAKEN FROM THE CONTRACT OR CAN THE CONTRACT BE
SURRENDERED ONCE IT HAS ENTERED THE PAYOUT PHASE?
No. After the Contract Value has been applied to an Income Plan on the Payout
Start Date, the Income Plan can not be changed, the exchange of the Contract
Value for an Income Plan can not be reversed, and no withdrawals can be made.
-------------------------------------------------
<PAGE>
AMENDMENT OF THE CONTRACTS
The Company reserves the right to amend the Contracts to meet the requirements
of applicable federal or state laws or regulations. The Company will notify the
Owner of any such amendments.
-----------------------------------------
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road, Northbrook,
Illinois, a wholly-owned subsidiary of Allstate Life, acts as the principal
underwriter of the Contracts. ALFS is registered as a broker-dealer under the
Securities Exchange Act of 1934 and became a member of the National Association
of Securities Dealers, Inc. on June 30, 1993. Contracts are sold by unaffiliated
registered representatives of broker-dealers or bank employees who are licensed
insurance agents appointed by the Company, either individually or through an
incorporated insurance agency. In some states, Contracts may be sold by
representatives or employees of banks that may be acting as broker-dealers
without separate registration under the Securities Act of 1934, pursuant to
legal and regulatory exceptions.
Commissions paid may vary, but in aggregate are not anticipated to exceed 8% of
any purchase payment. In addition, under certain circumstances, certain sellers
of the Contracts may be paid persistency bonuses which will take into account,
among other things, the length of time purchase payments have been held under a
Contract, and Contract Values. A persistency bonus is not expected to exceed
1.20%, on an annual basis, of the Contract Values considered in connection with
the bonus. These commissions are intended to cover distribution expenses.
The Underwriting Agreement between the Company and ALFS provides that the
Company will indemnify ALFS for certain damages that may be caused by actions,
statements or omissions by the Company.
The Company and ALFS reserve the right to offer the Contract at a special
interest rate(s) for specific time periods to customers of certain broker-
dealers. The Company and ALFS may also negotiate special commissions with such
broker-dealers.
------------------------------------------
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on the individual circumstances
of each person. If you are concerned about any tax consequences with regard to
your individual circumstances, you should consult a competent tax adviser.
<PAGE>
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter
L of the Internal Revenue Code. The following discussion assumes that the
Company is taxed as a life insurance company under Part I of Subchapter L.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL. In general, an annuity contract owned by a natural person is not
taxed on increases in the Contract Value until a distribution occurs. Annuity
contracts owned by non-natural persons are generally not treated as annuity
contracts for federal income tax purposes and the income on such contracts is
taxed as ordinary income received or accrued by the owner during the taxable
year. There are exceptions to the non-natural owner rule and you should discuss
these with your tax advisor.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. In the case of a partial withdrawal
under a non-qualified contract, amounts received are taxable to the extent the
Contract Value before the withdrawal exceeds the investment in the contract. In
the case of a partial withdrawal under a qualified contract, the portion of the
payment that bears the same ratio to the total payment that the investment in
the contract bears to the Contract Value, can be excluded from income. In the
case of a full withdrawal under a non-qualified contract or a qualified
contract, the amount received will be taxable only to the extent it exceeds the
investment in the contract. If an individual transfers an annuity contract
without full and adequate consideration to a person other than the individual's
spouse (or to a former spouse incident to a divorce), the owner will be taxed on
the difference between the Contract Value and the investment in the contract at
the time of transfer. Other than in the case of certain qualified contracts, any
amount received as a loan under a contract, and any assignment or pledge (or
agreement to assign or pledge) of the Contract Value is treated as a withdrawal
of such amount or portion.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of
payments received from an annuity contract provides for the return of the
owner's investment in the contract in equal tax-free amounts over the payment
period. The balance of each payment received is taxable. In the case of fixed
annuity payments, the amount excluded from income is determined by multiplying
the payment by the ratio of the investment in the contract (adjusted for any
refund feature or period certain) to the total expected value of annuity
payments for the term of the contract.
TAXATION OF ANNUITY DEATH BENEFITS. Amounts may be distributed from an annuity
contract because of the death of an owner or annuitant. Generally, such amounts
are includible in income as follows: (1) if distributed in a lump sum, the
amounts are taxed in the same manner as a full withdrawal or (2) if distributed
under an annuity option, the amounts are taxed in the same manner as an annuity
payment.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. There is a 10% penalty tax on the
taxable amount of any premature distribution from a non-qualified annuity
contract. The penalty tax generally applies to any distribution made prior to
the owner attaining age 59 1/2. However,
<PAGE>
there should be no penalty tax on distributions to owners (1) made on or after
the owner attains age 59 1/2; (2) made as a result of the owner's death or
disability; (3) made in substantially equal periodic payments over life or life
expectancy; or (4) made under an immediate annuity. Similar rules apply for
distributions under certain qualified contracts.
AGGREGATION OF ANNUITY CONTRACTS. All non-qualified annuity contracts issued
by the Company (or its affiliates) to the same owner during any calendar year
will be aggregated and treated as one annuity contract for purposes of
determining the taxable amount of a distribution.
IRS REQUIRED DISTRIBUTION AT DEATH RULES. In order to be considered an
annuity contract for federal income tax purposes, an annuity contract must
provide: (1) if any owner dies on or after the annuity start date but before the
entire interest in the contract has been distributed, the remaining portion of
such interest must be distributed at least as rapidly as under the method of
distribution being used as of the date of the owner's death; (2) if any owner
dies prior to the annuity start date, the entire interest in the contract will
be distributed within five years after the date of the owner's death. These
requirements are satisfied if any portion of the owner's interest which is
payable to, or for the benefit of, a designated beneficiary is distributed over
the life of such beneficiary (or over a period not extending beyond the life
expectancy of the beneficiary) and the distributions begin within one year of
the owner's death. If the owner's designated beneficiary is the surviving spouse
of the owner, the contract may be continued with the surviving spouse as the new
owner. If the owner of the contract is a non-natural person, then the annuitant
will be treated as the owner for purposes of applying the distribution at death
rules. Also, a change of annuitant on a contract owned by a non-natural owner
will be treated as the death of the owner.
QUALIFIED PLANS
This annuity contract may be used with several types of qualified plans. The tax
rules applicable to participants in such qualified plans vary according to the
type of plan and the terms and conditions of the plan itself. Adverse tax
consequences may result from excess contributions, premature distributions,
distributions that do not conform to specified commencement and minimum
distribution rules, excess distributions and in other circumstances. Owners and
participants under the plan and annuitants and beneficiaries under the contract
may be subject to the terms and conditions of the plan regardless of the terms
of the contract.
TYPES OF QUALIFIED PLANS
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity. Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
plans may be "rolled over" on a tax-deferred basis into an Individual Retirement
Annuity.
<PAGE>
SIMPLIFIED EMPLOYEE PENSION PLANS. Section 408(k) of the Code allows employers
to establish simplified employee pension plans for their employees using the
employees' individual retirement annuities if certain criteria are met. Under
these plans the employer may, within specified limits, make deductible
contributions on behalf of the employees to their individual retirement
annuities.
TAX SHELTERED ANNUITIES. Section 403(b) of the Code permits public school
employees and employees of certain types of tax-exempt organizations (specified
in Section 501(c)(3) of the Code) to have their employers purchase annuity
contracts for them, and subject to certain limitations, to exclude the purchase
payment from the employees' gross income. An annuity contract used for a Section
403(b) plan must provide that distributions attributable to salary reduction
contributions made after December 31, 1988, and all earnings on salary reduction
contributions, may be made only after the employee attains age 59 1/2, separates
from service, dies, becomes disabled or on the account of hardship (earnings on
salary reduction contributions may not be distributed for hardship).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS.
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of tax favored retirement plans for employees. The Self-Employed
Individuals Retirement Act of 1962, as amended, (commonly referred to as "H.R.
10" or "Keogh") permits self-employed individuals to establish tax favored
retirement plans for themselves and their employees. Such retirement plans may
permit the purchase of annuity contracts in order to provide benefits under the
plans.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible deferred
compensation plan. Generally, under the non-natural owner rules, such contracts
are not treated as annuity contracts for federal income tax purposes. However,
under these plans, contributions made for the benefit of the employees will not
be includible in the employees' gross income until distributed from the plan.
INCOME TAX WITHHOLDING. The Company is required to withhold federal income tax
at a rate of 20% on all "eligible rollover distributions" unless an individual
elects to make a "direct rollover" of such amounts to another qualified plan or
Individual Retirement Account or Annuity (IRA). Eligible rollover distributions
generally include all distributions from qualified contracts, excluding IRAs,
with the exception of (1) required minimum distributions, or (2) a series of
substantially equal periodic payments made over a period of at least 10 years,
or the life (joint lives) of the participant (and beneficiary). For any
distributions from non-qualified annuity contracts, or distributions from
qualified contracts which are not considered eligible rollover distributions,
the Company may be required to withhold federal and state income taxes unless
the recipient elects not to have taxes withheld and properly notifies the
Company of such election.
-------------------------------------------
<PAGE>
THE COMPANY
BUSINESS
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
"Corporation"). Sears, Roebuck and Co. ("Sears") distributed its remaining 80.3%
ownership in the Corporation on June 30, 1995 to Sears common shareholders
through a tax-free dividend. As a result of the distribution, Sears no longer
has an ownership interest in the Corporation.
REINSURANCE AGREEMENTS
Effective December 31, 1993, the Company entered into an assumption reinsurance
treaty with an affiliate, Glenbrook Life Insurance Company, to reinsure certain
annuity contracts. Under the terms of the agreement, the Company assumed all of
Glenbrook Life Insurance Company's liability under such contracts.
The Company and Allstate Life entered into a reinsurance agreement, effective
June 5, 1992, under which the Company reinsures all of its fixed annuity
business with Allstate Life. Under the reinsurance agreement, fixed annuity
purchase payments are automatically transferred to Allstate Life and become
invested with the assets of Allstate Life, and Allstate Life accepts 100% of the
liability under such contracts. However, the obligations of Allstate Life under
the terms of the reinsurance agreement are to the Company; the Company remains
the sole obligor under the Contracts to the Owners. The Company reinsures
substantially all of its annuities in force, including the business assumed from
Glenbrook Life Insurance Company, with Allstate Life. Accordingly, the results
of operations with respect to applications received and contracts issued by the
Company are not reflected in the Company's financial statements. The amounts
reflected in the Company's financial statements relate only to the investment of
those assets of the Company that are not transferred to Allstate Life under the
reinsurance agreement.
INVESTMENTS BY THE COMPANY
The Company's general account assets, like the general account assets of other
insurance companies, including Allstate Life, must be invested in accordance
with applicable state laws. These laws govern the nature and quality of
investments that may be made by life insurance companies and the percentage of
their assets that may be committed to any particular type of investment. In
general, these laws permit investments, within specified limits and subject to
certain qualifications, in federal, state, and municipal obligations, corporate
bonds, preferred stocks, real estate mortgages, real estate and certain other
investments. All of the Company's general account assets are available to meet
the Company's obligations.
<PAGE>
The Company will primarily invest its general account assets in investment-grade
fixed income securities including the following:
Securities issued by the United States Government or its agencies
or instrumentalities, which may or may not be guaranteed by the
United States Government;
Debt instruments, including, but not limited to, issues of or
guaranteed by banks or bank holding companies, and of
corporations, which are deemed by the Company's management to
have qualities appropriate for inclusion in this portfolio;
Commercial mortgages, mortgage-backed securities collateralized
by real estate mortgage loans, or securities collateralized by
other assets, that are insured or guaranteed by the Federal Home
Loan Mortgage Association, the Federal National Mortgage
Association or the Government National Mortgage Association, or
that have an investment grade at time of purchase within the four
highest grades assigned by Moody's Investors Services, Inc. (Aaa,
Aa, A or Baa), Standard & Poor's Corporation (AAA, AA, A or BBB)
or any other nationally recognized rating service;
Commercial paper, cash, or cash equivalents, and other short-term
investments having a maturity of less than one year that are
considered by the Company's management to have investment quality
comparable to securities having the ratings stated above.
In addition, interest rate swaps, futures, options, rate caps, and other hedging
instruments may be used solely for non-speculative hedging purposes. Anticipated
use of these financial instruments shall be limited to protecting the value of
portfolio sales or purchases, or to enhance yield through the creation of a
synthetic security.
In addition, the Company maintains certain unitized separate accounts which
invest in shares of open-end investment companies registered under the
Investment Company Act of 1940. These separate account assets, which relate to
the Company's variable annuity and variable life contracts, do not support the
Company's obligations under the Contracts.
----------------------------------------------------
SELECTED FINANCIAL DATA
The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
prospectus beginning on page F-1.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SELECTED FINANCIAL DATA
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR-END FINANCIAL DATA 1995 1994 1993 1992(2)
- ----------------------- ---------- -------- -------- -------
<S> <C> <C> <C> <C>
For The Years Ended December 31:
Income Before Taxes............................. $ 4,455 $ 2,017 $ 836 $ 337
Net Income...................................... 2,879 1,294 529 212
As of December 31:
Total Assets (1)................................ 1,409,705 750,245 169,361 12,183
- ------------------------
(1) The Company adopted SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" on December 31, 1993. See Note 3 to Financial
Statements.
(2) For the period from April 1, 1992 (date of acquisition) to December 31,
1992.
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA 1996 1995
- ------------------------ ---- ----
<S> <C> <C>
For The Quarter Ended June 30:.................................................... $ $
Income Before Taxes.......................................................
Net Income................................................................
As of June 30:
Total Assets..............................................................
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following highlights significant factors influencing results of operations
and financial position.
Glenbrook Life and Annuity Company ("the Company"), which is wholly owned by
Allstate Life Insurance Company ("Allstate Life"), currently issues flexible
premium fixed annuities, and beginning in 1995, flexible premium deferred
variable annuity contracts through its separate accounts. The Company markets
its products through banks and other financial institutions.
The Company reinsures all of its annuity deposits with Allstate Life, and all
life insurance in-force with other reinsurers. Accordingly, the financial
results reflected in the Company's statements of operations relate only to the
investment of those assets of the Company that are not transferred to Allstate
Life or other reinsurers under the reinsurance treaties.
<PAGE>
Separate Account assets and liabilities are legally segregated and carried at
fair value in the statements of financial position. The Separate Account
investment portfolios 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
1995 1994 1993
---- ---- ----
$ IN THOUSANDS
Net investment income................... $ 3,996 $ 2,017 $ 753
------- ------- ------
Realized capital gains (losses), after
tax.................................... $ 298 $ -- $ 54
------- ------- ------
Net income.............................. $ 2,879 $ 1,294 $ 529
------- ------- ------
Fixed income securities, at amortized
cost................................... $44,112 $51,527 $9,543
------- ------- ------
Net investment income increased $2.0 million in 1995, and $1.3 million in 1994.
In both years, the increases were attributable to an increased level of
investments, including the Company's participation in the Separate Accounts
during 1995, and a $40 million capital contribution received from Allstate Life
in the third quarter of 1994. Net income increases of $1.6 million and $0.8
million reflect the change in net investment income in both years.
Realized capital gains after tax of $0.3 million in 1995 were the result of
sales of investments to fund the Company's participation in the Separate
Accounts.
FINANCIAL POSITION
1995 1994
---- ----
$ IN THOUSANDS
Fixed income securities, at fair value...... $ 48,815 $ 49,807
---------- --------
Unrealized net capital gains (losses) (1)... $ 5,164 $ (1,720)
---------- --------
Separate Account assets, at fair value...... $ 15,578 $ --
---------- --------
Contractholder funds........................ $1,340,925 $696,854
---------- --------
Reinsurance recoverable from Allstate Life.. $1,340,925 $696,854
---------- --------
- ---------------------
(1) Unrealized net capital gains (losses) exclude the effect of deferred income
taxes.
<PAGE>
Fixed income securities are classified as available for sale and carried in the
statements of financial position at fair value. Although the Company generally
intends to hold its fixed income securities for the long-term, such
classification affords the Company flexibility in managing the portfolio in
response to changes in market conditions.
At December 31, 1995 unrealized capital gains were $5.2 million compared to
unrealized capital losses of $1.7 million at December 31, 1994. The significant
change in the unrealized capital gain/loss position is primarily attributable to
declining interest rates.
At December 31, 1995 both contractholder funds and amounts recoverable from
Allstate Life under reinsurance treaties reflect an increase of $644 million.
These increases result from sales of the Company's single and flexible premium
deferred annuities partially offset by surrenders. Reinsurance recoverable from
Allstate Life relates to policy benefit obligations ceded to Allstate Life.
The Company's participation in the Separate Accounts of $10.5 million at
December 31, 1995 is included in the Separate Accounts assets. Unrealized net
capital gains arising from the Company's participation in the Separate Accounts
was $0.3 million, net of tax, at December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Allstate Life made a $40 million capital contribution to the Company in the
third quarter of 1994.
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, who maintain investment
portfolios which support the Company's products.
------------------------------
[MD&A for the quarter]
------------------------------
COMPETITION
The Company is engaged in a business that is highly competitive because of the
large number of stock and mutual life insurance companies and other entities
competing in the sale of insurance and annuities. There are approximately 2,000
stock, mutual and other types of insurers in business in the United States. A.M.
Best Company assigns A+ (Superior) to Allstate Life which automatically
reinsures all net business of the Company. A.M. Best Company also assigns the
Company the rating of A+(r) because the Company automatically reinsures all
business with Allstate Life. Standard & Poor's Insurance Rating Services assigns
AA+ (Excellent) to Glenbrook Life's claims-paying ability and Moody's assigns an
Aa3 (Excellent) financial stability rating to Glenbrook Life. The Company shares
the same ratings of its parent, Allstate Life Insurance Company.
------------------------------
<PAGE>
EMPLOYEES
As of December 31, 1995, Glenbrook Life and Annuity Company has approximately 43
employees at its home office in Northbrook, Illinois.
--------------------------------------
PROPERTIES
The Company occupies office space provided by its parent, Allstate Life, in
Northbrook, Illinois. Expenses associated with these offices are allocated on a
direct and indirect basis to the Company.
--------------------------------------
STATE AND FEDERAL REGULATION
The insurance business of the Company is subject to comprehensive and detailed
regulation and supervision throughout the United States.
The laws of the various jurisdictions establish supervisory agencies with broad
administrative powers with respect to licensing to transact business, overseeing
trade practices, licensing agents, approving policy forms, establishing reserve
requirements, fixing maximum interest rates on life insurance policy loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. Each insurance company is required to file detailed
annual reports with supervisory agencies in each of the jurisdictions in which
it does business and its operations and accounts are subject to examination by
such agencies at regular intervals.
Under insurance guaranty fund law, in most states, insurers doing business
therein can be assessed up to prescribed limits for contract owner losses
incurred as a result of company insolvencies. The amount of any future
assessments on the Company under these laws cannot be reasonably estimated. Most
of these laws do provide, however, that an assessment may be excused or deferred
if it would threaten an insurer's own financial strength.
In addition, several states, including Illinois, regulate affiliated groups of
insurers, such as the Company and its affiliates, under insurance holding
company legislation. Under such laws, intercompany transfers of assets and
dividend payments from insurance subsidiaries may be subject to prior notice or
approval, depending on the size of such transfers and payments in relation to
the financial positions of the companies.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regulation,
controls on medical care costs, removal of barriers preventing
<PAGE>
banks from engaging in the securities and insurance business, tax law changes
affecting the taxation of insurance companies, the tax treatment of insurance
products and its impact on the relative desirability of various personal
investment vehicles, and proposed legislation to prohibit the use of gender in
determining insurance and pension rates and benefits.
---------------------------------
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with information
as to their ages, dates of election and principal business occupations during
the last five years (if other than their present business occupations).
LOUIS G. LOWER, II, 50, Chief Executive Officer and Chairman of the Board
(1995)* Also 1995 - Present Director of Allstate Indemnity Company; 1995 -
Present Chairman of the Board and Chief Executive Officer of Glenbrook Life
Insurance Company; 1995 - Present Chairman of the Board and Director of Laughlin
Group Holdings, Inc.; 1995 - Present Chairman of the Board and Chief Executive
Officer of Northbrook Life Insurance Company; 1995 - Present Chairman of the
Board and Chief Executive Officer of Glenbrook Life and Annuity Company; 1995 -
Present Director of Deerbrook Insurance Company; 1993 - Present Chairman of the
Board, President and Director of The Northbrook Corporation; 1992 - Present
Director of Glenbrook Life and Annuity Company; 1991 - Present Director of
Allstate Life Financial Services, Inc.; 1991 - Present Chairman of the Board,
President and Director of Glenbrook Life Insurance Company; 1990 - Present
Director of Saison Life Insurance Co., LTD.; 1990 - Present Trustee of The
Allstate Foundation; 1990 - Present Chairman of the Board and Director of
Allstate Settlement Corporation; 1990 - Present Chairman of the Board, Chief
Executive Officer and Director of Lincoln Benefit Life; 1990 - Present Chairman
of the Board, Chief Executive Officer and Director of Surety Life Insurance
Company; 1990 - Present President and Director of Allstate Life Insurance
Company; 1990 - Present Director of Northbrook Life Insurance Company; 1990 -
Present Chairman of the Board, President and Director of Allstate Life Insurance
Company of New York; 1987 - Present Director of Allstate Insurance Company.
MARLA G. FRIEDMAN, 42, President, Chief Operating Officer and Director (1995)*
Also 1995 - Present President and Chief Operating Officer of Glenbrook Life
Insurance Company; 1995 - Present Vice Chairman and Director of Laughlin Group
Holdings, Inc.; 1995 - Present President and Chief Operating Officer of
Glenbrook Life and Annuity Company; 1995 - Present President and Chief Operating
Officer of Northbrook Life Insurance Company; 1995 - Present Director of
Allstate Settlement Corporation; 1993 - Present Director of The Northbrook
Corporation; 1993 - Present Director of Allstate Life Financial Services, Inc.;
1992 - Present Director of Glenbrook Life and Annuity Company; 1992 - 1995 Vice
President of Glenbrook Life and Annuity Company; 1991 - Present Director of
Allstate Life Insurance Company; 1991 - Present Director of Glenbrook Life
Insurance Company; 1990 - 1995 Vice President of Glenbrook Life Insurance
Company; 1989 - Present Director of Northbrook Life Insurance Company.
<PAGE>
MICHAEL J. VELOTTA, 50, Vice President, Secretary, General Counsel, and Director
(1992)* Also from 1995 - Present Secretary and Director of Laughlin Group
Holdings, Inc.; 1994 - Present Secretary of Allstate Life Financial Services,
Inc.; 1994 -Present Secretary of Allstate Settlement Corporation; 1993 - Present
Director and Secretary of The Northbrook Corporation; 1993 - Present Director of
Allstate Life Financial Services, Inc.; 1993 - Present Director of Allstate
Settlement Corporation; 1993 - Present Vice President, Secretary and General
Counsel of Allstate Life Insurance Company of New York; 1992 - Present Director
of Allstate Life Insurance Company of New York; 1992 - Present Director and Vice
President, Secretary and General Counsel of Allstate Life Insurance Company;
1992 - Present Director and Vice President, Secretary and General Counsel of
Northbrook Life Insurance Company; 1992 - Present Director of Surety Life
Insurance Company; 1992 - Present Director of Lincoln Benefit Life Company;
1992- Present Director and Vice President, Secretary and General Counsel of
Glenbrook Life Insurance Company; 1992 - Present Director and Vice President,
Secretary and General Counsel of Glenbrook Life and Annuity Company.
PETER H. HECKMAN, 50, Vice President and Director (1992)* Also from 1995 -
Present Director of Laughlin Group Holdings, Inc.; 1993 - Present Director and
Vice President of Allstate Settlement Corporation; 1992 - Present Director and
Vice President of Glenbrook Life and Annuity Company; 1991 - Present Vice
President and Controller of The Northbrook Corporation; 1990 - Present Vice
President and Director of Glenbrook Life Insurance Company; 1990 - Present
Director of Allstate Life Insurance Company of New York; 1990 - Present Director
of Surety Life Insurance Company; 1990 - Present Director of Lincoln Benefit
Life Company; 1989 - Present Vice President of Allstate Life Insurance Company
of New York; 1988 - Present Director and Vice President of Northbrook Life
Insurance Company; 1988 - Present Director and Vice President - Finance of
Allstate Life Insurance Company.
G. CRAIG WHITEHEAD, 50, Assistant Vice President and Director (1995)* Also 1995
- - Present Director of Laughlin Group Holdings, Inc.; 1995 - Present Vice
President and Director of Glenbrook Life and Annuity Company; 1995 - Present
Director of Glenbrook Life Insurance Company; 1992 - Present Assistant Vice
President of Glenbrook Life and Annuity Company; 1991 - Present Assistant Vice
President of Allstate Life Insurance Company; 1991 - Present Assistant Vice
President of Glenbrook Life Insurance Company.
BARRY S. PAUL, 40, Assistant Vice President and Controller (1992)* Also 1995 -
Present Controller of Allstate Life Insurance Company; 1995 - Present Controller
of Northbrook Life Insurance Company; 1995 - Present Controller of Allstate
Settlement Corporation; 1992 - Present Assistant Vice President and Controller
of Glenbrook Life and Annuity Company; 1991 - Present Assistant Vice President
and Controller of Allstate Life Insurance Company of New York; 1991 - President
Assistant Vice President and Controller of Glenbrook Life Insurance Company;
1988 - Present Assistant Vice President of Northbrook Life Insurance Company;
and 1988 -Present Assistant Vice President of Allstate Life Insurance Company.
JAMES P. ZILS, 45, Treasurer (1995)* Also 6/10/96 - Present Vice President and
Treasurer of Allstate Investment Management Company; 3/7/96 - Present Chairman
of the Board, Director and Treasurer of Northbrook Holdings, Inc.; 1995 -
Present Treasurer Laughlin Group Holdings, Inc.; 1995 - Present Treasurer of
Allstate Life Insurance Company of New York; 1995 - Present
<PAGE>
Treasurer of Allstate Life Financial Services, Inc.; 1995 - Present Treasurer of
Allstate Life Insurance Company; 1995 - Present Treasurer of Allstate Settlement
Corporation; 1995 - Present Treasurer of Glenbrook Life and Annuity Company;
1995 - Present Treasurer of Glenbrook Life Insurance Company; 1995 - Present
Treasurer of Northbrook Life Insurance Company; 1995 -Present Treasurer of The
Northbrook Corporation; 1995 - Present Vice President and Treasurer of AEI
Group, Inc.; 1995 - Present Treasurer of Allstate International Inc.; 1995 -
Present Vice President and Treasurer of Allstate Motor Club, Inc.; 1995 -Present
Vice President and Treasurer of Direct Marketing Center Inc.; 1995 -Present Vice
President and Treasurer of Enterprises Services Corporation; 1995 -Present
Treasurer of The Allstate Foundation; 1995 - Present Vice President and
Treasurer of Forestview Mortgage Insurance Company; 1995 - Present Vice
President and Treasurer of Allstate Indemnity Company; 1995 - Present Treasurer
Allstate Insurance Company; 1995 - Present Vice President and Treasurer of
Allstate Property and Casualty; 1995 - Present Treasurer of Deerbrook Insurance;
1995 - Present Vice President and Treasurer of First Assurance Company; 1995 -
Present Vice President and Treasurer of Northbrook Indemnity; 1995 - Present
Vice President and Treasurer of Northbrook National Insurance Company; 1995 -
Present Vice President and Treasurer of Northbrook Property and Casualty; 1993 -
Present Vice President of Allstate Insurance Company; 1991 - 1993 Assistant Vice
President of Allstate Insurance Company.
CASEY J. SYLLA, 53, Chief Investment Officer (1995)* Also 6/10/96 - Present
Chairman of the Board, President and Director of Allstate Investment Management
Company; 4/5/96 - Present Executive Vice President and Chief Investment Officer
of Allstate International Inc.; 1995 -Present Chief Investment Officer of AEI
Group, Inc.; 1995 - Present Chief Investment Officer of Allstate County Mutual;
1995 - Present Director of Allstate Insurance Company; 1995 - Present Director
of Allstate Indemnity Company; 1995 - Present Chief Investment Officer of
Allstate International Inc.; 1995 - Present Chief Investment Officer of Allstate
Motor Club, Inc.; 1995 -Present Director of Allstate Property and Casualty
Insurance Company; 1995 - Present Chief Investment Officer of Allstate Texas
Lloyd's, Inc.; 1995 - Present Director of Deerbrook Insurance Company; 1995 -
Present Chief Investment Officer of Direct Marketing Center Inc.; 1995 - Present
Chief Investment Officer of Enterprises Services Corporation; 1995 - Present
Director of First Assurance Company; 1995 - Present Director of Northbrook
Indemnity Company; 1995 - Present Director of Northbrook National Insurance
Company; 1995 - Present Director of Northbrook Property and Casualty Insurance
Company; 1995 - Present Chief Investment Officer of Tech-Cor, Inc.; 1995 -
Present Chief Investment Officer of The Allstate Foundation; 1995 - Present
Chief Investment Officer of Allstate Life Insurance Company of New York; 1995 -
Present Chief Investment Officer of Glenbrook Life and Annuity Company; 1995 -
Present Chief Investment Officer and Director of Allstate Life Insurance
Company; 1995 - Present Chief Investment Officer of Northbrook Life Insurance
Company; 1995 - Present ChiefInvestment Officer of Glenbrook Life Insurance
Company; 1995 - Present Chief Investment Officer of Allstate Settlement
Corporation; 1995 - Present Chief Investment Officer of The Northbrook
Corporation; 1995 - Present Senior Vice President and Chief Investment Officer
of Allstate Insurance Company; 1995 -Present Senior Vice President and Chief
Investment Officer of Allstate Indemnity; 1995 - Present Senior Vice President
and Chief Investment Officer of Allstate Property and Casualty; 1995 - Present
Senior Vice President and Chief Investment Officer of Deerbrook; 1995 - Present
Senior Vice President and Chief investment Officer of First Assurance; 1995 -
Present Senior Vice President and Chief Investment Officer of Northbrook
Indemnity; 1995 - Present Senior Vice President and Chief Investment Officer of
Northbrook
<PAGE>
National; 1995 - Present Senior Vice President and Chief Investment Officer of
Northbrook Property and Casualty; 1992 - 1995 Senior Vice President and
Executive Officer Investments of Northwestern Mutual Life Insurance Company.
* Date elected to current office.
-----------------------------------------------------
EXECUTIVE COMPENSATION
Executive officers of the Company also serve as officers of Allstate Life and
receive no compensation directly from the Company. Some of the officers also
serve as officers of other companies affiliated with the Company. Allocations
have been made as to each individual's time devoted to his or her duties as an
executive officer of the Company. However, no officer's compensation allocated
to the Company exceeded $100,000 in 1995. The allocated cash compensation of all
officers of the Company as a group for services rendered in all capacities to
the Company during 1995 totaled $5,976.86. Directors of the Company receive no
compensation in addition to their compensation as employees of the Company.
Shares of the Company and Allstate Life are not directly owned by any director
or officer of the Company. The percentage of shares of The Allstate Corporation
beneficially owned by any director, and by all directors and officers of the
Company as a group, does not exceed one percent of the class outstanding.
SUMMARY COMPENSATION TABLE
(ALLSTATE LIFE INSURANCE CO.)
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
(G)
(A) (E) (F) SECURITIES (H) (I)
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
PRINCIPAL (B) (C) (D) COMPENSATION STOCK OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($) $ AWARD(S) SARS(#) ($) ($)
- --------- ---- --------- -------- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis G. 1995 $416,000 $266,175 $17,044 $199,890 $131,997 $411,122 $5,250(1)
Lower, II 1994 $389,050 $ 26,950 $25,889 $170,660 N/A 0 $1,890(1)
Chief 1993 $374,200 $294,683 $52,443 $318,625 N/A $ 13,451 $6,296(1)
Executive
Officer
and
Chairman
</TABLE>
- -------------------
(1) Amount received by Mr. Lower which represents the value allocated to his
account from employer contributions under the Profit Sharing Fund and to its
predecessor, The Savings and Profit Sharing Fund of Sears employees.
------------------------------------------------
<PAGE>
LEGAL PROCEEDINGS
The Company is involved in pending and threatened litigation in the normal
course of its business in which claims for monetary damages are asserted.
Management, after consultation with legal counsel, does not anticipate the
ultimate liability arising from such pending or threatened litigation to have a
material effect on the financial condition of the Company.
---------------------------------------------------------
EXPERTS
The financial statements of the Company included in this Prospectus and the
related financial statement schedule have been audited by Deloitte & Touche LLP,
Two Prudential Plaza, 180 North Stetson Avenue, Chicago, Illinois, 60601-6779,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
--------------------------------------------------------
LEGAL MATTERS
Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on certain
matters relating to the federal securities laws. All matters of Illinois law
pertaining to the Contracts, including the validity of the Contracts and the
Company's right to issue such Contracts under Illinois insurance law, have been
passed upon by Michael J. Velotta, General Counsel of the Company.
---------------------------------------------------------
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
GLENBROOK LIFE AND ANNUITY COMPANY:
We have audited the accompanying Statements of Financial Position of Glenbrook
Life and Annuity Company as of December 31, 1995 and 1994, and the related
Statements of Operations, Shareholder's Equity and Cash Flows for each of the
three years in the period ended December 31, 1995. Our audits also included
Schedule IV-Reinsurance. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule 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 Glenbrook Life and Annuity Company as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles. Also, in our opinion, Schedule
IV-Reinsurance, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information set
forth therein.
As discussed in Note 3 to the financial statements, in 1993 the Company changed
its method of accounting for investments in fixed income securities.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
March 1, 1996
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
---------- ---------
($ IN THOUSANDS)
<S> <C> <C>
Assets
Investments
Fixed income securities
Available for sale, at fair value (amortized cost $44,112 and
$51,527)................................................... $ 48,815 $ 49,807
Short-term..................................................... 2,102 924
---------- --------
Total investments.......................................... 50,917 50,731
Reinsurance recoverable from Allstate Life Insurance Company..... 1,340,925 696,854
Cash............................................................. 264
Deferred income taxes............................................ 542
Other assets..................................................... 2,021 2,118
Separate Accounts................................................ 15,578
---------- --------
Total assets............................................... $1,409,705 $750,245
========== ========
Liabilities
Contractholder funds............................................. $1,340,925 $696,854
Income taxes payable............................................. 1,637 605
Deferred income taxes............................................ 1,828
Net payable to Allstate Life Insurance Company................... 255 128
Separate Accounts................................................ 5,048
---------- --------
Total liabilities.......................................... 1,349,693 697,587
---------- --------
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 (losses)............................ 3,357 (1,118)
Retained income.................................................. 4,914 2,035
---------- --------
Total shareholder's equity................................. 60,012 52,658
---------- --------
Total liabilities and shareholder's equity................. $1,409,705 $750,245
========== ========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
------- ------- -----
<S> <C> <C> <C>
($ IN THOUSANDS)
Revenues
Net investment income............ $3,996 $2,017 $ 753
Realized capital gains (losses).. 459 83
------ ------ -----
Income before income taxes........... 4,455 2,017 836
Income tax expense................... 1,576 723 307
------ ------ -----
Net income........................... $2,879 $1,294 $ 529
====== ====== =====
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
UNREALIZED
----------
ADDITIONAL NET CAPITAL
---------- -----------
COMMON CAPITAL GAINS RETAINED
------ ------- ----- --------
STOCK PAID-IN (LOSSES) INCOME TOTAL
----- ------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
($ IN THOUSANDS)
Balance, December 31, 1992...................... $2,100 $ 9,641 $ (10) $ 212 $11,943
Net income.................................. 529 529
Change in unrealized net capital gains and
losses..................................... 703 703
------ ------- ------- ------ -------
Balance, December 31, 1993...................... 2,100 9,641 693 741 13,175
Net income.................................. 1,294 1,294
Capital contribution........................ 40,000 40,000
Change in unrealized net capital gains and
losses..................................... (1,811) (1,811)
------ ------- ------- ------ -------
Balance, December 31, 1994...................... 2,100 49,641 (1,118) 2,035 52,658
Net income.................................. 2,879 2,879
Change in unrealized net capital gains and
losses..................................... 4,475 4,475
------ ------- ------- ------ -------
Balance, December 31, 1995...................... $2,100 $49,641 $ 3,357 $4,914 $60,012
====== ======= ======= ====== =======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
($ IN THOUSANDS)
Cash flows from operating activities
Net income............................................ $ 2,879 $ 1,294 $ 529
Adjustments to reconcile net income to net cash from
operating activities
Deferred income taxes................................ (39)
Realized capital gains............................... (459) (83)
Changes in other operating assets and liabilities.... 1,217 (180) 656
--------- --------- --------
Net cash from operating activities................. 3,598 1,114 1,102
--------- --------- --------
Cash flows from investing activities
Fixed income securities available for sale
Proceeds from sales................................ 7,836 3,015
Investment collections............................. 1,568 649 969
Investment purchases............................... (1,491) (42,729) (3,737)
Participation in Separate Account..................... (10,069)
Change in short-term investments, net................. (1,178) 667 (1,102)
--------- --------- --------
Net cash from investing activities................. (3,334) (41,413) (855)
--------- --------- --------
Cash flows from financing activities
Capital contribution.................................. 40,000
--------- --------- --------
Net cash from financing activities................. 40,000
--------- --------- --------
Net increase (decrease) in cash........................ 264 (299) 247
Cash at beginning of year.............................. 299 52
--------- --------- --------
Cash at end of year.................................... $ 264 $ - $ 299
========= ========= ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. ORGANIZATION AND NATURE OF OPERATIONS
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 ("Allstate"), 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").
The Company develops and markets flexible premium deferred variable annuity
contracts and single and flexible premium deferred annuities to individuals
through banks and financial institutions in the United States.
Annuity contracts issued by the Company are subject to discretionary withdrawal
or surrender by the contractholder, subject to applicable surrender charges.
These contracts are reinsured with Allstate Life (Note 4) which selects assets
to meet the anticipated cash flow requirements of the assumed liabilities.
Allstate Life utilizes various modeling techniques in managing the relationship
between assets and liabilities and employs strategies 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. Currently there is proposed legislation which
would permit banks greater participation in securities businesses, which could
eventually present an increased level of competition for sales of the Company's
annuity contracts. Furthermore, the federal government may enact changes which
could possibly eliminate the tax-advantaged nature of annuities or eliminate
consumers' need for tax deferral, thereby reducing the incentive for customers
to purchase the Company's products. While it is not possible to predict the
outcome of such issues with certainty, management evaluates the likelihood of
various outcomes and develops strategies, as appropriate, to respond to such
challenges.
Certain reclassifications have been made to the prior year financial statements
to conform to the presentation for the current year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LIFE INSURANCE ACCOUNTING
The Company sells long-duration contracts that do not involve significant risk
of policyholder mortality or morbidity (principally single and flexible premium
annuities) which are considered investment contracts.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual and group annuities
that include an investment component. Payments received are recorded as
interest-bearing liabilities. Contractholder funds are equal to deposits
received and interest accrued to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Credited interest
rates on contractholder funds ranged from 3.0% to 7.4% for those contracts with
fixed interest rates and from 4.25% to 7.9% for those with flexible rates during
1995.
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
During 1995, the Company issued 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 (Glenbrook Life and Annuity Company
Variable Annuity Account and Glenbrook Life and Annuity Company Separate Account
A), unit investment trusts registered with the Securities and Exchange
Commission. Assets of the Separate Accounts are invested in funds of management
investment companies. For certain variable annuity contracts, the Company has
entered into an exclusive distribution arrangement with distributors.
The assets of the Separate Accounts are carried at fair value. Unrealized gains
and losses on the Company's participation in the Separate Account, net of
deferred income taxes, is shown as a component of shareholder's equity. The
Company's participation in the Separate Account, amounting to $10,530 at
December 31, 1995, is subject to certain withdrawal restrictions which are
dependent upon aggregate fund net asset values. In addition, limitations exist
with regard to the maximum amount which can be withdrawn by the Company within
any 30-day period.
Investment income and realized gains and losses of the Separate Accounts, other
than the portion related to the Company's participation, accrue directly to the
contractholders and, therefore, are not included in the accompanying statements
of operations. Revenues to the Company from the Separate Accounts consist of
contract maintenance fees, administrative fees and mortality and expense risk
charges, which are entirely ceded to Allstate Life.
REINSURANCE
Beginning June 5, 1992, the Company reinsures all new business to Allstate Life
(Note 4). Life insurance in force prior to that date is ceded to non-affiliated
reinsurers.
Contract charges and credited interest are ceded and reflected net of such
cessions in the statements of operations. Reinsurance recoverable and
contractholder funds are reported separately in the statements of financial
position.
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. Fixed
income securities are carried at fair value. The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a separate
component of shareholder's equity. Provisions are made to write down the
carrying value of fixed income securities for declines in value that are other
than temporary. Such writedowns are included in realized capital gains and
losses.
Short-term investments are carried at cost which approximates fair value.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments. Accrual
of income is suspended for fixed income securities 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.
F-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 and the enacted tax
rates. Deferred income taxes also arise from unrealized capital gains or losses
on fixed income securities carried at fair value.
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. ACCOUNTING CHANGE
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires that investments classified
as available for sale be carried at fair value. Previously, fixed income
securities classified as available for sale were carried at the lower of
amortized cost or fair value, determined in the aggregate. Unrealized holding
gains and losses are reflected as a separate component of shareholder's equity,
net of deferred income taxes. The net effect of adoption of this statement
increased shareholder's equity at December 31, 1993 by $693, with no impact on
net income.
4. RELATED PARTY TRANSACTIONS
REINSURANCE
Contract charges ceded to Allstate Life under reinsurance agreements were $1,523
and $409 in 1995 and 1994, respectively. Credited interest and expenses ceded to
Allstate Life amounted to $71,905 and $26,177 in 1995 and 1994, respectively.
Investment income earned on the assets which support contractholder funds is not
included in 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.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by Allstate in conducting its business activities. The Company
reimburses Allstate for the operating expenses incurred by Allstate on behalf of
the Company. The cost to the Company is determined by various allocation methods
and is primarily related to the level of services provided. Operating expenses,
including compensation and retirement and other benefit programs, allocated to
the Company were $348, $271 and $59 in 1995, 1994 and 1993, respectively.
Investment-related expenses are retained by the Company. All other costs are
assumed by Allstate Life under reinsurance treaties.
LAUGHLIN GROUP
Laughlin Group, Inc. ("Laughlin"), a wholly-owned subsidiary of Laughlin Group
Holdings Inc., a wholly-owned subsidiary of Allstate Life which was acquired in
September 1995, is a third-party marketer which distributes the products of
insurance carriers including the Company. Laughlin markets the Company's
flexible premium deferred variable annuity contracts and flexible premium
deferred annuities. Sales commissions paid to Laughlin subsequent to the
acquisition date of $3,439 were ceded to Allstate Life.
F-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
5. INCOME TAXES
Allstate Life and its life insurance subsidiaries, including the Company, will
file a consolidated federal income tax return. Tax liabilities and benefits
realized by the consolidated group are allocated as generated by the respective
subsidiaries, whether or not such benefits generated by the subsidiaries would
be available on a separate return basis. The Corporation and its domestic
subsidiaries including the Company (the "Allstate Group"), will be eligible to
file a consolidated tax return beginning in the year 2000.
Prior to the Distribution, the Allstate Group joined with Sears and its domestic
business units (the "Sears Group") in the filing of a consolidated federal
income tax return (the "Sears Tax Group") and were parties to a federal income
tax allocation agreement (the "Tax Sharing Agreement"). As a member of the Sears
Tax Group, the Corporation was jointly and severally liable for the consolidated
income tax liability of the Sears Tax Group. Under the Tax Sharing Agreement,
the Company, through the Corporation, paid to or received from the Sears Group
the amount, if any, by which the Sears Tax Group's federal income tax liability
was affected by virtue of inclusion of the Allstate Group in the consolidated
federal income tax return. Effectively, this resulted in the Company's annual
income tax provision being computed as if the Company filed a separate return,
except that items such as net operating losses, capital losses or similar items
which might not be immediately recognizable in a separate return, were allocated
according to the Tax Sharing Agreement and reflected in the Company's provision
to the extent that such items reduced the Sears Tax Group's federal tax
liability.
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 Tax
Sharing Agreement with respect to the Company's federal income tax liability and
taxes payable to or recoverable from the Sears Group.
The components of the deferred income tax assets and liabilities at December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Unrealized net capital losses on fixed income securities.. $ - $602
Other..................................................... - 4
------- ----
Total deferred assets................................... - 606
======= ====
Unrealized net capital gains on fixed income securities... $(1,807)
Difference in tax bases of investments.................... (21)
Other..................................................... (64)
------- ----
Total deferred liabilities.............................. (1,828) (64)
------- ----
Net deferred (liability) asset.......................... $(1,828) $542
======= ====
</TABLE>
F-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
5. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current................................................................... $1,615 $ 652 $ 290
Deferred.................................................................. (39) 71 17
------- ----- -----
Income tax expense...................................................... $1,576 $ 723 $ 307
======= ===== =====
</TABLE>
The Company paid income taxes of $874, $57 and $290 in 1995, 1994 and 1993,
respectively, under the Tax Sharing Agreement. The Company had income taxes
payable to Allstate Life of $1,637 and $605 at December 31, 1995 and 1994,
respectively.
6. INVESTMENTS
FAIR VALUES
The amortized cost, fair value and gross unrealized gains and losses for fixed
income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED -----------------
COST GAINS LOSSES FAIR VALUE
--------- ------ --------- ----------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1995
U.S. government and agencies............................................... $24,722 $3,470 - $28,192
Corporate.................................................................. 1,304 120 1,424
Mortgage-backed securities................................................. 18,086 1,113 19,199
------- ------ ------ -------
Totals................................................................... $44,112 $4,703 - $48,815
======= ====== ====== =======
AT DECEMBER 31, 1994
U.S. government and agencies............................................... $31,005 $ 30 $ 1,126 $29,909
Mortgage-backed securities................................................. 20,522 624 19,898
------- ------ ------- -------
Total.................................................................... $51,527 $ 30 $ 1,750 $49,807
======= ====== ======= =======
SCHEDULED MATURITIES
The scheduled maturities of fixed income securities available for sale at
December 31, 1995 are as follows:
AMORTIZED
COST FAIR VALUE
--------- ----------
Due in one year or less.................................................... $ 398 $ 403
Due after one year through five years......................................
Due after five years through ten years..................................... 15,883 17,681
Due after ten years........................................................ 9,745 11,532
------- -------
26,026 29,616
Mortgage-backed securities................................................. 18,086 19,199
------- -------
Total.................................................................... $44,112 $48,815
======= =======
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
F-10
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
6. INVESTMENTS (CONTINUED)
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains and losses on fixed income securities and the
Company's participation in the Separate Account included in shareholder's equity
at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED NET
COST FAIR VALUE GAINS/(LOSSES)
--------- ---------- ----------------
<S> <C> <C> <C>
Fixed income securities............ $44,112 $48,815 $ 4,703
Participation in Separate Account.. 10,069 10,530 461
Deferred income taxes.............. (1,807)
-------
Total............................ $ 3,357
=======
</TABLE>
The change in unrealized net capital gains and losses for fixed income
securities and the Company's participation in the Separate Account is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Fixed income securities................................ $ 6,423 $(2,786) $1,076
Participation in Separate Account in 1995.............. 461
Deferred income taxes.................................. (2,409) 975 (373)
------- ------- ------
Change in unrealized net capital gains and losses...... $ 4,475 $(1,811) $ 703
======= ======= ======
COMPONENTS OF NET INVESTMENT INCOME
Investment income by investment type is as follows:
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
------- ------- ------
Investment income:
Fixed income securities.............................. $ 3,850 $ 1,984 $ 729
Short-term........................................... 113 48 35
Participation in Separate Account in 1995............ 69
------- ------- ------
Investment income, before expense...................... 4,032 2,032 764
Investment expense..................................... 36 15 11
------- ------- ------
Net investment income.................................. $ 3,996 $ 2,017 $ 753
======= ======= ======
REALIZED CAPITAL GAINS AND LOSSES
Realized capital gains on investments are as follows:
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
------- ------- ------
Fixed income securities................................ $ 459 $- $ 83
Income tax............................................. 161 29
------- ---- ------
Net realized gains..................................... $ 298 $- $ 54
======= ==== ======
</TABLE>
F-11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
6. INVESTMENTS (CONTINUED)
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES
The proceeds from sales of investments in fixed income securities, excluding
calls, were $7,836 and $3,015, with related gross realized gains of $459 and $22
for 1995 and 1993, respectively. There were no such amounts realized in 1994.
SECURITIES ON DEPOSIT
At December 31, 1995, fixed income securities with a carrying value of $10,085
were on deposit with regulatory authorities as required by law.
7. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value of all financial
assets other than fixed income securities and all liabilities other than
contractholder funds approximates their carrying value as they are short-term in
nature.
Fair values for fixed income securities are based on quoted market prices. The
December 31, 1995 and 1994 fair values and carrying values of fixed income
securities are discussed in Note 6.
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 fund balance less surrender charge. The fair value of immediate
annuities with fixed terms are estimated using discounted cash flow calculations
based on interest rates currently offered for contracts with similar terms and
duration. Contractholder funds on investment contracts had a carrying value of
$1,340,925 at December 31, 1995 and a fair value of $1,282,248. The carrying
value and fair value at December 31, 1994 were $696,854 and $670,930,
respectively.
F-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
8. STATUTORY FINANCIAL INFORMATION
The following tables reconcile net income and shareholder's equity 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
----------
YEAR ENDED
----------
DECEMBER 31,
-----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance per generally accepted accounting principles.. $2,879 $1,294 $ 529
Income taxes........................................ (164) 29 8
Interest maintenance reserve........................ (53) 27
Non-admitted assets and statutory reserves.......... (46) 15 (47)
------ ------ -------
Balance per statutory accounting practices............ $2,669 $1,285 $ 517
====== ====== =======
SHAREHOLDER'S EQUITY
--------------------
DECEMBER 31,
------------
1995 1994
---- ----
Balance per generally accepted accounting principles.. $60,012 $52,658
Income taxes........................................ 698 (575)
Unrealized net capital gains (losses)............... (4,703) 1,719
Non-admitted assets and statutory reserves.......... (1,702) (1,635)
------- --------
Balance per statutory accounting practices............ $54,305 $52,167
======= =======
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares their statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the insurance
department of the State of Illinois. Prescribed statutory accounting practices
include a variety of publications of the National Association of Insurance
Commissioners, 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 or risk-
based capital.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by insurance companies without the prior approval of
the state insurance regulator is limited to formula amounts based on net income
and capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 1996 without prior approval of both the Illinois and California
Departments of Insurance is $5,220.
F-13
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV-REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
------ ------ ------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Life insurance in force......... $1,250 $1,250 $-
====== ====== ======
Premiums and contract charges:
Life and annuities.............. $6,571 $6,571 $-
====== ====== ======
GROSS NET
AMOUNT CEDED AMOUNT
------ ------ ------
YEAR ENDED DECEMBER 31, 1994
Life insurance in force......... $1,250 $1,250 $-
====== ====== ======
Premiums and contract charges:
Life and annuities.............. $ 409 $ 409 $-
====== ====== ======
GROSS NET
AMOUNT CEDED AMOUNT
------ ------ ------
YEAR ENDED DECEMBER 31, 1993
Life insurance in force......... $1,250 $1,250 $-
====== ====== ======
Premiums and contract charges:
Life............................ 6 6 -
Contract charges................ 70 70 -
------ ------ ------
$ 76 $ 76 $-
====== ====== ======
</TABLE>
F-14
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT ILLUSTRATION
EXAMPLE OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000
Guarantee Period: 5 Years
Interest Rate: 5.25%
Full Withdrawal: End of Contract Year 3
NOTE: THIS ILLUSTRATION ASSUMES THAT PREMIUM TAXES WERE NOT APPLICABLE.
EXAMPLE 1: (Assumes declining interest rates)
Step 1: Calculate Account Value at end of Contract Year 3:
= 10,000.00 x (1.0525)/3/ = $11,659.13
Step 2: Calculate the Free Withdrawal Amount:
Free Withdrawal Amount:
= .10 x 10,000.00 = $1,000.00
Step 3: Calculate the Withdrawal Charge:
= .06 x (11,659.13 - 1,000) = $639.55
Step 4: Calculate the Market Value Adjustment:
I = 6.77%
J = 6.77%
N = 2 years (5 years - 3 years)
Market Value Adjustment factor: .9 x (I-J) x N
.9 x (.0686 - .0636) x 2 = .009
Market Value Adjustment = factor x amount subject to Market Value
Adjustment:
= .009 x (11,659.13 - 1.000) = $95.93
Step 5: Calculate the actual amount received by customers as a result of a
full withdrawal at the end of Contract Year 3:
= 11,659.13 - 639.55 + 95.93 = $11,115.52
EXAMPLE 2: (Assumes rising interest rates)
Step 1: Calculate Account Value at end of Contract Year 3:
= 10,000.00 x (1.0525)/3/ = $11,659.13
Step 2: Calculate the Free Withdrawal Amount:
Free Withdrawal Amount:
= .10 x 10,000.00 = $1,000.00
Step 3: Calculate the Withdrawal Charge:
= .06 x (11,659.13 - 1,000) = $639.55
Step 4: Calculate the Market Value Adjustment:
I = 6.77%
J = 7.27%
N = 2 years (5 years - 3 years)
Market Value Adjustment factor: .9 x (I - J) x N
= .9 x (.0686 - .0736) x (2) = -.009
Market Value Adjustment = factor x amount subject to Market Value
Adjustment:
= -.009 (11,659.13 - 1,000) = - $95.93
Step 5: Calculate the net surrender value at end of Contract Year 3:
= 11,659.13 - 639.55 - 95.63 = $10,923.65
A-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Pursuant to Item 511 of Regulation S-K, the Registrant hereby represents
that the following expenses totaling approximately $35,100 will be incurred or
are anticipated to be incurred in connection with the issuance and distribution
of the securities to be registered: registration fees - $100; cost of printing
and engraving - $17,000; legal fees - $15,000; and accounting fees - $3,000.
All amounts are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The By-Laws of Glenbrook Life and Annuity Company ("Registrant") which are
incorporated herein by reference as Exhibit (3), provide that Registrant will
indemnify its officers and directors for certain damages and expenses that may
be incurred in the performance of their duty to Registrant. No indemnification
is provided, however, when such person is adjudged to be liable for negligence
or misconduct in the performance of his or her duty, unless indemnification is
deemed appropriate by the court upon application.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(1) Form of Underwriting Agreement
(2) None
(3) (i) Articles of Incorporation
(ii) By-Laws
(4) Glenbrook Life and Annuity Company Single Payment Deferred Annuity
Contract and Application
(5) Opinion of General Counsel re: Legality
(6) None
(7) None
(8) None
(9) None
(10) Reinsurance Agreement
(11) None
(12) None
(14) None
(15) None
(16) None
(21) None
<PAGE>
(23) (i) Consent of Experts
(ii) Consent of Counsel*
(24) Powers of Attorney
(25) None
(26) None
(27) Financial Data Schedule*
(28) None
* To be filed by Pre-Effective Amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be
<PAGE>
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 the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit ore proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of 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 Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this 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 State of Illinois, on the 27th day of
June, 1996.
GLENBROOK LIFE AND ANNUITY COMPANY
(Registrant)
(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
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been duly signed below by the following Directors and
Officers of Glenbrook Life and Annuity Company on the 27th day of June, 1996.
*/LOUIS G. LOWER, II Chairman of the Board of Directors and
- ---------------------- Chief Executive Officer (Principal
Louis G. Lower, II Executive Officer)
/s/MICHAEL J. VELOTTA Vice President, Secretary, General
- ---------------------- Counsel and Director
Michael J. Velotta
*/MARLA G. FRIEDMAN President, Chief Operating Officer and
- -------------------- Director
Marla G. Friedman
*/PETER H. HECKMAN Vice President and Director
- ----------------------
Peter H. Heckman
*/G. CRAIG WHITEHEAD Assistant Vice President and Director
- ----------------------
G. Craig Whitehead
*/JAMES P. ZILS Treasurer
- ----------------------
James P. Zils
*/CASEY J. SYLLA Chief Investment Officer
- ----------------------
Casey J. Sylla
*/BARRY S. PAUL Assistant Vice President and
- ---------------------- Controller (Principal Accounting
Barry S. Paul Officer)
*/ By Michael J. Velotta, pursuant to Power of Attorney, filed herewith.
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed herewith:
(1) Form of Underwriting Agreement
(2) None
(3) (i) Articles of Incorporation
(ii) By-Laws
(4) Glenbrook Life and Annuity Company Single Payment Deferred Annuity
Contract and Application
(5) Opinion of General Counsel re: Legality
(6) None
(7) None
(8) None
(9) None
(10) Reinsurance Agreement
(11) None
(12) None
(14) None
(15) None
(16) None
(21) None
(23) (i) Consent of Experts
(ii) Consent of Counsel*
(24) Powers of Attorney
(25) None
(26) None
(27) Financial Data Schedule*
(28) None
* To be filed by Pre-Effective Amendment.
<PAGE>
(1) Underwriting Agreement
<PAGE>
UNDERWRITING AGREEMENT
----------------------
THIS AGREEMENT, is entered into on this day of ,
1996, by and among GLENBROOK LIFE AND ANNUITY COMPANY ("Glenbrook Life" or
"Company"), a life insurance company organized under the laws of the State of
Illinois, and ALLSTATE LIFE FINANCIAL SERVICES, INC., ("Principal Underwriter"),
a corporation organized under the laws of the state of Delaware.
RECITALS
WHEREAS, Company proposes to issue to the public certain single
payment deferred annuity contracts identified in the Attachment A
("Contracts"); and
WHEREAS, the Contracts to be issued by Company are registered with the
Securities and Exchange Commission ("Commission") under the Securities Act of
1933 for offer and sale to the public and otherwise are in compliance with all
applicable laws; and
WHEREAS, Principal Underwriter, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. ("NASD"), proposes to act as principal underwriter on
an agency (best efforts) basis in the marketing and distribution of said
Contracts; and
WHEREAS, Company desires to obtain the services of Principal
Underwriter as an underwriter and distributor of said Contracts issued by
Company;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, the Company, the Separate Account, and the Principal Underwriter
hereby agree as follows:
1. AUTHORITY AND DUTIES
--------------------
(a) Principal Underwriter will serve as an underwriter and
distributor on an agency basis for the Contracts which will be
issued by the Company.
(b) Principal Underwriter will use its best efforts to provide
information and marketing assistance to licensed insurance agents
and broker-dealers on a continuing basis. However, Principal
Underwriter shall be responsible for compliance with the
requirements of state broker-dealer regulations and the
Securities Exchange Act of 1934 as each applies to Principal
Underwriter in connection with its duties as distributor of said
Contracts. Moreover, Principal Underwriter shall conduct its
affairs in accordance with the rules of Fair Practice of the
NASD.
<PAGE>
(c) Subject to agreement with the Company, Principal Underwriter may
enter into selling agreements with broker-dealers which are
registered under the Securities Exchange Act of 1934 and
authorized by applicable law or exemptions to sell single payment
deferred annuity contracts issued by Company. Any such
contractual arrangement is expressly made subject to this
Agreement, and Principal Underwriter will at all times be
responsible to Company for supervision of compliance with the
federal securities laws regarding distribution of Contracts.
2. WARRANTIES
----------
(a) The Company represents and warrants to Principal Underwriter
that:
(i) Registration Statements on Form S-1 for each of the
Contracts identified in Attachment A have been filed with
the Commission in the form previously delivered to
Principal Underwriter and that copies of any and all
amendments thereto will be forwarded to Principal
Underwriter at the time that they are filed with
Commission;
(ii) The Registration Statement and any further amendments or
supplements thereto will, when they become effective,
conform in all material respects to the requirements of
the Securities Act of 1933, and the rules and regulations
of the Commission under such Acts, and will not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary
to make the statements therein not misleading; provided,
however, that this representation and warranty shall not
apply to any statement or omission made in reliance upon
and in conformity with information furnished in writing to
Company by Principal Underwriter expressly for use
therein;
(iii) The Company is validly existing as a stock life insurance
company in good standing under the laws of the State of
Illinois, with power to own its properties and conduct its
business as described in the Prospectus, and has been duly
qualified for the transaction of business and is in good
standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any
business;
(iv) Those persons who offer and sell the Contracts are to be
appropriately licensed or appointed to comply with the
state insurance laws;
2
<PAGE>
(v) The performance of this Agreement and the consummation of
the transactions contemplated by this Agreement will not
result in a violation of any of the provisions of or
default under any statute, indenture, mortgage, deed of
trust, note agreement or other agreement or instrument to
which Company is a party or by which Company is bound
(including Company's Charter or By-laws as a stock life
insurance company, or any order, rule or regulation of any
court or governmental agency or body having jurisdiction
over Company or any of its properties);
(vi) There is no consent, approval, authorization or order of
any court or governmental agency or body required for the
consummation by Company of the transactions contemplated
by this Agreement, except such as may be required under
the Securities Exchange Act of 1934 or state insurance or
securities laws in connection with the distribution of the
Contracts; and
(vii) There are no material legal or governmental proceedings
pending to which Company is a party or of which any
property of Company is the subject (other than as set
forth in the Prospectus relating to the Contracts, or
litigation incident to the kind of business conducted by
the Company) which, if determined adversely to Company,
would individually or in the aggregate have a material
adverse effect on the financial position, surplus or
operations of Company.
(b) Principal Underwriter represents and warrants to Company that:
(i) It is a broker-dealer duly registered with the Commission
pursuant to the Securities Exchange Act of 1934, is a
member in good standing of the NASD, and is in compliance
with the securities laws in those states in which it
conducts business as a broker-dealer;
(ii) As a principal underwriter, it shall permit the offer and
sale of Contracts to the public only by and through
persons who are appropriately licensed under the
securities laws and who are appointed in writing by the
Company to be authorized insurance agents;
(iii) The performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of
or constitute a
3
<PAGE>
default under any statute, indenture, mortgage, deed of
trust, note agreement or other agreement or instrument to
which Principal Underwriter is a party or by which
Principal Underwriter is bound (including the Certificate
of Incorporation or By-laws of Principal Underwriter or
any order, rule or regulation of any court or governmental
agency or body having jurisdiction over either Principal
Underwriter or its property); and
(iv) To the extent that any statements made in the Registration
Statement, or any amendment or supplement thereto, are
made in reliance upon and in conformity with written
information furnished to Company by Principal Underwriter
expressly for use therein, such statements will, when they
become effective or are filed with the Commission, as the
case may be, conform in all material respects to the
requirements of the Securities Act of 1933 and the rules
and regulations of the Commission thereunder, and will not
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
3. BOOKS AND RECORDS
-----------------
(a) Principal Underwriter shall keep, in a manner and form approved
by Company and in accordance with Rules 17a-3 and 17a-4 under the
Securities Exchange Act of 1934, correct records and books of
account as required to be maintained by a registered broker-
dealer, acting as principal underwriter, of all transactions
entered into on behalf of Company with respect to its activities
under this Agreement. Principal Underwriter shall make such
records and books of account available for inspection by the
Commission, and Company shall have the right to inspect, make
copies of or take possession of such records and books of account
at any time upon demand.
(b) Subject to applicable Commission or NASD restrictions, Company
will send confirmations of Contract transactions to Contract
Owners. Company will make such confirmations and records of
transactions available to Principal Underwriter upon request.
4. SALES MATERIALS
---------------
(a) After authorization to commence the activities contemplated
herein, Principal Underwriter will utilize the currently
effective prospectus relating to the subject Contracts in
connection with its underwriting,
4
<PAGE>
marketing and distribution efforts. As to other types of sales
material, Principal Underwriter hereby agrees and will require
any participating or selling broker-dealers to agree that they
will use only sales materials which have been authorized for use
by Company, which conform to the requirements of federal and
state laws and regulations, and which have been filed where
necessary with the appropriate regulatory authorities, including
the NASD.
(b) Principal Underwriter will not distribute any prospectus, sales
literature or any other printed matter or material in the
underwriting and distribution of any Contract if, to the
knowledge of Principal Underwriter, any of the foregoing
misstates the duties, obligation or liabilities of Company or
Principal Underwriter.
5. COMPENSATION
------------
Principal Underwriter shall be entitled to such remuneration for its services
and reimbursement for its fees, charges and expenses as will be contained in
such Schedules as attached hereto as Attachment B. Said Schedules may be
amended from time to time at the mutual consent of the undersigned parties.
6. UNDERWRITING TERMS
------------------
(a) Principal Underwriter makes no representations or warranties
regarding the number of Contracts to be sold by licensed broker-
dealers and registered representatives of broker-dealers or the
amount to be paid thereunder. Principal Underwriter does,
however, represent that it will actively engage in its duties
under this Agreement on a continuous basis while there is an
effective registration statement with the Commission.
(b) Principal Underwriter will use its best efforts to ensure that
the Contracts shall be offered for sale by registered broker-
dealers and registered representatives (who are duly licensed as
insurance agents) on the terms described in the currently
effective prospectus describing such Contracts.
(c) It is understood and agreed that Principal Underwriter may render
similar services to other companies in the distribution of other
variable contracts.
(d) The Company will use its best efforts to assure that the
Contracts are continuously registered under the Securities Act of
1933 (and under any
5
<PAGE>
applicable state "blue sky" laws) and to file for approval under
state insurance laws when necessary.
(e) The Company reserves the right at any time to suspend or limit
the public offering of the subject Contracts upon one day's
written notice to Principal Underwriter.
7. LEGAL AND REGULATORY ACTIONS
----------------------------
(a) The Company agrees to advise Principal Underwriter immediately
of:
(i) any request by the Commission for amendment of the
Registration Statement or for additional information
relating to the Contracts;
(ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement
relating to the Contracts or the initiation of any
proceedings for that purpose; and
(iii) the happening of any known material event which makes
untrue any statement made in the Registration Statement
relating to the Contracts or which requires the making of
a change therein in order to make any statement made
therein not misleading.
(b) Each of the undersigned parties agrees to notify the other in
writing upon being apprised of the institution of any proceeding,
investigation or hearing involving the offer or sale of the
subject Contracts.
(c) During any legal action or inquiry, Company will furnish to
Principal Underwriter such information with respect the Contracts
in such form and signed by such of its officers as Principal
Underwriter may reasonably request and will warrant that the
statements therein contained when so signed are true and correct.
9. TERMINATION
-----------
(a) This Agreement will terminate automatically upon its assignment.
(b) This Agreement shall terminate without the payment of any penalty
by either party upon sixty (60) days' advance written notice.
(c) This Agreement shall terminate at the option of the Company upon
institution of formal proceedings against Principal Underwriter
by the
6
<PAGE>
NASD or by the Commission, or if Principal Underwriter or any
representative thereof at any time:
(i) employs any device, scheme, artifice, statement or
omission to defraud any person;
(ii) fails to account and pay over promptly to the Company
money due it according to the Company's records; or
(iii) violates the conditions of this Agreement.
10. INDEMNIFICATION
---------------
The Company agrees to indemnify Principal Underwriter for any liability that it
may incur to a Contract owner or party-in-interest under a Contract:
(a) arising out of any act or omission in the course of or in
connection with rendering services under this Agreement; or
(b) arising out of the purchase, retention or surrender of a
contract; provided, however, that the Company will not indemnify
Principal Underwriter for any such liability that results from
the willful misfeasance, bad faith or gross negligence of
Principal Underwriter or from the reckless disregard by such
Principal Underwriter of its duties and obligations arising under
this Agreement.
11. GENERAL PROVISIONS
------------------
(a) This Agreement shall be subject to the laws of the State of
Illinois.
(b) This Agreement, along with any Schedules attached hereto and
incorporated herein by reference, may be amended from time to
time by the mutual agreement and consent of the undersigned
parties.
(c) In case any provision in this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or
impaired thereby.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed, to be effective as of ,
1996.
GLENBROOK LIFE AND ANNUITY COMPANY
BY:
------------------------------- --------------------------------
President & COO Date
ALLSTATE LIFE FINANCIAL SERVICES, INC.
BY:
------------------------------- --------------------------------
President & COO Date
8
<PAGE>
Attachment A
UNDERWRITING AGREEMENT
----------------------
"CONTRACTS" FORM #
- ----------- ------
Single Premium Deferred Annuity
9
<PAGE>
Attachment B
UNDERWRITING AGREEMENT
----------------------
COMPENSATION
- --------------------------------------------------------------------------------
10
<PAGE>
(3)(i) Articles of Incorporation
<PAGE>
ARTICLES OF REORGANIZATION
AS ADOPTED BY THE BOARD OF DIRECTORS
OF
WILLIAM PENN LIFE ASSURANCE COMPANY OF AMERICA
APRIL 17, 1992
ARTICLE I
(a) The Company was organized pursuant to "An Act concerning insurance, and
declaring an emergency", approved March 8, 1935, being Chapter 162 of the Acts
of the Indiana General Assembly of 1935, and Acts amendatory thereof and
supplemental thereto.
(b) The name of the Company as reorganized shall be GLENBROOK LIFE AND
ANNUITY COMPANY.
(c) The domicile of the Company shall be the State of Illinois, and the
principal office of the Company shall be located in the Township of Northfield,
County of Cook, in the State of Illinois.
(d) The period of duration of the Company shall be perpetual.
ARTICLE II
The objects and purposes of the Company shall be to make, write and issue the
following classes and kinds of insurance:
(a) Life: Insurance on the lives of persons and every insurance
appertaining thereto or connected therewith and granting, purchasing or
disposing of annuities. Policies of life or endowment insurance or annuity
contracts or contracts supplemental thereto which contain provisions for
additional benefits in case of death by accidental means and provisions
operating to safeguard such policies or contracts against lapse or to give a
special surrender value, or special benefit, or an annuity, in the event that
the insured or annuitant shall become totally and permanently disabled, as
defined by the policy or contract, shall be deemed to be policies of life or
endowment insurance or annuity contracts within the intent of this clause.
Also to be deemed as policies of life or endowment insurance or
annuity contracts within the intent of this clause shall be those policies or
riders that provide for the payment of up to twenty-five percent of the face
amount of benefits in advance of the time they would otherwise be payable, upon
a diagnosis by a physician licensed to practice medicine in all of its branches,
that the insured has incurred on of the covered conditions listed in the policy
or rider.
(b) Accident and Health: Insurance against bodily injury, disablement or
death by accident and against disablement resulting from sickness or old age and
every insurance appertaining thereto.
<PAGE>
(c) Legal Expense: Insurance which involves the assumption of a
contractual obligation to reimburse the beneficiary against, or pay on behalf of
the beneficiary, all or a portion of fees, costs of expenses related to or
arising out of services performed by or under the supervision of an attorney
licensed to practice in the jurisdiction wherein the services are performed,
regardless of whether the payment is made by the beneficiary individually or by
a third person for the beneficiary, but does not include the provision of or
reimbursement for legal services incidental to other insurance coverages.
ARTICLE III
(a) The number of Members of the Board of Directors shall be as provided in
the By-Laws, but shall be not less than three, nor more than twenty-one. The
Directors shall be elected at each Annual Meeting of the Shareholders for a term
of one year. Vacancies in the Board of Directors shall be filled by vote of the
Shareholders.
(b) The corporate powers of the Company shall be vested in the Board of
Directors, which shall have power to do any and all acts the Company may do
under the law and not otherwise to be preformed by the Shareholders, and shall
have the power to adopt By-Laws not inconsistent with law and these Articles for
the governance and regulation of the business of the Company.
ARTICLE IV
The amount of capital stock of the Company shall be Two Million One Hundred
Thousand Dollars ($2,100,000), divided into four thousand two hundred (4,200)
shares of the par value of Five Hundred Dollars ($500) per share.
ARTICLE V
The designation of the General Officers of the Company shall be Chairman of
the Board, President, two or more Vice-Presidents, Treasurer and Secretary.
ARTICLE VI
The fiscal year of the Company shall commence on the first day of January
and terminate on the thirty-first day of December of each year.
ARTICLE VII
The Company may indemnify any agent as permitted by Section 10 of the
Illinois Insurance Code in its present form or as it may hereafter be amended.
The Company shall have the power to purchase and maintain insurance on behalf of
any agent against any liability asserted against such agent and incurred as
agent or arising out of any person's status as such, whether or not the Company
would have the power to indemnify such agent against such liability. The
Company shall also have the power to purchase and maintain insurance to
indemnify the Company for any obligation which it may incur as a result of such
indemnification of an agent.
Any indemnification provided to an agent shall (a) not be deemed exclusive
of any other
<PAGE>
rights to which such agent may be entitled by law or under any by-law,
agreement, vote of Shareholders or disinterested Directors, or otherwise, and
(b) inure to the benefit of the legal representative of such agent or the estate
of such agent, whether such representative be court-appointed or otherwise
designated, and to the benefit of the heirs of such agent. As used in this
Article, "agent" shall mean any person who is or was
(i) a Director, Officer or employee of the Company and/or any
subsidiary;
(ii) a Trustee or a fiduciary under any employee pension, profit sharing,
welfare or similar plan or trust of the Company and/or any
subsidiary, or
(iii) serving, at the request of the Company, as a Director, Officer
and/or employee of, or in a similar capacity in, another
corporation, partnership, joint venture, trust or other enterprise
(which, for purposes of this Article, is deemed to include not-for-
profit entities of any type), whether acting in such capacity or in
any other capacity including, without limitation, acting as a
Trustee or fiduciary under any employee pension, profit sharing,
welfare or similar plan or trust.
ARTICLE VIII
The Company shall be bound by all the terms and provisions of the Illinois
Insurance Code applicable to similar companies organized or incorporated
thereunder.
WILLIAM PENN LIFE ASSURANCE COMPANY OF AMERICA
By: /s/Louis G. Lower, II
---------------------
LOUIS G. LOWER, II
Chairman
By: /s/Michael P. Duncan
--------------------
MICHAEL P. DUNCAN
Vice President, Secretary
and General Counsel
Attest:
/s/James D. Clements Approved May 28, 1992
- -------------------- -------------
JAMES D. CLEMENTS State of Illinois
Assistant Secretary Department of Insurance
By: /s/Stephen F. Selcke
--------------------
Director of Insurance
<PAGE>
(3) (ii) By-Laws
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
BY-LAWS
ADOPTED JUNE 11, 1992
<PAGE>
BY-LAWS OF
GLENBROOK LIFE AND ANNUITY COMPANY
As adopted by the Board of Directors of the Corporation on June 11, 1992.
ARTICLE I
---------
Directors
---------
Section 1. The property, business and affairs of the Company shall be
managed and controlled by a Board of Directors composed of five members. The
Directors shall be elected at each annual meeting of the shareholders of the
Company for a term of one year. Each Director shall hold office for the term
for which elected and until the election and qualification of his successor.
Section 2. In the event of a vacancy occurring in the Board of
Directors, the shareholders of the Company shall, by a majority vote at a
special meeting called for that purpose or at the next annual meeting of
shareholders, elect a Director to fill such vacancy, such person to hold office
during the unexpired portion of the term of the Director whose place he or she
was elected to fill.
Section 3. The Board of Directors may declare dividends payable out of
the surplus funds of the Company when warranted by law.
Section 4. The Board of Directors shall elect all the general officers
of the Company hereafter provided, and may prescribe additional descriptive
titles for any such officers. The Board of Directors may from time to time
appoint an Actuary, Assistant Vice Presidents, Assistant Secretaries, Assistant
Treasurers, Assistant Actuaries and other officers of the Company. The Board of
Directors may prescribe the duties and fix the compensation of any elected or
appointed officer and may require from any officer security for faithful
service and for proper accounting for monies and property from time to time in
such officer's possession. All officers of the Company shall hold office at the
will of the Board of Directors.
Section 5. The Board of Directors shall designate in what bank or banks
the funds of the Company shall be deposited and the person or persons who may
sign, on behalf of the Company, checks or drafts against such deposits. Such
designations may also be made by such person or persons as shall be appointed
for that purpose by the Board of Directors.
1
<PAGE>
Section 6. The Board of Directors shall have the power to make rules and
regulations not inconsistent with applicable law, the Articles of Incorporation
of the Company, or these By-Laws, for the conduct of its own meetings and the
management of the affairs of the Company.
Section 7. The Board of Directors may authorize payment of compensation
to Directors for their services as Directors, and fix the amount thereof.
Section 8. The Board of Directors shall have the power to appoint
committees and to grant them powers not inconsistent with applicable law, the
Articles of Incorporation of the Company, or these By-Laws.
Section 9. An annual meeting of the Board of Directors shall be held
each year immediately after the adjournment of the annual meeting of the
shareholders. Other meetings of the Board of Directors may be held at such time
as the Board of Directors may determine, or when called by the Chairman or by a
majority of the Board of Directors.
Notice of meetings of the Directors, other than the stated annual meeting
shall be given by letter or facsimile sent to each Director's business address,
no fewer than three days prior to the meeting. Any Director may, in writing,
waive notice of any meeting, and the presence of a Director at any meeting shall
be considered a waiver of notice of such meeting, except as otherwise provided
by law.
Any action required or permitted to be taken at any meeting of the Board of
Directors, or of any Committee thereof, may be taken without a meeting if all
members of the Board or such Committee, as the case may be, consent thereto in
writing. Such writing or writings shall be filed with the minutes of
proceedings of the Board or such Committee.
Section 10. A majority of the whole Board of Directors shall constitute
a quorum for the transaction of business, but if at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn that meeting, from time to time, until a quorum shall have been
obtained.
ARTICLE II
----------
Officers
--------
Section 1. The general officers of the Company shall consist of a
Chairman of the Board, President, two or more Vice Presidents, a Secretary, and
a Treasurer, who shall be elected annually by the Board of Directors at the
stated annual meeting held upon adjournment of the annual shareholders' meeting,
and if not elected at
2
<PAGE>
such meeting, such officers may be elected at any meeting of the Board of
Directors held thereafter. Such officers shall be elected by a majority of the
Directors, and shall hold office for one year and until their respective
successors are elected and qualified, subject to removal at will by the Board of
Directors. In case of a vacancy in any of the general offices of the Company,
such vacancy may be filled by the vote of a majority of the Board of Directors.
Any two of the aforesaid offices may be filled by the same person, with the
exception of the offices of President and Vice President, and President and
Secretary.
Section 2. The Chairman of the Board shall preside at all meetings of
the shareholders and of the Board of Directors, but may designate any other
officer of the Company to so serve in his or her absence. The Chairman shall be
the Chief Executive Officer of the Company, shall have general and active
management of the business of the Company subject to the supervision of the
Board of Directors, and shall see that all orders and resolutions of the Board
of Directors are carried into effect. The Chairman shall also perform such
other duties as shall be prescribed from time to time by the Board of Directors.
Section 3. The President shall have general administrative control and
supervision over the operations of the Company, subject to the supervision of
the Chairman of the Board. The President shall, in the absence or inability of
the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board, shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Company, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Company, and shall also perform
such other duties as may properly belong to the office or as shall be prescribed
from time to time by the Chairman of the Board or by the Board of Directors.
Section 4. Each Vice President shall have such powers and shall perform
such duties as may be assigned by the Chairman of the Board or by the Board of
Directors. In the absence or in the case of the inability of the Chairman of
the Board or the President to act, the Board of Directors may designate which
one of the Vice Presidents shall be the acting Chief Executive Officer of the
Company during such absence or inability, whereupon such acting Chief Executive
Officer shall have all the powers and perform all of the duties incident to the
office of the Chairman during the absence or inability of the Chairman and
President to act.
Section 5. The Secretary shall keep the minutes of all meetings of the
Board of Directors, and of all meetings of the shareholders, in books provided
by the Company for such purpose. The Secretary shall attend to the giving of
all notices of meetings of the Board of Directors or shareholders. The
Secretary may sign with the Chairman of the Board, the President or a Vice
President, in the name of the Company, when authorized by the Board of Directors
so to do, all contracts and other instruments
3
<PAGE>
requiring the seal of the Company and may affix the seal thereto. The Secretary
shall, in general, perform all of the duties which are incident to the office of
Secretary and such other duties as the Board of Directors or Chairman of the
Board may from time to time prescribe.
Section 6. The Treasurer shall deposit the monies of the Company in the
Company's name in depositories designated by the Board of Directors, or by such
person or persons as shall be designated for that purpose by the Board of
Directors. The Treasurer shall, in general, perform all of the duties which are
incident to the office of Treasurer and such other duties as the Board of
Directors or Chairman of the Board may from time to time prescribe. The Board
of Directors may, in its discretion, require the Treasurer to give bond for the
faithful discharge of his duties.
ARTICLE III
-----------
Shareholder's Meeting
---------------------
Section 1. The annual meeting of the shareholders shall be held at the
principal office of the Company in Northfield Township, Cook County, Illinois,
or at such other location within or without the State of Illinois as may be set
forth in the notice of call, on the third Tuesday in February of each year,
except when such day shall be a legal holiday, in which case the meeting shall
be held on the next succeeding business day. The Chairman or the Board of
Directors may at any time call a special meeting of the shareholders, and the
Chairman shall call such special meeting when so requested, in writing, by the
owners of not less than one-fifth of the outstanding share of the Company.
Section 2. Notice of every meeting of the shareholders shall be given by
mailing notice thereof at least ten days before such meeting to all the
shareholders at their respective post office addresses last furnished by them,
respectively, to the Company. The shareholders may waive notice of any such
meeting, in writing, and the presence of a shareholder, either in person or by
proxy, shall be considered a waiver of notice, except as otherwise provided by
law.
Section 3. The presence at such meeting, in person or by proxy, of
shareholders of the Company representing at least fifty-one percent of the then
outstanding shares of the Company, shall be necessary to constitute a quorum for
the purpose of transacting business, except as otherwise provided by law, but a
smaller number may adjourn the meeting from time to time until a quorum shall be
obtained. Each shareholder shall be entitled to cast one vote in person or by
proxy for each share of stock of the Company held and of record in such
shareholder's name on the books of the Company.
4
<PAGE>
ARTICLE IV
----------
Shares
------
Section 1. Share certificates shall be signed by the Chairman or a Vice
President and countersigned by the Secretary, shall be sealed with the corporate
seal of the Company, and shall be registered upon the Share Register of the
Company. Each certificate shall express on its face the name of the Company,
the number of the certificate, the number of shares for which it is issued, the
name of the person to whom it is issued, the par value of each of the said
shares, and the amount actually received by the Company for each share
represented by said certificate.
Section 2. Transfer of shares of the Company shall be made only on the
books of the Company by the holder thereof in person or by an attorney duly
authorized, in writing, and upon the surrender of the certificates or
certificate for the share transfer, upon which surrender and transfer new
certificates will be issued. The Board of Directors may, by resolution, close
the share transfer books of the Company for a period not exceeding ten days
before the holding of any annual or special meeting of the shareholders. The
Board of Directors may, by resolution, also close the transfer books of the
Company for a period not exceeding ten days before the payment of any dividends
which may be declared upon the shares of the Company.
ARTICLE V
---------
Insurance Polices
-----------------
Section 1. All policies of insurance issued by this Company shall comply
with the laws of the respective states or territories in which the policies are
issued. All policies of insurance issued by this Company shall be signed,
either manually or by facsimile, by the President and the Secretary or by such
other officer or officers as the Chairman may designate, and shall be
countersigned by a duly licensed resident agent where so required by law or
regulation.
ARTICLE VI
----------
Miscellaneous
-------------
Section 1.
----------
(a) As used in this Article:
5
<PAGE>
(i) "acted properly" as to any person shall mean that such person
(A) acted in good faith;
(B) acted in a manner not clearly opposed to any written policy of
the Company or which such person reasonably believed to be in the
best interests of the Company; and
(C) with respect to any criminal action or proceeding, had no
reasonable cause to believe that such person's conduct was
unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act properly.
(ii) "agent" shall mean any person who is or was
(A) a Director, officer or employee of the Company and/or any
subsidiary;
(B) a trustee or a fiduciary under any employee pension, profit
sharing, welfare or similar plan or trust of the Company and/or
any subsidiary;
(C) serving at the request of the Company as a Director, officer
and/or employee of or in a similar capacity in another
corporation, partnership, joint venture, trust or other
enterprise, (which shall, for the purpose of this Article be
deemed to include not-for-profit or for-profit entities of any
type), whether acting in such capacity or in any other capacity
including, without limitation, as a trustee or fiduciary under
any employee pension, profit sharing, welfare or similar plan of
trust.
(iii) "expenses" shall include attorneys' fees and any expenses of
establishing a right to indemnification under this Article.
(iv) "proceeding" shall mean any threatened, pending or completed action
or completed action or proceeding, whether civil or criminal, and
whether judicial, legislative or administrative and shall include
investigative action by any person or body.
6
<PAGE>
(v) "subsidiary" shall mean a corporation, 50% or more of the shares of
which at the time outstanding having voting power for the election of
Directors, is owned directly or indirectly by the Company, or by one
or more subsidiaries, or by the Company and one or more subsidiaries.
(b) The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or
in the right of the Company) by reason of the fact that such person is or
was an agent, against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such proceeding, if such person acted properly.
(c) The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding by or in the right of the
Company to procure a judgment in its favor by reason of the fact that such
person is or was an agent, against amounts paid in settlement and against
expenses actually and reasonably incurred in connection with the defense or
settlement of such proceeding, if such person acted properly, except that
no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of duty to the Company, unless
and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as such court
shall deem proper.
(d) Expense incurred in defending a proceeding shall be paid by the Company
to or on behalf of an agent in advance of the final disposition of such
proceeding if:
(i) there is a reasonable basis to believe that such agent may be
entitled to indemnification under this Article;
(ii) such advance payments would not result in undue financial hardship to
the Company; and
(iii) the Company shall have received an undertaking by or on behalf of
such agent to repay such amount unless it shall ultimately be
determined that such agent is entitled to be indemnified by the
Company as authorized in this Article.
7
<PAGE>
(e) Any indemnification or advance under paragraphs (b), (c) or (d) of this
Article (unless ordered by a court) shall be made by the Company only as
authorized in the specific proceeding upon a determination that
indemnification or advancement to such person is proper in the
circumstances. Such determination shall be made:
(i) by the Chairman and General Counsel, so long as neither was made a
party to such proceeding, or
(ii) if the Chairman or General Counsel was made a party, by the Board of
Directors, by a majority vote of a quorum consisting of Directors who
were not made parties to such proceedings, or
(iii) if such a quorum is not obtainable, or, even if obtainable a quorum
of disinterested Directors so directs, by independent legal counsel
in a written opinion, or
(iv) if a quorum of disinterested Directors is not obtainable, or if a
majority of the disinterested Directors so directs, by the
shareholders.
(f) The Company shall indemnify or advance funds to any person described in
Section (a)(ii)(c), only after such person shall have sought
indemnification or an advance from the Company, partnership, joint venture,
trust or other enterprise in which such person was serving at the Company's
request, shall have failed to receive such indemnification or advance, and
shall have assigned irrevocably to the Company any right to receive
indemnification which such person might be entitled to assert against such
other corporation, partnership, joint venture, trust or other enterprise.
(g) The indemnification provided to an agent by this Article:
(i) shall not be deemed exclusive of any other rights to which such agent
may be entitled by law or under any articles of incorporation, by-
law, agreement, vote of shareholders or disinterested Directors or
otherwise; and
(ii) shall inure to the benefit of the legal representatives of such agent
or such agent's estate, whether such representatives are court-
appointed or otherwise designated, and to the benefit of the heirs of
such agent.
(h) The indemnification and advances provided to an agent by this Article shall
extend to and include claims for such payments arising out of any
8
<PAGE>
proceeding commenced or based on actions of an agent taken prior to
the effective date of this Article, provided that payment of such
claims had not been agreed to or denied by the Company at the
effective date.
(i) The Company shall have power to purchase and maintain insurance on
behalf of any agent against any liability asserted against and
incurred by such agent as agent or arising out of status as such,
whether or not the Company would have the power to indemnify against
such liability under the provisions of this Article. The Company
shall also have power to purchase and maintain insurance to indemnify
the Company for any obligation which it may incur as a result of the
indemnification of agents under the provisions of this Article.
(j) The invalidity or unenforceability of any provision in this Article
shall not affect the validity or enforceability of the remaining
provisions of this Article.
Section 2. The fiscal year of the Company shall commence in each year
on the first day of January and terminate on the thirty-first day of December of
each year.
Section 3. The common seal of the Company shall be circular in form and
shall contain the name of the Company and the words: "CORPORATE SEAL" and
"ILLINOIS".
Section 4. These By-Laws may be amended or repealed by the vote of a
majority of the Directors present at any meeting at which a quorum is present.
9
<PAGE>
(4) Contract and Application
<PAGE>
SINGLE PAYMENT DEFERRED
ANNUITY CONTRACT
GLENBROOK LIFE AND ANNUITY COMPANY, A Stock Company, Home Office:
Allstate Plaza, Northbrook, Illinois 60062
This Contract is issued in consideration of the purchase payment and any
application. Glenbrook Life and Annuity Company will pay the benefits of this
Contract, subject to its terms and conditions.
Throughout this Contract, "you" and "your" refer to the Contract owner(s). "We",
"us" and "our" refer to Glenbrook Life and Annuity Company.
This single payment deferred annuity provides a cash withdrawal benefit and a
death benefit prior to the Payout Start Date and periodic income payments
beginning on the Payout Start Date. THE CASH WITHDRAWAL BENEFIT, THE DEATH
BENEFIT AND THE AMOUNT APPLIED TO AN INCOME PLAN MAY BE SUBJECT TO A MARKET
VALUE ADJUSTMENT WHICH MAY RESULT IN AN UPWARD OR DOWNWARD ADJUSTMENT OF THE
AMOUNT DISTRIBUTED.
This Contract does not pay dividends.
The tax status as it applies to the owner should be reviewed each year.
PLEASE READ YOUR CONTRACT CAREFULLY
This is a legal Contract between the Contract owner(s) and Glenbrook Life and
Annuity Company.
Return Privilege
If you are not satisfied with this Contract for any reason, you may return it to
us within 20 days after you receive it. We will refund any purchase payment to
you.
If you have any questions about your Single Payment Deferred Annuity, please
contact Glenbrook Life at 1-800-776-6978.
/s/ Michael J. Velotta /s/ Louis G. Lower II
Secretary Chief Executive Officer
Page 1
<PAGE>
Single Payment Deferred Annuity
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
GENERAL DEFINITIONS......................................................... 4
THE PERSONS INVOLVED........................................................ 5
PURCHASE PAYMENTS AND CONTRACT VALUE........................................ 6
WITHDRAWALS................................................................. 7
DEATH BENEFIT............................................................... 9
INCOME PAYMENT OPTIONS...................................................... 10
GENERAL PROVISIONS.......................................................... 12
</TABLE>
Page 2
<PAGE>
- ------------------------------------
ANNUITY DATA
- ------------------------------------
<TABLE>
<CAPTION>
<S> <C>
CONTRACT NUMBER: ................................................. 444444444
ISSUE DATE: ...................................................... July 1, 1996
PURCHASE PAYMENT: ................................................ $10,000.00
</TABLE>
<TABLE>
<CAPTION>
RATE
ALLOCATED GUARANTEE GUARANTEED GUARANTEED
AMOUNT ($) PERIOD INTEREST RATE THROUGH
- ---------- --------- ------------- -----------
<S> <C> <C> <C>
2,000.00 1 Years 4.50% 06/30/1996
2,000.00 3 Years 4.55% 06/30/1999
1,000.00 5 Years 5.25% 06/30/2001
1,000.00 6 Years 5.35% 06/30/2002
1,000.00 7 Years 5.50% 06/30/2003
1,000.00 8 Years 5.60% 06/30/2004
1,000.00 9 Years 5.70% 06/30/2005
1,000.00 10 Years 5.80% 06/30/2006
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
OWNER: ........................................................... John Doe
ANNUITANT: ....................................................... John Doe
AGE AT ISSUE: ................................................ 35
SEX: ......................................................... Male
PAYOUT START DATE: ............................................... July 1, 2048
</TABLE>
<TABLE>
<CAPTION>
RELATIONSHIP
BENEFICIARY TO OWNER PERCENTAGE
- ----------- -------- ----------
<S> <C> <C>
Jane Doe Wife 100%
</TABLE>
Page 3
<PAGE>
_______________________________________________________________________________
GENERAL DEFINITIONS
_______________________________________________________________________________
ACCOUNT. An Account consists of funds that are allocated to a Guarantee Period.
You will create an Account(s):
[] when you make a purchase payment; or
[] when you select a new Guarantee Period after the prior Guarantee Period
expires.
The Account continues until the end of the Guarantee Period.
ACCOUNT VALUE. The funds allocated to an Account plus the interest credited to
it minus any withdrawals.
CONTRACT VALUE. The sum of the Account Values.
GUARANTEE PERIOD. A period of years for which a specified interest rate is
guaranteed.
MARKET VALUE ADJUSTMENT. An increase or decrease in a withdrawal payment to
you, or in the amount applied to an income plan, or an increase in a death
benefit payment, reflecting changes in the level of interest rates since the
Account was established. The method of calculation is explained on Page 8.
PAYOUT START DATE. The date the Contract Value adjusted by any Market Value
Adjustment is applied to an income plan. The projected date is shown on the
Annuity Data Page. You may change the Payout Start Date by writing to us at
least 30 days prior to this date. The Payout Start Date must be on or before
the later of:
[] the annuitant's 90th birthday; or
[] the 10th anniversary of the Contract's issue date.
Page 4
<PAGE>
_______________________________________________________________________________
THE PERSONS INVOLVED
_______________________________________________________________________________
OWNER. The person named at the time of application is the owner of this
Contract unless subsequently changed. As owner, you will receive any periodic
income payments, unless you have directed us to pay them to someone else.
You may exercise all rights stated in this Contract, subject to the rights of
any irrevocable beneficiary.
You may change the owner or beneficiary at any time. If the owner is a natural
person, you may change the annuitant prior to the Payout Start Date. Once we
have received a satisfactory written request for an owner, annuitant, or
beneficiary change, the change will take effect as of the date you signed it. We
are not liable for any payment we make or other action we take before receiving
any written request for a change from you.
You may not assign an interest in this Contract as collateral or security for a
loan. However, prior to the Payout Start Date, you may assign periodic income
payments under this Contract. We are bound by an assignment only if it is
signed by the assignor and filed with us. We are not responsible for the
validity of an assignment.
If the sole surviving owner dies prior to the Payout Start Date, the beneficiary
becomes the new owner. If the sole surviving owner dies after the Payout Start
Date, the beneficiary becomes the new owner and will receive any subsequent
guaranteed income payments.
If more than one person is designated as owner:
[] owner as used in this Contract refers to all people named as owners,
unless otherwise indicated;
[] any request to exercise ownership rights must be signed by all owners; and
[] on the death of any person who is an owner, the surviving person(s) named
as owner will continue as owner.
ANNUITANT. The annuitant must be a natural person. The annuitant is named on
the Annuity Data Page, but may be changed by the owner, as described above. If
the annuitant dies prior to the Payout Start Date, the new annuitant will be:
[] the youngest owner; otherwise,
[] the youngest beneficiary.
BENEFICIARY. The beneficiary is the person(s) named on the Annuity Data Page,
but may be changed by the owner, as described above. We will determine the
beneficiary from the most recent written request we have received from you. If
you do not name a beneficiary or if all of the beneficiaries named are no longer
living, the beneficiary will be:
[] your spouse if living; otherwise
[] your children equally if living; otherwise
[] your estate.
The beneficiary may become the owner under the circumstances described above.
The beneficiary may not assign benefits under the Contract until the beneficiary
becomes the owner.
Page 5
<PAGE>
- -------------------------------------------------------------------------------
PURCHASE PAYMENTS AND CONTRACT VALUE
- -------------------------------------------------------------------------------
Making Purchase Payments. You may allocate your purchase payment to any
Guarantee Period(s) being offered by us on the Contract's issue date. Guarantee
Periods may be 1, 3, 5, 6, 7, 8, 9, or 10 years.
We may deduct premium taxes from purchase payments or from later payments we
make to you according to when such premium taxes are assessed.
SELECTING A NEW GUARANTEE PERIOD. We will mail you a notice prior to the
expiration of each Guarantee Period outlining the options available at the end
of a Guarantee Period. During the 30 day period after a Guarantee Period
expires you may:
. take no action and we will automatically apply the Account Value to a new
Guarantee Period of the same duration as the expiring Guarantee Period to be
established on the day the previous Guarantee Period expired; or
. notify us to apply the Account Value to a new Guarantee Period(s) to be
established on the day the previous Guarantee Period expired; or
. receive a portion of the Account Value or the entire Account Value through
a partial or full withdrawal that is not subject to a Market Value
Adjustment. In this case, the amount withdrawn will be deemed to have been
withdrawn on the day the Guarantee Period expired.
CREDITING INTEREST. We credit interest daily to each Account at a rate which
compounds over one year to the interest rate we guaranteed when the Account was
established. We credit interest to the purchase payment from the issue date.
The interest rates will be no less than the minimum guaranteed rate shown on the
Annuity Data Page.
DETERMINING THE CONTRACT VALUE. Your Contract Value is the sum of the Account
Values. If you withdraw the entire Contract Value, you may receive an amount
greater or less than the Contract Value because a Market Value Adjustment, a
Withdrawal Charge, income tax withholding, and a premium tax charge may apply.
Page 6
<PAGE>
- -------------------------------------------------------------------------------
WITHDRAWALS
- -------------------------------------------------------------------------------
WITHDRAWAL LIMITS. You may withdraw part or all of your Contract Value at any
time prior to the Payout Start Date. You must specify the Account(s) from which
you wish to make a withdrawal. If any withdrawal reduces the Contract Value to
less than $2,000, we will treat the request as a withdrawal of the entire
Contract Value. However, we will require confirmation of your withdrawal
request before we make such a withdrawal. If you withdraw the entire Contract
Value, the Contract will terminate.
WITHDRAWALS WHEN A GUARANTEE PERIOD EXPIRES. You may withdraw part or all of
the Account Value without a Market Value Adjustment during the 30 day period
after a Guarantee Period expires. However, any applicable Withdrawal Charge will
apply to the amount withdrawn in excess of the free withdrawal amount. The
amount withdrawn will be deemed to have been withdrawn on the day the Guarantee
Period expired.
FREE WITHDRAWAL AMOUNT. The Free Withdrawal Amount for each Account is equal to
10% of the amount originally allocated to the Account. Each year you may
withdraw the Free Withdrawal Amount from each Account without any Withdrawal
Charge or Market Value Adjustment. Each year begins on the anniversary of the
date the Account was established.
Any Free Withdrawal Amount which is not actually withdrawn in a year may not be
carried over to increase the Free Withdrawal Amount in a subsequent year.
Similarly, a Free Withdrawal Amount not withdrawn from one Account may not be
transferred to increase a Free Withdrawal Amount in another Account.
OTHER WITHDRAWALS. A Market Value Adjustment and any applicable Withdrawal
Charge will be applied to the amount withdrawn from the Account Value in excess
of the Free Withdrawal Amount.
IMPACT OF WITHDRAWAL ON THE ACCOUNT VALUE. The Account Value will be reduced by
the amount we pay you, income tax we withhold for you, the Withdrawal Charge,
and any applicable premium tax charge. The Account Value will also be increased
by a positive Market Value Adjustment or reduced by a negative Market Value
Adjustment.
WITHDRAWAL CHARGE. The amount withdrawn from the Account Value in excess of the
Free Withdrawal Amount is subject to a Withdrawal Charge as follows:
Contract Year: 1 2 3 4 5 6 7 8 and Later
Percentage: 7% 7% 6% 5% 4% 3% 2% 0%
The Withdrawal Charge is determined by multiplying the percentage corresponding
to the Contract Year times the amount withdrawn in excess of the Free Withdrawal
Amount.
Any Withdrawal Charge will be waived on withdrawals taken to satisfy IRS minimum
distribution rules.
Page 7
<PAGE>
MARKET VALUE ADJUSTMENT. A Market Value Adjustment is an increase or decrease in
a withdrawal payment to you, in the amount applied to an income plan, or an
increase in a death benefit payment, reflecting changes in the level of interest
rates since the Account was established. As used in this provision, "Treasury
Rate" means the U. S. Treasury Note Constant Maturity weekly yield as reported
in Federal Reserve Bulletin Release H.15. The Market Value Adjustment is based
on the following:
I = the Treasury Rate for a maturity equal to the Account's Guarantee
Period for the week preceding the establishment of the Account;
N = the number of whole and partial years from the date we receive the
withdrawal or death benefit request, or from the Payout Start Date,
to the end of the Account's Guarantee Period;
J = the Treasury Rate for a maturity equal to the Guarantee Period for
the week preceding the receipt of the withdrawal request, death
benefit request, or Income Payment request.
An adjustment factor is determined from the following formula:
.9 x (I-J) x N
Any amount withdrawn from the Account Value which is subject to a Market Value
Adjustment is multiplied by the adjustment factor to determine the amount of the
Market Value Adjustment.
Any Market Value Adjustment will be waived on withdrawals taken to satisfy IRS
minimum distribution rules.
Page 8
<PAGE>
- -------------------------------------------------------------------------------
DEATH BENEFIT
- -------------------------------------------------------------------------------
A death benefit may be paid to the owner determined immediately after the death
if, prior to the Payout Start Date:
. any owner dies; or
. the annuitant dies and the owner is not a natural person.
DISTRIBUTION OF DEATH BENEFIT. If the owner eligible to receive the death
benefit is not a natural person, then the owner may elect to receive the benefit
in one or more distributions. Otherwise, if the owner is a natural person, the
owner may elect to receive a benefit either in one or more distributions or by
periodic payments through an Income Plan.
A Death Benefit will be paid: 1) if the owner elects to receive the Death
Benefit distributed in a single payment within 180 days of the date of death,
and 2) if the Death Benefit is paid as of the day the value of the Death Benefit
is determined. Otherwise, the Settlement Value will be paid. In any event, the
entire value of the Contract must be distributed within five (5) years after the
date of death unless an Income Plan is elected or a surviving spouse continues
the Contract in accordance with the following provisions.
Payments from the Income Plan must begin within one year of the date of death
and must be payable throughout:
. the life of the owner; or
. a period not to exceed the life expectancy of the owner; or
. the life of the owner with payments guaranteed for a period not to exceed the
life expectancy of the owner.
If the surviving spouse of the deceased owner is the new owner, then the spouse
may elect one of the options listed above or may continue the Contract in the
Accumulation Phase as if the death had not occurred. If the Contract is
continued in the Accumulation Phase as if the death had not occurred, the
surviving spouse may make a single withdrawal of any amount within one year of
the date of death without incurring a Withdrawal Charge. However, a Market
Value Adjustment, determined as of the date of the withdrawal, will apply. The
single withdrawal amount is in addition to the annual Free Withdrawal Amount.
If the Contract is continued and there is no annuitant, the new annuitant will
be the surviving spouse.
DEATH BENEFIT AMOUNT. The death benefit is the greater of:
. the Contract Value on the date we determine the death benefit; or
. the amount that would have been payable in the event of a full withdrawal of
the Contract Value on the date we determine the death benefit.
We will calculate the value of the death benefit as of the date we receive due
proof of death. Due proof of death is one of the following:
. a certified copy of a death certificate; or
. a certified copy of a decree of a court of competent jurisdiction as to a
finding of death; or
. any other proof acceptable to us.
Settlement Value. The Settlement Value is the same amount that would be paid in
the event of withdrawal of the Contract Value. We will calculate the Settlement
Value as of the requested distribution date for payment or on the mandatory
distribution date of 5 years after the date of death.
Page 9
<PAGE>
- -------------------------------------------------------------------------------
INCOME PAYMENT OPTIONS
- -------------------------------------------------------------------------------
INCOME PLANS. The Contract Value adjusted by any Market Value Adjustment on the
Payout Start Date, less any applicable taxes, will be applied to your income
plan choice from the following list. Minimum guaranteed payments for each
income plan are shown in the income payment tables on Page 10.
1. LIFE INCOME WITH GUARANTEED PAYMENTS. We will make payments for as long
as the annuitant lives. If the annuitant dies before the selected number of
guaranteed payments have been made, we will continue to pay the remainder of
the guaranteed payments.
2. JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. We will make
payments for as long as either the annuitant or joint annuitant, named at
the time of income plan selection, lives. If both the annuitant and the
joint annuitant die before the selected number of guaranteed payments have
been made, we will continue to pay the remainder of the guaranteed payments.
3. GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD. We will make payments for a
specified period beginning on the Payout Start Date. These payments do not
depend on the annuitant's life. The number of months guaranteed may be from
60 to 360.
We reserve the right to make available other income plans.
PAYOUT TERMS AND CONDITIONS. The income payments are subject to the following
terms and conditions:
. If the Contract Value adjusted by any Market Value Adjustment and applicable
premium taxes is not enough to provide an initial payment of at least $20,
we reserve the right to:
. change the payment frequency to make the payment at least $20; or
. terminate the Contract and pay you the Contract Value adjusted by any
Market Value Adjustment and applicable premium taxes in a lump sum.
. If we do not receive a written choice of an income plan from you at least
30 days before the Payout Start Date, the income plan will be life income
with guaranteed payments for 120 months.
. If you choose an income plan which depends on any person's life, we may
require:
. proof of age and sex before income payments begin; and
. proof that the annuitant or joint annuitant is still alive before we make
each payment.
. After the Payout Start Date, the income plan cannot be changed and
withdrawals cannot be made.
. If any owner dies after the Payout Start Date, the remaining income payments
will be paid to the successor owner as scheduled as of the date of
death.
Page 10
<PAGE>
INCOME PAYMENT TABLES. Income payments will be at least the amount based on the
adjusted age of the annuitant(s) and the tables below, less any federal income
taxes which are withheld. The adjusted age is the actual age on the Payout
Start Date reduced by one year for each six full years between January 1, 1983
and the Payout Start Date. Income payments for ages and guaranteed payment
periods not shown below will be determined on a basis consistent with that used
to determine those that are shown. The income payment tables are based on 3%
interest and the 1983a Annuity Mortality Tables.
<TABLE>
<CAPTION>
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS FOR 120 MONTHS
===============================================================================================
Monthly Income Payment for each $1,000 Applied to this Income Plan
- -----------------------------------------------------------------------------------------------
Annuitant's Annuitant's Annuitant's
Age Male Female Age Male Female Age Male Female
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
35 $3.43 $3.25 49 $4.15 $3.82 63 $5.52 $4.97
36 3.47 3.28 50 4.22 3.88 64 5.66 5.09
37 3.51 3.31 51 4.29 3.94 65 5.80 5.22
38 3.55 3.34 52 4.37 4.01 66 5.95 5.35
39 3.60 3.38 53 4.45 4.07 67 6.11 5.49
40 3.64 3.41 54 4.53 4.14 68 6.27 5.64
41 3.69 3.45 55 4.62 4.22 69 6.44 5.80
42 3.74 3.49 56 4.71 4.29 70 6.61 5.96
43 3.79 3.53 57 4.81 4.38 71 6.78 6.13
44 3.84 3.58 58 4.92 4.46 72 6.96 6.31
45 3.90 3.62 59 5.02 4.55 73 7.13 6.50
46 3.96 3.67 60 5.14 4.65 74 7.31 6.69
47 4.02 3.72 61 5.26 4.75 75 7.49 6.88
48 4.08 3.77 62 5.39 4.86
===============================================================================================
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS FOR 120 MONTHS
=============================================================================================
Monthly Income Payment for each $1,000 Applied to this Income Plan
- ---------------------------------------------------------------------------------------------
Female Annuitant's Age
-------------------------------------------------------------------------------
Male
Annuitant's 35 40 45 50 55 60 65 70 75
Age
- ---------------------------------------------------------------------------------------------
35 $3.09 $3.16 $3.23 $3.28 $3.32 $3.36 $3.39 $3.40 $3.42
40 3.13 3.22 3.31 3.39 3.46 3.51 3.56 3.59 3.61
45 3.17 3.28 3.39 3.50 3.60 3.69 3.76 3.81 3.85
50 3.19 3.32 3.45 3.60 3.74 3.87 3.98 4.07 4.14
55 3.21 3.35 3.51 3.68 3.87 4.06 4.23 4.37 4.48
60 3.23 3.37 3.55 3.75 3.98 4.23 4.47 4.70 4.88
65 3.24 3.39 3.57 3.80 4.07 4.37 4.71 5.04 5.34
70 3.24 3.40 3.59 3.83 4.13 4.48 4.90 5.36 5.81
75 3.25 3.41 3.61 3.86 4.17 4.56 5.04 5.61 6.22
=============================================================================================
</TABLE>
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD
==============================================================
Monthly Income Payment for each
Specified Period $1,000 Applied to this Income Plan
- --------------------------------------------------------------
10 Years $9.61
11 Years 8.86
12 Years 8.24
13 Years 7.71
14 Years 7.26
15 Years 6.87
16 Years 6.53
17 Years 6.23
18 Years 5.96
19 Years 5.73
20 Years 5.51
==============================================================
Page 11
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE ENTIRE CONTRACT. The entire Contract consists of this Contract, any
attached application, and any attached endorsements.
All statements made in written applications are representations and not
warranties. We will not use any statement in defense of a claim or to void the
Contract unless it is included in a written application.
Only our officers may change the Contract or waive a right or requirement. No
other individual may do this.
We may not modify this Contract without your consent, except to make it comply
with any changes in the Internal Revenue Code or as required by any other
applicable law.
INCONTESTABILITY. We will not contest the validity of this Contract after the
issue date.
MISSTATEMENT OF AGE OR SEX. If any age or sex has been misstated, we will pay
the amounts which would have been paid at the correct age and sex.
If we find the misstatement of age or sex after the income payments begin, we
will:
[_] pay all amounts underpaid including interest; or
[_] stop payments until the total payments are equal to the corrected amount.
For purposes of the Misstatement of Age or Sex provision, interest will be
calculated at an effective annual rate of 6%.
ANNUAL STATEMENT. At least once a year, prior to the Payout Start Date, we will
send you a statement containing Contract Value information. We will provide you
with Contract Value information at any time upon request. The information
provided will comply with any applicable law.
SETTLEMENTS. We may require that this Contract be returned to us prior to any
settlement. Any full withdrawal or death benefit under this Contract will not
be less than the minimum benefits required by any statute of the state in which
the Contract is delivered.
DEFERMENT OF PAYMENTS. We reserve the right to defer payment of any withdrawal
for up to six months after the date you request it. If state law requires any
interest to be paid, interest would be payable from the date the withdrawal
request is received by us to the date the payment is made.
Page 12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
(HEREIN CALLED "WE OR "US")
AMENDATORY ENDORSEMENT FOR WAIVER OF CHARGES
The following provisions are added to your Contract:
We will waive any Withdrawal Charge and Market Value Adjustment prior to the
Payout Start Date if at least 30 days after the Contract's issue date any owner
(or annuitant if the owner is not a natural person):
1. is first confined to a Long Term Care Facility or Hospital for at least 90
consecutive days, confinement is prescribed by a Physician and is
Medically Necessary, and the request for a withdrawal and adequate
written proof of confinement are received by us no later than 90 days
after discharge; or
2. is first diagnosed by a Physician as having a Terminal Illness and a
request for a withdrawal and adequate written proof of the diagnosis are
received by us. We may require a second opinion at our expense by a
Physician chosen by us.
"Physician" is a licensed medical doctor (M.D.) or a licensed doctor of
osteopathy (D.O.) practicing within the scope of his or her license. Physician
does not include the individual, a spouse, children, parents, grandparents,
grandchildren, siblings, or in-laws.
"Medically Necessary" means appropriate and consistent with the diagnosis in
accord with accepted standards of practice, and which could not have been
omitted without adversely affecting the individual's condition.
"Terminal Illness" is a condition which is expected to result in death within
one year for 80% of the diagnosed cases.
"Long Term Care Facility" is a facility which:
1. is located in the United States or its territories;
2. is licensed by the jurisdiction in which it is located;
3. provides custodial care under the supervision of a registered nurse
(R.N.); and
4. can accommodate three or more persons.
"Hospital" is a facility which:
1. is licensed as a hospital by the jurisdiction in which it is located;
2. is supervised by a staff of licensed physicians;
3. provides nursing services 24 hours a day by, or under the supervision, of
a registered nurse (R.N.);
4. operates primarily for the care and treatment of sick or injured persons
as inpatients for a charge; and
5. has access to medical, diagnostic and major surgical facilities.
/s/ Michael J. Velotta /s/ Louis G. Lower, II
SECRETARY CHIEF EXECUTIVE OFFICER
GLMU74
<PAGE>
BROKER/DEALER MVA
Issued by: Glenbrook Life and Annuity Company . PO Box 94039, Palatine, IL
60094-4039 . Telephone 800-776-6978 FAX 847-402-9543
Mail check (payable to) and application to: Glenbrook Life and Annuity Company
. PO Box 227317 . Dallas, TX 75222-7317
Overnight mail to: Glenbrook Life and Annuity Company . 8711 North Freeport
Parkway . Irving, TX 75063
For wiring instructions, please call Glenbrook Life and Annuity Company at
800-776-6978
................................................................................
. Owner(s) Name__________________ . M . F Birthdate ___ / ___ / ____
Address_____________________________________________________
Street City State Zip
Soc. Sec. No. ____________________ Phone No. ______________
Name__________________ . M . F Birthdate ___ / ___ / ____
Address_____________________________________________________
Street City State Zip
Soc. Sec. No. ____________________ Phone No. ______________
................................................................................
. Annuitant Name__________________ . M . F Birthdate ___ / ___ / ____
Leave blank
if Annuitant Address_____________________________________________________
is same as Street City State Zip
sole Owner
Soc. Sec. No. ____________________
................................................................................
. Beneficiary(ies) Name______________ Relationship to Owner______Percentage____
Name______________ Relationship to Owner______Percentage____
................................................................................
. Single Purchase SINGLE PURCHASE PAYMENT $_________
Payment Investment Allocation (whole % only, no fractions)
1 Year Guarantee Period _________%
2 Year Guarantee Period _________%
3 Year Guarantee Period _________%
4 Year Guarantee Period _________%
5 Year Guarantee Period _________%
6 Year Guarantee Period _________%
7 Year Guarantee Period _________%
8 Year Guarantee Period _________%
9 Year Guarantee Period _________%
10 Year Guarantee Period _________%
Total 100%
................................................................................
. Replacement Will this annuity replace or change any existing annuity or
Information life insurance? . Yes . No
(If Yes, complete the following.)
Company __________________________ Policy No. ______________
Cost basis amount ________________ Policy Date _____________
................................................................................
. Tax Qualified . Yes . No
Plan (If Yes, complete the following.) . Custodial IRA . SEP
. IRA Rollover . IRA/Year of Contribution _______
. IRA Transfer . Other __________
................................................................................
. Special ___________________________________________________________
Instructions ___________________________________________________________
................................................................................
. Signature(s) If Glenbrook Life and Annuity Company ("Glenbrook") declines
this application, Glenbrook will have no liability except to
return the purchase payment. I understand that any
distribution from any account prior to the end of a rate
guarantee period may be subject to a Market Value
Adjustment. I have received the current prospectus for this
annuity.
Signed at ____________________________ Date __ / __ / ____
City State
Owner(s) __________________________________________________
................................................................................
. Agent Use Will the annuity applied for replace or change any existing
Only annuity or life insurance? . Yes . No
Agent Name (Please print)_____________ Phone No.___________
Agent Signature_________________ Soc. Sec. No._____________
Agent GA No. (Joint Business) ______________
License No. (FL only) _________________________
B/D Name __________________ Client's B/D Acct. No._________
Designation: . A . B . C
(refer to the note on the reverse side of this form)
GLMR38 (6-96)
<PAGE>
BROKER/DEALER MVA
Issued by: Glenbrook Life and Annuity Company . PO Box 94039, Palatine, IL
60094-4039 . Telephone 800-776-6978 FAX 847-402-9543
Mail check (payable to) and application to: Glenbrook Life and Annuity Company
. PO Box 227317 . Dallas, TX 75222-7317
Overnight mail to: Glenbrook Life and Annuity Company . 8711 North Freeport
Parkway . Irving, TX 75063
For wiring instructions, please call Glenbrook Life and Annuity Company at
800-776-6978
................................................................................
The following states require insurance applicants to
acknowledge a fraud warning statement. Please refer to the
fraud warning statement for your state as indicated below.
................................................................................
. For applicants Any person who knowingly and with intent to defraud any
in Kentucky, insurance company or other person files an application for
Ohio and insurance or statement of claim containing any materially
Pennsylvania: false information or conceals for the purpose of misleading,
information concerning any fact material thereto commits a
fraudulent insurance act, which is a crime and subjects such
person to criminal and civil penalties.
______________________________________ Date __ / __ / ____
Applicant's Signature
................................................................................
. For applicants Any person who knowingly and with intent to injure, defraud,
in Florida: or deceive any insurer files a statement of claim or an
application containing any false, incomplete, or misleading
information is guilty of a felony of the third degree.
______________________________________ Date __ / __ / ____
Applicant's Signature
................................................................................
. For applicants Any person who includes any false or misleading information
in New Jersey: on an application for an insurance policy is subject to
criminal and civil penalties.
______________________________________ Date __ / __ / ____
Applicant's Signature
................................................................................
GLMR38(6/96)
. Agent Use Note: Please be advised that a firm designation may override
Only an individual agent designation. If no designation is given,
"A" will be the designation.
<PAGE>
(5) Opinion of General Counsel re: Legality
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
LAW AND REGULATION DEPARTMENT
3100 Sanders Road, J5B
Northbrook, Illinois 60062
Direct Dial Number 847.402.2400
Facsimile 847.402.4371
Michael J. Velotta Please Direct Reply to:
Vice President, Secretary Post Office Box 3005
and General Counsel Northbrook, Illinois 60065-3005
June 27, 1996
TO: GLENBROOK LIFE AND ANNUITY COMPANY
NORTHBROOK, ILLINOIS 60062
FROM: MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
RE: FORM S-1 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FILE NO. 33-_____________________________
With reference to the Registration Statement on Form S-1 filed by Glenbrook
Life and Annuity Company with the Securities and Exchange Commission covering
the Single Premium Deferred Annuity Contracts ("Contracts"), I have examined
such documents and such law as I have considered necessary and appropriate, and
on the basis of such examination, it is my opinion that:
1. Glenbrook Life and Annuity Company is duly organized and existing under
the laws of the State of Illinois and has been duly authorized to do business
and to issue Contracts by the Director of Insurance of the State of Illinois.
2. The Contracts covered by the above Registration Statement have been or
will be approved and authorized by the director of Insurance of the State of
Illinois and when issued will be valid, legal and binding obligations of
Glenbrook Life and Annuity Company.
I hereby consent to the filing of this opinion as an exhibit to the above
referenced Registration Statement and to the use of my name under the caption
"Legal Matters" in the Prospectus constituting a part of the Registration
Statement.
Sincerely,
/s/ MICHAEL J. VELOTTA
----------------------
Michael J. Velotta
Vice President, Secretary
and General Counsel
<PAGE>
(10) Reinsurance Agreement
<PAGE>
REINSURANCE AGREEMENT
BETWEEN THE
GLENBROOK LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "GLENBROOK")
AND
ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "ALLSTATE")
Article I
---------
BASIS OF REINSURANCE
--------------------
1. One-hundred percent (100%) of the net benefits (defined in Article II,
Paragraph 1), under all eligible policies (defined in Schedule A) of
GLENBROOK, will be reinsured with ALLSTATE.
2. This reinsurance will be ceded to ALLSTATE on an automatic coinsurance
basis.
3. In no event will reinsurance on an application or a policy under this
Agreement be in force unless the corresponding application or policy issued
by GLENBROOK, or the reinsurance accepted by GLENBROOK, as the case may be,
is in force.
Article II
----------
REINSURANCE BENEFITS
--------------------
1. Net benefits are defined as follows:
(a) For an application received, or a policy issued directly by GLENBROOK
and reinsured under this Agreement, net benefits are the actual
amounts payable by GLENBROOK to the policyholder, less any amounts
payable to GLENBROOK by another reinsurer with respect to the policy.
These payments include, but are not limited to, death benefits,
endowment
<PAGE>
benefits, annuity benefits, disability benefits, benefits under
accident and health policies, surrender benefits, and payments on
supplemental contracts with and without life contingencies.
(b) For policies reinsured by GLENBROOK and retroceded under this
Agreement, net benefits are the actual amounts payable by GLENBROOK to
the ceding company with respect to the policy reinsured by GLENBROOK.
These payments will include commissions and expense allowances on
reinsurance accepted.
2. With respect to applications received, or policies issued directly or
reinsured by GLENBROOK, after the Effective Date of this Agreement,
ALLSTATE's liability for net benefits will begin simultaneously with that
of GLENBROOK and will include any liability GLENBROOK may incur as a result
of a Temporary Insurance Agreement or Conditional Receipt issued in
conjunction with a policy subject to this Agreement.
3. ALLSTATE's liability under this Agreement will continue as long as
GLENBROOK remains liable on the underlying coverage, and will terminate
simultaneously with GLENBROOK's termination of liability.
Article III
-----------
SETTLEMENTS
-----------
1. While this Agreement is in effect, GLENBROOK shall pay to ALLSTATE no less
frequently than weekly, with respect to policies reinsured under this
Agreement, a reinsurance premium equal to (or the accounting equivalent of)
the sum of Items (a), (b) and (c) below, less the sum of Items (d) and (e)
below, as applicable for the period since the date of GLENBROOK's last
payment to ALLSTATE.
(a) Gross premiums (direct and reinsurance assumed) collected by
GLENBROOK.
(b) Reserves transferred from a GLENBROOK Separate Account to the
GLENBROOK General Account.
(c) Policy loan repayments, including interest, collected by GLENBROOK.
(d) Gross premiums refunded by GLENBROOK to policyholders.
<PAGE>
(e) Reserves transferred from the GLENBROOK General Account to the
GLENBROOK Separate Account.
2. While this Agreement is in effect, ALLSTATE shall pay to GLENBROOK no less
frequently than weekly a benefit and expense allowance equal to (or the
accounting equivalent of) the sum of Items (a), (b), (c), (d) and (e)
below, with respect to the policies reinsured under this Agreement, as
applicable for the period since the date of ALLSTATE's last payment to
GLENBROOK.
(a) Net benefits (as defined in Article II) paid by GLENBROOK.
(b) Commissions and other sales compensation paid by GLENBROOK.
(c) General insurance expenses paid by GLENBROOK.
(d) Insurance taxes, licenses and fees (excluding Federal Income Tax) paid
by GLENBROOK.
(e) Policy loan distributions to policyholders paid by GLENBROOK.
Article IV
----------
OVERSIGHTS
----------
ALLSTATE shall be bound as GLENBROOK is bound, and it is expressly understood
and agreed that if failure to reinsure or failure to comply with any terms of
this Agreement is shown to be unintentional and the result of misunderstanding
or oversight on the part of either GLENBROOK or ALLSTATE, both GLENBROOK and
ALLSTATE shall be restored to the positions they would have occupied had no such
error or oversight occurred.
Article V
---------
POLICY CHANGES
--------------
If any change is made in coverage reinsured under this Agreement GLENBROOK shall
notify ALLSTATE.
<PAGE>
Article VI
----------
RECAPTURE
---------
1. If a policy reinsured under this Agreement becomes ineligible for
reinsurance (as specified in Schedule A), the policy will be immediately
recaptured by GLENBROOK.
2. GLENBROOK shall notify ALLSTATE of any such recapture.
3. Within ninety (90) days after receiving notice of recapture under paragraph
1 of this Article VI, ALLSTATE shall pay to GLENBROOK an amount equal to
the net reserves attributable to the recaptured policy. Such reserves will
be calculated as mutually agreed upon by GLENBROOK and ALLSTATE.
4. Within ninety (90) days following the recapture by GLENBROOK of any
business ceded to another reinsurer, GLENBROOK shall pay to ALLSTATE an
amount equal to the net reserves attributable to the recaptured business.
Such reserves will be calculated as mutually agreed upon by GLENBROOK and
ALLSTATE.
Article VII
-----------
INSPECTION OF RECORDS
---------------------
GLENBROOK and ALLSTATE shall have the right, at any reasonable time, to examine
at the office of the other, any books, documents, reports or records which
pertain in any way to the policies reinsured under this Agreement.
Article VIII
------------
INSOLVENCY
----------
1. In the event of the insolvency of GLENBROOK, reinsurance under this
Agreement is payable by ALLSTATE on the basis of its liability hereunder
without diminution because of the insolvency of GLENBROOK.
2. Further, in the event of the insolvency of GLENBROOK, the liquidator,
receiver or statutory successor of the insolvent GLENBROOK shall give
written notice
<PAGE>
to ALLSTATE of the pendency of an obligation of the insolvent GLENBROOK on
any policy reinsured, whereupon ALLSTATE may investigate such claim and
interpose at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which it may deem available to
GLENBROOK or its liquidator or statutory successor. The expense thus
incurred by ALLSTATE shall be chargeable, subject to court approval,
against the insolvent GLENBROOK as part of the expenses of liquidation to
the extent of a proportionate share of the benefit which may accrue to
GLENBROOK solely as a result of the defense undertaken by ALLSTATE.
3. All monies due GLENBROOK or ALLSTATE under this Agreement shall be offset
against each other, dollar for dollar, regardless of any insolvency of
either party .
Article IX
----------
ARBITRATION
-----------
Any dispute arising with respect to this Agreement which is not settled by
mutual agreement of the parties shall be referred to arbitration. Within twenty
(20) days from receipt of written notice from one party that an arbitrator has
been appointed, the other party will also name an arbitrator. The two
arbitrators will choose a third arbitrator and will forthwith notify the
contracting parties of such choice. Each arbitrator should be a present or
former officer of a life insurance company and should have no present or past
affiliation with this Agreement or with either party. The arbitrators will
consider this Agreement as an honorable engagement rather than merely as a legal
obligation, and will be relieved of all judicial formalities. The decision of
the arbitrators will be final and binding upon the parties hereto. Each party
shall bear the expenses of its own arbitrator and shall jointly and equally bear
the expenses of the third arbitrator and of the arbitration. Any such
arbitration will take place at the Home Office of GLENBROOK, unless some other
location is mutually agreed upon.
Article X
---------
PARTIES TO AGREEMENT
--------------------
This Agreement is solely between GLENBROOK and ALLSTATE. The acceptance of
reinsurance hereunder does not create any right or legal relation whatever
between ALLSTATE and any party in interest under any policy reinsured hereunder.
<PAGE>
GLENBROOK shall be and remain solely liable to any insured, contract owner, or
beneficiary under any policy reinsured hereunder.
Article XI
----------
DURATION OF AGREEMENT
---------------------
This Agreement will be effective as of July 1, 1991, and will be unlimited as to
its duration; provided, however, it may be terminated with respect to the
reinsurance of new business by either party giving sixty (60) days prior written
notice of termination to the other party.
IN WITNESS HEREOF, the parties to this Agreement have caused it to be duly
executed in duplicate by their respective officers on the date shown below.
GLENBROOK LIFE INSURANCE COMPANY of Northbrook, Illinois
By /s/ Marla Friedman
-----------------
Title Vice President
-----------------
Date 10/11/91
-----------------
ALLSTATE LIFE INSURANCE COMPANY of Northbrook, Illinois
By /s/ James D. Clements
---------------------
Title Assistant Vice President, Assistant Secretary & Assistant General
-----------------------------------------------------------------
Counsel
-------
Date October 11, 1991
----------------
<PAGE>
REINSURANCE AGREEMENT
BETWEEN
GLENBROOK LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "GLENBROOK")
AND
ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
(HEREAFTER "ALLSTATE")
Schedule A
ELIGIBLE AND INELIGIBLE POLICIES
--------------------------------
1. This Agreement covers all eligible policies issued directly by GLENBROOK
after the Effective Date of this Agreement, and all reinsurance accepted by
GLENBROOK after the Effective Date of this Agreement.
2. An eligible policy is defined as any policy whose reserve is invested, in
whole or in part, in the GLENBROOK General Account; provided, however, that
the portion of any such policy which is not so invested is not covered
under this Agreement.
<PAGE>
AMENDMENT # 1 TO THE
REINSURANCE AGREEMENT
BETWEEN
GLENBROOK LIFE AND ANNUITY COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "GLENBROOK")
AND
ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "ALLSTATE")
WHEREAS, Glenbrook and Allstate entered into a Reinsurance Agreement
(hereinafter "Agreement") dated July 1, 1991; and,
WHEREAS, the California Insurance Department has determined that various changes
to the Agreement are required under California insurance law; and,
WHEREAS, Glenbrook and Allstate desire to amend the Agreement with respect to
coverage issued to California residents to meet the California requirements;
NOW THEREFORE, the Agreement is hereby amended with respect to California
residents, as follows;
1.) Article VIII, "Insolvency", is hereby amended by deleting said Article
in its entirety, and replacing it with the following new Article VIII.
Article VIII
------------
INSOLVENCY
----------
1. The portion of any risk or obligation assumed by Allstate, when such
portion is ascertained, shall be payable on demand of Glenbrook at the
same time as Glenbrook shall pay its net retained portion of such risk
or obligation, and the reinsurance shall be payable by Allstate on the
basis of the liability of Glenbrook under the contract or contracts
reinsured under this Agreement without diminution because of the
insolvency of Glenbrook. In the event of insolvency and the
appointment of a conservator, liquidator or statutory successor of
Glenbrook, such portion shall be payable to such conservator,
liquidator or statutory successor
<PAGE>
immediately upon demand, on the basis of claims allowed against
Glenbrook by any court of competent jurisdiction or, by any
conservator, liquidator, or statutory successor of Glenbrook having
authority to allow such claims, without diminution because of such
insolvency or because such conservator, liquidator or statutory
successor has failed to pay all or a portion of any claims. Payments
by Allstate as above set forth shall be made directly to Glenbrook or
its conservator, liquidator or statutory successor.
2. Further, in the event of the insolvency of Glenbrook, the liquidator,
receiver or statutory successor of the insolvent Glenbrook shall give
written notice to Allstate of the pendency of an obligation of the
insolvent Glenbrook on any policy reinsured, whereupon Allstate may
investigate such claim and interpose at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to Glenbrook or its liquidator or
statutory successor. The expense thus incurred by Allstate shall be
chargeable, subject to court approval, against the insolvent Glenbrook
as part of the expenses of liquidation to the extent of a
proportionate share of the benefit which may accrue to Glenbrook
solely as a result of the defense undertaken by Allstate
2.) In addition, a new Article XII is added to the Agreement, as follows:
Article XII
-----------
OFFSET
------
All monies due Glenbrook or Allstate under this Agreement shall be offset
against each other dollar for dollar.
Except as amended hereby, the Agreement shall remain unchanged.
IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be
duly executed in duplicate by their respective officers on the dates shown
below.
GLENBROOK LIFE AND ANNUITY COMPANY ALLSTATE LIFE INSURANCE
COMPANY
By: /s/ Craig Whitehead By: /s/ Michael J. Velotta
------------------- -----------------------
Title: Asst. Vice President Title: V.P., Secretary & General Counsel
-------------------- ---------------------------------
Date: Dec. 18, 1994 Date: Jan. 18, 1995
------------- -------------
<PAGE>
AMENDMENT NUMBER 2
TO THE REINSURANCE AGREEMENT
EFFECTIVE JULY 1, 1991
BETWEEN
GLENBROOK LIFE AND ANNUITY COMPANY
(HEREINAFTER CALLED "GLENBROOK")
AND
ALLSTATE LIFE INSURANCE COMPANY
(HEREINAFTER CALLED "ALLSTATE")
IT IS HEREBY AGREED, that the Reinsurance Agreement effective July 1, 1991
between GLENBROOK and ALLSTATE (hereafter "Agreement"), is amended as provided
below.
1. Effective January 1, 1995, Article III is hereby amended by adding the
following new paragraph:
ALLSTATE shall pay to GLENBROOK, no less frequently than annually, any
taxes incurred by GLENBROOK as a result of Section 848 of the Internal
Revenue Code which concerns capitalization of policy acquisition costs.
2. Effective January 1, 1993, Article III is hereby amended by adding the
following new paragraph:
ALLSTATE and GLENBROOK agree to an election under Treasury Regulations
1-848-2(g)(8), as follows:
(a) For each taxable year under this Agreement, the party with net
positive consideration, as defined in the regulations promulgated
under Treasury Code Section 848, will capitalize specified policy
acquisition expenses with respect to this Agreement without regard to
the general deductions limitation of Section 848(c)(1);
(b) GLENBROOK and ALLSTATE agree to exchange information pertaining to the
amount of net consideration for all reinsurance agreements in force
between them to ensure consistency for purposes of computing specified
policy acquisition expenses. GLENBROOK and ALLSTATE shall agree on the
amount of such net consideration for each taxable year no later than
May 1 following the end of such year.
<PAGE>
(c) This election shall be effective for 1993 and for all subsequent
taxable years for which this Agreement remains in effect.
Except as amended hereby, the Agreement shall remain unchanged.
IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be
duly executed in duplicate by their respective officers on the dates shown
below.
GLENBROOK LIFE AND ANNUITY COMPANY
By: /s/ Sarah R. Donahue
--------------------
Title: Vice President
--------------
Date: 12/18/95
---------
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ C. Nelson Strom
-------------------
Title: Assistant Vice President
---------------------------
Date: 12/5/95
---------
<PAGE>
(23)(i) Consent of Experts
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Glenbrook Life and
Annuity Company on Form S-1 of our report dated March 1, 1996 relating to the
financial statements and financial statement schedule of Glenbrook Life and
Annuity Company, appearing in the Prospectus, which is part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
June 24, 1996
<PAGE>
(24) Powers of Attorney
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SINGLE PREMIUM DEFERRED ANNUITY CONTRACT
Know all men by these presents that Louis G. Lower, II, whose signature
appears below, constitutes and appoints Michael J. Velotta, his attorney-in-
fact, with power of substitution, and his in any and all capacities, to sign any
Form S-1 registration statements and amendments thereto for the Glenbrook Life
and Annuity Company Single Premium Deferred Annuity Contract and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
June 3, 1996
------------
Date
/s/LOUIS G. LOWER, II
---------------------
Louis G. Lower, II
Chairman of the Board of Directors
and Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SINGLE PREMIUM DEFERRED ANNUITY CONTRACT
Know all men by these presents that Michael J. Velotta, whose signature
appears below, constitutes and appoints Louis G. Lower, II, his attorney-in-
fact, with power of substitution, and his in any and all capacities, to sign any
Form S-1 registration statements and amendments thereto for the Glenbrook Life
and Annuity Company Single Premium Deferred Annuity Contract and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
June 4, 1996
------------
Date
/s/MICHAEL J. VELOTTA
---------------------
Michael J. Velotta
Vice President, Secretary,
General Counsel and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SINGLE PREMIUM DEFERRED ANNUITY CONTRACT
Know all men by these presents that Marla G. Friedman, whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, her attorneys-in-fact, with power of substitution,
and her in any and all capacities, to sign any Form S-1 registration statements
and amendments thereto for the Glenbrook Life and Annuity Company Single Premium
Deferred Annuity Contract and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or her
substitute or substitutes, may do or cause to be done by virtue hereof.
June 17, 1996
-------------
Date
/s/MARLA G. FRIEDMAN
--------------------
Marla G. Friedman
President, Chief Operating Officer
and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SINGLE PREMIUM DEFERRED ANNUITY CONTRACT
Know all men by these presents that Peter H. Heckman, whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution,
and his in any and all capacities, to sign any Form S-1 registration statements
and amendments thereto for the Glenbrook Life and Annuity Company Single Premium
Deferred Annuity Contract and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
June 3, 1996
------------
Date
/s/PETER H. HECKMAN
-------------------
Peter H. Heckman
Vice President and Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SINGLE PREMIUM DEFERRED ANNUITY CONTRACT
Know all men by these presents that G. Craig Whitehead, whose
signature appears below, constitutes and appoints Louis G. Lower, II, and
Michael J. Velotta, and each of them, his attorneys-in-fact, with power of
substitution, and his in any and all capacities, to sign any Form S-1
registration statements and amendments thereto for the Glenbrook Life and
Annuity Company Single Premium Deferred Annuity Contract and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
June 5, 1996
-------------
Date
/s/G. CRAIG WHITEHEAD
---------------------
G. Craig Whitehead
Assistant Vice President and
Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SINGLE PREMIUM DEFERRED ANNUITY CONTRACT
Know all men by these presents that James P. Zils, whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution,
and his in any and all capacities, to sign any Form S-1 registration statements
and amendments thereto for the Glenbrook Life and Annuity Company Single Premium
Deferred Annuity Contract and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
June 3, 1996
------------
Date
/s/JAMES P. ZILS
----------------
James P. Zils
Treasurer
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SINGLE PREMIUM DEFERRED ANNUITY CONTRACT
Know all men by these presents that Casey J. Sylla, whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution,
and his in any and all capacities, to sign any Form S-1 registration statements
and amendments thereto for the Glenbrook Life and Annuity Company Single Premium
Deferred Annuity Contract and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
June 17, 1996
-------------
Date
/s/CASEY J. SYLLA
------------------
Casey J. Sylla
Chief Investment Officer
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
SINGLE PREMIUM DEFERRED ANNUITY CONTRACT
Know all men by these presents that Barry S. Paul, whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution,
and his in any and all capacities, to sign any Form S-1 registration statements
and amendments thereto for the Glenbrook Life and Annuity Company Single Premium
Deferred Annuity Contract and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
June 3, 1996
------------
Date
/s/BARRY S. PAUL
----------------
Barry S. Paul
Assistant Vice President and
Controller
