<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-62193
33-91916
33-92842
GLENBROOK LIFE AND ANNUITY COMPANY
(Exact name of registrant as specified in its charter)
ILLINOIS 35-1113325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive offices)
(Zip Code)
847/402-2400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes../X/.. No
Indicate the number of shares of each of the issuer's classes of common
stock, as of June 30, 1996; there were 4,200 shares of common capital stock
outstanding, par value $500 per share all of which shares are held by Allstate
Life Insurance Company.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Position As Of
June 30, 1996 (Unaudited) and December 31, 1995 3
Statements of Operations
Three Months Ended June 30, 1996 and
June 30, 1995 (Unaudited)
Six Months Ended June 30, 1996 and
June 30, 1995 (Unaudited) 4
Statements of Cash Flows
Six Months Ended June 30, 1996 and
June 30, 1995 (Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
Signature Page
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GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
June 30, December 31,
($ in thousands) 1996 1995
(Unaudited)
<S> <C> <C>
Assets
Investments
Fixed income securities available for
sale, at fair value (amortized cost
$45,730 and $44,112) $ 47,344 $ 48,815
Short-term 2,070 2,102
Total investments 49,414 50,917
Reinsurance recoverable from Allstate Life
Insurance Company 1,713,632 1,340,925
Cash 2,804 264
Other assets 2,339 2,021
Separate Accounts 99,079 15,578
Total assets $1,867,268 $1,409,705
Liabilities
Contractholder funds $1,713,632 $1,340,925
Income taxes payable 2,520 1,637
Deferred income taxes 942 1,828
Net payable to Allstate Life Insurance Company 2,721 255
Separate Accounts 87,902 5,048
Total liabilities 1,807,717 1,349,693
Shareholder's equity
Common stock, $500 par value, 4,200 shares
authorized, issued and outstanding 2,100 2,100
Additional capital paid-in 49,641 49,641
Unrealized net capital gains 1,697 3,357
Retained income 6,113 4,914
Total shareholder's equity 59,551 60,012
Total liabilities and shareholder's equity $1,867,268 $1,409,705
</TABLE>
See notes to financial statements.
3
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GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
($ in thousands) 1996 1995 1996 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Net investment income $ 941 $1,022 $1,864 $2,018
Income before income taxes 941 1,022 1,864 2,018
Income tax expense 336 363 665 717
Net income $ 605 $ 659 $1,199 $1,301
</TABLE>
See notes to financial statements.
4
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GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
($ in thousands) 1996 1995
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,199 $ 1,301
Adjustments to reconcile net income to net
cash provided by operating activities
Deferred income taxes 7 25
Changes in other operating assets and
liabilities 3,012 478
Net cash provided by operating
activities 4,218 1,804
Cash flows from investing activities
Fixed income securities
Investment collections 1,389 685
Investment purchases (2,989) (1,491)
Change in short-term investments, net 32 (998)
Participation in Separate Account (110)
Net cash used in investing activities (1,678) (1,804)
Net increase in cash 2,540 0
Cash at beginning of period 264 0
Cash at end of period $ 2,804 $ 0
</TABLE>
See notes to financial statements.
5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
($ in thousands)
1. Basis of Presentation
Glenbrook Life and Annuity Company (the "Company") is wholly owned by
Allstate Life Insurance Company ("Allstate Life"), which is wholly owned by
Allstate Insurance Company, a wholly-owned subsidiary of The Allstate
Corporation.
The statements of financial position as of June 30, 1996, the statements of
operations for the three-month and six-month periods ended June 30, 1996 and
1995, and the statements of cash flows for the six-month periods then ended are
unaudited. These interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for the fair presentation of the financial position,
results of operations and cash flows for the interim periods. The financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Glenbrook Life and Annuity Company Annual Report on Form
10K for 1995. The results of operations for the interim periods should not be
considered indicative of results to be expected for the full year.
To conform with the 1996 presentation, certain items in the prior year's
financial statements have been reclassified.
2. Reinsurance
The Company reinsures substantially all business with Allstate Life.
Contract charges ceded to Allstate Life under reinsurance agreements were $1,480
and $806 for the six-month periods ended June 30, 1996 and 1995, respectively.
Credited interest and expenses ceded to Allstate Life amounted to $52,768 and
$29,890 for the six-month periods ended June 30, 1996 and 1995, respectively.
Investment income earned on the assets which support contractholder funds was
excluded from the Company's financial statements as those assets were
transferred to Allstate Life under the terms of reinsurance treaties.
Reinsurance ceded arrangements do not discharge the Company as the primary
insurer.
6
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GLENBROOK LIFE AND ANNUITY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following highlights significant factors influencing results of operations
and changes in financial position of Glenbrook Life and Annuity Company (the
"Company"). It should be read in conjunction with the discussion and analysis
and financial statements thereto found under Items 7 and 8 of Part II of the
Glenbrook Life and Annuity Company Annual Report on Form 10-K.
The Company, which is wholly owned by Allstate Life Insurance Company
("Allstate Life"), issues flexible premium fixed annuity contracts, indexed
annuity contracts and single premium life insurance policies. In addition, the
Company issues flexible premium deferred variable annuity contracts, the assets
and liabilities of which are legally segregated and reflected in the
accompanying statements of financial position as the assets and liabilities of
the Separate Accounts. The Company markets its products through banks and other
financial institutions.
The Company reinsures substantially all of its annuity deposits with Allstate
Life, and all life insurance in force with other unaffiliated reinsurers.
Accordingly, the financial results reflected in the Company's statements of
operations do not include income related to those assets that are transferred to
Allstate Life or other reinsurers under the reinsurance treaties.
Separate Account assets and liabilities are carried at fair value in the
statements of financial position. Certain Separate Account investment
portfolios established in 1995 were initially funded with a $10 million seed
money contribution from the Company in 1995. Investment income and realized
gains and losses of the Separate Account investments, other than the portion
related to the Company's participation, accrue directly to the contractholders
(net of fees) and, therefore, are not included in the Company's statements of
operations.
RESULTS OF OPERATIONS
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
($ IN THOUSANDS) ($ IN THOUSANDS)
Net investment income ....... $ 941 $ 1,022 $ 1,864 $ 2,018
Net income .................. $ 605 $ 659 $ 1,199 $ 1,301
Fixed income securities, at
amortized cost ............ $ 45,730 $ 52,352 $ 45,730 $ 52,352
7
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Pre-tax net investment income decreased 7.9% to $941 thousand for the second
quarter of 1996 compared to $1,022 thousand for the same period in 1995 and
decreased 7.6% to $1,864 thousand for the first six months of 1996 compared to
$2,018 thousand for the same period in 1995. The decreases reflect the impact of
the Company's $10 million investment in the variable funds of the Separate
Account, whose assets are invested predominantly in equity securities. The
dividend yield on the variable funds is significantly below the level of
interest earned on fixed income securities in which the $10 million was invested
prior to the fourth quarter of 1995.
FINANCIAL POSITION
At June 30, 1996, unrealized net capital gains before tax were $2.6 million
compared to $5.2 million at December 31, 1995. The change in unrealized gains in
the fixed income portfolio is due to the effect of rising interest rates.
At June 30, 1996 both contractholder funds and amounts recoverable from
Allstate Life under reinsurance treaties reflect a 27.8% increase of $372.7
million as compared to December 31, 1995. These increases result from sales of
the Company's flexible premium fixed annuity contracts, partially offset by
surrenders. Reinsurance recoverable from Allstate Life relates to policy
benefit obligations ceded to Allstate Life.
Separate Account assets increased by $83.5 million and Separate Account
liabilities increased by $82.9 million as compared to December 31, 1995. The
increases were primarily attributable to increased sales of flexible premium
deferred variable annuity contracts.
LIQUIDITY AND CAPITAL RESOURCES
Under the terms of intercompany reinsurance agreements, assets of the Company
that relate to insurance in force, excluding Separate Account assets, are
transferred to Allstate Life or other reinsurers, which maintain investment
portfolios that support the Company's products.
8
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would materially
affect the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
(2) None
(3)(i) Articles of Incorporation*
(ii) By-laws*
(4) Glenbrook Life and Annuity Company Flexible Premium
Deferred Variable Annuity Contract and Application**
(10) Reinsurance Agreement between Glenbrook Life
and Annuity Company and Allstate Life
Insurance Company*
(11) None
(15) None
(18) None
(19) None
(22) None
(23)(a) Consent of Independent Public Accountants***
(b) Consent of Attorneys****
(24) None
(27) Financial Data Schedule
(99) None
(b) Reports on 8-K
No reports on Form 8-K were filed during the
second quarter of 1996.
* Previously filed in Form N-4 Registration Statement No. 33-60882
dated April 9, 1993 and incorporated by reference.
** Previously filed in Form S-1 Registration Statement No. 33-91916
dated May 4, 1995 and incorporated by reference. Previously filed in Form S-1
Registration Statement No. 33-92842 dated May 30, 1995 and incorporated by
reference. Previously filed in Form N-4 Registration Statement No. 33-62203
dated November 21, 1995 and incorporated by reference.
*** Previously filed in Form S-1 Registration Statement No. 33-91916
dated April 10, 1996 and incorporated by reference.
**** Previously filed in Pre-Effective Amendment No. 1 of Form N-4 Registration
Statement No. 33-91914 dated September 15, 1995 and incorporated by reference.
Previously filed in Form S-1 Registration Statement No. 33-92842 dated August
24, 1995 and incorporated by reference. Previously filed in Form N-4
Registration Statement No. 33-62203 dated November 21, 1995 and incorporated by
reference.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Glenbrook Life and Annuity Company
(Registrant)
DATE August 13, 1996 /s/ LOUIS G. LOWER, II
---------------- ----------------------------------
LOUIS G. LOWER, II
CHAIRMAN OF THE BOARD OF DIRECTORS
and CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
DATE August 13, 1996 /s/ BARRY S. PAUL
---------------- ----------------------------------
BARRY S. PAUL
ASSISTANT VICE PRESIDENT
and CONTROLLER
(Chief Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<DEBT-HELD-FOR-SALE> 47,344 48,815
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 0 0
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 49,414 50,917
<CASH> 2,804 264
<RECOVER-REINSURE> 1,713,632 1,340,925
<DEFERRED-ACQUISITION> 0 0
<TOTAL-ASSETS> 1,867,268 1,409,705
<POLICY-LOSSES> 0 0
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 1,713,632 1,340,925
<NOTES-PAYABLE> 0 0
<COMMON> 2,100 2,100
0 0
0 0
<OTHER-SE> 57,451 57,912
<TOTAL-LIABILITY-AND-EQUITY> 1,867,268 1,409,705
0 0
<INVESTMENT-INCOME> 1,864 3,996
<INVESTMENT-GAINS> 0 459
<OTHER-INCOME> 0 0
<BENEFITS> 0 0
<UNDERWRITING-AMORTIZATION> 0 0
<UNDERWRITING-OTHER> 0 0
<INCOME-PRETAX> 1,864 4,455
<INCOME-TAX> 665 1,576
<INCOME-CONTINUING> 1,199 2,879
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,199 2,879
<EPS-PRIMARY> 285.48 685.48
<EPS-DILUTED> 285.48 685.48
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
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<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
