<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-62193
33-91916
33-92842
GLENBROOK LIFE AND ANNUITY COMPANY
(Exact name of registrant as specified in its charter)
ILLINOIS 35-1113325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive offices)
(Zip Code)
847/402-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes../X/.. No
Indicate the number of shares of each of the issuer's classes of common
stock, as of March 31, 1996; there were 4,200 shares of common capital stock
outstanding, par value $500 per share all of which shares are held by Allstate
Life Insurance Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Position
March 31, 1996(Unaudited) and December 31, 1995 3
Statements of Operations
Three Months Ended March 31, 1996 and
March 31, 1995 (Unaudited) 4
Statements of Cash Flows
Three Months Ended March 31, 1996 and
March 31, 1995 (Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
Signature Page 11
2
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GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
($ in thousands) 1996 1995
(Unaudited)
<S> <C> <C>
Assets
Investments
Fixed income securities
Available for sale, at fair value
(amortized cost $43,690 and $44,112) $ 46,019 $ 48,815
Short-term 3,270 2,102
Total investments 49,289 50,917
Reinsurance recoverable from Allstate Life
Insurance Company 1,502,656 1,340,925
Cash 264
Other assets 2,184 2,021
Separate Accounts 37,115 15,578
Total assets $1,591,244 $1,409,705
Liabilities
Contractholder funds $1,502,656 $1,340,925
Income taxes payable 1,957 1,637
Deferred income taxes 1,105 1,828
Net payable to Allstate Life Insurance Company 36 255
Separate Accounts 26,233 5,048
Total liabilities 1,531,987 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 2,008 3,357
Retained income 5,508 4,914
Total shareholder's equity 59,257 60,012
Total liabilities and shareholder's equity $1,591,244 $1,409,705
</TABLE>
See notes to financial statements.
3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
($ in thousands) 1996 1995
(Unaudited)
<S> <C> <C>
Revenues
Net investment income $ 923 $ 996
Income before income taxes 923 996
Income tax expense 329 354
Net income $ 594 $ 642
</TABLE>
See notes to financial statements.
4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
($ in thousands) 1996 1995
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 594 $ 642
Adjustments to reconcile net income to net
cash from operating activities
Deferred income taxes 3 181
Changes in other operating assets and
liabilities (71) 57
Net cash from operating activities 526 880
Cash flows from investing activities
Fixed income securities available for sale
Investment collections 430 102
Change in short-term investments, net (1,168) (982)
Participation in Separate Account (52)
Net cash from investing activities (790) (880)
Net (decrease) in cash (264) 0
Cash at beginning of period 264 0
Cash at end of period $ 0 $ 0
</TABLE>
See notes to financial statements.
5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
($ in thousands)
1. Basis of Presentation
Glenbrook Life and Annuity Company (the "Company") is wholly owned by
Allstate Life Insurance Company ("Allstate Life"), which is wholly owned by
Allstate Insurance Company, a wholly-owned subsidiary of The Allstate
Corporation.
The statements of financial position as of March 31, 1996, the
statements of operations for the three-month periods ended March 31, 1996
and 1995, and the statements of cash flows for the three-month periods then
ended are unaudited. The 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 period should not be considered indicative of
results to be expected for the full year.
2. Reinsurance
Contract charges ceded to Allstate Life under reinsurance agreements
were $597 and $424 for the three-month periods ended March 31, 1996 and
1995, respectively. Credited interest and expenses ceded to Allstate Life
amounted to $25,197 and $13,125 for the three-month periods ended March 31,
1996 and 1995, 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.
6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following highlights significant factors influencing results of
operations and changes in financial position of Glenbrook Life and Annuity
Company (the "Company"). It should be read in conjunction with the financial
statements and notes thereto found under Part II. Item 8 along with the
discussion and analysis found under Part II. Item 7 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"), currently issues flexible premium fixed annuities and,
beginning in late 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. One of the Separate
Accounts' investment portfolios was initially funded with a $10 million seed
money contribution from the Company in 1995. Investment income and realized
gains and losses of the Separate Account investments, other than the portion
related to the Company's participation, accrue directly to the contractholders
(net of fees) and, therefore, are not included in the Company's statements of
operations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1996 1995
------- -------
($ IN THOUSANDS)
<S> <C> <C>
Net investment income....................... $ 923 $ 996
------- -------
Net income.................................. $ 594 $ 642
------- -------
Fixed income securities, at amortized cost.. $43,690 $51,434
------- -------
</TABLE>
7
<PAGE>
Pre-tax net investment income decreased 7.3% to $923 thousand for the first
three months of 1996 compared to $996 thousand for the same period in 1995. The
decrease is primarily attributable to a decline in interest income as a result
of the $10 million seed money contribution to the Separate Accounts during the
fourth quarter of 1995. The decrease in net income of $48 thousand reflects the
change in net investment income.
FINANCIAL POSITION
At March 31, 1996 unrealized net capital gains were $3.1 million compared
to $5.2 million at December 31,1995. The change in unrealized net capital gain
is primarily attributable to rising interest rates.
At March 31, 1996 both contractholder funds and amounts recoverable from
Allstate Life under reinsurance treaties reflect a 12.1% increase of $162
million as compared to December 31, 1995. These increases result from sales of
the Company's flexible premium deferred annuities, partially offset by
surrenders. Reinsurance recoverable from Allstate Life relates to policy benefit
obligations ceded to Allstate Life.
Separate Account assets and liabilities increased by $21.5 million and
$21.2 million, respectively, in comparison to December 31, 1995. The increases
were primarily attributable to sales of variable annuities.
LIQUIDITY AND CAPITAL RESOURCES
Under the terms of intercompany reinsurance agreements, assets of the
Company that relate to insurance in force, excluding Separate Account assets,
are transferred to Allstate Life or other reinsurers, which maintain investment
portfolios that support the Company's products.
8
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would materially
affect the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
(2) None
(3)(i) Articles of Incorporation*
(ii) By-laws*
(4) Glenbrook Life and Annuity Company Flexible Premium
Deferred Variable Annuity Contract and Application**
(10) Reinsurance Agreement between Glenbrook Life
and Annuity Company and Allstate Life
Insurance Company*
(11) None
(15) None
(18) None
(19) None
(22) None
(23)(a) Consent of Independent Public Accountants***
(b) Consent of Attorneys****
(24) None
(27) Financial Data Schedule
(99) None
(b) Reports on 8-K
No reports on Form 8-K were filed during the
first quarter of 1996.
* Previously filed in Form N-4 Registration Statement No. 33-60882
dated April 9, 1993 and incorporated by reference.
** Previously filed in Form S-1 Registration Statement No. 33-91916 dated May
4, 1995 and incorporated by reference. Previously filed in Form S-1 Registration
Statement No. 33-92842 dated May 30, 1995 and incorporated by reference.
Previously filed in Form N-4 Registration Statement No. 33-62203 dated November
21, 1995 and incorporated by reference.
*** Previously filed in Form S-1 Registration Statement No. 33-91916
dated April 10, 1996 and incorporated by reference.
**** Previously filed in Pre-Effective Amendment No. 1 of Form N-4 Registration
Statement No. 33-91914 dated September 15, 1995 and incorporated by reference.
Previously filed in Form S-1 Registration Statement No. 33-92842 dated August
24, 1995 and incorporated by reference. Previously filed in Form N-4
Registration Statement No. 33-62203 dated November 21, 1995 and incorporated by
reference.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Glenbrook Life and Annuity Company
(Registrant)
DATE May 14, 1996 /s/ MICHAEL J. VELOTTA*
------------ ----------------------
LOUIS G. LOWER, II
CHAIRMAN OF THE BOARD OF DIRECTORS
and CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
DATE MAY 14, 1996 /s/ BARRY S. PAUL
------------ -----------------
BARRY S. PAUL
ASSISTANT VICE PRESIDENT
and CONTROLLER
(Chief Accounting Officer)
*by Michael J. Velotta, Vice President, Secretary and General Counsel pursuant
to Power of Attorney dated July 18, 1995 previously filed with Form S-1
Registration Statement, File No. 33-62193 filed August 28, 1995; Power of
Attorney dated May 24, 1995 previously filed with Form S-1 Registration
Statement, File No. 33-92842 filed May 30, 1995; and Power of Attorney dated
July 18, 1995 previously filed with Form S-1 Registration Statement, File No.
33-91916 filed September 15, 1995, copies attached hereto.
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
MARKET VALUE ADJUSTED ANNUITY CONTRACT
Know all men by these presents that Louis G. Lower, II, whose signature
appears below, constitutes and appoints Michael J. Velotta, his attorneys-in-
fact, with power of substitution, and each of them in any and all capacities, to
sign any Form S-1 registration statements and amendments thereto for the
Glenbrook Life and Annuity Company Market Value Adjusted Annuity Contract and
related contracts 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
substitutes, may do or cause to be done by virtue hereof.
July 18, 1995
---------------
Date
/s/ LOUIS G. LOWER, II
----------------------
Louis G. Lower, II
Chairman of the Board, CEO
and Director
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
MARKET VALUE ADJUSTED ANNUITY CONTRACT
Know all men by these presents that Louis G. Lower, II, whose signature
appears below, constitutes and appoints Michael J. Velotta, his attorneys-in-
fact, with power of substitution, and each of them in any and all capacities, to
sign any Form S-1 registration statements and amendments thereto for the
Glenbrook Life and Annuity Company Market Value Adjusted Annuity Contract and
related contracts 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
substitutes, may do or cause to be done by virtue hereof.
May 24, 1995
--------------
Date
/s/ LOUIS G. LOWER, II
----------------------
Louis G. Lower, II
President and Chairman of the Board
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
MARKET VALUE ADJUSTED ANNUITY CONTRACT
Know all men by these presents that Louis G. Lower, II, whose signature
appears below, constitutes and appoints Michael J. Velotta, his attorneys-in-
fact, with power of substitution, and each of them in any and all capacities, to
sign any Form S-1 registration statements and amendments thereto for the
Glenbrook Life and Annuity Company Market Value Adjusted Annuity Contract and
related contracts 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
substitutes, may do or cause to be done by virtue hereof.
July 18, 1995
---------------
Date
/s/ LOUIS G. LOWER, II
----------------------
Louis G. Lower, II
Chairman of the Board, CEO
and Director
Glenbrook Life and Annuity Company
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information extracted from
Statements of Financial Position; Statements of Operations; and Statements of
Cash Flows and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<DEBT-HELD-FOR-SALE> 46,019 48,815
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 0 0
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 49,289 50,917
<CASH> 0 264
<RECOVER-REINSURE> 1,502,656 1,340,925
<DEFERRED-ACQUISITION> 0 0
<TOTAL-ASSETS> 1,591,244 1,409,705
<POLICY-LOSSES> 0 0
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 1,502,656 1,340,925
<NOTES-PAYABLE> 0 0
<COMMON> 2,100 2,100
0 0
0 0
<OTHER-SE> 57,157 57,912
<TOTAL-LIABILITY-AND-EQUITY> 1,591,244 1,409,705
0 0
<INVESTMENT-INCOME> 923 3,996
<INVESTMENT-GAINS> 0 459
<OTHER-INCOME> 0 0
<BENEFITS> 0 0
<UNDERWRITING-AMORTIZATION> 0 0
<UNDERWRITING-OTHER> 0 0
<INCOME-PRETAX> 923 4,455
<INCOME-TAX> 329 1,576
<INCOME-CONTINUING> 594 2,879
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 594 2,879
<EPS-PRIMARY> 141.43 685.48
<EPS-DILUTED> 141.43 685.48
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
