GLENBROOK LIFE & ANNUITY CO, S-1/A, 1996-08-23

GLENBROOK LIFE & ANNUITY CO
S-1/A, 1996-08-23

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1996
REGISTRATION NO. 333-00987
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

PRE-EFFECTIVE AMENDMENT NO. 2 [X]

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)

<TABLE>
<S> <C> <C>
ILLINOIS 6311 35-1113325
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>

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)
------------------------

COPIES TO:

<TABLE>
<S> <C>
Stephen E. Roth, Esquire John R. Hedrick, Esquire
Sutherland, Asbill and Brennan Allstate Life Financial Services, Inc.
1275 Pennsylvania Avenue 3100 Sanders Road
Washington, D.C. 20004-2404 Northbrook, Illinois 60062
</TABLE>

------------------------

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

<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Deferred Annuity Contracts and
Participating Interests
therein......................... $15,000,000 * * $5,172.41
</TABLE>

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.

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- --------------------------------------------------------------------------------
<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
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<S> <C> <C>
1. Forepart of the Registration Statement and Outside Outside Front Cover Page
Front Cover Page of Prospectus.......................

2. Inside Front and Outside Back Cover Pages of Inside Front Cover
Prospectus...........................................

3. Summary Information, Risk Factors and Ratio of Inside Front Cover; Accumulation Units; Accumulation
Earnings to Fixed Charges............................ Unit Value

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........... Purchase of the Contracts; Benefits under the
Contract; Charges and other Deductions; Federal Tax
Matters; Taxation of Annuities in General

10. Interests of Named Experts and Counsel............... Not Applicable

11. Information with Respect to the Registrant........... Glenbrook Life and Annuity Company and the Variable
Account; 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 Indemnification Not Applicable
for Securities Act Liabilities.......................
</TABLE>
<PAGE>

GLENBROOK LIFE MULTI-MANAGER VARIABLE ACCOUNT

OFFERED BY

GLENBROOK LIFE AND ANNUITY COMPANY

POST OFFICE BOX 94042
PALATINE, ILLINOIS 60094-4042
1-(800) 755-5275

INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
---------------------

This prospectus describes the "Glenbrook Provider Variable Annuity," a Flexible
Premium Deferred Variable Annuity Contract ("Contract") designed to aid you in
long-term financial planning and which can be used for retirement planning. The
Contracts are issued by Glenbrook Life and Annuity Company ("Company"), a wholly
owned subsidiary of Allstate Life Insurance Company. Purchase payments for the
Contracts will be allocated to a series of Variable Sub-accounts of the
Glenbrook Life Multi-Manager Variable Account ("Variable Account") and/or to a
Fixed Account option(s) funded through the Company's general account.

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. In certain
states, certificates are issued pursuant to the Financial Services Group
Insurance Trust, an Illinois Trust. For convenience, this prospectus refers to
both Contracts and certificates as "Contracts."

The Variable Account will invest in shares of one or more managed investment
companies ("Funds") each of which will have multiple investment Portfolios. All
of the Funds which are described in this prospectus may not be available with
your Contract. Presently, the Variable Account will invest in shares of the
following Funds:

- Dean Witter Variable Investment Series ("Dean Witter Fund")

- Dreyfus Variable Investment Fund and The Dreyfus Socially Responsible
Growth Fund, Inc. (collectively the "Dreyfus Funds")

- Fidelity Variable Insurance Products Fund and Fidelity Variable Insurance
Products Fund II (collectively the "Fidelity Funds")

- MFS-Registered Trademark- Variable Insurance Trust ("MFS Fund")

- Twentieth Century Companies, Inc., TCI Portfolios, Inc. ("TCI Funds")

The DEAN WITTER FUND has four available Portfolios: (1) Dividend Growth (2)
European Growth (3) Quality Income Plus and (4) Utilities; the DREYFUS FUNDS
have four available Portfolios: (1) VIF Growth and Income (2) VIF Money Market
(3) The Dreyfus Socially Responsible Growth Fund, Inc. and (4) VIF Small Company
Stock; the FIDELITY FUNDS have three available Portfolios: (1) VIP II Contrafund
(2) VIP Growth and (3) VIP High Income; the MFS FUND has two available
Portfolios: (1) Emerging Growth Series and (2) Limited Maturity Series; and the
TCI FUNDS "Twentieth Century" have two available Portfolios: (1) TCI Balanced
and (2) TCI International.

The Contract is not available in all states.

At least once each Contract year, 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
applies 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 and are also available by personal
computer from the SEC's EDGAR database on the world wide web at
http://www.sec./gov/edgarhp.htm or through the SEC's web site at
http://www.sec.gov. Copies of such material can also be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates.

<PAGE>

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.

------------------------

This prospectus presents information you should know before making a decision to
invest in the Contract and the available Investment Alternatives.

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 AND THE INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS, OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, AND THE FUNDS' SHARES ARE
NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT
IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.

THESE CONTRACTS ARE NOT FDIC INSURED.

The Company has prepared and filed a Statement of Additional Information dated
September , 1996 with the U.S. Securities and Exchange Commission. If you wish
to receive the Statement of Additional Information, you may obtain a free copy
by calling or writing the Company at the address above. For your convenience, an
order form for the Statement of Additional Information may be found on page B-2
of this prospectus. Before ordering, you may wish to review the Table of
Contents of the Statement of Additional Information on page B-1 of this
prospectus. The Statement of Additional Information has been incorporated by
reference into this prospectus.

This Prospectus is Valid Only When Accompanied or Preceded By A Current
Prospectus For The Funds.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE 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 SEPTEMBER , 1996.

2
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3

TABLE OF CONTENTS

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PAGE
<S> <C>
Glossary........................................ 4
Highlights...................................... 5
Summary of Variable Account Expenses............ 6
Condensed Financial Information................. 9
Yield and Total Return Disclosure............... 9
Financial Statements............................ 9
Glenbrook Life and Annuity Company and the
Variable Account............................... 9
Glenbrook Life and Annuity Company............ 9
The Variable Account.......................... 10
The Funds....................................... 10
Fixed Account Options........................... 12
Dollar Cost Averaging Fixed Account........... 12
Guaranteed Maturity Fixed Account............. 12
Example of Interest Crediting During the
Guarantee Period........................... 13
Withdrawals or Transfers.................... 14
Market Value Adjustment..................... 14
Purchase of the Contracts....................... 14
Purchase Payment Limits....................... 14
Free-Look Period.............................. 14
Crediting of Initial Purchase Payment......... 15
Allocation of Purchase Payments............... 15
Accumulation Units............................ 15
Accumulation Unit Value....................... 15
Transfers Among Investment Alternatives....... 15
Dollar Cost Averaging......................... 16
Automatic Portfolio Rebalancing............... 16
Benefits Under the Contract..................... 16
Withdrawals................................... 16
Income Payments............................... 17
Payout Start Date for Income Payments....... 17
Variable Account Income Payments............ 17
Fixed Amount Income Payments................ 17
Income Plans................................ 17
Death Benefits.................................. 18
Distribution Upon Death Payment Provisions.... 18
Death Benefit Amount.......................... 18
Charges and Other Deductions.................... 19
Deductions from Purchase Payments............. 19
Withdrawal Charge (Contingent Deferred Sales
Charge)...................................... 19
Contract Maintenance Charge................... 19
Administrative Expense Charge................. 20
Mortality and Expense Risk Charge............. 20
Taxes......................................... 20
Transfer Charges.............................. 20
Fund Expenses................................. 20

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PAGE
<S> <C>
General Matters................................. 21
Owner......................................... 21
Beneficiary................................... 21
Assignments................................... 21
Delay of Payments............................. 21
Modification.................................. 21
Customer Inquiries............................ 21
Federal Tax Matters............................. 21
Introduction.................................. 21
Taxation of Annuities in General.............. 21
Tax Deferral................................ 21
Non-Natural Owners.......................... 22
Diversification Requirements................ 22
Ownership Treatment......................... 22
Delayed Maturity Dates...................... 22
Taxation of Partial and Full Withdrawals.... 22
Taxation of Annuity Payments................ 23
Taxation of Annuity Death Benefits.......... 23
Penalty Tax on Premature Distributions...... 23
Aggregation of Annuity Contracts............ 23
Tax Qualified Contracts..................... 23
Restrictions Under Section 403(b) Plans..... 23
Income Tax Withholding...................... 24
Distribution of the Contracts................... 24
Voting Rights................................... 24
Selected Financial Data......................... 24
Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 25
General....................................... 25
Results of Operations......................... 25
Financial Position............................ 25
Liquidity and Capital Resources............... 26
Competition..................................... 27
Employees....................................... 27
Properties...................................... 27
State and Federal Regulation.................... 27
Executive Officers and Directors of the
Company........................................ 27
Executive Compensation.......................... 29
Legal Proceedings............................... 30
Experts......................................... 30
Legal Matters................................... 30
Financial Statements............................ F-1
Appendix A -- Market Value Adjustment........... A-1
Statement of Additional Information: Table of
Contents....................................... B-1
Order Form...................................... B-2
</TABLE>

<PAGE>
4

GLOSSARY

ACCUMULATION UNIT -- A measure of your ownership interest in a Sub-account of
the Variable Account prior to the Payout Start Date. Analogous, though not
identical, to a share owned in a mutual fund.

ACCUMULATION UNIT VALUE -- The value of each Accumulation Unit which is
calculated each Valuation Date. Each Sub-account of the Variable Account has its
own distinct Accumulation Unit Value. Analogous, though not identical, to the
share price (net asset value) of a mutual fund.

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. Joint annuitants
are only permitted on or after the Payout Start Date.

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 Flexible Premium Deferred
Variable Annuity Contract, known as the "Glenbrook Provider Variable Annuity"
that is described in this prospectus.

CONTRACT ANNIVERSARY -- An anniversary of the date that the Contract was issued.

CONTRACT VALUE -- The value of all amounts accumulated under the Contract prior
to the Payout Start Date, equivalent to the Accumulation Units in each
Sub-account of the Variable Account multiplied by the respective Accumulation
Unit Value, plus the value in the Fixed Account.

CONTRACT YEAR -- A period of 12 months starting with the issue date or any
Contract Anniversary.

DOLLAR COST AVERAGING FIXED ACCOUNT -- Purchase payments may be allocated to the
Dollar Cost Averaging Fixed Account for the purpose of establishing a Dollar
Cost Averaging Program.

GUARANTEED MATURITY FIXED ACCOUNT -- The Guaranteed Maturity Fixed Account is
divided into Sub-accounts. These Sub-accounts are distinguished by Guarantee
Period(s) and the dates the period(s) begin. The Fixed Sub-accounts are
established when purchase payments are allocated to the Guaranteed Maturity
Fixed Account; when previous Sub-accounts expire and new Guarantee Periods are
selected; and when You transfer an amount to the Guaranteed Maturity Fixed
Account. Also known as the "Guaranteed Maturity Account."

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 payment amounts may vary based on any Sub-account
of the Variable Account and/or may be fixed for the duration of the Income Plan.

INVESTMENT ALTERNATIVES -- The Sub-accounts of the Variable Account and the
Fixed Account options.

MARKET VALUE ADJUSTMENT -- The adjustment made to the money distributed from a
Sub-account of the Guaranteed Maturity Fixed Account, prior to the end of the
Guarantee Period, to reflect the impact of changes in interest rates between the
time the Sub-account of the Guaranteed Maturity Fixed Account was established
and the time of distribution.

NON-QUALIFIED CONTRACTS -- Contracts other than Qualified Contracts.

OWNER(S)("YOU") -- With respect to individual Contracts, the person or persons
designated as the Owner in the Contract. With respect to group Contracts, an
individual participant(s) under the Contract.

PAYOUT START DATE -- The date on which income payments begin.

PORTFOLIOS -- The mutual fund Portfolios of the Funds.

QUALIFIED CONTRACTS -- Contracts issued under plans that qualify for special
federal income tax treatment under Sections 401(a), 403(a), 403(b) and 408 of
the Internal Revenue Code.

VALUATION DATE -- Each day that the New York Stock Exchange is open for
business. The Valuation Date does not include such Federal and non-Federal
holidays as are observed by the New York Stock Exchange.

VALUATION PERIOD -- The period between successive Valuation Dates, commencing at
the close of regular trading on the New York Stock Exchange (which is normally
4:00pm Eastern Time) and ending as of the close of regular trading on the New
York Stock Exchange on the next succeeding Valuation Date.

VARIABLE ACCOUNT -- Glenbrook Life Multi-Manager Variable Account, a separate
investment account established by the Company to receive and invest purchase
payments paid under the Contracts.

VARIABLE SUB-ACCOUNT -- A portion of the Variable Account invested in shares of
a corresponding Portfolio. The investment performance of each Variable
Sub-account is linked directly to the investment performance of its
corresponding Portfolio.
<PAGE>
5

HIGHLIGHTS

THE CONTRACT

This Contract is designed for long-term financial planning and retirement
planning. Money can be allocated to any combination of Variable Sub-accounts and
Fixed Account options. You have access to your funds either through withdrawals
of Contract Value or through periodic income payments. You bear the entire
investment risk for Contract Values and income payments based upon the Variable
Account, because values will vary depending on the investment performance of the
Portfolio(s) underlying the Variable Sub-accounts you select. See "Accumulation
Unit Value," page and "Income Plans," page . You will also bear the
investment risk of adverse changes in interest rates in the event amounts are
prematurely withdrawn or transferred from Sub-accounts of the Guaranteed
Maturity Fixed Account. See "Guaranteed Maturity Fixed Account," page .

FREE-LOOK

You may cancel the Contract any time within 20 days after receipt of the
Contract, or longer of required by state law, and receive a full refund of
purchase payments allocated to the Fixed Account options. Purchase payments
allocated to the Variable Account will be returned after an adjustment to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation, unless a refund of purchase payments is
required by state or federal law.

HOW TO INVEST

Your first purchase payment must be at least $3,000 (for qualified contracts,
$2,000). Subsequent purchase payments must be at least $50. Purchase payments
may also be made pursuant to an Automatic Addition Program. See "Purchase
Payment Limits," page . At the time of your application, you will allocate
your purchase payment among the Investment Alternatives. The allocation you
specify on the application will be effective immediately. All allocations must
be in whole percents from 0% to 100% (total allocation equals 100%) or in whole
dollars (total allocation equals entire dollar amount of purchase payment).
Allocations may be changed by notifying the Company in writing. See "Allocation
of Purchase Payments," page .

INVESTMENT ALTERNATIVES

Presently, the Variable Account invests in shares of the following Funds:

- Dean Witter Variable Investment Series ("Dean Witter Fund")

- Dreyfus Variable Investment Fund and The Dreyfus Socially Responsible
Growth Fund, Inc. (collectively the "Dreyfus Funds")

- Fidelity Variable Insurance Products Fund and Fidelity Variable Insurance
Products Fund II (collectively the "Fidelity Funds")

- MFS-Registered Trademark- Variable Insurance Trust ("MFS Fund")

- Twentieth Century Companies, Inc., TCI Portfolios, Inc. ("TCI Fund")

The assets of each Portfolio are held separately from the other Portfolios and
each has distinct investment objectives and policies which are described in the
accompanying prospectuses for the Funds.

In addition to the Variable Account, Owners can also allocate all or part of
their purchase payments to the Fixed Account options. See "Fixed Account
Options," on page .

TRANSFERS AMONG INVESTMENT ALTERNATIVES

Prior to the Payout Start Date, you may transfer amounts among the Investment
Alternatives. The Company reserves the right to assess a $10 charge on each
transfer in excess of twelve per Contract Year. The Company is presently waiving
this charge. Transfers to the Guaranteed Maturity Fixed Account must be at least
$50. Certain Fixed Account transfers may be restricted. See "Transfers Among
Investment Alternatives," page . You may want to enroll in a Dollar Cost
Averaging Program or an Automatic Portfolio Rebalancing Program. See "Dollar
Cost Averaging," page , and "Automatic Portfolio Rebalancing," page .
<PAGE>
6

CHARGES AND DEDUCTIONS

The costs of the Contract include: a contract maintenance charge ($35 annually),
a mortality and expense risk charge (deducted daily, equal on an annual basis to
1.25% of the Contract's daily net assets of the Variable Account and for
Contracts with the optional enhanced death benefit provision, an additional
mortality and expense risk charge of .10% is assessed bringing the total
mortality and expense risk charge to 1.35%) and an administrative expense charge
(deducted daily, equal on an annual basis to .10% of the Contract's daily net
assets of the Variable Account). The Company reserves the right to assess a
transfer charge ($10 on each transfer in excess of twelve per Contract Year).
Additional deductions may be made for certain taxes. See "Contract Maintenance
Charge," page , "Mortality and Expense Risk Charge," page , "Administrative
Expense Charge," page , "Transfer Charges," page , and "Taxes," page .

WITHDRAWALS

You may withdraw all or part of the Contract Value before the earliest of the
Payout Start Date, the death of any Owner or, if the Owner is not a natural
person, the death of the Annuitant. Each Contract Year, no withdrawal charges or
Market Value Adjustments will be applied to amounts withdrawn up to 15% of the
amount of purchase payments. Amounts withdrawn in excess of the 15% may be
subject to a withdrawal charge of 0% to 6% depending on how long purchase
payments have been invested in the Contract. Amounts withdrawn from a
Sub-account of the Guaranteed Maturity Fixed Account, in excess of the 15%,
except during the 30 day period after the Guarantee Period expires, will be
subject to a Market Value Adjustment. Once the total amount of withdrawals
exceed the total amount of purchase payments, future withdrawals will not be
subject to a withdrawal charge. See "Withdrawals," page , "Withdrawals or
Transfers," page , "Taxation of Annuities in General," page and "Withdrawal
Charge," page .

DEATH BENEFIT

The Company will pay a death benefit prior to the Payout Start Date on the death
of any Owner or, if the Owner is not a natural person, the death of the
Annuitant. See "Death Benefit Amount," page .

INCOME PAYMENTS

You will receive periodic income payments beginning on the Payout Start Date.
You may choose among several Income Plans to fit your needs. Income payments may
be received for a specified period or for life (either single or joint life),
with or without a guaranteed number of payments. You can select income payments
that are fixed, variable or a combination of fixed and variable. See "Income
Payments," page .

SUMMARY OF VARIABLE ACCOUNT EXPENSES

The following table illustrates all expenses and fees that you will incur. The
expenses and fees set forth in the table are based on charges under the
Contracts and on the expenses of the Variable Account and the underlying Funds.

OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)

<TABLE>
<S> <C> <C>
Sales Load Imposed on
Purchases (as a
percentage of
purchase payments)... None
Withdrawal Charge (as
a percentage of
purchase payments)... *

NUMBER OF COMPLETE
YEARS SINCE PURCHASE APPLICABLE SALES
PAYMENT BEING CHARGE AS
WITHDRAWN WAS MADE A PERCENTAGE
- ---------------------- -------------------
0 years........... 6%
1 year............ 6%
2 years........... 5%
3 years........... 5%
4 years........... 4%
5 years........... 3%
6 years or more... 0%

Transfer Fee.......... **
Contract Maintenance
Charge............... $35***

VARIABLE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF
THE CONTRACT'S AVERAGE NET ASSETS IN THE VARIABLE
ACCOUNT)
Mortality and Expense
Risk Charge.......... 1.35%****
Administrative Expense
Charge............... .10%

Total Variable Account
Annual Expenses...... 1.45%****
</TABLE>

- ------------
* Each Contract Year up to 15% of the amount of purchase payments may be
withdrawn without a withdrawal charge or a Market Value Adjustment.

** No charges will be imposed on the first twelve transfers in any Contract
Year. The Company reserves the right to assess a $10 charge for each
transfer in excess of twelve in any Contract Year,
<PAGE>
7
excluding transfers due to dollar cost averaging and automatic Portfolio
rebalancing.

*** The Contract Maintenance Charge will be waived if total purchase payments
as of a Contract Anniversary or upon a full withdrawal are $50,000 or more
or if all monies are allocated to the Fixed Account options on the Contract
Anniversary.

**** For Contracts without an enhanced death benefit provision, the mortality
and expense risk charge is 1.25%, resulting in total Variable Account
annual expenses of 1.35%.

FUND EXPENSES
(AS A PERCENTAGE OF FUND ASSETS)

<TABLE>
<CAPTION>
OTHER TOTAL FUND ANNUAL
PORTFOLIO MANAGEMENT FEES EXPENSES EXPENSES
- ------------------- --------------- ------------- -------------------
<S> <C> <C> <C>
VIS Dividend
Growth............ 0.59%(1) 0.02% 0.61%
VIS European
Growth............ 1.00% 0.17% 1.17%
VIS Utilities...... 0.65%(2) 0.03% 0.68%
VIS Quality Income
Plus.............. 0.50%(3) 0.04% 0.54%
VIP Growth......... 0.61% 0.09% 0.70%
VIP High Income.... 0.60% 0.11% 0.71%(4)
VIP II
Contrafund........ 0.61% 0.11% 0.72%(4)
Dreyfus Socially
Responsible
Growth............ 0.75%(5) 0.58% 1.27%(7)
VIF Small Company
Stock(6).......... 0.75% 0.65% 1.20%(7)
VIF Growth &
Income............ 0.75% 0.20% 0.92%(7)
VIF Money Market... 0.50% 0.15% 0.62%(7)
MFS Emerging Growth
Series(8)......... 0.75% 0.25% 1.00%
MFS Limited
Maturity
Series(8)......... 0.55% 0.45% 1.00%
TCI
International..... 1.50% 0.00% 1.50%
TCI Balanced....... 1.00% 0.00% 1.00%
</TABLE>

- ---------------

(1) The management fee is 0.625% for net assets of up to $500 million. For net
assets which exceed $500 million, but do not exceed $1 billion, the
management fee is 0.50% and for net assets that exceed $1 billion, the
management fee is 0.475%.

(2) This percentage is applicable to Portfolio net assets of up to $500 million.
For net assets which exceed $500 million, the management fee is 0.55%.

(3) This percentage is applicable to Portfolio net assets of up to $500 million.
For net assets which exceed $500 million, the management fee is 0.45%.

(4) A portion of the brokerage commissions the fund paid was used to reduce its
expenses. With this reduction, total operating expenses were (for High
Income: 0.71% and Contrafund 0.72% [please note - there were brokerage
commissions paid, but they did not affect these ratios]).

(5) The Dreyfus Corporation has undertaken, until December 31, 1996, that if the
aggregate expenses of the Fund, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the management
fee, exceed 1.00 of 1% of the value of the Fund's average daily net assets,
the Fund may deduct from the payment to be made to Dreyfus under the
management agreement, or Dreyfus will bear, such excess expense.

(6) The Dreyfus Corporation has undertaken, until December 31, 1996, that if the
aggregate expenses of the Portfolio, exclusive of taxes, brokerage, interest
on borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the management
fee, exceed 1.25 of 1% of the value of the Portfolio's average daily net
assets, the Portfolio may deduct from the payment to be made to Dreyfus
under the management agreement, or Dreyfus will bear, such excess expense.
The Total Fund Expense is an annualized figure based off of actual expenses
incurred during the period from inception (May 1, 1996) to June 30, 1996.

(7) Total Fund Annual Expenses reflect expense reimbursements for The Dreyfus
Socially Responsible Growth Fund, Inc., VIF Small Company Stock, VIF Growth
& Income, and VIF Money Market Portfolios of 0.06%, 0.20%, 0.03% and 0.03%
respectively.

(8) The Adviser has agreed to bear, subject to reimbursement, expenses for each
of the Emerging Growth Series and Limited Maturity Series such that each
Series' aggregate operating expenses shall not exceed, on an annual basis,
1.00% of the average daily net assets of the Series from November 2, 1994
through December 31, 1996, 1.25% of the average daily net assets of the
Series from January 1, 1997 through December 31, 1998, and 1.50% of the
average daily net assets of the Series from January 1, 1999 through December
31, 2004; provided however, that this obligation may be terminated or
revised at any time. See "Information Concerning Shares of Each Series --
Expenses" below. Absent this expense arrangement, "Other Expenses" for the
Emerging Growth Series and Limited Maturity Series would be 2.16% and 1.00%
respectively, and "Total Operating Expenses" would be 2.91% and 1.55%
respectively, for these Series. Each Series has an expense offset
arrangement which reduces the Series' custodian fee based upon the amount of
cash maintained by the Series with its custodian and dividend disbursing
agent and may enter into other such arrangements and directed brokerage
arrangements (which would also have the effect of reducing the Series'
expenses). Any such fee reductions are not reflected under "Other Expenses."

- -------------------------------------------------------
<PAGE>
8

EXAMPLE

You (the Owner) would pay the following cumulative expenses on a $1,000
investment, assuming a 5% annual return under the following circumstances:
If you terminate your Contract or annuitize for a specified period of less than
120 months at the end of the applicable time period:
<TABLE>
<CAPTION>
(WITH ENHANCED DEATH BENEFIT
PROVISION)
PORTFOLIO ONE YEAR THREE YEAR
- -------------------------------- ------------- -------------
<S> <C> <C>
VIS Dividend Growth............. $ 73 $ 111
VIS European Growth............. $ 79 $ 128
VIS Utilities................... $ 74 $ 113
VIS Quality Income Plus......... $ 73 $ 109
VIP Growth...................... $ 74 $ 114
VIP High Income................. $ 74 $ 114
VIP II Contrafund............... $ 74 $ 115
Dreyfus Socially Responsible
Growth......................... $ 81 $ 133
VIF Small Company Stock......... $ 81 $ 135
VIF Growth & Income............. $ 77 $ 122
VIF Money Market................ $ 74 $ 112
MFS Emerging Growth Series...... $ 77 $ 123
MFS Limited Maturity Series..... $ 77 $ 123
TCI International............... $ 82 $ 138
TCI Balanced.................... $ 77 $ 123

(WITHOUT ENHANCED DEATH BENEFIT
PROVISION)
PORTFOLIO ONE YEAR THREE YEAR
- -------------------------------- ------------- -------------
<S> <C> <C>
VIS Dividend Growth............. $ 72 $ 108
VIS European Growth............. $ 78 $ 125
VIS Utilities................... $ 73 $ 110
VIS Quality Income Plus......... $ 72 $ 106
VIP Growth...................... $ 73 $ 111
VIP High Income................. $ 73 $ 111
VIP II Contrafund............... $ 73 $ 111
Dreyfus Socially Responsible
Growth......................... $ 80 $ 130
VIF Small Company Stock......... $ 80 $ 132
VIF Growth & Income............. $ 76 $ 119
VIF Money Market................ $ 73 $ 109
MFS Emerging Growth Series...... $ 76 $ 120
MFS Limited Maturity Series..... $ 76 $ 120
TCI International............... $ 81 $ 135
TCI Balanced.................... $ 76 $ 120
</TABLE>

If you do not terminate your Contract or if you annuitize for a specified period
of 120 months or more at the end of the applicable time period:
<TABLE>
<CAPTION>
(WITH ENHANCED DEATH BENEFIT
PROVISION)
PORTFOLIO ONE YEAR THREE YEAR
- -------------------------------- ------------- -------------
<S> <C> <C>
VIS Dividend Growth............. $ 22 $ 69
VIS European Growth............. $ 28 $ 86
VIS Utilities................... $ 23 $ 71
VIS Quality Income Plus......... $ 22 $ 66
VIP Growth...................... $ 23 $ 71
VIP High Income................. $ 23 $ 72
VIP II Contrafund............... $ 23 $ 72
Dreyfus Socially Responsible
Growth......................... $ 30 $ 91
VIF Small Company Stock......... $ 30 $ 93
VIF Growth & Income............. $ 26 $ 79
VIF Money Market................ $ 23 $ 70
MFS Emerging Growth Series...... $ 26 $ 81
MFS Limited Maturity Series..... $ 26 $ 81
TCI International............... $ 30 $ 93
TCI Balanced.................... $ 26 $ 81

(WITHOUT ENHANCED DEATH BENEFIT
PROVISION)
PORTFOLIO ONE YEAR THREE YEAR
- -------------------------------- ------------- -------------
<S> <C> <C>
VIS Dividend Growth............. $ 21 $ 66
VIS European Growth............. $ 27 $ 83
VIS Utilities................... $ 22 $ 68
VIS Quality Income Plus......... $ 21 $ 63
VIP Growth...................... $ 22 $ 68
VIP High Income................. $ 22 $ 69
VIP II Contrafund $ 22 $ 69
Dreyfus Socially Responsible
Growth......................... $ 29 $ 88
VIF Small Company Stock......... $ 29 $ 90
VIF Growth & Income............. $ 25 $ 76
VIF Money Market................ $ 22 $ 67
MFS Emerging Growth Series...... $ 25 $ 78
MFS Limited Maturity Series..... $ 25 $ 78
TCI International............... $ 30 $ 93
TCI Balanced.................... $ 25 $ 78
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of
the table is to assist you in understanding the various costs and expenses that
you will bear directly or indirectly. The table reflects expenses of the
Variable Account and the Fund. Premium taxes, which vary from 0-3.5% depending
on the state where the Contract is sold, are not reflected in the example.
<PAGE>
9

CONDENSED FINANCIAL INFORMATION

Condensed financial information for the Glenbrook Life Multi-Manager Variable
Account is not included because, as of the date of this prospectus, the Variable
Account had not yet commenced operations and had no assets, liabilities, or
income.

YIELD AND TOTAL RETURN DISCLOSURE

From time to time the Variable Account may advertise the yield and total return
investment performance of one or more Sub-accounts. Yield and standardized total
return advertisements include all charges and expenses attributable to the
Contracts. Including these fees has the effect of decreasing the advertised
performance of a Sub-account, so that a Sub-account's investment performance
will not be directly comparable to that of an ordinary mutual fund.

When a Sub-account advertises its standardized total return it will be
calculated for one year, five years, and ten years or since inception if the
Sub-account has not been in existence for such periods. Total return is measured
by comparing the value of an investment in the Sub-account at the end of the
relevant period to the value of the investment at the beginning of the period.

In addition to the standardized total return, the Sub-account may advertise a
non-standardized total return. This figure may be calculated for one year, five
years, and ten years or other periods. Non-standardized total return is measured
in the same manner as the standardized total return described above, except that
the withdrawal charges under the Contract are not deducted. Therefore, a
non-standardized total return for a Sub-account can be higher than a
standardized total return for a Sub-account.

Certain Sub-accounts may advertise yield in addition to total return. Except in
the case of the Money Market Sub-account, the yield will be computed in the
following manner: the net investment income per unit earned during a recent one
month period is divided by the unit value on the last day of the period, and
then annualized. This figure reflects the recurring charges at the separate
account level.

The Money Market Sub-account may advertise, in addition to the total return,
either yield or the effective yield. The yield in this case refers to the income
generated by an investment in that Sub-account over a seven-day period net of
recurring charges at the separate account level. The income is then annualized
(i.e., the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment). The effective yield is calculated similarly but
when annualized, the income earned by an investment in the Money Market
Sub-account is assumed to be reinvested at the end of each seven-day period. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment during a 52-week period.

The Variable Account may also disclose yield, standard total return, and
non-standard total return for periods prior to the date that the Variable
Account commenced operations. For periods prior to the date the Variable Account
commenced operations, performance information for the Sub-accounts will be
calculated based on the performance of the underlying Portfolios and the
assumption that the Sub-accounts were in existence for the same periods as those
of the underlying Portfolios, with a level of charges equal to those currently
assessed against the Sub-accounts.

Please refer to the Statement of Additional Information for a further
description of the method used to calculate a Sub-account's yield and total
return.

FINANCIAL STATEMENTS

The financial statements of Glenbrook Life and Annuity Company are on page F-1
of this prospectus. The financial statements of Glenbrook Life Multi-Manager
Variable Account are not included in the Statement of Additional Information
because, as of the date of this prospectus, the Variable Account had not yet
commenced operations and had no assets, liabilities, or income.

GLENBROOK LIFE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT

GLENBROOK LIFE AND ANNUITY COMPANY

The Company is the issuer of the Contract. The Company is a stock life insurance
company which was organized under the laws of the State of Illinois in 1992. The
Company was originally organized under the laws of the State of Indiana in 1965.
From 1965 to 1983 the Company was known as "United Standard Life Assurance
Company" and from 1983 to 1992 the Company was known as "William Penn Life
Assurance Company of America." As of the date of this prospectus, the Company is
licensed to operate in the District of Columbia and all states except New York.
The Company intends to market the Contract in those jurisdictions in which it is
licensed to operate. The Company's home office is located at 3100 Sanders Road,
Northbrook, Illinois 60062.

The Company is a wholly-owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life
<PAGE>
10
insurance company incorporated under the laws of the State of Illinois. Allstate
Life is a wholly-owned subsidiary of Allstate Insurance Company ("Allstate"), a
stock property-liability insurance company incorporated under the laws of
Illinois. All of the outstanding capital stock of Allstate is owned by The
Allstate Corporation ("Corporation").

The Company and Allstate Life entered into a reinsurance agreement, effective
June 5, 1992, under which the Company reinsures substantially all of its
business with Allstate Life. Under the reinsurance agreement, Fixed Account
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.

THE VARIABLE ACCOUNT

Established on January 15, 1996, the Glenbrook Life Multi-Manager Variable
Account is a unit investment trust registered with the Securities and Exchange
Commission under the Investment Company Act of 1940. However, such registration
does not signify that the Commission supervises the management or investment
practices or policies of the Variable Account. The investment performance of the
Variable Account is entirely independent of both the investment performance of
the Company's general account and the performance of any other separate account.

The Variable Account has been divided into fifteen Sub-accounts, each of which
invests solely in its corresponding Portfolio of the Funds. Additional Variable
Sub-accounts may be added at the discretion of the Company.

The assets of the Variable Account are held separately from the other assets of
the Company. They are not chargeable with liabilities incurred in the Company's
other business operations. Accordingly, the income, capital gains and capital
losses, realized or unrealized, incurred on the assets of the Variable Account
are credited to or charged against the assets of the Variable Account, without
regard to the income, capital gains or capital losses arising out of any other
business the Company may conduct. The Company's obligations arising under the
Contracts are general corporate obligations of the Company.

THE FUNDS

The Variable Account will invest in shares of one or more Funds. The Funds are
registered with the Securities and Exchange Commission as open-end, series,
management investment companies. Registration of the Funds does not involve
supervision of their management, investment practices or policies by the
Securities and Exchange Commission. The Funds' Portfolios are designed to
provide investment vehicles for variable insurance contracts of various
insurance companies, in addition to the Variable Account.

The Funds available for investment by the Variable Account as of the date of
this Prospectus are listed below:

I. DEAN WITTER FUND

- DIVIDEND GROWTH PORTFOLIO -- seeks to provide reasonable current income
and long-term growth of income and capital by investing primarily in
common stock of companies with a record of paying dividends and the
potential for increasing dividends.

- EUROPEAN GROWTH PORTFOLIO -- seeks to maximize the capital appreciation on
its investments by investing primarily in securities issued by issuers
located in Europe.

- QUALITY INCOME PLUS PORTFOLIO -- seeks, as its primary objective, to earn
a high level of current income and, as a secondary objective, capital
appreciation, but only when consistent with its primary objective, by
investing primarily in debt securities issued by the U.S. Government, its
agencies and instrumentalities, including zero coupon securities, and in
fixed-income securities rated A or higher by Moody's Investors Service,
Inc. (Moody's) or Standard & Poor's Corporation (Standard & Poor's) or
non-rated securities of comparable quality, and by writing covered call
and put options against such securities.

- UTILITIES PORTFOLIO -- seeks to provide current income and long-term
growth of income and capital by investing primarily in equity and
fixed-income securities of companies engaged in the public utilities
industry.

Dean Witter InterCapital Inc. ("InterCapital"), Two World Trade Center, New
York, New York 10048, is the Fund's Investment Manager. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. Morgan Grenfell
Investment Services Limited, 20 Finsbury Circus, London, England, is the
Sub-Advisor of the European Growth Portfolio of the Fund.

II. DREYFUS FUNDS

- VIF GROWTH & INCOME PORTFOLIO -- seeks to provide long-term capital
growth, current income and
<PAGE>
11
growth of income, consistent with reasonable investment risk.

- VIF MONEY MARKET PORTFOLIO -- seeks to provide as high a level of current
income as is consistent with the preservation of capital and the
maintenance of liquidity.

- THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. -- seeks to provide
capital growth. Current income is a secondary goal. Invests principally in
common stocks, or securities convertible into common stock, of companies
which, in the opinion of the Fund's management, not only meet traditional
investment standards, but also show evidence that they conduct their
business in a manner that contributes to the enhancement of the quality of
life in America.

- VIF SMALL COMPANY STOCK PORTFOLIO -- seeks to provide investment results
that are greater than the total return performance of publicly-traded
common stocks in the aggregate, as represented by the Russell 2500-TM-
Index. Invests primarily in a portfolio of equity securities of small- to
medium-sized domestic issuers, while attempting to maintain volatility and
diversification similar to that of the Russell 2500-TM- Index.

The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166, was formed
in 1947 and serves as the Fund's investment manager. The Dreyfus Corporation is
a wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Bank Corporation.

III. FIDELITY FUNDS

- VIP II CONTRAFUND -- seeks capital appreciation by investing in companies
that Fidelity Management & Research Company ("FMR") believes to be
undervalued due to an overly pessimistic appraisal by the public.

- VIP GROWTH -- seeks capital appreciation by investing primarily in common
stocks. The fund may also pursue capital appreciation through the purchase
of bonds and preferred stocks.

- VIP HIGH INCOME -- seeks high current income by investing primarily in all
types of income-producing debt securities, preferred stocks, and
convertible securities.

Fidelity Management & Research Company, 82 Devonshire Street, Boston,
Massachusetts, is the Investment Manager of the Funds.

IV. MFS FUND

- EMERGING GROWTH SERIES -- seeks to provide long-term growth of capital.
Dividend and interest income from portfolio securities, if any, is
incidental to the Portfolio's investment objective of long-term growth of
capital.

- LIMITED MATURITY SERIES -- the primary investment objective is to provide
as high a level of current income as is believed to be consistent with
prudent investment risk. The Portfolio's secondary objective is to protect
shareholders' capital.

MFS manages each Series pursuant to an Investment Advisory Agreement with the
Trust on behalf of each Portfolio. MFS provides the Series with overall
investment advisory and administrative services, as well as general office
facilities.

V. TWENTIETH CENTURY FUNDS

- TCI BALANCED -- the investment objective of TCI Balanced is capital growth
and current income. It will seek to achieve its investment objective by
maintaining approximately 60% of the assets of TCI Balanced in common
stocks that are considered by management to have better-than-average
prospects for appreciation and the remaining assets in bonds and other
fixed income securities.

- TCI INTERNATIONAL -- the investment objective of TCI International is
Capital Growth. It will seek to achieve its investment objective by
investing primarily in an internationally diversified portfolio of common
stocks that are considered by management to have prospects for
appreciation. The fund will invest primarily in securities of issuers
located in developed markets.

Investors Research Corporation ("Investors Research") serves as the investment
manager of TCI Portfolios. Its principal place of business is Twentieth Century
Tower, 4500 Main Street, Kansas City, Missouri 64111.

Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.

An investment in the Dreyfus VIF Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the Money
Market Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
<PAGE>
12

All dividends and capital gains distributions from the Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset value.

There is no assurance that the Portfolios will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Portfolios can be found in the current prospectuses for the
Funds accompanying this prospectus.

You will find more complete information about the Portfolios, including the
risks associated with each Portfolio, in the accompanying prospectuses. You
should read the prospectuses for the Funds in conjunction with this prospectus.

THE FUND PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE
SUB-ACCOUNT.

FIXED ACCOUNT OPTIONS

DOLLAR COST AVERAGING FIXED ACCOUNT

Purchase payments allocated to the Dollar Cost Averaging Fixed Account become
part of the general account of the Company, which supports insurance and annuity
obligations. The general account consists of the general assets of the Company
other than those in segregated asset accounts.

Instead of you bearing the investment risk, as is the case for amounts in the
Variable Account or in other segregated asset accounts of the Company, we bear
the investment risk for all amounts in the Dollar Cost Averaging Fixed Account.
We have sole discretion to invest the assets of the Dollar Cost Averaging Fixed
Account, subject to applicable law. We guarantee that the amounts allocated to
the Dollar Cost Averaging Fixed Account will be credited interest at a net
effective annual interest rate at least equal to the minimum guaranteed rate
found in the Contract. Currently, the amount of interest credited in excess of
the guaranteed rate will vary periodically at the sole discretion of the
Company. Any interest held in the Dollar Cost Averaging Fixed Account does not
entitle an Owner to share in the investment experience of the general account.

Money allocated to the Dollar Cost Averaging Fixed Account earns interest for a
one year period at the current rate in effect at the time of allocation. After
the one year period, a renewal rate will be declared. Subsequent renewal dates
will be every twelve months for each payment. The renewal interest rate will be
guaranteed by us for a full year and will not be less than the minimum
guaranteed rate found in the Contract. We may declare more than one interest
rate for different monies based upon the date of allocation to the Dollar Cost
Averaging Fixed Account. Any interest credited to amounts allocated to the
Dollar Cost Averaging Fixed Account in excess of the guaranteed rate found in
the Contract will be determined at the sole discretion of the Company.

Purchase payments may be allocated to the Dollar Cost Averaging Fixed Account
for the purpose of establishing a Dollar Cost Averaging Program. Each purchase
payment and all its earnings must be transferred out of the Dollar Cost
Averaging Fixed Account via Dollar Cost Averaging within 36 months of the
payment. At the end of 36 months, any remaining payment and associated earnings
will be transferred to the Money Market portfolio.

Surrenders and withdrawals from the Dollar Cost Averaging Fixed Account may be
delayed for up to six months.

Interests in the Dollar Cost Averaging Fixed Account are not registered with the
Securities and Exchange Commission ("SEC") and the SEC does not review
disclosure related to or supervise the operations of this account.

GUARANTEED MATURITY FIXED ACCOUNT

Purchase payments and transfers allocated to one or more of the Sub-accounts of
the Guaranteed Maturity Fixed Account become part of the general account of the
Company. Each Sub-account offers a separate interest rate Guarantee Period.
Guarantee Periods will be offered at the Company's discretion and may range from
one to ten years. Presently, the Company offers Guarantee Periods of one, three,
five, seven and ten years. The Owner must select the Sub-account(s) to which to
allocate each purchase payment and transfer. No less than $50 may be allocated
to any one Sub-account. The Company reserves the right to limit the number of
additional purchase payments. The Guaranteed Maturity Fixed Account option may
not be available in all states. Please consult with your sales representative
for current information.

Interest is credited daily to each Sub-account at a rate which compounds to the
effective annual interest rate declared for each Sub-account's Guarantee Period
that has been selected.
<PAGE>
13

The following example illustrates how the Sub-account value for a Sub-account of
the Guaranteed Maturity Fixed Account would grow given an assumed purchase
payment, Guarantee Period, and effective annual interest rate:

EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD:

<TABLE>
<S> <C>
Purchase Payment:............................................................... $10,000.00
Guarantee Period:............................................................... 5 years
Effective Annual Rate:.......................................................... 4.75%
</TABLE>

END OF CONTRACT YEAR:

<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Beginning Sub-Account Value $ 10,000.00
X (1 + Effective Annual Rate) 1.0475
------------
$ 10,475.00
Sub-Account Value at end of Contract $ 10,475.00
year 1 X (1 + Effective Annual Rate) 1.0475
------------
$ 10,972.56
Sub-Account Value at end of Contract $ 10,972.56
year 2 X (1 + Effective Annual Rate) 1.0475
------------
$ 11,493.76
Sub-Account Value at end of Contract $ 11,493.76
year 3 X (1 + Effective Annual Rate) 1.0475
------------
$ 12,039.71
Sub-Account Value at end of Contract $ 12,039.71
year 4 X (1 + Effective Annual Rate) 1.0475
------------
Sub-Account Value at end of Guarantee
Period: $ 12,611.60
------------
------------
</TABLE>

TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $2,611.60 ($12,611.60 -
$10,000.00)

NOTE: The above illustration assumes no withdrawals of any amount during the
entire five year period. A withdrawal charge and a Market Value Adjustment may
apply to any amount withdrawn in excess of 15% of the amount of purchase
payments. The hypothetical interest rate is for illustrative purposes only and
is not intended to predict future interest rates to be declared under the
Contract.

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. For current interest rate information, please
contact your sales representative or the Company's customer support unit at
1(800)755-5275.

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.

At 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. During the 30 day period
after a Guarantee Period expires the Owner may:

- take no action and the Company will automatically renew the Sub-account
value to a Guarantee Period of the same duration to be established as of
the day the previous Guarantee Period expired; or

- notify the Company to apply the Sub-account value to a new Guarantee
Period or periods to be established as of the day the previous Guarantee
Period expired; or

- notify the Company to apply the Sub-account value to any Sub-account of
the Variable Account on the day we receive the notification; or
<PAGE>
14

- receive a portion of the Sub-account value or the entire Sub-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
renewed at the shortest Guarantee Period then being offered with current
interest credited from the date the Guarantee Period expired.

The Automatic Laddering Program allows the Owner to choose, in advance, one
renewal Guarantee Period for all renewing Sub-accounts. 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. The Company reserves the right to
discontinue this Program. For additional information on the Automatic Laddering
Program, please call the Company's Customer Support Unit at 1(800)755-5275.

WITHDRAWALS OR TRANSFERS

Withdrawals in excess of the free withdrawal amount and transfers, paid from a
Sub-account of the Guaranteed Maturity Fixed Account other than during the 30
day period after a Guarantee Period expires are subject to a Market Value
Adjustment. See "Market Value Adjustment" section on page for additional
details.

The amount received by the Owner under a withdrawal request equals the amount
requested, adjusted by any Market Value Adjustment, less any applicable
withdrawal charge (based upon the amount requested prior to any Market Value
Adjustment), less premium taxes and withholding (if applicable), less any
applicable transfer fee.

MARKET VALUE ADJUSTMENT

The Market Value Adjustment reflects the relationship between (1) the Treasury
Rate for the original Guarantee Period at the time of the request for withdrawal
or transfer, and (2) the Treasury Rate for the original Guarantee Period at the
time the Sub-account was established. As such, the Owner bears some investment
risk under the Contract. Treasury Rate means the U.S. Treasury Note Constant
Maturity yield for the preceding week as reported in Federal Reserve Bulletin
Release H.15.

Generally, if the Treasury Rate at the time the Sub-account was established is
higher than the applicable current Treasury Rate, then the Market Value
Adjustment will result in a higher amount payable to the Owner or transferred.
Similarly, if the Treasury Rate at the time the Sub-account was established is
lower than the applicable current Treasury Rate (interest rate for a period
equal to the original Guarantee Period), then the Market Value Adjustment will
result in a lower amount payable to the Owner or transferred.

For example, assume the Owner purchases a Contract and selects an initial
Guarantee Period of five years and the five year Treasury Rate for that duration
is 4.75%. Assume that at the end of 3 years, the Owner makes a partial
withdrawal. If, at that later time, the current five year Treasury Rate is
4.00%, 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 five
year Treasury Rate is 7.00%, 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.

PURCHASE OF THE CONTRACTS

PURCHASE PAYMENT LIMITS

Your first purchase payment must be at least $3,000 unless the Contract is a
Qualified Contract, in which case the first purchase payment must be at least
$2,000. All subsequent purchase payments must be $50 or more and may be made at
any time prior to the Payout Start Date. We may limit your ability to make
subsequent purchase payments in order to comply with the laws of the state where
this Contract is delivered. Subsequent purchase payments may also be made from
your bank account through Automatic Additions. The minimum purchase payment for
allocation to the Dollar Cost Averaging Fixed Account or any Sub-account of the
Guaranteed Maturity Fixed Account is $50. Please consult with your sales
representative for detailed information about Automatic Additions.

We reserve the right to limit the maximum amount of purchase payments we will
accept.

FREE-LOOK PERIOD

You 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
purchase payments allocated to the Fixed Account Options. Purchase payments
allocated to the Variable Account will be returned after an adjustment to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation unless a refund of purchase payments is
required by state or federal law.
<PAGE>
15

CREDITING OF INITIAL PURCHASE PAYMENT

The initial purchase payment accompanied by a duly completed application will be
credited to the Contract within two business days of receipt by us at our home
office. If an application is not duly completed, we will credit the purchase
payments to the Contract within five business days or return it at that time
unless you specifically consent to us holding the purchase payment until the
application is complete. We reserve the right to reject any application.
Subsequent purchase payments will be credited to the Contract at the close of
the Valuation Period in which the purchase payment is received by the Company at
its home office.

ALLOCATION OF PURCHASE PAYMENTS

On the application, you instruct us how to allocate the purchase payment among
the Investment Alternatives. Purchase payments may be allocated in whole
percents, from 0% to 100% (total allocation equals 100% of the purchase
payment), or in whole dollar amounts (total allocation equals the purchase
payment), to any Investment Alternative. Unless you notify us in writing
otherwise, subsequent purchase payments are allocated according to the
allocation for the previous purchase payment. Any change in allocation
instructions will be effective at the time we receive the notice in good order.

ACCUMULATION UNITS

Each purchase payment allocated to the Variable Account will be credited to the
Contract as Accumulation Units. For example, if a $10,000 purchase payment is
credited to the Contract when the Accumulation Unit value equals $10, then 1,000
Accumulation Units would be credited to the Contract. The Variable Account, in
turn, purchases shares of the corresponding Portfolio.

ACCUMULATION UNIT VALUE

The Accumulation Units in each Sub-account of the Variable Account are valued
separately. The value of Accumulation Units will change each Valuation Period
according to the investment performance of the shares purchased by each Variable
Sub-account and the deduction of certain expenses and charges.

The value of an Accumulation Unit in a Variable Sub-account for any Valuation
Period equals the value of the Accumulation Unit as of the immediately preceding
Valuation Period, multiplied by the Net Investment Factor for that Sub-account
for the current Valuation Period. The Net Investment Factor for a Valuation
Period is a number representing the change, since the last Valuation Date in the
value of Sub-account assets per Accumulation Unit due to investment income,
realized or unrealized capital gain or loss, deductions for taxes, if any, and
deductions for the mortality and expense risk charge and administrative expense
charge.

TRANSFERS AMONG INVESTMENT ALTERNATIVES

Amounts may be transferred among Investment Alternatives, subject to the
following restrictions. The Company reserves the right to assess a $10 charge on
each transfer in excess of twelve per Contract Year. The Company is presently
waiving this charge. Transfers to or from more than one Investment Alternative
on the same day are treated as one transfer.

Transfers among Investment Alternatives before the Payout Start Date may be made
at any time. After the Payout Start Date, if the Income Plan depends on any
person's life, transfers among Sub-accounts of the Variable Account or from a
variable amount income payment to a fixed amount income payment may be made only
once every six months and may not be made during the first six months following
the Payout Start Date. After the Payout Start Date, if the Income Plan does not
depend on any person's life, transfers among Sub-accounts of the Variable
Account or from a variable amount income payment to a fixed amount income
payment may be made immediately. After the Payout Start Date, transfers from a
fixed amount income payment are not allowed.

Telephone transfer requests will be accepted by the Company if received at
1(800)755-5275 by 3:00 p.m., Central Time. Telephone transfer requests received
at any other telephone number or after 3:00 p.m., Central Time will not be
accepted by the Company. Telephone transfer requests received before 3:00 p.m.,
Central Time are effected at the next computed value. The Company utilizes
procedures which the Company believes will provide reasonable assurance that
telephone authorized transfers are genuine. Such procedures include taping of
telephone conversations with persons purporting to authorize such transfers and
requesting identifying information from such persons. Accordingly, the Company
disclaims any liability for losses resulting from such transfers by reason of
their allegedly not having been properly authorized. However, if the Company
does not take reasonable steps to help ensure that such authorizations are
valid, the Company may be liable for such losses.

The minimum amount that may be transferred into a Sub-account of the Guaranteed
Maturity Fixed Account is $50. No transfers are allowed into the Dollar Cost
Averaging Fixed Account. Any transfer from a Sub-account of the Guaranteed
Maturity Fixed Account at a time other than
<PAGE>
16
during the 30 day period after a Guarantee Period expires will be subject to a
Market Value Adjustment.

The Company reserves the right to waive transfer restrictions.

DOLLAR COST AVERAGING

Transfers may be made automatically through Dollar Cost Averaging prior to the
Payout Start Date. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month from the Dollar Cost Averaging Fixed Ac-
count or the Money Market Sub-account, to any Sub-account of the Variable
Account. Dollar Cost Averaging cannot be used to transfer amounts to the
Guaranteed Maturity Fixed Account. In addition, such transfers are not assessed
a $10 charge and are not included in the twelve free transfers per Contract
Year.

The theory of Dollar Cost Averaging is that, if purchases of equal dollar
amounts are made at fluctuating prices, the aggregate average cost per unit will
be less than the average of the unit prices on the same purchase dates. However,
participation in the Dollar Cost Averaging program does not assure you of a
greater profit from your purchases under the program; nor will it prevent or
alleviate losses in a declining market.

AUTOMATIC PORTFOLIO REBALANCING

Transfers may be made automatically through Automatic Portfolio Rebalancing
prior to the Payout Start Date. By electing Automatic Portfolio Rebalancing, all
of the money allocated to Sub-accounts of the Variable Account will be
rebalanced to the desired allocation on a quarterly basis, determined from the
first date that you decide to rebalance. Each quarter, money will be transferred
among Sub-accounts of the Variable Account to achieve the desired allocation.

The desired allocation will be the allocation initially selected, unless
subsequently changed. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive the written request. We are not responsible for
rebalancing that occurs prior to receipt of the written request.

Transfers made through Automatic Portfolio Rebalancing are not assessed a $10
charge and are not included in the twelve free transfers per Contract Year.

Any money allocated to the Fixed Account Options will not be included in the
rebalancing.

BENEFITS UNDER THE CONTRACT

WITHDRAWALS

You may withdraw all or part of the Contract Value at any time prior to the
earlier of the death of the Owner (or the Annuitant if the Owner is not a
natural person) or the Payout Start Date. The amount available for withdrawal is
the Contract Value next computed after the Company receives the request for a
withdrawal at its home office, adjusted by any applicable Market Value
Adjustment, less any applicable withdrawal charges, contract maintenance
charges, income tax withholding, penalty tax and premium taxes. Withdrawals from
the Variable Account will be paid within seven days of receipt of the request,
subject to postponement in certain circumstances. See "Delay of Payments," page
.

Money can be withdrawn from the Variable Account or the Fixed Account. To
complete the partial withdrawal from the Variable Account, the Company will
redeem Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. The Owner must name the
Investment Alternative from which the withdrawal is to be made. If none is
named, then the withdrawal request is incomplete and cannot be honored.

The minimum partial withdrawal is $50. If the Contract Value after a partial
withdrawal would be less than $2,000, then the Company will treat the request as
one for termination of the Contract and the entire Contract Value, adjusted by
any Market Value Adjustment, less any charges and premium taxes, will be paid
out.

Partial withdrawals may also be taken automatically through Systematic
Withdrawals on a monthly, quarterly, semi-annual or annual basis. Systematic
Withdrawals of $50 or more may be requested at any time prior to the Payout
Start Date. At the Company's discretion, Systematic Withdrawals may not be
offered in conjunction with Dollar Cost Averaging or Automatic Portfolio
Rebalancing.

Partial and full withdrawals may be subject to income tax and a 10% tax penalty.
This tax and penalty are explained in "Federal Tax Matters," on page .

After the Payout Start Date, withdrawals are only permitted when payments from
the Variable Account are being made that do not involve life contingencies. In
that case, you may terminate the Variable Account portion of the income payments
at any time and receive a lump sum equal to the commuted balance of the
remaining variable payments due, less any applicable withdrawal charge.
<PAGE>
17

INCOME PAYMENTS

PAYOUT START DATE FOR INCOME PAYMENTS

The Payout Start Date is the day that income payments will start under the
Contract. You 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 (a) at least one month after the issue
date; and (b) no later than the day the Annuitant reaches age 90, or the 10th
anniversary of the issue date, if later.

VARIABLE ACCOUNT INCOME PAYMENTS

The amount of Variable Account income payments depends upon the investment
experience of the Sub-accounts selected by the Owner and any premium taxes, the
age and sex of the Annuitant, and the Income Plan chosen. The Company guarantees
that the amount of the income payment will not be affected by (1) actual
mortality experience and (2) the amount of the Company's administration
expenses.

The Contracts offered by this prospectus contain income payment 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 will be used.

The total income payments received may be more or less than the total purchase
payments made because (a) Variable Account income payments vary with the
investment results of the underlying Portfolios, and (b) Annuitants may not live
as long as, or may live longer than, expected.

The Income Plan option selected will affect the dollar amount of each income
payment. For example, if an Income Plan for a Life Income is chosen, the income
payments will be greater than income payments under an Income Plan for a Life
Income with Guaranteed Payments.

If the actual net investment experience of the Variable Account is less than the
assumed investment rate, then the dollar amount of the income payments will
decrease. The dollar amount of the income payments will stay level if the net
investment experience equals the assumed investment rate and the dollar amount
of the income payments will increase if the net investment experience exceeds
the assumed investment rate. For purposes of the Variable Account income
payments, the assumed investment rate is 3 percent. For more detailed
information as to how Variable Account income payments are determined, see the
Statement of Additional Information.

FIXED AMOUNT INCOME PAYMENTS

Income payment amounts derived from any monies allocated to any Fixed Account
Option are guaranteed for the duration of the Income Plan. The income payment
based upon any fixed amount income payment is calculated by applying the portion
of the Contract Value in any Fixed Account Option on the Payout Start Date,
adjusted by any Market Value Adjustment and less any applicable premium tax, to
the greater of the appropriate value from the income payment table selected or
such other value as we are offering at that time.

INCOME PLANS

The Income Plans include:

INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS

The Company will make payments for as long as the Annuitant lives. If the
Annuitant dies before the selected number of guaranteed payments have been
made, the Company will continue to pay the remainder of the guaranteed
payments.

INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS

The Company will make payments for as long as either the Annuitant or Joint
Annuitant, named at the time of Income Plan selection, is living. If both
the Annuitant and the Joint Annuitant die before the selected number of
guaranteed payments have been made, the Company will continue to pay the
remainder of the guaranteed payments.

INCOME PLAN 3 -- GUARANTEED NUMBER OF PAYMENTS

The Company will make payments for a specified number of months 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. The mortality and
expense risk charge will be deducted from Variable Account assets supporting
these payments even though the Company does not bear any mortality risk.

The Owner may change the Income Plan until 30 days before the Payout Start Date.
If an Income Plan is chosen which depends on the Annuitant or Joint Annuitant's
life, proof of age will be required before income payments begin. Applicable
premium taxes will be assessed.
<PAGE>
18

In the event that an Income Plan is not selected, the Company will make income
payments in accordance with Income Plan 1 with Guaranteed Payments for 120
Months. At the Company's discretion, other Income Plans may be available upon
request. The Company currently uses sex-distinct annuity tables. However, if
legislation is passed by Congress or the states, the Company reserves the right
to use income payment tables which do not distinguish on the basis of sex.
Special rules and limitations may apply to certain qualified contracts.

If the Contract Value to be applied to an Income Plan is less than $2,000, or if
the monthly payments determined under the Income Plan are less than $20, the
Company may pay the Contract Value adjusted by any Market Value Adjustment and
less any applicable taxes, in a lump sum or change the payment frequency to an
interval which results in income payments of at least $20.

DEATH BENEFITS

DISTRIBUTION UPON DEATH PAYMENT PROVISIONS

A distribution upon death 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.

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 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 Valuation 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 a surviving spouse continues the Contract or an
Income Plan is selected 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.

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. The Company will only
permit the Contract to be continued once. If the Contract is continued in the
accumulation phase, 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, any applicable Market Value Adjustment, determined as of the
date of the withdrawal, will apply.

DEATH BENEFIT AMOUNT

Prior to the Payout Start Date, the standard death benefit is equal to the
greatest of:

(a) the Contract Value on the date the Company determines the death benefit;
or

(b) the Settlement Value on the date the Company determines the death
benefit; or

(c) the Contract Value on each Death Benefit Anniversary prior to the date
the Company determines the death benefit adjusted by any purchase
payments, withdrawals* and charges made between such Death Benefit
Anniversary and the date the Company determines the death benefit. A
Death Benefit Anniversary is every seventh Contract Anniversary
beginning with the issue date. For example, the issue date, 7th and 14th
Contract Anniversaries are the first three Death Benefit Anniversaries.

For Contracts with the optional enhanced death benefit provision, the death
benefit will be the greater of (a) through (c) above, or (d) below:

(d) the greatest of the anniversary values as of the date the Company
determines the death benefit. The anniversary value is equal to the
Contract Value on a Contract Anniversary, increased by purchase payments
made since that anniversary and reduced by an adjustment
<PAGE>
19
for any partial withdrawals* since that anniversary. Anniversary values
will be calculated for each Contract Anniversary prior to the earlier
of: (i) the date we determine the death benefit, or (ii) the oldest
Owner's or the Annuitant's, if the Owner is not a natural person,
attained age 80.

* The adjustment for withdrawals is equal to the Contract Value on a Death
Benefit Anniversary or Contract Anniversary multiplied by the ratio of the
withdrawal amount to the Contract Value immediately prior to the to the
withdrawal.

The value of the death benefit will be determined at the end of the Valuation
Period during which the Company receives a complete request for payment of the
death benefit, which includes due proof of death.

The Company will not settle any death claim until it receives due proof of
death.

CHARGES AND OTHER DEDUCTIONS

DEDUCTIONS FROM PURCHASE PAYMENTS

No deductions are made from purchase payments. Therefore, the full amount of
every purchase payment is invested in the Investment Alternative(s).

WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)

You may withdraw the Contract Value at any time before the earliest of the
Payout Start Date, the death of any Owner or, if the Owner is not a natural
person, the death of the Annuitant.

There are no withdrawal charges on amounts withdrawn up to 15% of the amount of
purchase payments. Amounts withdrawn in excess of this may be subject to a
withdrawal charge. Amounts not subject to a withdrawal charge and not withdrawn
in a Contract Year are not carried over to later Contract Years. Withdrawal
charges, if applicable, will be deducted from the amount paid.

For purposes of calculating the amount of the withdrawal charge, withdrawals are
assumed to come from purchase payments first, beginning with the oldest payment.
Withdrawals made after all purchase payments have been withdrawn, will not be
subject to a withdrawal charge. For partial withdrawals, the Contract Value will
be adjusted to reflect the amount of payment requested by the Owner, any
withdrawal charge, any applicable taxes and any Market Value Adjustment.

Withdrawals in excess of the free withdrawal amount will be subject to a
withdrawal charge as set forth below:

<TABLE>
<CAPTION>
COMPLETE YEARS SINCE APPLICABLE
PURCHASE PAYMENT BEING WITHDRAWAL
WITHDRAWN WAS MADE CHARGE PERCENTAGE
- -------------------------------- --------------------
<S> <C>
0 YEARS.............................................6%
1 YEAR..............................................6%
2 YEARS.............................................5%
3 YEARS.............................................5%
4 YEARS.............................................4%
5 YEARS.............................................3%
6 YEARS OR MORE.....................................0%
</TABLE>

Withdrawal charges will be used to pay sales commissions and other promotional
or distribution expenses associated with the marketing of the Contracts. The
Company does not anticipate that the withdrawal charges will cover all
distribution expenses in connection with the Contract.

In addition, federal and state income tax may be withheld from withdrawal
amounts. Certain terminations may also be subject to a federal tax penalty. See
"Federal Tax Matters," page .

The Company will waive any withdrawal charge prior to the Payout Start Date if
1) at least 30 days after the Contract Date any Owner (or Annuitant if the Owner
is not a natural person) 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 120 days
after discharge or 2) any Owner (or Annuitant if the Owner is not a natural
person) is diagnosed with a terminal illness. The withdrawal charge will also be
waived on withdrawals taken to satisfy IRS required minimum distribution rules.
This waiver is permitted only for withdrawals which satisfy distributions
resulting from this Contract. If applicable, such withdrawals will be subject to
a Market Value Adjustment.

CONTRACT MAINTENANCE CHARGE

A contract maintenance charge is deducted annually from the Contract Value to
reimburse the Company for its actual costs in maintaining each Contract and the
Variable Account. The Company guarantees that the amount of this charge will not
exceed $35 per Contract Year over the life of the Contract. Prior to the Payout
Start Date, this charge will be waived if the total purchase payments are
$50,000 or more on a Contract Anniversary or if all money is allocated to the
Fixed Account on the Contract Anniversary. After the Payout Start Date, this
charge will be waived if total purchase payments are $50,000 or more as of the
Payout Start Date.
<PAGE>
20

Maintenance costs include but are not limited to expenses incurred in billing
and collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and policy changes; proxy statements; calculating Accumulation Unit
and Annuity Unit values; and issuing reports to Owners and regulatory agencies.
The Company does not expect to realize a profit from this charge.

On each Contract Anniversary prior to the Payout Start Date, the contract
maintenance charge will be deducted from Sub-accounts of the Variable Account in
the same proportion that the Owner's value in each bears to the Owner's total
value in all Sub-accounts of the Variable Account. After the Payout Start Date,
a pro rata share of the annual contract maintenance charge will be deducted from
each income payment. For example, 1/12 of the $35, or $2.92, will be deducted if
there are twelve income payments during the Contract Year. A pro-rated contract
maintenance charge will be deducted if the Contract is terminated on any date
other than a Contract Anniversary.

ADMINISTRATIVE EXPENSE CHARGE

The Company will deduct an administrative expense charge which is equal, on an
annual basis, to .10% of the daily net assets the Owner has allocated to the
Sub-accounts of the Variable Account. This charge is designed to cover actual
administrative expenses which exceed the revenues from the contract maintenance
charge. The Company does not intend to profit from this charge. The Company
believes that the administrative expense charge and contract maintenance charge
have been set at a level that will recover no more than the actual costs
associated with administering the Contracts. There is no necessary relationship
between the amount of administrative charge imposed on a given Contract and the
amount of expenses that may be attributable to that Contract.

MORTALITY AND EXPENSE RISK CHARGE

The Company will deduct a mortality and expense risk charge which is equal, on
an annual basis, to 1.25% of the daily net assets you have allocated to the
Sub-accounts of the Variable Account. The Company estimates that .80% is
attributable to the assumption of mortality risks and .45% is attributable to
the assumption of expense risks. For Contracts with the optional enhanced death
benefit provision, the mortality and expense risk charge will be deducted daily,
at a rate equal on an annual basis to 1.35% of the daily net assets in the
Variable Account. The assessment of the additional .10% for the enhanced death
benefit is attributed to the assumption of additional mortality risks. The
Company guarantees that the percentage for this charge will not increase over
the life of the Contract.

The mortality risk arises from the Company's guarantee to cover all death
benefits and to make income payments in accordance with the Income Plan selected
and the Income Payment Tables.

The expense risk arises from the possibility that the contract maintenance and
administrative expense charge, both of which are guaranteed not to increase,
will be insufficient to cover actual administrative expenses.

If the mortality and expense risk charge is insufficient to cover the Company's
mortality costs and excess expenses, the Company will bear the loss. If the
charge is more than sufficient, the Company will retain the balance as profit.
The Company currently expects a profit from this charge. Any such profit, as
well as any other profit realized by the Company and held in its general account
(which supports insurance and annuity obligations), would be available for any
proper corporate purpose, including, but not limited to, payment of distribution
expenses.

TAXES

The Company will deduct applicable state premium taxes or other similar
policyholder taxes relative to the Contract (collectively referred to as
"premium taxes") either at the Payout Start Date, or when a total withdrawal
occurs. Current premium tax rates range from 0 to 3.5%. The Company reserves the
right to deduct premium taxes from the purchase payments.

At the Payout Start Date, the charge for premium taxes will be deducted from
each Investment Alternative in the proportion that the Owner's value in the
Investment Alternative bears to the total Contract Value.

TRANSFER CHARGES

The Company reserves the right to assess a $10 charge on each transfer in excess
of twelve per Contract Year, excluding transfers through Dollar Cost Averaging
and Automatic Portfolio Rebalancing. The Company is presently waiving this
charge.

FUND EXPENSES

A complete description of the expenses and deductions from the Portfolios is
found in the prospectuses for the Funds. This prospectus is accompanied by the
prospectuses for the Funds.
<PAGE>
21

GENERAL MATTERS

OWNER

The Owner has the sole right to exercise all rights and privileges under the
Contract, except as otherwise provided in the Contract. The Contract cannot be
jointly owned by both a non-natural person and a natural person.

BENEFICIARY

Subject to the terms of any irrevocable Beneficiary designation, the Owner may
change the Beneficiary at any time by notifying the Company in writing. Any
change will be effective at the time it is signed by the Owner, whether or not
the Owner is living when the change is received by the Company. The Company will
not, however, be liable as to any payment or settlement made prior to receiving
the written notice.

Unless otherwise provided in the Beneficiary designation, if a Beneficiary
predeceases the Owner and there are no other surviving beneficiaries or if the
Owner does not name a Beneficiary, the new Beneficiary will be: the Owner's
spouse if living; otherwise, the Owner's children, equally, if living;
otherwise, the Owner's estate. Multiple Beneficiaries may be named. Unless
otherwise provided in the Beneficiary designation, if more than one Beneficiary
survives the Owner, the surviving Beneficiaries will share equally in any
amounts due.

ASSIGNMENTS

The Company will not honor an assignment of an interest in a Contract as
collateral or security for a loan. Otherwise, the Owner may assign benefits
under the Contract prior to the Payout Start Date. No Beneficiary may assign
benefits under the Contract until they are due. No assignment will bind the
Company unless it is signed by the Owner and filed with the Company. The Company
is not responsible for the validity of an assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments.

DELAY OF PAYMENTS

Payment of any amounts due from the Variable Account under the Contract will
occur within seven days, unless:

1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;

2. An emergency exists as defined by the Securities and Exchange Commission; or

3. The Securities and Exchange Commission permits delay for the protection of
the Owners.

Payments or transfers from the Fixed Account may be delayed for up to 6 months.
If payment or transfer is delayed for 30 days or more, the Company will pay
interest as required by applicable law.

MODIFICATION

The Company may not modify the Contract without the consent of the Owner except
to make the Contract meet the requirements of the Investment Company Act of
1940, or to make the Contract comply with any changes in the Internal Revenue
Code or to make any changes required by the Code or by any other applicable law.

CUSTOMER INQUIRIES

The Owner or any persons interested in the Contract may make inquiries regarding
the Contract by calling or writing your representative or the Company at:

GLENBROOK LIFE AND ANNUITY COMPANY
POST OFFICE BOX 94042
PALATINE, ILLINOIS 60094-4042
1-(800) 755-5275

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.

TAXATION OF ANNUITIES IN GENERAL

TAX DEFERRAL

Generally, an annuity contract owner is not taxed on increases in the Contract
Value until a distribution occurs. This rule applies only where (1) the owner is
a natural
<PAGE>
22
person, (2) the investments of the Variable Account are "adequately diversified"
in accordance with Treasury Department Regulations, and (3) the issuing
insurance company, instead of the annuity owner, is considered the owner for
federal income tax purposes of any separate account assets funding the contract.

NON-NATURAL OWNERS

As a general rule, annuity contracts owned by non-natural persons such as
corporations, trusts, or other entities are not treated as annuity contracts for
federal income tax purposes and the income on such contracts is taxed as
ordinary income received or accrued by the owner during the taxable year. There
are several exceptions to the general rule for contracts owned by non-natural
persons which are discussed in the Statement of Additional Information.

DIVERSIFICATION REQUIREMENTS

For a Contract to be treated as an annuity for federal income tax purposes, the
investments in the Variable Account must be "adequately diversified" in
accordance with the standards provided in the Treasury regulations. If the
investments in the Variable Account are not adequately diversified, then the
Contract will not be treated as an annuity contract for federal income tax
purposes and the Owner will be taxed on the excess of the Contract Value over
the investment in the Contract. Although the Company does not have control over
the Portfolios or their investments, the Company expects the Portfolios to meet
the diversification requirements.

OWNERSHIP TREATMENT

In connection with the issuance of the regulations on the adequate
diversification standards, the Department of the Treasury announced that the
regulations do not provide guidance concerning the extent to which contract
owners may direct their investments among Sub-accounts of a variable account.
The Internal Revenue Service has previously stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the owner possesses incidents of ownership in those assets such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, Treasury announced that guidance would
be issued in the future regarding the extent that owners could direct their
investments among Sub-accounts without being treated as owners of the underlying
assets of the Variable Account. As of the date of this prospectus, no such
guidance has been issued.

The ownership rights under this contract are similar to, but different in
certain respects from, those described by the Service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of this contract has the choice of more investment options to
which to allocate premiums and contract values, and may be able to transfer
among investment options more frequently than in such rulings. These differences
could result in the contract owner being treated as the owner of the assets of
the Variable Account. In those circumstances, income and gains from the Variable
Account assets would be includible in the Contract Owners' gross income. In
addition, the Company does not know what standards will be set forth in the
regulations or rulings which the Treasury Department has stated it expects to
issue. It is possible that Treasury's position, when announced, may adversely
affect the tax treatment of existing contracts. The Company, therefore, reserves
the right to modify the Contract as necessary to attempt to prevent the Owner
from being considered the federal tax owner of the assets of the Variable
Account. However, the Company makes no guarantee that such modification to the
contract will be successful.

DELAYED MATURITY DATES

If the contract's scheduled maturity date is at a time when the annuitant has
reached an advanced age, e.g., past age 85, it is possible that the contract
would not be treated as an annuity. In that event, the income and gains under
the contract could be currently includible in the owner's income.

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. The investment in the contract is the
gross premium or other consideration paid for the contract reduced by any
amounts previously received from the contract to the extent such amounts were
properly excluded from the owner's gross income. 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 (i.e.,
nondeductible IRA contributions, after tax contributions to qualified plans)
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
<PAGE>
23
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. The contract provides a death benefit that in certain
circumstances may exceed the greater of the payments and the contract value. As
described elsewhere in the prospectus, the Company imposes certain charges with
respect to the death benefit. It is possible that some portion of those charges
could be treated for federal tax purposes as a partial withdrawal from the
contract.

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 variable annuity payments, the amount
excluded from taxable income is determined by dividing the investment in the
contract by the total number of expected payments. 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. Once the total amount of the investment in the
contract is excluded using these ratios, the annuity payments will be fully
taxable. If annuity payments cease because of the death of the annuitant before
the total amount of the investment in the contract is recovered, the unrecovered
amount generally will be allowed as a deduction to the annuitant for his last
taxable year.

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, 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; (4)
made under an immediate annuity; or (5) attributable to an investment in the
contract before August 14, 1982. Similar rules apply for distributions under
certain qualified contracts. A competent tax advisor should be consulted to
determine if any other exceptions to the penalty apply to your specific
circumstances.

AGGREGATION OF ANNUITY CONTRACTS

All non-qualified deferred 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.

TAX QUALIFIED CONTRACTS

Annuity contracts may be used as investments with certain tax qualified plans
such as: (1) Individual Retirement Annuities under Section 408(b) of the Code;
(2) Simplified Employee Pension Plans under Section 408(k) of the Code; (3) Tax
Sheltered Annuities under Section 403(b) of the Code; (4) Corporate and Self
Employed Pension and Profit Sharing Plans; and (5) State and Local Government
and Tax-Exempt Organization Deferred Compensation Plans. In the case of certain
tax qualified plans, the terms of the plans may govern the right to benefits,
regardless of the terms of the contract.

RESTRICTIONS UNDER SECTION 403(B) PLANS

Section 403(b) of the Code provides for tax-deferred retirement savings plans
for employees of certain non-profit and educational organizations. In accordance
with the requirements of Section 403(b), any annuity contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after 12/31/88, and all earnings on salary reduction
contributions, may be made only after the employee attains age 59 1/2, separates
from service, dies, becomes disabled or on account of hardship (earnings on
salary reduction contributions may not be distributed on the account of
hardship). These limitations do not apply to withdrawals where the Company is
directed to transfer some or all of the contract value to another Section 403(b)
plans.
<PAGE>
24

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.

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 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 which may be acting as broker-dealers without separate
registration under the Securities Exchange Act of 1934, pursuant to legal and
regulatory exceptions.

Commissions paid may vary, but in aggregate are not anticipated to exceed 6.50%
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 0.25%, on an annual basis, of the Contract Values considered in
connection with the bonus. These commissions are intended to cover distribution
expenses. In addition, sale of the Contract may count toward incentive program
awards for the registered representative.

The underwriting agreement with ALFS provides for indemnification of ALFS by the
Company for liability to Owners arising out of services rendered or Contracts
issued.

VOTING RIGHTS

The Owner or anyone with a voting interest in the Sub-account of the Variable
Account may instruct the Company on how to vote at shareholder meetings of the
Fund. The Company will solicit and cast each vote according to the procedures
set up by the Fund and to the extent required by law. The Company reserves the
right to vote the eligible shares in its own right, if subsequently permitted by
the Investment Company Act of 1940, its regulations or interpretations thereof.

Fund shares as to which no timely instructions are received will be voted in
proportion to the voting instructions which are received with respect to all
Contracts participating in that Sub-account. Voting instructions to abstain on
any item to be voted upon will be applied on a pro-rata basis to reduce the
votes eligible to be cast.

Before the Payout Start Date, the Owner holds the voting interest in the
Sub-account of the Variable Account. (The number of votes for the Owner will be
determined by dividing the Contract Value attributable to a Sub-account by the
net asset value per share of the applicable eligible Portfolio.)

After the Payout Start Date, the person receiving income payments has the voting
interest. After the Payout Start Date, the votes decrease as income payments are
made and as the reserves for the Contract decrease. That person's number of
votes will be determined by dividing the reserve for such Contract allocated to
the applicable Sub-account by the net asset value per share of the corresponding
eligible Portfolio.

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.

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
</TABLE>

- ---------------

(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.
<PAGE>
25

(2) For the period from April 1, 1992 (date of inception) to December 31, 1992.

<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA 1996 1995
- -------------------------------- --------- ---------
<S> <C> <C>
For The Quarters Ended June 30:
Income Before Taxes........... $ 941 $ 1,022
Net Income.................... 605 659
As of June 30:
Total Assets.................. 1,867,268 1,101,366
</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.

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

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
$ IN THOUSANDS
<S> <C> <C> <C>
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
--------- --------- ---------
</TABLE>

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

<TABLE>
<CAPTION>
1995 1994
--------- ---------
$ IN THOUSANDS
<S> <C> <C>
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
--------- ---------
</TABLE>

- ---------------
(1) Unrealized net capital gains (losses) exclude the effect of deferred income
taxes.

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.

<PAGE>
26

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.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1996

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
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
--------- --------- --------- ---------

<CAPTION>
($ IN THOUSANDS) ($ IN THOUSANDS)
<S> <C> <C> <C> <C>
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
</TABLE>

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.

<PAGE>
27

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.
Several independent rating agencies regularly evaluate life insurer's
claims-paying ability, quality of investments and overall stability. 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. These ratings do not
relate to the investment performance of the Variable Account.

EMPLOYEES

As of December 31, 1995, Allstate Life had approximately 43 employees at its
home office in Northbrook, Illinois who work primarily on the Company's matters.

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 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 Director of Deerbrook
Insurance Company; 1993 - Present Chairman of the Board, President and Director
of The Northbrook Corporation; 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
<PAGE>
28
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.

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.

PETER H. HECKMAN, 50, President, Chief Operating Officer and Director (1992)*

Also from 1995 - Present Director of Laughlin Group Holdings, Inc.; 1993 -
Present Director and Vice President of Allstate Settlement Corporation; 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, President and Chief Operating
Officer of Northbrook Life Insurance Company; 1988 - Present Director and Vice
President - Finance of Allstate Life Insurance Company.

G. CRAIG WHITEHEAD, 50, Senior Vice President and Director (1995)*

Also 1995 - Present Director of Laughlin Group Holdings, Inc.; 1995 - Present
Director of Glenbrook Life Insurance 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; 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 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 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
<PAGE>
29
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 and Director of
Allstate Life Insurance Company; 1995 - Present Chief Investment Officer of
Northbrook Life Insurance Company; 1995 - Present Chief Investment 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 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.
<PAGE>
30

SUMMARY COMPENSATION TABLE
(ALLSTATE LIFE INSURANCE CO.)
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------- ------------------------ --------------------------

<CAPTION>
(A) (B) (C) (D) (E) (F) (G) (H) (I)
SECURITIES
UNDERLYING
OTHER ANNUAL RESTRICTED OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) $ AWARD(S) (#) ($) ($)
- --------------------- --------- --------- --------- ------------- ----------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis G. Lower, II... 1995 $ 416,000 $ 266,175 $ 17,044 $ 199,890 $ 131,997 $ 411,122 $ 5,250(1)
Chief Executive
Officer and 1994 $ 389,050 $ 26,950 $ 25,889 $ 170,660 N/A 0 $ 1,890(1)
Chairman 1993 $ 374,200 $ 294,683 $ 52,443 $ 318,625 N/A $ 13,451 $ 6,296(1)
</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.

LEGAL PROCEEDINGS

From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. 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 as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995 and the related
financial statement schedule included in this prospectus 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 and Brennan., of Washington, D.C., has provided advice on
certain legal matters relating to the federal securities laws applicable to the
issue and sale of the Contracts. 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
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
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>
ADDITIONAL UNREALIZED NET
COMMON CAPITAL CAPITAL GAINS RETAINED
STOCK PAID-IN (LOSSES) INCOME TOTAL
----------- ----------- --------------- ----------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
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.

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.

F-6
<PAGE>
7

GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ in thousands)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.

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

F-7
<PAGE>
8

GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ in thousands)

4. RELATED PARTY TRANSACTIONS (Continued)
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.

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-8
<PAGE>
9

GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ in thousands)

5. INCOME TAXES (Continued)
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
----------- --------- --------- -----------
----------- --------- --------- -----------
</TABLE>

Scheduled maturities

The scheduled maturities of fixed income securities available for sale at
December 31, 1995 are as follows:

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- ---------
<S> <C> <C>
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-9
<PAGE>
10

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>
UNREALIZED
AMORTIZED FAIR NET GAINS/
COST VALUE (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
--------- --------- ---------
--------- --------- ---------
</TABLE>

Components of net investment income

Investment income by investment type is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
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
--------- --------- ---
--------- --------- ---
</TABLE>

Realized capital gains and losses

Realized capital gains on investments are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fixed income securities............................................................................. $459 $ -- $83
Income tax.......................................................................................... 161 29
---- ---- ----
Net realized gains.................................................................................. $298 $ -- $54
---- ---- ----
---- ---- ----
</TABLE>

F-10
<PAGE>
11

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.

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
--------- --------- ---
--------- --------- ---
</TABLE>

<TABLE>
<CAPTION>
SHAREHOLDER'S
EQUITY
DECEMBER 31,
----------------
1995 1994
------- -------
<S> <C> <C>
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

F-11
<PAGE>
12

GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ in thousands)

8. STATUTORY FINANCIAL INFORMATION (Continued)
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-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ in thousands)
<TABLE>
<CAPTION>
GROSS
AMOUNT CEDED NET 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
AMOUNT CEDED NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
Year Ended December 31, 1994
Life insurance in force............................................................... $ 1,250 $ 1,250 $ --
----- --------- -----
----- --------- -----
Premiums and contract charges:
Life and annuities.................................................................. $ 409 $ 409 $ --
----- --------- -----
----- --------- -----
<CAPTION>

GROSS
AMOUNT CEDED NET AMOUNT
----------- --------- -----------
<S> <C> <C> <C>
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-13
<PAGE>

GLENBROOK LIFE AND ANNUITY COMPANY
FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 1996

GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
(UNAUDITED)

<CAPTION>
($ IN THOUSANDS)
<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.

F-14
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
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.

F-15
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1995
----------- ---------
<S> <C> <C>
(UNAUDITED)

<CAPTION>
($ IN THOUSANDS)
<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.

F-16
<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.

F-17
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT

The Market Value Adjustment is based on the following:

<TABLE>
<C> <S>
I = the Treasury Rate for a maturity equal to the Sub-account's Guarantee Period for the
week preceding the establishment of the Sub-account.

N = the number of whole and partial years from the date we receive the withdrawal,
transfer, or death benefit request, or from the Payout Start Date to the end of the
Sub-account's Guarantee Period.

J = the Treasury Rate for a maturity equal to the Sub-accounts Guarantee Periodfor the week
preceding the receipt of the withdrawal request, transfer request, death benefit
request, or income payment request. If a Note with a maturity of the original guarantee
period is not available, a weighted average will be used.
</TABLE>

Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.

The Market Value Adjustment factor is determined from the following formula:

.9* (I-J)* N

Any transfer, withdrawal in excess of the free withdrawal amount, or death
benefit paid from a Sub-account of the Guaranteed Maturity Fixed Account will be
multiplied by the Market Value Adjustment factor to determine the Market Value
Adjustment.

ILLUSTRATION

EXAMPLE OF MARKET VALUE ADJUSTMENT

<TABLE>
<S> <C>
Purchase
Payment: $10,000
Guarantee
Period: 5 years
Interest Rate: 4.75%
Full
Withdrawal: End of Contract Year 3
</TABLE>

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 * (1.475)3 = $11,493.76

Step 2: Calculate the Free Withdrawal Amount:

= .15 * (10,000.00) = $1,500.00

Step 3: Calculate the Withdrawal Charge:

= .05 * (10,000.00 - 1,500.00) = $425.00

Step 4: Calculate the Market Value Adjustment:

I= 4.75%
J= 4.25%
N =730 days = 2
365 days

Market Value Adjustment Factor: .9 * (I--J) * N

A-1
<PAGE>
= .9 * (.0475 - .0425) * 2 = .009

Market Value Adjustment = Factor * Amount Subject to Market Value Adjustment:

= .009 * (11,493.76 - 1,500) $89.94

Step 5: Calculate The Amount Received by Customers as a Result of a Full
Withdrawal at the end of Contract Year 3:

= 11,493.76 - 425.00 + 89.94 = $11,158.70

Example 2: (Assumes rising interest rates)

Step 1: Calculate Account Value at End of Contract Year 3:

= 10,000.00 * (1.0475)3 = $11,493.76

Step 2: Calculate the Free Withdrawal Amount:

= .15 * (10,000.00) = $1,500.00

Step 3: Calculate the Withdrawal Charge:

= .05 * (10,000.00 - 1,500.00) = $425.00

Step 4: Calculate the Market Value Adjustment:

I= 4.75%
J= 5.25%
N =730 days = 2
365 days

Market Value Adjustment Factor: .9 * (I-J) * N

= .9 * (.0475 - .0525) * (2) = -.009

Market Value Adjustment = Factor * Amount Subject to Market Value Adjustment

= -.009 * ($11,493.76 -1,500) = 89.94

Step 5: Calculate The Net Withdrawal Value at End of Contract Year 3:

= 11,493.76 - 425.00 - 89.94 = $10,978.82

A-2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Additions, Deletions or Substitutions of
Investments................................... 3

Reinvestment................................... 3

The Contract................................... 4

Purchase of Contracts........................ 4

Performance Data............................. 4

Tax-free Exchanges (1035 Exchanges, Rollovers
and Transfers).............................. 5

Premium Taxes................................ 6

Tax Reserves................................. 6

Income Payments................................ 6

Calculation of Variable Annuity Unit Values.. 6

General Matters................................ 7

Incontestability............................. 7

Settlements.................................. 7

Safekeeping of the Variable Account's
Assets...................................... 7

Federal Tax Matters............................ 7

Introduction................................. 7

Taxation of Glenbrook Life and Annuity
Company..................................... 8

Exceptions to the Non-Natural Owner Rule..... 8

IRS Required Distribution at Death Rules..... 8

Qualified Plans.............................. 9

Types of Qualified Plans..................... 9

Variable Account Financial Statements.......... 11
</TABLE>

B-1
<PAGE>
ORDER FORM

Please send me a copy of the most recent Statement of Additional Information for
the Glenbrook Provider Variable Annuity.

<TABLE>
<S> <C> <C>
- ------------------- --------------------------------------
(Date) (Name)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip
Code)
</TABLE>

Send to: Glenbrook Life and Annuity Company
Post Office Box 94042
Palatine, Illinois 60094-4042
Attention: VA Customer Service Unit

B-2
<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 $58,272 will be incurred or are anticipated
to be incurred in connection with the issuance and distribution of the
securities to be registered: registration fees -- $5,272.41; cost of printing
and engraving -- $30,000 ; legal fees -- $20,000 (approximate); and accounting
fees -- $3,000.

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

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------
<S> <C>
(1) Underwriting Agreement*
(2) Not Applicable
(3) Articles of Incorporation**, By-Laws**
(4) Contract and Application*
(5) Opinion of General Counsel re: Legality
(6) Not Applicable
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10) Reinsurance Agreement between Glenbrook Life and Annuity Company and Allstate Life
Insurance Company**
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(22) Not Applicable
(23)(a) Consent of Independent Public Accountants
(23)(b) Consent of Counsel
(24) Powers of Attorney
(26) Not Applicable
(27) Financial Data Schedule
(28) Not Applicable
(29) Not Applicable
</TABLE>

- ------------------------

* Filed and incorporated by reference in N-4 registration statement dated
August 23, 1996 (333-00999)

** Previously filed and incorporated by reference in Registrant's S-1
registration statement dated June 28, 1996 (333-07275).

II-1
<PAGE>
ITEM 17. UNDERTAKINGS

The undersigned registrant, Glenbrook Life and Annuity Company, 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;

(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; and

(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 ("Act") may be permitted to directors, officers and controlling persons
of Glenbrook Life and Annuity Company ("Registrant"), 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 that the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-2
<PAGE>
INDEX TO EXHIBITS

The following exhibits are filed herewith:

<TABLE>
<S> <C>
(1) Underwriting Agreement*
(2) Not Applicable
(3) Articles of Incorporation,** By-Laws**
(4) Contract and Application*
(5) Opinion of General Counsel re: Legality
(6) Not Applicable
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10) Reinsurance Agreement between Glenbrook Life and Annuity Company
and Allstate Life Insurance Company**
(11) Not Applicable
(12) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(22) Not Applicable
(23)(a) Consent of Independent Certified Public Accountants
(23)(b) Consent of Counsel
(24) Powers of Attorney
(26) Not Applicable
(27) Financial Data Schedule
(29) Not Applicable
</TABLE>

- ------------------------
* Filed and incorporated by reference in N-4 registration statement dated
August 23, 1996 (333-00999)

** Previously filed and incorporated by reference in Registrant's S-1
registration statement dated June 28, 1996 (333-07275).

II-3

<PAGE>

GLENBROOK LIFE AND ANNUITY COMPANY
LAW AND REGULATION DEPARTMENT
3100 Sanders Road, J5D
Northbrook, Illinois 60062
Direct Dial Number 847.402.2400
Facsimile 847.402.4371

Michael J. Velotta
Vice President, Secretary
and General Counsel

August 13, 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. 333-00987

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 Flexible Premium Deferred Variable 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 the 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>

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Pre-Effective Amendment No. 2 to Registration
Statement No. 333-00987 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
August 19, 1996

<PAGE>

SUTHERLAND, ASBILL & BRENNAN
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2404

TEL: (202) 383-0100 ATLANTA
AUSTIN
FAX: (202) 637-3593 NEW YORK
WASHINGTON

JULY 11, 1996

Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, Illinois 60062

Ladies and Gentlemen:

We hereby consent to the reference to our name under the caption
"Legal Matters" in the prospectus filed as part of Pre-Effective Amendment No. 2
to the Registration Statement on Form S-1 (File No. 333-00987) filed by
Glenbrook Life and Annuity Company for certain annuity contracts. In giving
this consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.

Very truly yours,

SUTHERLAND, ASBILL & BRENNAN

By: /s/ Stephen E. Roth
-----------------------
Stephen E. Roth

<PAGE>

POWER OF ATTORNEY

WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
PROVIDER ANNUITY CONTRACT

Know all men by these presents that John R. Hunter, 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 Provider Annuity 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.

August 22, 1996
--------------------
Date

/s/ JOHN R. HUNTER
-------------------
John R. Hunter
Director

<PAGE>

POWER OF ATTORNEY

WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
PROVIDER ANNUITY CONTRACT

Know all men by these presents that Kevin R. Slawin, 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 Provider Annuity 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.

August 22, 1996
-----------------------
Date

/s/ KEVIN R. SLAWIN
-----------------------
Kevin R. Slawin
Vice President

<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHED. CONTAINS SUMMARY FIN. INFO. EXTRACTED FROM STMTS OF FIN. POS. AS OF
06/30/1996 (UNAUDITED) AND 12/31/1995; STMTS OF OPER. 3 MONTHS ENDED 06/30/1996
AND 06/30/1995 (UNAUDITED) 6 MONTHS ENDED 06/30/1996 AND 06/30/1995 UNAUDITED;
AND STMTS OF CASH FLOWS, 6 MONTHS ENDED 06/30/1996 AND 06/30/1995 (UNADITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<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
0 0
0 0
<COMMON> 2,100 2,100
<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
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