FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this Form with the reduced disclosure
format.
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-62193
33-91916
33-92842
333-00987
GLENBROOK LIFE AND ANNUITY COMPANY
(Exact name of registrant as specified in its charter)
ILLINOIS 35-1113325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3100 Sanders Road
Northbrook, Illinois 60062
(Address of principal executive offices)
(Zip Code)
847/402-2400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes../X/.. No
Indicate the number of shares of each of the issuer's classes of common
stock, as of March 31, 1997; there were 4,200 shares of common capital stock
outstanding, par value $500 per share all of which shares are held by Allstate
Life Insurance Company.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Statements of Financial Position
March 31, 1997(Unaudited) and December 31, 1996.... ..............3
Statements of Operations
Three Months Ended March 31, 1997 and
March 31, 1996 (Unaudited)........................................4
Statements of Cash Flows
Three Months Ended March 31, 1997 and
March 31, 1996 (Unaudited)..................................5
Notes to Financial Statements.....................................6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................7
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK*..................................................N/A
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS...................................................9
Item 2. CHANGES IN SECURITIES*............................................N/A
Item 3. DEFAULTS UPON SENIOR SECURITIES*..................................N/A
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*..............N/A
Item 5. OTHER INFORMATION...................................................9
Item 6. EXHIBITS AND REPORTS ON FORM 8-K....................................9
SIGNATURE PAGE...............................................................10
*Omitted pursuant to General Instruction H(2) of Form 10Q.
-2-
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31, December 31,
($ in thousands) 1997 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $67,393 and $46,925) $ 67,704 $ 49,389
Short-term 2,780 1,287
------------ ------------
Total investments 70,484 50,676
Reinsurance recoverable from Allstate Life Insurance Company 2,212,158 2,060,419
Net receivable from affiliates - 19,206
Other assets 2,509 2,049
Separate Accounts 343,099 272,420
----------- -----------
Total assets $ 2,628,250 $ 2,404,770
=========== ===========
LIABILITIES
Contractholder funds $ 2,212,158 $ 2,060,419
Income taxes payable 1,167 653
Deferred income taxes 771 1,528
Net payable to affiliates 1,953 -
Separate Accounts 330,925 260,290
----------- -----------
Total liabilities 2,546,974 2,322,890
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 4,200 shares authorized,
issued, and outstanding 2,100 2,100
Additional capital paid-in 69,641 69,641
Unrealized net capital gains 1,378 2,790
Retained income 8,157 7,349
----------- -----------
Total shareholder's equity 81,276 81,880
----------- -----------
Total liabilities and shareholder's equity $ 2,628,250 $ 2,404,770
=========== ===========
</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) 1997 1996
---- ----
(Unaudited)
<S> <C> <C>
REVENUES
Net investment income $1,242 $ 923
Realized capital gains and losses 7 -
------- -------
INCOME BEFORE INCOME TAX EXPENSE 1,249 923
INCOME TAX EXPENSE 441 329
------- -------
NET INCOME $ 808 $ 594
======= =======
</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) 1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 808 $ 594
Adjustments to reconcile net income to net cash
provided by operating activities
Change in deferred income taxes 3 3
Realized capital gains and losses (7) -
Changes in other operating assets and liabilities 1,212 (71)
------- -------
Net cash provided by operating activities 2,016 526
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Investment collections 523 430
Investment purchases (20,981) -
Participation in Separate Accounts (65) (52)
Change in short-term investments, net (1,493) (1,168)
------- ------
Net cash used in investing activities (22,016) (790)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution 20,000 -
------- ------ -
Net cash provided by financing activities 20,000 -
------- ------
NET DECREASE INCREASE IN CASH - (264)
CASH AT BEGINNING OF PERIOD - 264
------- -------
CASH AT END OF PERIOD $ - $ -
======= =======
</TABLE>
See notes to financial statements.
-5-
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying financial statements include the accounts of Glenbrook
Life and Annuity Company (the "Company") a wholly owned subsidiary of
Allstate Life Insurance Company ("ALIC"), 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, 1997, the
statements of operations for the three-month periods ended March 31,
1997 and 1996, 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. These financial statements should be read
in conjunction with the financial statements and notes thereto included
in the Glenbrook Life and Annuity Company Annual Report on Form 10-K for
1996. The results of operations for the interim period should not be
considered indicative of results to be expected for the full year.
2. Reinsurance
The Company and ALIC entered into a reinsurance agreement effective June
5, 1992. All business issued subsequent to that date is ceded to ALIC.
Life insurance in force prior to that date is ceded to non-affiliated
reinsurers. Contract charges and credited interest are ceded and shown
net of such cessions in the statements of operations. Under the
reinsurance agreement with ALIC, all premiums and deposits are
transferred to ALIC. The amounts shown in the Company's statements of
operations relate to the investment of those assets of the Company that
are not transferred to ALIC under the reinsurance agreement. Reinsurance
recoverable and contractholder funds are reported separately in the
statements of financial position. The Company continues to have primary
liability as the direct insurer for risks reinsured.
Contract charges ceded to ALIC under reinsurance agreements were $2.1
million for the three-month period ended March 31, 1997 and $597
thousand for the three-month period ended March 31, 1996. Credited
interest, policy benefits and expenses ceded to ALIC amounted to $37.6
million and $25.2 million for the three-month periods ended March 31,
1997 and 1996, respectively. Investment income earned on the assets
which support contractholder funds is not included in the Company's
financial statements as those assets are owned and managed by ALIC under
the terms of reinsurance agreements.
-6-
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights significant factors influencing
results of operations and financial position of Glenbrook Life and Annuity
Company (the "Company"). It should be read in conjunction with the financial
statements and related notes thereto found under Items 7 and 8 of Part II of the
Glenbrook Life and Annuity Company Annual Report on Form 10-K for the year ended
December 31, 1996.
The Company is wholly owned by Allstate Life Insurance Company ("ALIC").
The Company markets life insurance contracts and annuity products through banks
and broker-dealers.
The Company and ALIC entered into a reinsurance agreement effective on
June 5, 1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers. The
Company's results of operations relate to the investment of those assets of the
Company that are not transferred to ALIC under the reinsurance agreement.
Separate Account assets and liabilities are carried at fair value in the
statements of financial position. The Separate Account investment portfolios
were initially funded with a $10.0 million seed money contribution from the
Company in 1995. Investment income and realized gains and losses of the Separate
Accounts, other than the portion related to the Company's participation, accrue
directly to the contractholders (net of fees) and, therefore, are not included
in the Company's statements of operations. The Company plans to liquidate the
investment in the Separate Account during the second and third quarters of 1997.
Results of Operations
($ in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1997 1996
---- ----
<S> <C> <C>
Net investment income $ 1,242 $ 923
======== ========
Realized capital gains, after tax $ 4 $ -
======== ========
Net income $ 808 $ 594
======== ========
Total investments $ 70,484 $ 50,676
======== ========
</TABLE>
Net income increased $214 thousand or 36.0% for the first quarter of 1997
when compared to first quarter of 1996 primarily due to the increase in net
investment income.
Net investment income for the first quarter of 1997 increased 34.6% or
$319 thousand to $1.2 million compared to $923 thousand for the first quarter of
1996. Increased investment income was the result of the higher base of
investments primarily arising from a $20 million capital contribution received
from ALIC in January, 1997.
-7-
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Position
($ in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ -------------
<S> <C> <C>
Total investments $ 70,484 $ 50,676
============ ============
Separate Account assets $ 343,099 $ 272,420
============ ============
Contractholder funds $ 2,212,158 $ 2,060,419
============ ============
Reinsurance recoverable from ALIC $ 2,212,158 $ 2,060,419
============ ============
Separate Account liabilities $ 330,925 $ 260,290
============ ============
</TABLE>
The Company's fixed income securities portfolio consists of publicly
traded corporate bonds, mortgage-backed securities and U.S. government bonds.
The Company generally holds its fixed income securities for the long term, but
has classified all of these securities as available for sale to allow maximum
flexibility in portfolio management. Total investments increased to $70.5
million at March 31, 1997 from $50.7 million at December 31, 1996. The increase
in investments was primarily due to a $20.0 million capital infusion from ALIC
in January which was partially offset by a decrease of $2.2 milion in the
unrealized gains on fixed income securities. The decrease in the unrealized gain
position is primarily attributable to rising interest rates on fixed income
securities.
All of the Company's fixed income securities portfolio is rated investment
grade, with a National Association of Insurance Commissioners rating of 1 or 2
and a Moody's rating of Aaa, Aa, or A.
During the first quarter of 1997, contractholder funds and amounts
recoverable from ALIC under the reinsurance agreement increased by $151.7
million. The increases primarily resulted from sales of the Company's flexible
premium deferred annuities, interest credited to contractholders, and sales of
single premium life insurance policies, partially offset by surrenders,
withdrawals and death benefits. Reinsurance recoverable from ALIC relates to
contract benefit obligations ceded to ALIC.
Separate Account assets increased by $70.7 million and Separate Account
liabilities increased by $70.6 million as compared to December 31, 1996. The
increases were attributable to increased sales of flexible premium deferred
variable annuity contracts and the favorable investment performance of the
Separate Account investment portfolios, partially offset by variable annuity
contract charges, surrenders and withdrawals.
Liquidity and Capital Resources
In January 1997, a $20.0 million capital contribution from ALIC was
received, which was accrued at December 31, 1996.
Under the terms of intercompany reinsurance agreements, assets of the
Company that relate to insurance in force, excluding Separate Account assets,
are transferred to ALIC, which maintains the investment portfolios supporting
the Company's products. The Company continues to have primary liablity as a
direct reinsurer for risks reinsured.
Pending Accounting Standards
In January 1997, the Securities and Exchange Commission issued Financial
Reporting Release No. 48 ("FRR 48") "Disclosure of Accounting Policies for
Derivative Financial Instruments and Derivative Commodity Instruments and
Disclosure of Quantitative and Qualitative Information about Market Risk
Inherent in Derivative Financial Instruments, Other Financial Instruments, and
Derivative Commodity Instruments."
Among other things, FRR 48 requires annual disclosure of quantitative and
qualitative information about the market risk inherent in the Company's
market risk sensitive instruments, including but not limited to, the Company's
fixed income securities. The quantitative and qualitative disclosures are
effective for the Company's year-end 1998 reporting, but recent Congressional
events may ultimately impact the nature and effective date of FRR 48.
-8-
<PAGE>
PART II - OTHER INFORMATION
<TABLE>
<S> <C>
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. 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.
Item 5. OTHER INFORMATION
Not applicable.
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 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 1997.
* Previously filed in Form S-1 Registration Statement No.333-07275 dated June
28, 1996 and incorporated by reference.
** Previously filed in Form S-1 Registration Statement No. 33-91916 dated May
4, 1995 and incorporated by reference. Previously filed in Form S-1 Registration
Statement No. 33-92842 dated May 30, 1995 and incorporated by reference.
Previously filed in Form N-4 Registration Statement No. 33-62203 dated November
21, 1995 and incorporated by reference. Previously filed in Form N-4
Registration Statement No.333-00999 dated August 23, 1996 and incorporated by
reference.
*** Previously filed in Form S-1 Registration Statement No. 33-91916 dated May
1, 1997 and incorporated by reference. Previously filed in Form S-1 Registration
Statement No. 33-92842 dated April 1, 1997 and incorporated by reference.
Previously filed in Form S-1 Registration Statement No. 33-62193 dated April 1,
1997 and incorporated by reference. Previously filed in Form S-1 Registration
Statement No.333-00987 dated April 1, 1997 and incorporated by reference.
**** Previously filed in Pre-Effective Amendment No. 1 of Form N-4 Registration
Statement No. 33-91914 dated September 15, 1995 and incorporated by reference.
Previously filed in Form S-1 Registration Statement No. 33-92842 dated August 24,
1995 and incorporated by reference. Previously filed in Form S-1 Registration
Statement No. 33-62193 dated November 22, 1995 and incorporated by reference.
Previously filed in Form S-1 Registration Statement No.333-00987 dated August 23,
1996 and incorporated by reference.
</TABLE>
-9-
<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, on the 14th day of May 1997.
GLENBROOK LIFE AND ANNUITY COMPANY
(Registrant)
(SEAL)
Attest: /s/BRENDA D. SNEED By: /s/MICHAEL J. VELOTTA
--------------------- ----------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary and Vice President, Secretary,
Assistant General Counsel General Counsel and Director
*LOUIS G. LOWER, II CHAIRMAN OF THE BOARD OF DIRECTORS
- ----------------------- AND CHIEF EXECUTIVE OFFICER
LOUIS G. LOWER, II (Principal Executive Officer)
/s/ KEITH A. HAUSCHILDT ASSISTANT VICE PRESIDENT AND CONTROLLER
- ----------------------- (Chief Accounting Officer)
KEITH A. HAUSCHILDT
*/By Michael J. Velotta, pursuant to Power of Attorney previously filed.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND> THIS SCHEUDLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
STATEMENTS OF FINANCIAL POSITION AT MARCH 31, 1997; STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997; AND STATEMENTS OF CASH FLOWS THREE MONTHS
ENDED MARCH 31, 1997.
</LEGEND>
<CIK> 0000945094
<NAME> GLENBROOK LIFE & ANNUITY COMPANY
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 67,704
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 70,484
<CASH> 0
<RECOVER-REINSURE> 2,212,158
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 2,628,250
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 2,212,158
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,100
<OTHER-SE> 79,176
<TOTAL-LIABILITY-AND-EQUITY> 2,628,250
0
<INVESTMENT-INCOME> 1,242
<INVESTMENT-GAINS> 7
<OTHER-INCOME> 0
<BENEFITS> 0
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 1,249
<INCOME-TAX> 441
<INCOME-CONTINUING> 808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 808
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
